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The Whole Armor of Personal Finance

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Some of my favorite bible verses are those packed full of encouragement and power.  In the following passage, the Apostle Paul is speaking to the church at Ephesus regarding the battles to be fought, and the weapons with which they should fight.  This text is incredibly uplifting and full of timeless wisdom.

Paul reminds the reader that the Christian battle is not one of flesh and blood, but of principalities, powers, the rulers of this world, and wickedness in high places.

It reminds me of our battle against debt, advertising, commercialism, and the war we fight to gain control over our personal finances.

The Scripture

Finally, my brethren, be strong in the Lord, and in the power of his might.  Put on the whole armour of God, that ye may be able to stand against the wiles of the devil.  For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places.  Wherefore take unto you the whole armour of God, that ye may be able to withstand in the evil day, and having done all, to stand.  Stand therefore, having your loins girt about with truth, and having on the breastplate of righteousness;  And your feet shod with the preparation of the gospel of peace;  Above all, taking the shield of faith, wherewith ye shall be able to quench all the fiery darts of the wicked.  And take the helmet of salvation, and the sword of the Spirit, which is the word of God:  Praying always with all prayer and supplication in the Spirit, and watching thereunto with all perseverance and supplication for all saints;”  – Ephesians 6:10-18

The whole armor of God

  1. Loins girt about with Truth
  2. Breastplate of Righteousness
  3. Feet shod with the preparation of The Gospel of Peace
  4. Shield of Faith
  5. Helmet of Salvation
  6. Sword of the Bible

The whole armor of Personal Finance

  1. Loins girt about with Wise Money Management
  2. Breastplate of Frugality
  3. Feet shod with the preparation of Sound Financial Counsel & Education
  4. Shield of Contentment
  5. Helmet of A Proper Money Mindset
  6. Sword of Cutting Expenses

Loins girt about with Wise Money Management

  • Budget to gain control & focus on Spending less than you earn
  • Emergency fund savings – while many say to get at least $1,000 saved for emergencies, I advise to continually fund your emergency fund and other high interest savings accounts by using the percentage approach.  I currently designate 25% of my available funds to my savings even though I am still in debt reduction mode.
  • Debt reduction – where I focus the remaining 75% of my available funds.  It is of the utmost importance to rid yourself of all your high interest consumer debt like credit cards, department store cards, auto loans, etc.  Once you pay off your high interest debt, I advise shifting the majority of your available funds to savings & investments.
  • Invest & continue to save – once you have paid off your high interest consumer debt, continue building your EF and invest the rest in your investment of choice.  Index Funds (through Charles Schwab or Vanguard) are solid, low-cost, choices that will meet market returns.
  • Pay off your mortgage & student loans – once you have your savings funded according to the needs of your individual situation, paint a big bulls-eye on your low interest debt and slash that baby down as quickly as possible.  I may catch flack for saying this, but I am a HUGE proponent of paying off the mortgage and living DEBT FREE.

Breastplate of Frugality

  • Creative mindset – get your creative juices flowing & be resourceful.  Before we do anything now, my wife & I run all our financial decisions through our protective frugal filter.
  • Stop eating out – If you have been following our Debt Free Adventure then you may well know that Mrs. Jabs & me were spending between $5,000 – $6,000 a year eating out at restaurants.  Looking back now, this is absolutely atrocious to me but before equipping ourselves with the breastplate of frugality we just didn’t concern ourselves with the costs.  If you must eat out use my Frugal Guide to Eating Out.
  • Homemade gifts & products – making more things at home including:  food, cleaning products, gifts, home decor, etc. will save you money and bring many other benefits along with it.  We make products such as homemade laundry detergent, toothpaste, deodorant, all-purpose cleaner, homemade dishwasher detergent, etc.  We also stopped buying cards & gifts and choose to make our own now – the results are more personalized, unique, and special than their store-bought counterparts.
  • Use Coupons – When we do buy things we always shop around and seek out coupons.  This is especially useful when shopping on the Internet, before I make any purchase I simply go to Google and type in “Coupon *product I’m buying*”
  • Ask for discounts – I tell my wife all the time, you never know until you ask!  Just a few weeks ago, when putting in my paver patio I saved over $300 by simply asking for a discount due to the volume of my purchase.
  • Decrease use of heat & AC – we used to keep our house at 70 in the winter and 74 in the summer.  Now we keep it at 64 in the winter and have actually been able to keep our A/C off every day this summer except for two!

