Due to this success, Tracy and I were recently interviewed for a story on MSN.com titled “How To Live Well on $40,000 or Less.”  This story’s author interviewed another couple as well and was trying to help others and give them real-life examples of people that are doing well financially despite not making a lot of money.  Well, from the comments this story received, you would have thought this was an offensive and mean-spirited article.  Here is a sampling of some of these comments:

40k is not much money!  They must be on welfare. Why work, became a Taker, sit on your rear watching Oprah and make the equivalent of 70 k. Goodbye

No, no, no.  These people are not living like anyone I grew up with.  They are dumpster divers who are raising their children on other people’s trash.  Living frugally is very do-able, but NOT at $40K for four people.

I’m going to guess that the Kofkes and Magais also rely on the government for their healthcare – aka: our tax dollars.  They also must rely on hardship monies for their children’s school fees which are intended for families who are in true need, not those who choose to live off the generosity of others.  And then they have the audacity to buy a 50″ HDTV and use 10% of their net income to pay for cable?!

What are you saving 100 bucks a month for your kids education for? To learn how to make Ketchup?  I thought the American dream was to provide a “better” life for ones kids? What you are doing is indoctrinating them into a life of glorified poverty and teaching them to “enjoy” it. Nope, teachers along with everyone else don’t need a pension, SS and medicare benefits when they retire. All they need is a page out of your play book. Sounds great, more money for me!  Please pass the ketchup!

I agree with Steve…there’s a lot of holes in these budgets.  Apparently these idiots are driving around uninsured.

This is crazy. The article was “How to Live Well on $40,000.” I know that everyone’s perspective is different but making your own food and ketchup is not my idea of living well. And date night is a sub from the grocery store? That would get old in a long term marriage.

It seems that some of these readers know more about me and my family than I do!  I did not realize that I am on welfare, I sit on my rear and watch Oprah, I am a dumpster diver living on someone else’s trash, I rely on government alone to pay for my healthcare, I am indoctrinating my children into a life of glorified poverty and teaching them to enjoy it and am an idiot driving around uninsured.

The sad thing is I cannot say I was too surprised at some of these comments.  It seems like many people would rather bring others down than learn something and better themselves.  I know that my family’s situation is different than others but this article was meant to give various tips that could hopefully help those that are struggling.  We can all come up with reasons on why we cannot do something.  Until we start trying to learn from our mistakes and change our behavior I am afraid many will experience tough times for years to come.

Visit MSN.com to read the article:  How To Live Well on $40,000 or Less.   Perhaps you have a positive story similar to Danny’s or you’re facing challenges of getting by on less income.   Danny’s story is an inspiration in that you don’t have to make a lot of money to be wealthy or accomplish financial goals such as saving and investing.  Do you have a success story or questions for Danny?  If so, please share them in the comments section.  We’re looking for positive comments and questions, unlike some of the discussion on MSN.com .  As a policy, we don’t care for negative comments here.

No matter your stage of life there are probably many things you’ve learned in the last 10 years about money management which may have come at the expense of mistakes, from reading and research, or from the model behaviour of others around you.

So, pretending I could travel back in time 10 years ago there are a few money lessons I would definitely tell myself.  1o years ago would have put me in the stage of life of being single with no children.  I had just graduated graduate school and was a few years into my profession.

Ownership and Responsibility

10 years ago I thought I owned all my money.  I didn’t have God’s perspective on managing money, although, I naturally wanted to manage it well given my organization and business skills.  But, I still thought it was mine to do with it as I pleased and I was far from using it for God’s purposes.  This was definitely evident in the absence of my giving.  Since then I’ve learned through some key scripture the foundational principles of ownership and financial stewardship that help me live in God’s economy.

The earth is the Lord’s and everything in it (Psalms 24:1).

So then, men ought to regard us as servants of Christ and as those entrusted with the secret things of God. Now it is required that those who have been given a trust must prove faithful (1 Corinthians 4: 1-2).

Saving

I think savingfor emergencies and having extra cash on-hand is so important.  10 years ago I was blessed to be making an excellent salary for my age and experience, but I had absolutely no cash to show for it.  Saving requires alot of discipline because you have to be able to say no in order to put money aside.  I will tell you this becomes increasingly difficult to do when you get married and have a family.  The expenses increase and their are more reasons to spend money.  So, what are some savings tips I would have provided myself 10 years ago?

• Auto deposit a portion of your savings into a savings account directly from my paycheck
• Make sure your savings is a separate savings account
• Set specific and attainable savings goals with an eventual target of at least 6 months of emergency expenses
• Differentiate savings between emergencies, auto and other future needs and make sure there are clear categories for these in your monthly budget

Work/Making Money

I would also give myself a lesson on work and making money.  I think my attitude when I got out of school was to chase after the highest paying job.  I definitely had some interest in my field of software and technology, but I was mostly attracted to the salary and didn’t pay as as much attention as I should have to my God given passions and talents.

