Stumbling Through Nostalgia

In the past several months, through the magic of Facebook, I have been stumbling through nostalgia. I have reconnected with some old friends and acquaintances from my grade school and junior high school years. I don’t know about most people, but I’d honestly rather forget most of what happened during those years. In fact, I’d rather have my fingernails pulled out without anesthesia rather than face some of those memories (for the record, I have recently experienced having part of my fingernail pulled out – it hurts).

However, having stumbled on to an old friend on Facebook, I began to encounter others. Some found me and wanted to be friends and I found others, including those whom I don’t want to be friends with. I wandered around a few fan sites for my old schools, checking out other people who were in my classes as well as pictures from the schools. I even went so far as to pull out an old year book to compare pictures. My friend looked pretty much like an older version of himself then. He hadn’t changed much. I found a girl that I had a huge crush on in eighth grade. She’s not so pretty anymore. I found out that one of the bullies that I had to deal with died violently a few years ago. I'm not sure how I feel about that.

Memory is a funny thing. As I looked at old pictures and tried to remember things, I realized how skewed my memories had become over the years. Things that I thought I clearly remembered were actually different. Faces were different than they were in my head. Places in the school looked completely wrong. Even the map that I have in my head of my hometown doesn’t reflect reality. Many of these memories had a surreal feeling to them as I explored the reality. It was as if I was viewing them through a filter, like an old movie reel.

I don’t know what bearing this has on the world, but for me, there are many memories that I don’t really want to be crystal clear in my mind. I’d rather not remember too clearly those years of puberty. I really don’t want to have the pain of loss from a loved one stay razor sharp for the rest of my life. The fear I remembered watching my wife in childbirth and heading off for c-section is something I don’t want to be fresh in my mind on a daily basis.

I’m not sure why our memories fade so,

but it is probably a gift.

Financial Tip # 10 - It Ain't My Fault

The recent crash in our financial markets that destroyed our economy for the last two years has been blamed primarily on banks (although, for some reason, our beloved leaders in Washington are focusing on fixing Wall Street.) I worked for 13 years in banking and can honestly tell you that the banks ARE largely to blame for some of the practices that lead to this fiasco. They sold complicated loan products to people to buy houses they couldn’t afford. They encouraged people to refinance and take money out for debt consolidation and for home improvements. They even gave loans that were purposely worth more than the house was appraising for at the time. And that makes it all the bank’s fault right? Let’s punish those greedy, evil, fat cats sitting in their plush offices, because they are responsible for predatory lending. Right?

Yes. At least partly so.

But let’s not forget that other people had a part in this too. The government required banks to give loans in areas that were high risk and to people who were high risk through the Fair Housing Act of 1968, the Home Mortgage Disclosure Act of 1975 and most importantly through the Community Reinvestment Act of 1977. They then established companies like Sallie Mae and Freddie Mac who guarantee credit for student loans and home loans to those who cannot afford (or cannot qualify for) them under normal lending guidelines. These laws, while well intentioned, helped create a house of cards that was destined to fall. So let’s blame the government. Right?*

It’s funny how we like to take complex situations and narrow the blame down to one single person or group of people. That way, we feel better about ourselves forget that the problem ever happened.

Except, there is one more group of people that we mustn’t forget. Not Wall Street Investors. Not Bankers. Not the government. Who could we possibly blame then?

It’s you and I. It is us and all of our friends and neighbors. To quote the old Sunday cartoon, Pogo, “We have met the enemy and he is us.” We are all at fault.

• Every person who took out a mortgage on a house that was well outside of their budgetary range and didn’t realize how deep they were is responsible.
• Everyone who signed on the dotted line for an adjustable rate mortgage that they didn’t understand is at fault.
• Each person who accepted cashout on a mortgage to buy things such as cars, boats, toys, or other items because the broker told them that they could do it shares the blame.
• All those who had B and C credit who went to mortgage brokers and bought a home or got a second mortgage with a future balloon payment or a 125% equity product because they believed the loan officer about their ability to repay it shares the liability for the failure.
• Anyone who financed their car for five or six years so they could buy a more expensive car with lower payments because the finance guy showed them how it would work, shoulders part of this burden.

We have to be honest that it is our own greed and lack of education that got us here.