Feet shod with the preparation of Sound Financial Counsel & Education

  • Adopt a financial mentor – when I truly began to get a hold on my finances at the beginning of this year I found myself in need of some solid financial advice from those who were already standing where I wanted to be.  I decided to adopt a few financial mentors and they continue to be an ENORMOUS blessing in my life.
  • Read personal finance blogs – they’re free and chocked full of sound money advice.  A few great ones to get you started are Frugal Dad, Bible Money Matters, Get Rich Slowly, Five Cent Nickel, and The Simple Dollar
  • Read personal finance books– if you are like JD Roth and you like the smell of books, or you simply love the feeling of a good book in your hands then get started with a few goodies.  I recommend:

Shield of Contentment

  • Simplify your life – break free from the culture of temptation that marketers have been driving at us for decades, and choose instead to return to a simpler life.  Ride your bike more, walk more, read more, turn off the TV.  All of these things may seem like sacrifices at first but after being exercised by them Mrs. Jabs & me have realized the true blessings of a simplified life.
  • Determine your needs – what do you need at a most basic level?  Water, food, shelter, and love – everything else is a bonus.
  • Determine your wants – our wants can be endless so it is incredibly important that we realize this and quickly determine what we can do to keep them in check.  What kind of food should we buy?  How big of a house?  What clothes should we wear?  These questions, like many others in this post, will be answered differently based on your income, debt, age, and relationship status so be sure to answer them specific to your position.
  • Find a balance – now that you have separated you wants from your needs, focus on finding that balance where you have what you need, are living below your means, but still comfortable.

Helmet of A Proper Money Mindset

  • Sacrifice now to benefit later – this is actually my entire financial philosophy in a nutshell.  The concept is simple and revolves around my view that it is better to scrimp & save now than it will be when you’re in our 60’s, 70’s, 80’s, & 90’s!
  • Embrace compounding interest – to motivate yourself, calculate how much interest you are paying to big banks and do whatever necessary to reverse that cycle and start paying yourself first.
  • Spend less than you earn & avoid debt – this isn’t rocket science and does not require explanation.
  • Save/invest increasingly – Grow your savings every year, even if you are currently paying debt.  Always pay yourself at least 25% of your extra money each month.
  • Give generously – it truly is more blessed to give than to receive.  Since implementing an automated charitable giving plan earlier this year, my wife & me have never had a better grasp on our finances.

Sword of Cutting Expenses

  • Turn off your TV – I mentioned it earlier in the post and I am purposely mentioning it again.  It is hard to impress upon you the many benefits of canceling your TV service.  I am much more productive in my side hustles, I spend more time with my wife, I accomplish more around house… especially in the way of my “honey do list”.
  • Reduce grocery costs – grow a garden, make more homemade food, stop eating out, buy in bulk, eat locally, preserve the harvest by freezing it and by canning it.
  • Reduce your consumption – I’ll say it again… turn down/off your furnace and turn down/off your air conditioning.  At first we thought this was uncomfortable but found we adapted to the temperature quickly.  Now that we no longer use our A/C we are always very cold when we go into a building that has it in use.
  • Carefully check your monthly bills for errors – I was able to save $160 over the course of two months because my utility company was over charging me.  I am not sure whether this was done on purpose, but regardless, by checking the bill and looking it over carefully I was able to save a lot of money.

I hope you were encouraged by this article, and that it helps to equip you with the whole armor of personal finance so you can protect yourself from the wiles of debt, advertising and commercialism.  Let us fight the good fight of faith and strive to win the daily battle to gain control over our personal finances!

Credit Cards – Close ’em Shred ’em & Forget ’em!

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Before…

DFA community wisdom says forgo the “rewards” of the credit card industry and put an end to toxic relationships with giant credit card banks.

Last week I asked all of you to help me decide a Wise Use of Paid off Credit Cards.

The overwhelming majority say “forget FICO” and chose instead to “close ‘em, shred ‘em, and forget ‘em!”

So…

I decided to take your advice…

After…

Yesterday we closed all our old big bank credit cards, and were not the least bit sad to see them go!  Here is a list of our ex-saboteurs:

  • Capital One
  • Chase (twice)
  • Citi
  • HSBC

I also closed these department store cards:

  • ABC Warehouse
  • Banana Republic

Thank you to all who participated in the poll, and especially to everyone who added to the many insightful comments (53 at the time of this writing.) You input was very carefully combed over and very much appreciated.