I’ve definitely learned I have passions and talents for my profession, but I think my hobbies outside of this work truly reflect what I love to do.  Today I believe in looking at these hobbies and figuring out ways to monetize them.  So, if your hobby is blogging on personal finance there is an opportunity to monetize that hobby by providing content and services to others.  The same could be true about many things.  I think Dan Miller’s book, No More Mondays by Dan Miller, helped me see the importance of this.  Therefore, I would buy this book for me 10 years ago and stress the need to read it and make sure you do the work you love.

Final Thoughts

There are many money lessons I would teach myself 10 years ago about money, but these three seem to be first to mind.  The first and most valuable lesson on ownership and responsibility truly drives all decisions financially.  If you do your best to manage money according to God’s truths, I believe you’ll thrive and prosper.

So, what about you?  What lessons would you have taught yourself about money 10 years ago?  Have you ever considered teaching others these lessons?

Post #1 Recap

Man’s Assumptions and Thoughts About Money

We could all use a little more money margin in our lives, right? For whatever reasons, at some point in time, it has become the norm to not have money margin.

What is a lack of money margin?  It’s being contacted by creditors, overrun with debt and spending money to please people we don’t care about.  It’s spending more money than you make in a single month!

In the first post, we discussed four common assumptions we have about money when God isn’t in the picture.   To quickly recap, if God isn’t driving your thoughts about money you will more than likely think…

• Money will bring you happiness
• Money will define who you are
• Money is yours to spend as you want to
• You’re not responsible for bad financial situations
• The best advice is found out there in the world in a guru’s brain

God’s viewpoint on money – establishing money margin

However, if God is driving your thoughts about money, your heart and mind will change.  Therefore, your actions and the way you manage it will change.  Now, let’s take a look at each of these assumptions from a Godly or Biblical perspective.  I recommend you preface them with:

If God is driving my thoughts about money, I will think…

Money doesn’t bring happiness

In fact, money can bring you heartache.  The love of money will absolutely harm you.  As we learn in 1 Timothy some people who have put money first and chased after more of it have caused themselves much grief and despair.

⁹People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction. ¹⁰For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs. (1 Timothy 6: 9–10)

Money can deceive you.  It lies to you.

²⁴“No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money. (Matthew 6:24)

My pastor noted this scripture doesn’t say you can’t serve both God and Satan.  Rather the word money is used instead. Money can become a God or idol quickly if you’re not careful.  The truth is that we can’t control money by our own little wills.  Money isn’t a neutral thing.  It has power and it’s impossible to control it by ourselves.

It is God’s to use for His purposes

God owns everything, including money.

¹⁰ For every animal of the forest is mine, and the cattle on a thousand hills.  ¹¹ I know every bird in the mountains, and the creatures of the field are mine.  ¹² If I were hungry I would not tell you, for the world is mine, and all that is in it. (Psalm 50: 10-12)

There has never been a dollar you’ve earned in your entire life that didn’t come from God.  Even when you might say you’ve worked hard to get a job or a promotion that pays you well; God gave you the health to earn every dollar.

You are fully responsible no matter the condition

I liked the example my pastor mentioned in the sermon. Dave Ramsey once said:   When the tide goes out you can tell who’s been skinny dipping. The tide might be in when you buy that new car.   Things are going well and you think you have the money to make the payments.  However, when the tide goes out, you have to work more to make it.

It’s important you don’t play the blame game.  If you’re in a mess, you have the responsibility to get out of it.  That’s actually the first step in getting yourself out of debt.  You have to take responsibility for the actions you took to get yourself in trouble.  But remember, as my pastor mentioned, you can reset your ways to Christ.

The best money advice is found in the Bible

As a Money Map Coach, I couldn’t agree with this more.  The best financial advice you can find out there is not in one person’s brain.  It is in the brain of Jesus!  There are two principles that Jesus shared that should be the foundation of developing the right perspective on money.

Avoid greed and the pursuit of possessions and more, more, more stuff!

¹⁵Then he said to them, “Watch out! Be on your guard against all kinds of greed; a man’s life does not consist in the abundance of his possessions. (Luke 12:15)

Give!  Nothing releases our hold on money more than giving to the Lord’s work and to others.

³⁸Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you. (Luke 6:38)

What are the implications of God driving your thoughts about money?