This is our last and final financial lesson in this series. You HAVE to educate yourself.

Yes, financial issues are complicated. These concepts are hard to understand. If you can’t define amortization, APR, equity, cost basis, accrual, escrow, LTV, per diem interest, PITI, no-load index fund, capital gain, prime rate, ZBA, REIT, or RESPA; then you need to get educated before you go into a bank or before you begin investing.

Yes, this stuff is hard. I'm sure there are some strange accounting types for whom this stuff is enjoyable. They're probably good a poker too. I'm not one of those people. I worked for years in banking and only learned a small portion of the financial information that I need to know. I did tax analysis on some of the most complicated taxes for companies and individuals seeking financing. I worked with first and second mortgages, with a mortgage broker, and in dealer financing. I understand lending quite well, but when it comes time to invest money, I have to study the products. When it came time to do my taxes as a pastor (the IRS has some really weird regulations regarding pastors), I had to learn about it.

Don’t let your rush to purchase something blind you to the need to understand it. Don’t fall victim to your finances because reading all that paperwork is mind-numbing and difficult. Greed and laziness will be your downfall when it comes to your money.

If you want to be poor and in debt all your life, keep buying things with credit, keep trusting what bankers and brokers tell you, and never get educated on money and finances. There is no one responsible for your financial issues but you.

Don’t stand there and blame everyone else. Take responsibility for your finances and do something about it.

Want to get educated? Here are some of my recommendations:

Dave Ramsey – www.daveramsey.com – writer and radio host, Dave teaches you about how to become debt free and how to gain control of your money. I believe that he would agree with much of what I have written in these last ten segments. My wife and I recently found his program and, though we were already working towards living debt free, we changed to his model because there are parts that make a lot of sense. I recommend following his baby steps, found in his book Total Money Makeover.

Crown Financial Ministries – www.crown.org – a Christian ministry that provides financial education for people. I have not personally used their program but know several churches that do.

Feed the Pig – www.feedthepig.org – lots of great tools and information on saving money and getting control of your finances.

FDIC Money Smart - http://www.fdic.gov/consumers/consumer/moneysmart/index.html A government program for educating people about finances. They have some good resources, but I have to wonder if anyone in congress has had any financial education.

My Money – www.mymoney.gov – Another government website teaching financial literacy. Wow, with all these tools, you’d think we could pass a balanced budget.

The Dummies Series - http://www.dummies.com/how-to/personal-finance.html - I love the ‘for Dummies’ series of books. They are written by subject matter experts, but are written in laymen’s terms. They have a whole series on personal finance and budgeting. They are definitely worth your time.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense; most people just don't use their common sense when it comes to financial matters.

* Note: If you are a Republican, feel free to blame President Obama or Clinton. If you are a Democrat, feel free to blame President Bush or Reagan. It’s never your party’s fault.**

** If you fail to note the extreme sarcasm here, please insert your voter registration card in your nearest paper shredder. Then, take the pieces and burn them with a lighter. Take the leftover ashes and flush them down the toilet and never, ever vote again.

Financial Tip # 9 - Planting Trees

We just had two new trees planted at the church today; they were a donation in memory of Mark Tibben, a former member who passed away recently. These skinny little trees are just under two inches in diameter and about nine feet tall with a little foliage on them, but not much. I’m told that in a few years they will grow quite large, ultimately with a spread of about 35-45 feet on their branches. Within ten to fifteen years these trees will grow over 20 feet and can get up to 40-60 in height with care.

Planting a tree is a hope-filled act. They provide no shade today and little in the next few years. But, there is hope. In later years these trees will bring joy to many other people. Children will climb in the branches. Teens will cuddle in the shade. Picnic blankets will be thrown under the branches. Parents will point out bird’s nests to their preschoolers. Deep discussions will be had and perhaps a few naps.

When we are looking at our money, we need to remember an incredibly key point: you have to give some away. The Bible is replete with God’s desire that we provide for the poor, shelter the homeless, clothe the naked, adopt the orphan, and support the widows in need. This is how you plant trees with your finances.

There are few greater joys in life than giving away some of what God has provided for you. Many people use a 10 percent rule, but don’t let that limit you. When you give money away to a good cause, it changes you. You grow too. You experience joy too. It’s not just about the person receiving the gift.