So why else did we close our credit card accounts?

Good question.  For whatever reason it was not a decision that came quickly or easily, rather we toiled over the decision for months.

And I’m not really sure why we toiled.  Credit card companies have never been a benefit to me, or my wife.  They have never “saved” us from economic hardship – quite the opposite actually.

In the interest of full disclosure, there was a period a few years ago where my wife was out of work and we used the cards while “in the red” at the end of each month.  However, looking back if we would have simply lowered our standard of living – like we have now – we never would have needed to use them and would have gotten by just fine – nay… better – without them.

The truth of the matter is, credit card banks make me nervous.

Their business practices blow past “questionable” and fall more accurately in the realm of “criminal.”

You don’t have to hold a doctorate in Economics to realize that fattening up the bottom line by any means defines gospel truth to credit card banks.  Arguing the moral inventory of the credit industry would be a job reserved for the corporately brainwashed – to whom I say, “WAKE UP!”

Case in point… since paying our cards off – just a few months back – we have already been hit with a newly instituted annual fee whose induction was buried on page 3 of a statement we received about our interest rate going up.  Ultimately I take responsibility for not reading the entire document (*puke*) but this type of hoodwinking is exactly what I want to avoid – and exactly why I ended up canceling our cards.

**NEWSFLASH** Attention credit card companies – Despite what you may have learned in credit card school, your customers do not enjoy getting bamboozled.

Should you close your credit card accounts?

That is up to you my friend.  If you want my advice I would say to yes, you should close them – however I will refrain from using this blanket statement since some people love to play the rewards game.  Personally… I don’t have the time or patience for it, and would MUCH prefer simply never having to deal with the toxic credit card banks ever again.

Here are some reasons for and against closing your old credit cards accounts.  I will try to remain fair to both sides here…

Nah… I will call it exactly as I see it.

Reasons you may want to leave your account open:

  • When credit cards say jump for rewards – you say how high.  Remember, to get their rewards you have to use the card in a very specific way.  And if you screw up once… BAM!  Fees high enough to wipe out months, maybe years, of built up rewards.
  • Increased FICO score – In the above poll DFA readers overwhelming advised against basing your decisions on your FICO score or, as some called it in the comments, your “I Love Debt Score.”
  • Security for emergencies – C’mon… you know what I’m going to say now right?  Don’t use credit cards for emergencies… work to build up your Emergency Fund and use that instead.  Trust me… this is the way to go!

Reasons for you to close your credit card account:

  • No more temptation to use them – You can’t spend what you don’t have.  Getting rid of your cards eliminates temptation to spend money you don’t have.
  • No more dealings with a company who lives to empty your pockets – From the time you’re of legal age the giant credit card banks are courting you with very carefully orchestrated strategies… all with the end goal of getting you into an endless cycle of interest payments to them.
  • No worrying about fees (late payment fee, over the limit fee, etc.) – No open credit card accounts = no fees.  It’s just that simple.
  • No more interest payments to others – Instead you can bank your money and pay yourself interest.  What a concept eh?
  • No more supporting an industry that feeds on the less fortunate – I mentioned the fact that you no longer have to deal with deceitful companies, but closing your accounts will also end your relationship with an industry based on predation of the less fortunate.  According to the FDIC 93% of fees are charged to 14% of credit card users.

I’m sure there are countless other reasons to terminate your relationship with your big credit card banks… but this list is more than enough to open your eyes and give you a head-start.

Will I ever use credit card rewards again?

Because I am a Personal Finance Blogger…

I may soon be testing the rewards program of my local credit union in the hopes of providing DFA readers with a positive rewards solution – because I will never endorse big bank rewards programs and I would like to be able to endorse a healthy alternative… if possible.

In that spirit I have decided to leave myself a single credit option, albeit a much healthier one.  If you must keep a credit card, the following route is probably your best bet.

After recently switching to Capital One 360 for our banking – *love it* – we decided to subsidize the liaison with a membership to our local credit union.  A few weeks prior to our close ’em, shred ’em, and forget ’em decision… the credit union extended a joint, rewards credit card offer, and we accepted.  While we have no immediate intention of using this card, because it is with our local credit union (not a big bank) and because of the reason stated above, we are keeping the account open… for now.

Wise Use of Paid off Credit Cards? You Decide.

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Paid off credit cards – shred ’em, close ’em, and forget ’em – OR – shred ’em but leave open and risk fees in hope of increased FICO score – OR – risk fees, leverage rewards, and laugh all the way to the bank!

