Category Archives: Finances

Derailing the Gravy Train

Why do taxes, debt and government spending continue to skyrocket while public and elected officials claim they are making significant cuts? It’s a numbers game. A lack of fiscal savvy on the part elected officials often plays a contributing factor, as do those with a ‘kid in a candy store’ mentality. Either way, the solution is derailing the gravy train.

The principles I outlined for getting yourself out from under debt in Debt Makes Slaves of Those Who Owe and in Roadmap to Financial Freedom are equally as valid whether you own a business, are the CEO of a large corporation or an elected official representing your constituents at the federal, state or local levels… yes, even those we elect to our school boards. Debt is debt… and just like the law of gravity, the key for gaining financial freedom is the same at home, work and even for government. There shouldn’t be a difference between how a person responsibly manages their personal finances and how they would manage public finances, if elected to office. The common sense principle of  living within our means is as true as the laws of nature… that the sun rises in the east and sets in the west.

Government entities have a difficult time comprehending this fact because they are addicted to spending. After all, it isn’t their money they are spending. No, they’re spending other people’s money… the taxpayers’ money…. your money.

“Are you entitled to the fruits of your labor or does government have some presumptive right to spend and spend and spend?”–President Ronald Reagan

Most government programs related to public education are out-and-out failures. Most government efforts at so-called educational reform are misnomers. In most cases, government programs do nothing to actually “reform” or improve student learning and typically, the interference makes things worse. Think about it. Kids in the Wisconsin Northwoods have different educational needs than kids in the inner cities or those living along the southern border of the US… or anywhere else, for that matter. Even within our own state there are different student needs from school district to school district. It doesn’t make sense for the state or federal government to try and impose on local school districts a one-size-fits-all approach to education, but that is often the case. The problem with the big government blanket approach is it doesn’t effectively target resources. Instead, it is your local school board, administrators and teachers who know best how to educate and meet each of their students’ unique needs.

So why doesn’t the state and federal government just get out of the way and let the local experts do it?

President Reagan said it best:

“We developed at the local school district level probably the best public school system in the world. Or it was until the Federal government added Federal interference to Federal financial aid and eroded educational quality in the process.”

It’s all about control, bureaucracy, politics and money. This is the root of the problem.

Government programs are never really intended to actually improve student learning, but if you read the small print, it becomes crystal clear the true purpose of these programs is to consolidate more authority and power over local public education at the state or federal level.

You see, unlike other areas of government… say the court system… where first a case is tried at the county level, then it can be appealed and work it’s way up the ladder to state or district courts before finally reaching the U.S. Supreme Court, which is the highest in the land and final decision, in the case of your local school board, they hold the decision-making power in your local school district. It’s only when they take the carrot on the stick… when they sign on the dotted line to become involved in various government programs, usually in exchange for funding, which rarely, if ever, covers all of the costs… that they are actually selling out the local taxpayers, parents and students… and something which is priceless:  local control.

This is what’s meant when you hear school administrators, board members or other local officials complain about “unfunded mandates”… it’s really the proverbial strings attached to these various government programs and the realization the funding provided by the government as an incentive to participate was not nearly enough to actually cover the costs associated with it.

There are some government programs such as the controversial and infamous No Child Left Behind (NCLB), among others, which local school boards have no choice in the matter but to participate because these programs have been written into law as mandates. But there are many, many other state and federal programs where school boards do have full authority to decide whether to participate or not. School boards need to approach these programs, cautiously, to ensure they are truly needed and determine if they are a wise use of funds.

Government and public schools financing is not an easy topic to tackle. However, a fundamental understanding of the process and pitfalls is necessary if we are to get off the hamster wheel and actually fix it… so listen up.

One of the most glaring problems I see is the budget practice of Line-Item Budgeting and Traditional Incremental Budgeting which is a budget process utilizing Baseline Budgeting, a common practice at many levels of government, and is especially popular in school districts across the country. Line-Item Budgeting is akin to “accountant-speak” because unless you are an accountant, it can be extremely vague and confusing for the average person to understand exactly where or how the money is being spent.