Let me encourage you to recognize the power of wealth freely given. It doesn’t take much, but it will grow if you let it. I once worked with a guy who was always on to the next get-rich-quick scheme. He once told me, “Rodger, I want to be rich so that one day, I can make a big donation to a church, or have a homeless shelter built in my name. I want to do good with my money when I get there.”

I then asked him the hard question, “How much did you give to others last week?”

“Why nothing,” he said, “I’m not rich yet.”

“If you aren’t giving when you have a little, then you won’t give when you have more,” was my reply.

I have observed in life, that it is often the poorest people who are the most generous. I hope I made him think. I don’t know if he ever made giving a habit, but I hope so.

Generosity is a lifestyle and it is one that can touch people’s lives. Every year, I take a group of high schoolers to a summer conference that occurs on college campuses in California or Colorado. There is always a point during the week where we have an evening off and go off to do some fun activity such as white water rafting, horseback riding, or go to the beach. Taking a dozen teens into town can be challenging. A few years ago, we took the group to a Mexican restaurant for dinner on our free night and the kids were a little rowdy and silly. So, when we collected money from everyone for dinner and a tip, I asked each kid to give above their normal tip amount so that we could bless the poor waitress that put up with us. The adult volunteers and I did the same. When all was said and done, we paid $150 for the meal and left $150 for tip!!! We quickly left, because I didn’t want to be there when she found the tip. We went into town and walked around for a few hours waiting for time for our next event. At one point, I realized that I needed to use the restroom and all of the businesses had signs that said “no public restrooms.” I decided to go back to the restaurant, since I had been a customer there and it was only a few blocks away. When I walked in, our waitress saw me and glumly said, “I figured you’d be back. You paid too much.” I smiled really big at here and said, “No, I know how much we left you, that was all a tip for you. God bless you.” She got tears in her eyes and quietly said, “Thank you,” then started crying and turned towards the back. I will never know what all was going on in her life, but I know we touched her life that day.

Let me recommend that you plant some trees (figuratively). Invest in someone else by providing for their needs. Donate money to a local church ministry. Give to a homeless shelter. Write a check to an afterschool program for poor families. Leave a big tip for a waiter or waitress. Be generous.

Let me ask this also, spend your money on people. I know that there are hundreds of charities out there that help animals and the rainforest and other such causes. Don’t be afraid to give to them too, but let me ask that your primary giving be towards helping people. Life is short and can be very brutal for some people, so let’s work together to touch their lives. There is a lot of hurt out there and never enough people willing to help.

Planting trees is an act of hope. So is generosity. It gives you hope in humanity and it gives other people hope in humanity. It changes everyone it touches and, just like trees, acts of generosity will continue to spread joy for years to come.

When you get your next paycheck this month, take something from it and give it away.

Plant a tree of generosity.

If you need some suggestions of places to donate, here are a few local, national, and international organizations that I can recommend:

Phoenix Rescue Mission – www.phoenixrescuemission.org – Helps provide shelter, food, and skills training to assist homeless men, women, and families.

Streetlight Ministries - www.streetlightphx.org – Helps rescue underage girls forced into prostitution at an average age of 13 years old. Provides drug rehab, job training, GED classes, and counseling as well as shelter and a home until they can take care of themselves.

HOW Home – www.thisishowhome.org – provides a home and helping hand to transgendered people living on the streets. Helps them get back their life.

Rapha House – www.raphahouse.org – an international group committed to stop sex slavery in Southeast Asia. Provides housing and job training for teen and preteen girls (as young as six) to get out of forced prostitution.

The Dream Center – www.dreamcenter.org – Provides help for the poorest and most marginalized people in Los Angeles, New York, and Phoenix.

World Vision – www.wvi.org – Provides immediate international emergency relief in disaster and war torn areas of the world and long term help to villages and communities through child sponsorship, education, clean water wells, etc.

Mountain View Christian Church Benevolence Fund – www.mvccaz.com – Our church (and most other churches) maintains a Benevolence fund which provides immediate financial assistance with food, rent, and utility bills to those in need. This money goes directly to those in the immediate community who are in need and does NOT pay salaries, building repairs, or any other day-to-day costs. You can contact us at 602-955-9414 if you want to make a donation to this fund OR, call up almost any church or synagogue to do the same.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense; most people just don't use their common sense when it comes to financial matters.

