There are a few simple steps that work for April and me in regards to being financially responsible and solvent. I think they’d be helpful to others, but take or leave this as you wish. This is just what works for us.
Step 1: Tithe
Take 10% of your gross income and give it to the church. This is your income before taxes and before deductions. Whatever your yearly salary is, whatever your monthly or weekly paycheck, look at the biggest number and multiply by 0.10. Write a check for that amount and put it in the tithing box, plate, whatever.
I do this for a few reasons:
- God tells us to.
- God provides everything for us, so this isn’t much for him to ask.
- It helps His church.
- It is an important act of faith that I give the money to God’s church to do with as they feel directed, rather than trying to direct it myself.
- From experience, God has continually provided better and better for me as I have tithed.
- Tithing has improved my faith in other matters.
No matter how little money you make, you can afford to tithe. If you cannot afford to tithe, you’re doing something wrong. You need to seriously reevaluate your budget and lifestyle and make cuts. If you can’t tithe, you’re living beyond your means, which is just dangerous.
Step 2: Budget AKA Pay Your Bills/Debt
Set up a budget (you might consider using Mint, which I wrote about recently, or maybe just a piece of paper with your amounts/dates).
Stick to the budget. Make minimum payments on your debt.
I had this in my rant about Dave Ramsey followers, but it bears restating. Don’t spend all your damned money. Live within your means. Discipline yourself. You’ll be happier in the long run.
Step 3: Save
Put your money into a good savings account until you have enough for six months worth of bills/debt. I recommend a High Yield Money Market Account from Everbank, but any high interest savings will do. Bankrate.com has a good listing of these.
Part of our savings is soon going to be invested in stocks as well, but that’s because I’ve been getting some education on this recently and feel confident I can do it safely and reliably. I don’t recommend this unless you have had similar tutelage.
Step 4: Pay everything off
Car, house, student loans, everything. Once you’ve got enough money saved where you don’t have to worry about going into more debt if you get laid off, your roof needs repaired, or something else comes up, you start buckling down and making payments.
In mine and April’s case, we’re making minimum payments and saving/investing until she gets a full time job, at which time 100% of her paycheck will go towards paying everything off. I make sure we can live on just my paycheck and that we don’t over-extend ourselves for this very reason. If she needs to quit her job for school, or if she doesn’t get a job right after graduating, we’ll be OK. When she does get a job, we’ll pay things off very quickly.
Step 5: Save More
Now you begin investing in Roth IRAs and other savings mediums. My intent is to set up a savings for each kid when they are conceived for their 1) First Car, 2) College, and 3) Wedding. If they decide they don’t want a car, college, and/or wedding, then I guess they’ll just have a nice cash bed to roll around on. We’ll have an IRA for retirement and stocks for investing.
I did the math a couple of years ago and realized that there were two options:
- Invest in retirement/savings while paying off debt
- Pay off everything, then invest in retirement savings
Option 2 resulted in exponentially higher end-sums, even with a delay of several years, because we’d be able to invest so much more per month. Seems like most of the financial consultants agree.
Ask for Help
If you need help, ask for it. Get an accountability partner who will regularly go over your finances with you. This should be a monthly meeting, at the least, to look at transactions, trends, and to discuss challenges.
There are two things we absolutely must not let happen. First, we cannot let or rely upon others to manage our money for us. It’s what keeps you in food, clothing, and a home, and other people will care about that a whole lot less than you will. At the same time, we mustn’t let our money manage us.
Just because the Good Book says that “money is the root of all evil” doesn’t mean we should try and ignore its implications on our lives. We have to be responsible with what God has given us. Likewise, we should recognize that God has given us the Church, just as he gave us to the Church and gave Himself for the Church. This community exists expressly to provide fellowship and aid. Don’t hesitate to ask.