An easy way to understand what Incremental or Baseline Budgeting is would be to think of it as if you were to apply this method to your personal finances:

Hypothetically, let’s say you spend $100 a week on groceries, which totals $5,200 in a year. If you were setting up your budget for the coming year, using the baseline method, you would automatically add to that total an anticipated increase in cost for food of $600 over the year, bringing your total up to $5,800.

Let’s say you want to add new spending in the form of hosting a huge party, once a month, which will cost an extra $200 per party or $2,400 over the course of the year. Now you’re up to $8,200. This amount becomes your baseline.

So, maybe you decide to “cut back” and only host a huge party twice during the year bringing your annual food budget down to $6,200… that becomes a “savings” of $2,000 out of your budget even though you are, in reality, adding $1,000 for two new parties plus estimated cost increases.

The other part of this is looking at the estimated $600 increase for food. Maybe costs won’t increase at that level and come the end of the year, the actual increase was only $100. You have $500 extra. Since you are using Baseline Budgeting and want to be sure to get as much or more money to spend the following year, you have to quick spend that $500… so it’s generally wasted, keeping your baseline going forward at $6,200… an $1,000 increase over the previous year.

This is a simple illustration of how government spends your tax dollars. It is, particularly in school districts, why, as the end of their fiscal year draws night there is a rush to spend every last cent remaining in the budget. By reporting any end of the fiscal year surplus, they will not get an increase in their funding. Many, if not most, public school districts, other local government entities and government agencies all tend to operate under this system, which, in reality, encourages wasteful spending and fiscal irresponsibility.

Governor Scott Walker's budget gives local governments tools to rein in spending

It also partially explains why school districts can claim they are making substantial cuts to their budgets, yet, year-by-year spending continues to increase. In Wisconsin, public schools operate under a funding cap, which normally includes a built-in annual increase. The current year, however, is an exception due to significant changes made at the state level in Governor Scott Walker’s biennial budget passed into law earlier this year.

It is thanks to Scott Walker’s changes to the collective bargaining law which has provided public school districts, towns, cities and counties across Wisconsin with the needed tools to rein in employee benefits costs while giving taxpayers a break. It’s a valuable opportunity, especially for school districts facing structural deficits which could very well cause them to go bankrupt, to right the ship and return to a course of fiscal stability. The question is, though, will public schools and local governments use this opportunity to effect long term solutions, heading off disaster… or squander it?

Well, that depends on whether or not those governing the purse strings have the strength and will to insist on rooting out waste and making fundamental changes to the budget process, itself.

The combination of using Line-Item Budgeting and Baseline Budgeting serves to obscure how a school district truly spends its funds. There is nothing “transparent” about it and basically, a person just about has to be an accountant to understand where the money is going. I believe a school budget, and particularly it’s annual report, should be written in plain language the common person can comprehend and understand… and all documents should be readily available for public scrutiny. Some public school districts are very open about their budgets. Many schools are actually posting their budget, broken down into easily understandable categories, along with supporting documentation, right on their websites. This is transparency. Anything less is not.

Even though the lion’s share of a public school district’s budget goes to paying employee salaries and benefits, out-of-control spending and budget bloat cannot be blamed entirely on the number of employees, alone. School boards must also take a critical look at the entire budget, ask questions and get answers, for instance:  How much money is being spent on Professional Development? What is the total amount spent on travel, both in-state and out-of-state? What is being spent on non-sick day substitutes who are used so teachers can attend meetings during the school day? What is being spent on food and beverages for meetings? How much money is being spent on mileage reimbursements to staff and administrators? Is the district paying for employee cell phone bills?