Financial Tip # 8 - What is Between Before and After?

You see it all over the internet. It’s in magazines, newspapers, and on television: The Two Picture advertisement. The picture on the right-side shows a very attractive woman. She’s thin, toned, and usually wearing a bikini. Her hair is done up and her makeup is perfect. That’s the “After” shot. The left side, the picture you should have looked at first shows a different woman. She’s not so pretty. She’s fat, wearing frumpy clothes, an out of date hairstyle, and only draws your eye in mockery of the other picture. That’s the “Before” shot. Sometimes these ads use men, in which case you see a dumpy guy with love handles magically transformed into a muscular, ripped hunk who somehow has more hair and got tanned. The suggestion of these advertisements is usually that, if you use the instant diet/fast-working cream/15-minute program/etc. that they are selling, you too will go from bumpy to beautiful in no time at all.

Let’s be honest here. Life just doesn’t work that way. There are NO magic potions. No matter what you choose to lose weight, there is pain and work involved if you really want to lose the weight. I have a friend, Danny, who used to weigh close to 500 pounds. It took him about three years of working out and eating healthy to reach a healthy and muscular 250 pounds. He now helps other people do the same. He’ll tell you that there aren’t any magic potions or pill, just will-power, accountability, discipline, effort, and time. Personally, I have struggled with weight and have taken almost four years to lose 70 pounds. That’s four years of struggle, falling down and getting back up, eating right, working out, etc.

This brings us to our financial tip of today: There is space between the before and after. If you want to have a relatively secure financial situation, it takes work. If you want to be wealthy, you have to have discipline. If you want to be in control of your money it takes effort. If you want to be debt free and no longer a slave to your creditors, it takes time. There are plenty of books, cd's, and programs that promise you get-rich-quick ideas, but these just don't generally work. It takes real work to get there.

Hard work is not a four-letter word (yes, I know it is two four letter words). Discipline didn’t use to be a bad word. Our culture has become saturated by get rich quick schemes. Microwave food, fast food restaurants, instant financing, quick money making opportunities… Now, now, now. The problem is, this type of attitude just doesn’t work for most people. Sure, some people do hit that big idea that turns them into an instant millionaire. But, most of your millionaires didn’t get there that way.

I’m not a millionaire. I’m just a guy who sees the pain and suffering that friends and family suffer in the throws of debt and I know there is a better way. It just takes hard work.

Don’t be afraid to sit down and look at your real financial situation. It’s like taking out a camera and taking your before shot. Your finances may be bumpy, ugly, and not something you want to look at; but, with brutal honest, hard work, accountability, and discipline, you can have sexy finances too. Not through magic potions, but through work.

Hard work and discipline worked for our grandparents, getting them through the Great Depression. It works for immigrants and refugees who come here with nothing. Let it work for you too.

Just remember, it takes time to get from Before to After.

Proverbs 13:11 - Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.

By the way, if you want Danny to help you get from Before to After in your weight loss goals, he can be found at www.dviiifitness.com. I promise you, he will help you, but you will have to work hard for it.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense; most people just don't use their common sense when it comes to financial matters.

Financial Tip # 7 – The Old Man and the Mountain

As I sit writing this, I can look out my office window and see Squaw Peak Mountain. Every day, dozens, if not hundreds of people climb this mountain. I’m not sure why, because it is all desert and just plain hard work, but people do it anyway. I have climbed Squaw Peak several times with friends who got a wild hair and decided this was a wise idea. The last time I climbed Squaw Peak, I was huffin' and a puffin' about halfway up and I heard this huffing sound behind me. I looked back and there was this old man who looked to be about 100 years old running up the mountain. He was all skin, sinew and bone and must have weighed less than his age. But, he was moving and fast. He wore a determined look on his face and never looked side to side at the people he passed; he focussed only on the trail ahead. He ran past me and soon disappeared up the trail. I continued plodding along and by the time I had hit the ¾ mark (where it starts to get really hard), the same old man came running back down the mountain at full speed. He had already been to the top and back!!! That was very discouraging and I considered turning around and going home then and there. I didn’t want him to pass me again going back up a second time!