As we discussed in the first post, there are implications of following worldly assumptions about money.  Here is a quick recap:

• Spending tends to be completely selfish.  It’s focused on competitive spending (trying to have as much or more than others) and therapeutic spending (spending to make you feel better)
• Saving will seem senseless.  Why would you want to save if you have to spend to prove something to others?
• Giving will seem senseless.   You would never give money away because you would be losing it.

Implications of following God’s perspective of money

Spending will now be based on contentment

Your focus will now be on managing God’s resources for Him and not spending it for yourself.  Therefore, you will be content based on what God has entrusted you to manage and no longer feel you have to spend to compete with others.

I have learned to be content in whatever circumstances I am.  I know how to get along with humble means, and I also know how to live in prosperity….I can do all thing through Him who strengthens me (Philippians 4:11-13).

Savings is a wise thing to do

Saving is wise because it provides the freedom for you to be used for Godly causes when you are asked to do so.

Giving becomes joyful

The only way to break the iron grip of money is to give it away!!!

³⁵In everything I did, I showed you that by this kind of hard work we must help the weak, remembering the words the Lord Jesus himself said: ‘It is more blessed to give than to receive.  (Acts 20: 35).

Your 3 challenges

Our pastor closed the sermon with three challenges.  We were asked to write them down and identify one or more areas we needed to work on.

• Go cash only.  If you go with cash only you are forced to spend only what you have and no more.  As an aside, I’m not against credit cards as long as they can be used wisely and paid off each month.  It’s when the balances start carrying over from month to month when issues with debt arise.
• Save regularly.  I think an ideal goal (outside of retirement savings) is to save 5% of your net spendable income (income after taxes and tithe).  If you can save 5% regularly, you can build an emergency fund that will help stay out of credit card debt.
• Give to the Lord’s work.  Give 10% of your next paycheck and trust God to replenish.  I love this challenge!  We decided to take that same challenge a few years ago and have been blessed more than we could have imagined.

In conclusion, money margin is something you can really have.  You will discover it,  if you follow God’s Biblical financial principles.

So, what will be your challenge?  Will you do one, two or all of these?

Foundation of financial stability

But why do you call Me ‘Lord, Lord,’ and do not do the things which I say? Whoever comes to Me, and hears My sayings and does them, I will show you whom he is like: 4He is like a man building a house, who dug deep and laid the foundation on the rock. And when the flood arose, the stream beat vehemently against that house, and could not shake it, for it was founded on the rock. Luke 6:46-48

The strongest structure will not stand on a weak foundation.  A structural example of this is the Leaning Tower of Pisa. Although intended to stand vertically, the tower began to lean soon after its construction because it was built on a poorly laid foundation.  Our financial foundation are the principals of biblical stewardship and giving.  Once this foundation is laid, you have the potential to build wide (diversity) and high (wealth, profit and increase).

The pillars promote a balanced and diversified approach to financial stability.  Conventional wisdom dictates you should not put all your eggs in one basket. Using the pillars as an example, it may be tempting to build the savings pillar without any regards to insurance.  A medical problem could wipe out months, even years of savings.  The Bible also supports diversification:

Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth. Ecc 11:2

Let’s take a closer look at some of the building blocks that make up the 3 pillars.  In the diagram, I placed savings in the middle because it is the load bearing beam.  If you are beginning to build, I recommend starting here.

Savings

Sure you could save money like grandma used to by stuffing it under a mattress, but there is absolutely no security in that!  Find a bank or credit union that is backed by the FDIC or NCUA respectively to insure your money.  Build an emergency fund large enough to match your situation and comfort level.  The personal finance experts cannot agree on the amount.  Some advocate 3 months of expenses, and others advocate as much as 9 months.  Consider the following factors and set a goal/amount that works for you.

• Risk tolerance
• Stability of income stream(s)
• Number of income streams
• Number of dependents
• Other assets

Savings should be secure, low/no risk and accessible when needed.  Traditional savings accounts at a brick and mortal bank or an online high yield savings accounts are appropriate for an emergency savings stash.  As your savings accumulates, check to see if you are eligible for a money market account. Money market accounts work like regular bank accounts except they have higher interest, a minimum balance, and a low limit on the number of withdrawals allowed per month.  This is an excellent fit for an emergency fund as interest will accumulate.

Another building block in the savings pillar is the certificate of deposit (CD).  CDs have a fixed term and typically a fixed-rate.  There are withdrawal penalties, so this is something that should not be considered for an emergency fund.  Generally, the larger the principal deposit and term length, the higher the interest rate.  CDs attract conservative savers and investors because of their low risk.  However, the return is low for the amount of time your money is held up.  The CD laddering strategy attempts to alleviate this.  The idea is to start several CDs at the same time at varying lengths (example: 1yr, 2yr, and 3yr).  As the CD matures, it would be reinvested at the 3-yr term (highest interest rate).  Eventually, all the CDs will be invested at the 3-yr term, however one would mature every year.  Giving you a bit of flexibility.

