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Help When Overwhelmed by Personal Finances – DFA Tip of the Week – 4/13/2009

04.13.2009 by Matt Jabs //

There are many ways to reduce costs in our every day lives, so to help do just that each Monday I will post a money saving “Tip of the Week”.

“And he said unto him, Well, thou good servant: because thou hast been faithful in a very little, have thou authority over ten cities.” Luke 19:17

This weeks tip involves…Getting Started.  I want you to consider the following quote, then read the rest of this article.  By the end you should be well equipped to get started on your very own Debt Free Adventure!

“A journey of a thousand miles begins with a single step!”  ~Lao Tzu

The Trap…

All of this Personal Finance business can be overwhelming!  Debt repayment vs. Reduce Monthly Bills vs. Saving & Investing, etc.  While all of these topics require your necessary attention, it is important that you do not focus on everything all at once.  You need to start somewhere, so here are a few tricks you can employ to get yourself started without falling into the trap of idleness.

Tips to Avoid the Trap…

To get your finances in order break them down into the 3 following main groups:

  1. Debt Repayment – Make a simple list of all the “consumer debt” you have including auto loans, credit cards, department store cards,  student loans.  Write down each debt, how much you pay toward it each month, and then add the debt of each up to come up with your total debt amount.
  2. Monthly Expenses – Write down all your monthly bills and how much each costs you per month (if amounts vary, come up with a guesstimate average).
  3. Savings and/or Investment Accounts – Make a list of all your savings accounts and investment accounts and write down how much you contribute toward each.

Once you have the above completed you are REALLY CLOSE to having created your very own budget!  That is the next step…finish these steps to complete your budget:

  1. Write down your monthly income – Do not budget weekly, bi-weekly, or any other way…budget monthly.  Write down how much monthly income you have from all sources.
  2. Write down all outgoing expenses – In a 2nd section, copy the information you compiled above regarding your monthly debt & expense costs and jot them all down and subtract them all from your income.
  3. Add any other expenses – You may have forgotten to write down groceries, gasoline, etc.  Figure any other expenses you have each month and add them to your “outgoing expenses” section to arrive at the total amount you spend each month.

Now that you have your first rough draft budget done, go celebrate by eating a cookie, dancing the jig, or doing anything else to express the joy you feel that comes from getting started on the path toward financial freedom!  When you are done dancing and eating dessert, look over you budget one last time to make sure you didn’t forget anything.  Ask your spouse to proof-read it as an additional check to see if you have left anything out.

Now commit to the following…

Now that you have your budget, you have your expenses, debt, income, & savings all written down and can start to wrangle everything in.  Commit to the following:

  1. Give 10% to the Lord – Read my Testimony to the Tithe and see how the Lord promises to bless you if you give, but also promises your indebtedness will continue if you do not.
  2. Contribute any amount to savings automatically – Transfer any amount, no matter how small, into your savings each month.  Even if it is just $20/month, make a promise to yourself that you will pay yourself that $20 instead of paying it in interest to some big bank.  Try to make this an automatic thing.  I HIGHLY recommend switching your banking to Capital One 360 to make all this easier.  Read about how I use Capital One 360 for debt repayment and emergency fund savings…and remember…this is all spoken from personal experience!
  3. Reduce your monthly expenses – follow my advice and work to reduce each of your monthly expenses, but do so one at a time.  Commit to calling one service provider a week to see about either switching, reducing your plan, or discontinuing that service altogether if possible.
  4. Tweak your budget – Your budget is a “living document” and should be given attention on a weekly basis.  Think about how you can reallocate your money after you reduce your monthly bills as we discussed above.  Continue to contribute more and more toward your debt repayment, and I advise you to focus the majority of your funds on this until your debt is greatly reduced.  Once your debt is considerably lower, begin contributing more toward your savings each month.  I currently employ a 75/25 plan where 75% of my available funds go toward debt repayment and 25% go toward savings.  Do what works for you, but again…I urge you to focus the majority on debt repayment!