This brings us to our next financial tip. You have to focus on your own goals. No two people are alike. No two families are alike. There are some basic financial principles that apply to most people, but the way you employ them in your own life may differ from your neighbor.

It’s really easy to look at the guy next to you and wish you had it as good as him. This budget and finance stuff would be easy if we had a paid off house like he does. That family over there makes much more money than we do, we’d be farther along in our plan if we made that much. Look at her, her family bought her everything in life and now she just received a huge inheritance to boot; we can’t ever catch a break.

I didn’t know the story of the old man on the mountain. Why was he running? What did he have to prove? What had happened to him in life that got him there? The same is true of finances. I don’t know what other people really have going for them or what they’re dealing with. All I can focus on is myself and my family when it comes to financial planning. Our situation is the one that matters to our budget. I must keep the faith. With disciplined spending, wise budgeting, and focus on our goal, our family will get where we need to be.

On that trail that day, there were dozens of people going at different speeds. Some took side trails. Some stopped for a water break and to look at the view. There were some who quit part way and others that doggedly made it to the top. I made it that day, not as fast as the old guy, but I did make it. With that same determination, you too can make it with your financial goals, making a wise budget, becoming debt free, funding your retirement, and reaching the point where you can spend for fun, but only if you focus on your goals and not on wishing you had what someone else has.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense; most people just don't use their common sense when it comes to financial matters.

Financial Tip # 6 - A Cheap Trick

If you weren’t alive in the 70s, perhaps you’ve never heard of the band, Cheap Trick. They wrote a song in the late 70s called “I want you to want me.” The lyrics, sung in a soft seventies pop sound, go something like this: “I want you to want me, I need you to need me, I’d love you to love me, I’m beggin you to beg me.” I am not a fan of Cheap Trick or this song, but there is a lesson here. The singer understands that wants and needs are different.

We’ve taught our daughter an important question to ask. Whenever she says something like, “I need an iPod,” we have her ask the following question. “Is it a need, or is it a want?” Now, as a parent, it sometimes sucks to teach your kids something like this because the day WILL come when I say, “I need a new …. (fill in the blank)” and she will promptly respond, “Daddy, is it a need, or is it a want?” Don’t kids know that they should be quiet and not question their elders?

This is an inconvenient but terribly important tool in your financial tool box. The rule in our house is that we discuss any purchase over $50 and take a breather on anything over $100. Large purchases require (in most cases) a three-day waiting period where we talk about it, pray about it, and question whether this is the right choice. I have to be honest here, it wasn’t always like that. We used to spend willy-nilly on whatever we wanted and then immediately prepared the rationalization about how we really needed it.

What really brings this home is the process of having a yard sale. As you drag all the junk out of closets, from under beds, up on shelves, and off the back porch; you really get an idea of how much money you have wasted over the years, buying on impulse. Retailers know this about us, that’s why infomercials actually stay on T.V. People actually DO buy the New and Improved Electric Dog Polishers or the Amazing Milkahol Device that changes ordinary milk into gasoline for your car or the Moptastic that cleans your floors and can also be used to brush your teeth!!! You see the ad for this and you begin to go into a trance. “I need that!” you suddenly exclaim, “I don’t know how I ever got along without one!” You promptly call the telephone number on the screen before the time runs out so that you can take advantage of the $5.99 savings and free shipping. “Heck,” you think, “I’m probably making money on this deal!”

But wait, there’s more.

That object ends up in your garage only to come out when time for the next yard sale. You then look upon it wondering why in the hell you ever bought that stupid piece of junk. Sometimes, you even throw it in the trash because you don’t want the people coming to the yard sale to judge you.

I know. I’ve been there.

If you want to control your finances and ever truly get ahead in life, you have to ask yourself this one question. “Is it a want or is it a need.” Needs get taken care of first.

Air, food, water and medicine first. Feed your family. Take care of medical needs.

Shelter is second. Pay your rent or mortgage.

Keep the lights on at home. Pay your electric bill.

Save for a rainy day. Savings are important so you don’t get faced with emergency financial decision.

Give. Tithe. Donate some to help others.