On Wednesday I featured an article titled “More Reasons to Pay Off Credit Card Debt” where I mention a few of the ways our recent reduction in spending and use of credit has affected our relationships with our credit card banks.  In summary, the recent changes we’ve made in spending make them mad – and the ways in which they’re responding make me puke!

So… should I tie them to the bumper of my car and drag ’em through the city streets?  Or risk navigating the shark infested waters by trying to increase my FICO score and/or exploit their rewards programs while avoiding the 47895 possible fees?

What is the most wise use of paid off credit cards?

To help me decide whether I should close the 3 credit card accounts and forgo the benefits of increased credit score and possible future rewards – or keeping them open, risk the fees, and hope my FICO score will rise… I will turn to the über-wise DFA debt slaying community.

In today’s post I will detail the three choices I am kicking around including the approach I am currently using, along with two opposing responses I received from two DFA commentators… and put them up for all of you to examine – vote on – and comment on.

Three possible approaches:

My current approach:

As of right now I have paid off all three credit cards, shredded all but one, but have not closed any.  I haven’t closed them because the word on the streets is… a paid off credit card will increase your FICO score – but a closed card will not.

“Steve in W MA” uses his cards with this system and reaps the benefits…

After getting used to using the Cash Envelope system for all my ongoing weekly and day to day spending (Food, Gas/Tolls, and Fun), I have discovered that it has trained me to stay on budget like a hawk. So now what I do is shop with the envelope in hand as well as my credit card.  I clear all purchases with my budget by first looking to see that enough greenbacks are in the cash envelope, then I use the credit card to run the purchase.  I take the greenbacks from the cash envelope and put them in a fourth envelope I carry marked “VISA repayment”.

The cash envelopes get adjusted, the Visa bill gets paid, I don’t go over budget or into debt, and I get the 1% (soon increasing to 5%).

I am astonished at how much the cash envelope system is doing for me – even though, by including use of a credit card,  I am acting  in a way staunch Dave Ramsey followers might consider perverse and twisted.

The fact that I clear all spending by checking my cash envelopes first means that I cannot fall prey to the usual temptations of the credit card including… losing track of your money, spending more when you use it, and going over budget (and risk falling into debt over time.)

I still spend at my predetermined budget limit, but I am getting the 1% back (soon to be 5%.) And for someone who watches their dollars like a hawk and spends less than $50 a week on food, that one percent, or $2-$4 a month,  is appreciated and will go to good use. Once I am getting 5%, it will be $10 a month.  $10-$20 is decent money to be had – if and only if you are sure you aren’t losing $200 out the other end by overspending. However, the cash envelope system as I describe here prevents that overspending.

I would only recommend doing this to people who:

  • are familiar with and  use a cash envelope system as well as a master budget system
  • have been successful at using the strict normal cash envelope system for several months and therefore have begun to associate normal spending behavior with  checking the envelopes and pulling out cash, rather with reaching for your credit or debit card
  • in general are no longer as tempted by the lure of spending.

My long term experiences have shown me that using a credit card without a similar system of proven success, or while still experiencing spending temptations, will most definitely cause you to overspend.

Whereas Mr. Not the Jet Set holds a completely different point of view…

Matt – love the post.

First – “Can’t you just see the execs of Capital One, Citibank, etc. sitting around in a board room coming up with new ways to screw us out of our money?”  Yeah, I nearly fall off the couch laughing at these new credit card commercials & how they wanna be your buddy again. “Yeah, yeah, we hate debt too, so we’re giving you 17 new BS features to help you, ya know, pay off your debt or something… oh and we’ve got this sweet rewards program too…” As if.

Second – I’ll join the chorus here and challenge both you and Peter to shred those cards. Burn’em. BBQ’em. Whatever! Ditch the credit cards and their never-ending schemes. Then come back in a month, 3 months, 6 months – tell me if you really miss it. It’s not like you can’t go out and get another card if it’s really that awful.

It’s a much simpler life.

What do you think?

Kill credit cards & bury ’em in the back yard – Leave them open but shred ’em – or use & abuse them and beat credit card banks at their own game?  That is the question!

Here is a poll.  Weigh in with your opinion… I’m really intrigued to find out what the majority of DFA readers think.

[poll id=”4″]

Where is Mr. Credit Card when you need him?

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DFA is passionately dedicated to helping people break the bondage of debt and work toward financial freedom using biblical principles.