These are all examples of common costs which siphon money out of the classroom in favor of creating perks for administrators and staff. It’s one of the reasons why many school districts are on a continual treadmill of decrying budget shortfalls and touting their perennial “cuts” to supposedly “balance their budget”… yet, before the ink is dry on one year’s budget, they are right back to talking about having to cut as much or more from the upcoming year’s budget. It’s also a tactic some districts employ in an effort to wear down their taxpayers and pressure the public to approve a referendum to raise taxes while claiming “it’s for the kids”.

It’s time for perks to go the way of the dinosaur.

It’s not only the status quo in public school districts, but also at each step of government all the way to the top. This is why we have Government Gone Wild and taxes up through the roof.

There is nothing balanced nor fiscally responsible on the part of elected officials who allow this sort of smoke-and-mirrors financial mismanagement to continue, year after year… always on the trajectory of financial bankruptcy and ruin, just around the corner. “Cut” only what’s absolutely necessary to get the numbers to appear balanced, all the while continuing to spend and spend… and waste money like there’s no tomorrow. In reality, it is doing nothing more than paying lip-service to fiscal responsibility. Tell the public what they want to hear so no one will look too closely at how tax dollars are being spent or ask any questions… so the Gravy Train can keep on rolling.

Instead, why not actually FIX the problem? Wouldn’t that be the logical and common sense thing to do?

This is why, I believe, we must do away with Line-Item and Incremental or Baseline Budgeting practices in favor of the efficiency and transparency of Zero-Based Budgeting (ZBB), a methodology for conducting the budget process which was predominant throughout public education from the 1950s and 1960s through in to the 1980s, when it fell by the wayside. It is now seeing a resurgence as boards of education are returning to the time-tested, proven budgeting model for efficient and improved school operation. Zero-Based Budgeting is popping up in districts from Vermont… to Georgia… to Oregon and many, many other locations.

A recent article published in the Pittsburgh Post-Gazette reports how the Penn Hills School District’s finances have benefitted by changing to a Zero-Based Budgeting model:

“Using a zero-based budgeting approach, in which all departmental spending starts at zero and must be justified in detail, the district was able to eliminate inefficiencies, officials said. Mr. Liberto said departments lowered their operational budgets by about 10 percent, as he and superintendent Tom Washington had requested.

“Over the past three or four years, we’ve gotten into a rut where we might have gotten out of one program, not eliminated it, and started something new, so we were picking up double expenses,” Mr. Liberto said. “We’ve noticed a lot technology wise … programs and things that we’ve been operating for years that we no longer need and can streamline. So, the zero-based budget has helped quite a bit.”

So why do I favor Zero-Based Budgeting? Because it approaches the budgeting process with a clean slate as it bases the allocation of resources according to actual needs rather than simply adding across-the-board increases to previous spending levels. By forcing the justification of spending on a needs basis, it eliminates wasteful and obsolete spending practices, and avoids habitual spending while detecting inflated budgets. It puts an end to the end-on-the-fiscal-year “spend it or lose it” mentality. This sort of systematic review imposes fiscal discipline on the organization, improving operational efficiencies. It shines sunlight on the process and the end results. It increases transparency and accountability.

I believe, particularly given the country’s economic troubles, finding better ways to ensure good stewardship of tax dollars is more important than ever… and Zero-Based Budgeting is a valuable, common sense tool in accomplishing this goal.

Using a Zero-Based Budget, managers and administrators are forced to find cost effective solutions to improve operations while performing meaningful review. One of the inherent benefits of Zero-Based Budgeting is conducting analysis to critically evaluate program effectiveness on their merits as a part of the review process. It is the “big picture” which connects cost with results.

This is vitally important information as it can assist in improving the quality of elected board members’ decisions as they determine if or when a program should be sunset, based on facts. It also goes without saying, this process elevates board-level budget discussions to a more meaningful level and enables them to ultimately make better, more informed, intelligent decisions. Ultimately, this approach will have a positive impact in the classrooms as ineffective programs are eliminated in favor of methods which demonstrate proven success. It benefits both the children and the taxpayers… truly a “win-win” for everyone.