Provide for your family’s future. Retirement. College. Etc.

Once your needs are taken care of, then, and only then, do you consider wants.

It is amazing how much money we waste, culturally, on junk. Buying bigger and better televisions, a newer and more powerful computer, a newer and shinier car; these things consume us and consume our money. This is one of those places where you have to be brutally honest with yourself. Every dime, dollar and nickel you waste on useless junk is multiplied in its damage, because it is money that you cannot invest and earn interest on in the future.

If you want to be financially secure, learn this Cheap Trick – know the difference between needs and wants. Ask the question “Is it a need, or is it a want?” and then base your spending decision on the answer.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense, most people just don't use their common sense when it comes to financial matters.

Financial Tip # 5 – Listen to Noah

Noah built an ark to survive the coming flood. It took a long time and a lot of work when the skies were bright and beautiful and there was not clue that there was a storm on the horizon. “Ha, ha,” his neighbors would say, “Look at dumb Old Mr. Noah and the stupid ugly boat he’s building on dry land.” When the rains came, they learned their lesson too late as they sunk under the waters while Mr. and Mrs. Noah and family floated safely by. God told Noah to be prepared and now I’m telling you.

OK, I’m taking that out of context for a financial series, but the idea of being prepared is a good one. If you aren’t saving money for a rainy day, then you will be in trouble when the storm comes. As I’ve written these tips, I’ve had several people comment on Facebook and in person about how they had to get a loan because of the position that they were in. That is the message of all of this, if you take control of your finances instead of letting them control you, then there should never come a time when you have to get a loan. This is why payday lenders exist – people don’t have a cushion of savings and investments. This is why car dealers make so much money off of car loans - people aren't prepared to buy their next car because they are still paying on their old one.

Every good financial advisor will tell you that you have to pay yourself first. Now, I would say pay God first (giving) and then pay yourself second, but we’ll talk about giving later in another blog. Right now, we'll talk about savings. This is building a boat before the floods come.

Every single paycheck, put a little back. If you are already in a tough financial position (as most people are), then you may only be able to put a few bucks back at a time. But do it. No excuses. Even if it is five dollars a paycheck right now, take Nike’s advice and just do it. Open a separate savings account at the bank, for which you do not have an ATM card. As each paycheck is deposited, move whatever you can afford over into that account and then DON’T TOUCH IT! This account is only for emergencies. For the record, emergencies do not include buying a better car than the one that you already have that is running. They don’t include dinner out with the family. Vacations are not emergencies.

Ultimately, save back three to six months of expenses and then some. I used to think that this was an impossible goal. But, a little at a time gets you there.

Once you have your cushion, then you begin two new steps: investing for the future and saving for specifics.

Investing for the future means retirement, college for the kids, and future medical expenses. This is done through a good financial advisor with mutual funds, IRAs, 401ks, and the like.

Saving for specific things includes your next vehicle, car maintenance and repair, vacations, house down payment (if you don’t already own one), etc. These can be specific future needs or fun desires. The key is you save for them now and then you won’t use debt to get them later.

Emergencies DO happen. The rains WILL come. The question here is whether you have built a boat to survive the flood or will you be drowning when the waters close over you.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense, most people just don't use their common sense when it comes to financial matters.

Financial Tip # 4: The Death of a Thousand Rose Petals

Marcus Aurelius Antoninus became emperor of Rome at the ate of 14 and was only emperor for four short years. Anyone who has spent any time with teenage boys could have told you that to give him that much power at that young of age would result in debauchery. He was so bad in fact that he disgusted the hedonistic Roman people. And that’s saying something.

During one of his infamous parties, he was said to have arranged for the ceiling panels to be pulled aside and thousands of rose petals dropped on his guests. There were so many rose petals that some of them were suffocated.

A single rose petal weighs in at just around 1/16 of an ounce. Yet, enough of them on top of you can crush you.

And this is where we get into our financial tip for the day:

A single sheet of paper weighs less than 1/200 of a pound and yet enough paper can crush you…Financially.

If you are ever going to get control of your day-to-day spending, your monthly budget, or your lifetime of financial investment; you have to get control of your paper!!! You must get organized.

