Tag Archives: prosperity

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.