But Zero-Based Budgeting is not just for public school districts. Counties, towns and cities are rediscovering the benefits of Zero-Based Budgeting; from small towns like Wimberley, Texas and Nashua, New Hampshire… to major metropolitan giants like Phoenix and Chicago. Likewise, it’s winning favor in state legislatures, as well. Already eighteen states are using it, with legislation pending in many others. And it’s not just a growing trend, here, in the US as it’s catching on in Canada and the UK, too.

Mr Marc J. Lane, a Chicago business and tax attorney and a financial advisor recently wrote an Op-Ed published in Chicago Business entitled Zero-based budgeting holds much promise for Illinois’ fiscal future:

“An unheralded provision of last spring’s budget legislation adds Illinois to the growing roster of states committed to performance-driven budgeting. “Budgeting for outcomes” was introduced by former Washington Gov. Gary Locke in 2002, when he faced a $2.5-billion budget shortfall. Mr. Locke reformed the way state officials prioritized and spent taxpayer dollars and, by 2003, had closed a nearly 15% budget gap. Since then, state after state has followed Mr. Locke’s lead, demanding that budgets be designed from the ground up, a common-sense practice now mandated in Illinois for fiscal year 2012 and beyond.”

Here’s how it works:  The various departments of the particular government entity or building level, for public school districts, prepare and submit their budget proposals under the guidance and watchful eye of the Chief Financial Officer or Accounting Department. Within schools, this would include the input of teachers at the department level before presenting to to their building principals. This should include alternative levels of funding:  with a Minimum Level below current spending, a Base Level reflecting current costs and an Improvement Level. The “Decision Package”, as it is called, is advanced to the administrator, if there is one, along with the elected officials, who sit down… to review these proposals. Then, the elected officials set priorities and make decisions as to what should be cut, changed or approved… just as we should all do with our own personal finances.

It’s not the job of a hired administrator, in my opinion, to decide on their own or with their hand-picked, small inner circle behind closed doors, what the spending priorities should be, because typically, they usually tend to be more concerned with implementing their own personal agenda, padding budgets, expanding costs and staffing – and, unfortunately, in some cases, how to enhance their own resume – rather than in what is best for the taxpayers and community.

But it’s not their job to care about the strain their spending places on taxpayers.

Think about it. When decisions as to how tax dollars are to be spent are made exclusively by paid administrators – and when they are operating within a system of Baseline Budgeting, it’s no wonder so many of our public schools and other levels of government are drowning in red ink.

I firmly believe it is the sworn duty of those whom the citizenry elects to represent them to have an active and participatory role in the budget process. This is what’s meant by having a representative form of government and is why our Constitution begins with the words: “We the People”. If it were otherwise and it was, in fact, the paid administrator’s exclusive right to make these budgetary decisions in a process which excluded those who sit on an elected board, I ask you, why even have elected officials at all? In such a situation you have taxation without representation… exactly what our ancestors fought against and died for during the American Revolution… and something which is a principle cornerstone of the founding of our nation.

A hired administrator’s job is limited to acting in an advisory capacity to the board – be it school, town or at county levels. You see, setting goals each year, establishing priorities, planning and making these kinds of decisions is the job of those we elect to represent us. Each of these components are vital to the creation of a successful budget and in operating an efficient, effective organization.

When a budget is written in a one-year vacuum, without considering its impact and ramifications going forward into subsequent years, it becomes simply a “placeholder”… or worse, like putting a band-aid over a life-threatening wound. At minimum, I believe public school districts should create a three-year balanced budget plan – and share it with their community in the interest of openness and transparency. It’s only by taking the time to map out a long-range view where we can solve these public schools and government’s dire financial problems… while actually working to avert any bankruptcies looming on the horizon so these organizations can become fiscally responsible.

Isn’t this what the voters and taxpayers expect?