This is probably the hardest of the financial tips for me to give because it is the one that I struggle with the most. I am a cluttered person. Anyone who has seen my desk can tell it is true. When my wife and I decided to take control and go debt free, we began sorting through our old paperwork. Months worth of unopened mail was placed in a plastic bin and we opened them one item at a time. We found lots of bills that we had paid, but just left the paperwork on the counter. We found sales , ads, and junk mail that should have been thrown away long ago. We found invitations to a party we missed. Worst of all, we found two checks that had been sent to us as refunds. Both were long since expired and of no further use. Our disorderly conduct had cost us money.

To control your budget and get out of debt, you must open your mail every day (or at least several times a week). Prioritize your bills by date and throw out the trash. In fact, I sort my mail over the trash so I don’t set anything down that we don’t need.

Place the bills in a tickler system so that you can pay them in order when your paycheck comes in.

Then, you need a filing system. Label everything. When you pay the bill, staple the receipt to the bill and place it in a file folder labeled for those items. If you are paying off collections, demand a payoff letter from them and then, when you pay it off, keep a copy of the checks you used so you can prove it later.

If your personality type is not one for doing this sort of tedium, you are going to hate it. But, I can promise you that it will save you hundreds and even thousands of dollars over your life time and also cut your stress when it comes time to purchase a home, pay taxes, or deal with collectors who have already been paid.

Like those little rose petals, out of control paperwork will smother you. Control your paperwork and it won’t crush you.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense, most people just don't use their common sense when it comes to financial matters.

P.S. I apologize for the break in this series. I was completing homework for school. Talk about papers suffocating you.

Financial Tip # 3 – Keepin’ Up with the Jones

Did you see? The Jones family just bought a new car for Mrs. Jones. We should get a new car too. Our old one is approaching 50,000 miles and it’s brown. I don’t like brown cars. I saw an ad on T.V. yesterday that says that Global Lincoln-Mercury-Kia-Mazda-Ford-Chevy-Mercedes is having a sale. And, since I mentioned a T.V. did you see that Dave got a new 90 inch 3-D Plasma TV. Best Buy is selling those for only five thousand dollars. That’s a savings of almost $2000 off the normal price. Heck, with the money we saved, we could go on a cruise like the Taylors did last month.

It may not be that obvious, but keepin’ up with the Jones family is killing us financially. I watch it in my congregation and in my group of friends. I saw it at the company I used to work for. Whenever someone gets a new car, a new computer, a new T.V., a new cell phone, or some other new toy; several other people immediately go out and get one too. And then, since everyone else is doing it, then even more people have to go get theirs too.

The idea is: if they can afford it, then we can too. The problem with this thinking is that the Jones family is dead broke. They are buying all this stuff on credit. They are so deep in debt with credit card bills and car loans that they don’t see an end in sight.

Frankly, it all comes down to locker-room mentality: ‘Mine is bigger than yours.’ This ‘mine is bigger than yours’ competition is crushing them financially, and if you try to follow them, then you’ll be crushed too.

I used to catch a lot of flack at my old job for driving a Kia. I worked with a bunch of electronics geeks who thought a souped-up rice burner was the be-all-end-all car. If it didn’t have ground effects, a custom paint job, and a turbo; it wasn’t worth driving. You know, the Fast and Furious type. They can’t afford the payment, but they can get from here to the grocery store in 58 seconds. The dark, ugly truth, though, is that they are all drowning in payments. My Kia on the other hand is paid for.

My family has a nice big-screen television. It was given to us second hand. We saved for our computer. We are saving up a little at a time for a nice vacation next year. There is a lot less stress now, when it comes to paying bills than we used to have when we believed that debt was the way to get stuff. You can actually be at peace with money without being a millionaire.

There are two fallacies to look at here:

First – Debt is a tool to get ahead with. That’s just not true. Debt is an anchor that holds you back. Very few people are disciplined enough to really make debt work for them. And even the disciplined ones are only one financial problem away from trouble. Work hard, do without, scrimp and save to pay off that debt and you’ll be able to save and invest your money to work for you, not be its slave.

Second – Stuff makes you happy. Again, it’s just not true. You want to be happy, be debt free. Bills coming in that you don’t have money for are stressful. Credit collectors calling at all hours are nerve-wracking. All the stuff that you thought would make you happy may bring you some joy for awhile, but in most cases, it ends up in the garage sale tomorrow.