Insurance

Insurance is like bitter pill.  We take it because we know it’s good for us, but no one really wants to.  However, having insurance is the responsible thing to do, and in some cases it is required by law.  There is insurance for everything under the sun!  The key is to make sure you have enough of the right kind of insurance.

Probably one of the most popular insurance decisions will be whole or term life insurance.  Term insurance is the cheaper of the two.  It provides coverage for a predetermined amount of time (eg. 30 years).  Whole, or permanent life insurance is open ended, providing coverage as long as you pay the premiums.   They also accumulate a cash value.  Generally speaking, there are better mechanisms than a permanent policy.  If you are disciplined in your investments, you may not need to rely on a life insurance product to save for you.  To see where you line up, use bank rate’s insurance calculator.

If you are going to operate a motor vehicle, car insurance is a requirement in every state.  The amount of minimum coverage varies from state to state.  A 2006 report from the Insurance Research Council estimates more than 14% of drivers are uninsured.  The penalties are hefty and not worth jeopardizing your financial stability.  Don’t do it!

Selecting the amount and type of insurance is a delicate balance between cost and peace of mind.  Not enough insurance and you may find yourself unsettled and in dire straits should a need arise.  Consequently, if you spend too much on insurance, you may not have enough to save or build the third pillar…

Investments

Unlike savings, where your money is stored in a safe, accessible manner; investments involve risk with greater potential for gain over extended periods of time.  The primary focus of investing is increasing your net worth and achieve long term financial goals.  The amount and types of investments you choose will vary according to your risk tolerance.  The market fluctuates and your portfolio graph may look like the latest thrill roller coaster.  However, over long periods of time (10 years or more), the market traditionally increases between 8-10%.

Popular investments include

• 401 (k) retirement plans – Many employers will match a portion of your contribution
• Individual Retirement Accounts
• 529 College Savings Plan – Each state’s plan is different.  Shop around!  You don’t have to select the plan in your state of residence
• Mutual funds & Exchange Trade Funds

Of course there are plenty of other entities not listed here.  This is not meant to be an all inclusive list.  When you start with a strong foundation and these 3 pillars, you are on your way to building financial stability.

What does your blueprint for building financial stability look like?  Do you use the three pillars listed?  Could you include more pillars?  Less?

For example, I’ve noticed the TV transitioning from color to black and white every now and then.  Given I’m no TV repair man and my JVC is a carry over from my single days (more than 7 years ago); I figure it’s coming up on its last few run of shows.

That’s both good and bad, right?  Good because we may finally look at the big flat screen as a replacement and bad because they aren’t cheap!

We also have an older washer and dryer (again from my single days) that could be in need of replacement.  The dryer requires a few cycles for drying a load of clothes sometimes which I know is probably costing us some more money on our electric bill.

And finally, the tread on the car tires is smoothing out from all my commuter miles each day to work and back home.  Car tires aren’t the price of a washer and dryer or TV, but they’re not exactly pocket change either.

Add these expenses up and the total is something I’d rather not think about!  Timing for one of these items going out could make matters worse.  But scripture tells us we need to think about them.  According to Proverbs 21:20 we should save for the future and not spend everything we earn.

Even though we’d rather not think about them, we don’t want them to become emergency expenses if we don’t have cash on-hand to replace them.  Is the TV really an emergency expense?  With two small children and no Mickey Mouse Clubhouse, yes, we have an emergency.

However, I don’t think they have to be emergencies if we start saving money for these future expenses and plan for them today.  In our situation, there are obvious indicators that the expenses will need to occur in the near future, so it wouldn’t be wise to ignore them.

Aren’t these areas we choose to forget about when it comes to saving?  The first reaction isn’t to save for future expenses.  It’s typically spend as we need or spend as we want.

However, without wisely thinking about such savings, we are often suprised when they do stop working and we don’t have the money to pay for them.  And without enough savings on-hand people are often put into the situation of financing them.

While some stores offer 0% financing, I’d personally not rather not be locked into a monthly payment.  I’ve been there before and the payment, even at 0%, is hanging over my head, limiting freedom and flexibility.   I think there is more freedom in making the payment to myself in savings.

Therefore, my wife and I have talked about the importance of building out a seperate monthly replacement savings.  Certainly I can’t say we’ll have enough saved when these things do decide to retire, but even so, saving now would help insure we don’t have to spend as much out of our emergency savings account and hopefully help us avoid any need for financing.

Is there anything around your house in need of replacement that might turn into an emergency?  Think about it and determine if you need to start saving for future expenses with a new category in your monthly spending plan.

Photo by gbaku.