Listen up… it’s not just all about money:  Zero-Based Budgeting is very much tied to student performance and realistically improving both the school district’s cost-effectiveness, as well as the level of student learning. It’s about financial and educational accountability. Forget all the media and political hype about needing “educational reform”. Look at it this way, if you have educational accountability, you won’t need any “reform”.

Let me say it again. If you have educational accountability, you won’t need any “reform”.

In a nut shell, Zero-Based Budgeting pulls back on the reins, steering the organization onto the path leading to fiscal reality, soundness and sanity. In times of economic upheaval or even prosperity, it’s about living within our means – whatever that may be.

Critics claim it is too much work, but what they’re really afraid of is how Zero-Based Budgeting upsets the apple cart in that it exposes waste, inefficiencies and ineffective programs as it Derails the Gravy Train. Did you hear that? I’ll say it again:  Zero-Based Budgeting exposes waste, inefficiencies and ineffective programs as it Derails the Gravy Train. It changes the paradigm as it eliminates the old status quo in favor of accountability and true transparency.


  1. Penn Hills School District cuts 44 jobs, contracts bussing to balance budget by Zak Koeske, Pittsburgh Post-Gazette (5/26/2011)
  2. North Hampton School Board pushes zero-based budget for 2009-10 by Tamara Le, Seacoast Online (11/25/2008)
  3. Zero-Based Budget Committee Page, Burlington School District (8/1/2011)
  4. Catskill looks at zero-based budget on March 1 by Paul Smart, WGXC Newsroom (2/25/2011)
  5. Plans for zero-based budgeting by Lynh Bul, The Arizona Republic (6/25/2011)
  6. Council adopts zero-based budgeting in preparation of future city budgets, The Hays County RoundUp (7/25/2011)
  7. OpEd:  Zero-based budgeting holds much promise for Illinois’ fiscal future by Marc J. Lane, Chicago Business (1/10/2011)

Roadmap to Financial Freedom

(Yesterday, I published Debt Makes Slaves of Those Who Owe, part one. Today, I hope to answer the question:  How does a person get out of debt?)

Let’s budget… did I hear moaning? Don’t worry, it’s really not difficult… you’ll see.

But, before you can make any decisions on how you’ll handle your money you’ve got to see the big picture and understand where your money is going, on a monthly basis. If you don’t take the time to do this, it’s like driving blindfolded.

Gather up some sticky notes, a pen, calculator and your bills. Separate out necessities such as your mortgage or rent payment, taxes, child support obligations, your church tithes, insurances, utilities, food, medical and car expenses. Label that stack “NEEDS”.

The second stack should be your credit card bills along with any loans you may have such as:  extra vehicles, motorcycles, snowmobiles, campers, boats, a cabin, student or other types of personal loans… whatever it may be. Label that stack “WANTS”.

If you have other types of monthly expenditures, such as cellphones, internet service, newspaper subscriptions, music or dance lessons, karate classes, a membership at the athletic club, etc… This stack is labeled “EXTRAS”.

Write down what you spend on a regular basis such as:  restaurant meals, fancy coffees on the way to work, what you spend at the bar, cigarettes, trips to the hair salon, and other incidentals. Label this stack “HABITS”.

You may need to carry a small pad of paper and a pen with you for a week or so and actually record what you are spending, as most people underestimate what they think they are spending on these incidentals. Keeping track by jotting them down will help you to realize how these items actually add up.

When you are satisfied you have all of your data, tally up what you owe or spend for each category, along with a grand total and write it down.

Next, figure out your monthly income. Hopefully, that number is larger than what you owe. But even if it isn’t, you can fix it.

It’s time, now, to prioritize. By separating your obligations into these piles, you’ve already begun. The NEEDS stack is a given. Subtract that total from your income.

Then, take a critical look at the items in your WANTS stack. Ask yourself how often do your actually use each item. Look at your loan balances. Think about what you can do without… what can be eliminated. Maybe you can sell some of the things adding to your debt load. Do it.