Learn to do without. Smile when the Jones’s show you their new car and tell you about their giant plasma. Congratulate them and then go drive home with your family and enjoy a movie together on your normal size T.V. Later, as you are able to walk in and plop down cash for the new toy that you saved for, you can smile again when you realize that they are still paying through the nose for the item that is now an out of date clunker, while you are paying less in cash for the newer, better model.

Don’t keep up with the Jones’ Those poor guys are broke!

Financial Tip # 2 - Don't Ask A Barber if You Need A Haircut

Don't Ask A Barber if You Need A Haircut

This cowboy wisdom can be applied throughout your financial life. Don’t ask a realtor how much house you can afford and don’t ask a banker how much of a loan you need.

Don’t get me wrong, good advice is a thing to be treasured, but you always have to consider what someone’s motivation is. Are they working for your benefit or for theirs? When it comes to your realtor and banker, you don’t usually have to wonder.

This housing boom and the following bust came largely because people trusted their banker and real estate agent on what they could afford instead of educating themselves and proceeding with caution.

The biggest issue is that they base what you need on what they think that you can afford.

Let’s look at a little banking term called DTI (Debt to Income). This is a ratio of how much money you have going out the door compared to how much you have coming in the door each month. It seems like an easy concept until you consider that different banks, mortgage companies, finance companies, credit card companies and other lenders look at this amount differently and NONE of them look at it realistically.

Here is our example today:

Mr. Jones has a job where he makes $50,000 a year. After taxes, 401k, insurance, and other payroll deductions, he actually brings home about $37,000 a year. Divide that by 12 and you get a monthly income of $3083.

Let’s say that Mr. Jones is a normal guy and has a car payment of $420 (average American car payment) and car insurance payment of $145 (average American car insurance payment). He also has a home phone bill, cell phone bill, gas, water, and electric bills totaling $600 per month. Let’s not forget cable television and internet of $120 per month. Groceries are about $300 a month and he eats out a few times a week totaling another $200 a month. He also has credit cards with a total minimum payment due of $115. His rent at this time is $1000 a month. That brings him to a total of $3083 coming in each month and $2780 accounted for in spending each month. This doesn’t take into consideration that cup of coffee at Starbucks every morning, his medicine and clothes as well as other extraneous impulse buys.

To calculate his Debt to Income ratio, you divide his debt ($2780) into his income ($3083) to get 90.2%. That’s very high. Of course the rent would come out when he buys the house, but then he’ll have a house payment, plus property taxes and mortgage insurance, so that will likely be higher. Let’s say that totals $1200 a month. His DTI is now 94.1% He’ll have no cushion in case of emergency. Kind of scary, Huh? No lender in their right mind would offer this guy a loan. Except…

Different types of lenders and banks look at his DTI differently. Most don’t count utilities. So that automatically knocks off the $600 a month from their calculation. They also don’t think about groceries and payment history as well as that cup of starbucks every day, medical expenses, etc. So that knocks off another $500 a month from their calculation.

Then, the kicker: Most of them use Gross income, not Net income. So they take the $50,000 per year and divide by 12. Now the calculation works like this:

$50,000 divide by 12 = $4167. Total expenses used in calculation: $1880. $1880 divide by $4167 = 45.1% DTI!!! Now he’s looking good. Heck, he can afford way more than a $1200 a month payment now. Let’s get him into a bigger home. Incidentally, I think that politicians use this same methodology for balancing the budget.

As a consumer, it is YOUR job to be brutally realistic about your finances. Look at your real budget. Include those cups of coffee from starbucks. Don’t forget medical expenses, cell phones, and utilities. Groceries really do cost money and so does eating out all the time.

Calculate your own DTI before deciding what you can afford and don’t trust your banker or realtor on this. You don’t need as big of a house as you think you do.

I’m not telling you that your banker or realtor is dishonest, only that they are working in their interest too and you need to be aware of that. Don’t shut off your brain and blindly accept what they say.

Think for yourself and do the math for yourself.

And be careful where you get a haircut.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense, most people just don't use their common sense when it comes to financial matters.