Follow these simple steps to get started and remember to break tasks into their respective groups and tackle things one at a time.

Memorize the following quote:

“A journey of a thousand miles begins with a single step!”  ~Lao Tzu

Click here to see all our past DFA Tips of the Week.

Categories // Debt, Expenses, Investing, Tips Tags // bills, Debt, Finances, help, overwhelming, personal, with

Training Children How To Handle Finances

01.21.2009 by Matt Jabs //

In these economic times it is not only crucial that we reevaluate the way we handle our finances, but also the way we teach our children how to handle finances!

It should be stated first and foremost that children learn from watching their parents behavior, not from listening to what their parents preach.  I suppose then, the best way to train children on the proper use of finances is to use our own finances properly! You should also be aware of the fact that I do not currently have any children, though Lord willing my wife and I would like to have some soon; so please…take what I say with a grain of inexperienced salt!

My inspiration for writing today’s article came from a recent post by “Nickel” at FiveCentNickel.com on the topic of Paying Children for Good Grades.  Nickel pays his children an allowance which is mostly used to train them on budgeting and how to handle their finances, he does not give the allowance as a reward for completing household chores.  I agree with this philosophy entirely!  Children in a family should not be paid for their contribution to the daily upkeep of the home.  I do believe they can be rewarded for going above and beyond the normal call of duty, but they should not be rewarded for performing everyday tasks.

Allowance needs to be a tool used to train the child on the matter of money management.  Nickel also describes in this post how the allowance system works in his family.  I agree with Nickel’s strategy with one exception.  While he makes no mention of this, I believe children should have taxes taken out of their allowance in order to paint them a more accurate portrait of how money is handled in the real world.  Some may find this legalistic, but I’d rather they be as prepared for reality as possible.

Once I have children, here is how I plan to train them regarding the distribution of their allowance:

  • 10% tithe to the church (% based on the gross amount…taken first, before any taxes or anything else)
  • 15% to taxes – this I plan to put into their college savings fund that my wife & I manage.  It may not seem like a lot will be going into this, but every penny counts!
  • 25% to savings – to go into their savings account
  • 25% to bills – to go back to their parents in order to help pay for the household bills.  I hope to use this philosophy to teach them to conserve spending on household utilities, groceries, etc.  I plan to involve them in my bill paying/grocery shopping process and believe this will give them a “vested interest” in cutting costs.
  • 25% to spending – this portion will be able to be used for whatever they want.  If they want to spend it, they can spend it.  If they want to roll it into their savings, they can do that as well.  If they want to help out with bills, that will also be welcomed!

I plan on giving the children all their money up front, so they can see it and physically handle it.  Then divvy it up accordingly.  I don’t want to simply withhold a certain amount, because I want them to be as involved as possible.

What do you think?  For those of you that currently have children, what are some challenges I’ll face while trying to implement this system?  What system do you have in place?

Categories // Giving, Money Management, Spirituality Tags // allowance, Children, Finances, Taxes, teach, tithe, train

Are You Paying Yourself?

01.05.2009 by Matt Jabs //

When it comes to saving money lately, my personal strategy leaves little to be desired.  Over the past few years I have failed to save ANY money.  On the contrary, I have actually been slowly slipping into renewed credit card debt.  Sure, I may not have as much credit card debt as a lot of people, or even as much as the average person; but to me, any credit card debt is too much.

Well I’m fed up.  I’m done paying credit card companies interest money while not paying myself anything.  What am I going to do about it?  Starting immediately, I’m going to have my employer direct deposit $100 into my savings account every month.  Sounds simple right?  Well…it is simple, and I’m a little upset at myself for not doing it sooner.  However, I refuse to dwell on the fact that I haven’t done it in the past and am excited about doing it from here on out.

I’m actually starting a new blog to this end as well.  I will not reveal what exactly it is yet because I’m not completely finished setting it up, but I am very excited about it and will announce it to you all soon.

Maybe it’s time for you to start paying yourself too?

Categories // Counsel, Debt, Investing Tags // Finances, money, pay yourself, save

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