Now, if you’re really serious about getting out of debt and attaining financial freedom for yourself and your family, sell everything on your WANTS list that is a tangible asset. In other words, if there’s something you can stick a “For Sale” sign on, do it.

Trust me. The sacrifices are only temporary. Go ahead, call up the newspaper and write up your classified ads to sell that stuff you can’t afford… the things which are weighting you down, keeping your head under water and your life in bondage to debt.

Carefully look at each item left in your WANTS stack to determine what interest rate you’re being charged. Chances are, you are paying the highest interest on your credit cards. But whatever the case may be, arrange your stack with the highest interest items on top and the lowest on the bottom. Make a list recording the bill with the highest interest on the top, then the next highest, and so forth. This is your WANTS LIST.

You’ve just prioritized your debts.

Arrange your EXTRAS stack according to what’s most important to your family. Eliminate as many of the less important items as possible.

If you have a child who takes dance, piano or karate lessons, perhaps he or she can find a part-time job to pay for it. If they are too young, maybe you can request family members consider gifting the child with cash or a gift certificate from the business at birthdays or Christmas to cover or defray the expense. A child is never too young to begin learning the value of a dollar, goal setting and personal responsibility.

Take the same approach with your own items on the EXTRAS list. If there are little ones in your home, you will be setting a good example for them to follow.

Depending on your circumstances, you may have to entirely eliminate your HABITS list. I’d strongly recommend doing so. Remember, it’s not forever. If you give up these HABITS, at least for now, it will speed up the process, enabling you to become debt free sooner.

If you have credit cards, stop using them and cut them up, if necessary. I know, that’s plain old common sense. But many people are addicted to reaching for their plastic and by destroying the credit cards, it lessens the temptation and risk of ending up farther in debt. The rain has to stop before you can succeed at bailing the boat out.

Although I believe in building a savings account, if you have a heavy debt load, you may be better off temporarily applying your resources to becoming debt-free because most likely the amount of money you are paying in interest, alone, is probably greater than the amount of interest you are likely to earn on a savings account. So it makes sense to put your resources where they will do the most good. But I should emphasize, as soon as you do get some breathing room… some relief from your debt, get in the habit of making regular contributions to your savings.

Now you can begin to get yourself out of debt.

Each month, after you’ve first met all of your NEEDS obligations, pay the minimum amount due on each of the remaining WANTS items, except for the one bill at the top of your WANTS LIST. This debt item becomes your TARGET to pay off as quickly as possible by making double or triple payments… or even just an extra $100, $50, or $25 a month. When you sell anything from your WANTS list, be sure you pay off the remaining loan balance, then, if there is any extra money, apply it to your TARGET. Likewise, all of the funds you’ve freed up by eliminating WANTS, EXTRAS and HABIT items are to be paid to the one debt item you’ve identified to TARGET.

Of course, it goes without saying, always pay your bills on time… or early, if possible. But I said it anyway.  By paying your debts as soon as you’re able, rather than waiting until the due date, you can save yourself some interest charges. A little each month adds up over the long run.

Once you accomplish your goal of paying off that first TARGET, cross it off your WANTS LIST and pat yourself on the back. Congratulations on your first success!

When the next month comes along, take the monies you were using to pay on your first TARGET item’s debt and add it to the minimum amount due on your second TARGET item. As you begin to pay off these TARGET items, one by one, you will gain momentum because you’ll actually have more available income to use towards paying off your next TARGET. And the quicker you are able to bring down the credit card or loan balances, the less interest it will cost, so you’ll save money and come out ahead.

If you stick with it, it won’t be long before you will see the fruits of your labor and if you are determined and committed to becoming debt-free, you will get there.

After you have paid off and eliminated all debt associated with your WANTS LIST, set your sights on your NEEDS list, applying the same principles to paying off your vehicle or family vehicles, then work on your mortgage, if you have one.

Now comes the fun part of getting your finances in order and learning how to manage them responsibly, so you can avoid debt in the future.

After you succeed at getting yourself out of debt, put these same principles to work for you in setting aside money for your savings to build up a nest egg. And likewise, consider setting up a special savings account earmarked for a specific purpose – so you can afford to pay cash for things you used to go into debt to purchase.

Of course, there may be times when you can’t avoid debt, such as the purchase of a home or replacing a car, for instance. However, by planning ahead and earmarking some of your savings for these purposes, you can at least have a down payment for these major purchases. If you do get a loan, pay it off as quickly as you can.

Living within your means is simply spending less than what you earn. If you get a raise or a better job, continue to live as you did before. Spending less than what you earn allows you to set aside money in your savings… and, with faith and obedience to God, you can enjoy prosperity. Life is full of expenses so you really cannot afford not to save.

Owe nothing to anyone–except for your obligation to love one another.–Romans 13:8a (NLT)

Personal finance management is all about making wise choices, walking in faith and obedience to God, exercising restraint by living within your means… and always remembering:  Debt makes slaves of those who owe. I wish you peace and prosperity.

Debt Makes Slaves of Those Who Owe

As I was growing up, like most children, I had a piggy bank. I learned from an early age how to save my money, putting it away for the proverbial “rainy day”. At birthdays, when my grandparents would tuck some paper money into my birthday card, I fed the piggy. Spare change, allowances, change from a treat at the dime store, a coin found on the sidewalk… I fed the piggy. From time to time, my dad would lay newspaper out on the floor, open my bank and help me count the money, then carefully, we’d sort and put the coins into paper “rolls” to be deposited into my bank account. Over time, my account passbook tally grew… with interest… and I learned an important life lesson: how to manage money.

I landed my first “real” job at fourteen years old at the corner drug store. Sure, I had earned money babysitting, mowing lawns and managing my own Kool-aid stands, like most kids, but this was a “real” job paying $1.25 an hour. I used my meager paychecks to purchase my own clothes and still managed to squirrel some into my saving account.

At seventeen, I had saved enough pennies, and nickles, and dimes and quarters… and dollars… to pay cash for my first automobile: a 1972 Buick Skylark with a 350 cubic inch engine… and I did it without emptying my account.

My parents taught me the value of a dollar. How to set goals and achieve them. They gave me the life-long gift of learning how to handle money responsibly.

Train up a child in the way he should go: and when he is old, he will not depart from it.–Proverbs 22:6 (American King James Version)

As parents, we have a responsibility to teach our children how to exercise good stewardship of their money. By teaching them the principles of good money management from an early age, we can help prevent them from going astray by making poor money decisions as adults.

It’s important that we remember to set a good example for our children to follow, by managing our own finances responsibly. Sometimes, though, it can be hard to keep your head above water – especially, if you weren’t taught how to handle money, yourself.

Remember in the classic old movie, The Wizard of Oz, when Dorothy closed her eyes and repeated “There’s no place like home” as she clicked the heels of her ruby slippers three times? She awoke, her problems were solved, the sun was shining, she was surrounded by her family, friends, and of course, her little dog Toto… and she was back in Kansas. You see, as Glenda told her, she had the ability to change her life all along. It’s something we all possess: free will.

We just have to stop compounding our problems and change our mindset… change our way of thinking about how we manage our money. Stop allowing yourself to be held hostage to your finances and take control. You can do it… and you don’t even need a pair of ruby slippers.

As long as you are a slave to debt, you cannot prosper.

What do I mean by that… what does it mean to be a slave to debt?

When a person is in debt, they are legally obligated to pay off that debt, plus interest. The debt owed becomes money the person no longer has any control over, so there’s a loss of freedom on the part of the debtor… plus the additional money to be paid in interest, are given to the creditor. In other words, the debtor’s productivity belongs his creditor. The debtor, in effect, will be working by the sweat of his brow for the creditor while he’s paying back the loan, but also while he’s earning the additional money to pay the interest on that loan.

The man of wealth has rule over the poor, and he who gets into debt is a servant to his creditor.–Proverbs 22:7 (Bible in Basic English)

As long as a person owes a debt, they do not actually own whatever the item may be on which they are making payments. This is what’s meant by saying a person’s wealth is on paper. Their name may be on the papers, but if they do not meet the terms of the obligation… the loan, they’ll find our very quickly exactly who owns it when the lender, who has the legal right to repossess or foreclose, does so. Basically, until the things a person is in debt for are completely paid in full, he doesn’t actually own them. This is why a person who is in debt cannot prosper… because debt stands in the way of prosperity.

Let them shout for joy, and be glad, that favor my righteous cause: yes, let them say continually, Let the LORD be magnified, which has pleasure in the prosperity of his servant.–Psalm 35:27 (American King James Version)

Isn’t it great to know God takes pleasure in our prosperity?

In the secular world, prosperity is generally believed to mean having wealth, fame and prestige. We see people in the world who seemingly have insatiable appetites for riches and things. They seem to be driven by materialism, yet no mater how incredibly wealthy they become, they are never satisfied. The reality is money, riches and possessions do not make a person prosperous.

True prosperity is far more than just being successful or financially secure because it describes a state of the soul. The Biblical meaning also includes: to have joy, health, and to see progress in all we undertake… peace of mind. Ask yourself, what good is wealth, if the person is miserable? True prosperity is rooted in faith and obedience to God’s Word.

Do you remember the old Sunday school song, The Wise Man Built His House Upon the Rock? This is about prosperity. In the song, the foolish man built his house upon the sand and met calamity. But the obedient man built his house on the Lord Jesus Christ and he received blessings. Joy, good health, success and financial security are blessings and they are the evidence of Biblical… true prosperity.

Beloved, I pray that in all respects you may prosper and be in good health, just as your soul prospers.–3 John 1:2 (New American Standard Bible)

Think about how your family’s life could improve if your were living debt-free and were able to set aside a nest egg to purchase your next vehicle with cash, take a special family trip… and save for your retirement. Having peace of mind in knowing when life’s unexpected calamities come knocking at your door, you will have the resources available to deal with them. How fantastic to be out from under the crushing weight of the debt burden you carry on your shoulders and drag along day by day shackled to your ankles and wrists!

Freedom! That’s the feeling of financial freedom.

Most people are shackled by debt. The lion’s share of what they earn goes to making payments and they struggle to make ends meet. If anything upsets the apple cart, they’re in trouble. The downward spiral can quickly get out of control and spill over into other areas of a person’s life. Consequently, money problems are often a contributing factor to divorce.

I’ve seen this happen to a family member. Like most people, they had a mortgage and car payments, then the husband went into debt to start a business. It takes time to get a business off the ground… more time than he expected. In order to keep things going, he relied on credit cards… maxing out several. Big mistake. The interest alone was a crushing burden.

After the divorce, it took the wife years to dig out from under her share of the debt. At one point, she was so overwhelmed by bills, she would put them into a plastic ice cream bucket, then draw one out at a time as she was able to come up with the money. Eventually, with perseverance, she succeeded, but it was not easy and it took a lot of determination and self-discipline.

What’s easy is getting into financial trouble. It’s easy… far too easy to get approved for credit – often, even if you don’t have a job or the income to justify it. We live in an impatient world where everyone wants instant gratification. Why wait? Why deny yourself that luxury you deserve? There’s simply too much “keeping up with the Jones”… which is envy. Everyone wants everything… now… which is coveting.

The temptations to buy and unwisely spend money we don’t have for things we really don’t need bombards us on a daily basis. This can lead to impulse buying, which is exactly what advertisers count on – and is why advertising is such a booming business.

Then 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 (New International Version)

A godly life brings huge profits to people who are content with what they have.–1 Timothy 6:6 (God’s Word Translation)

So where to start?… How does a person get out of debt?

Stay tuned. My next entry, A Roadmap to Financial Freedom, will show the way.