If you think about it, there are only a few things you can do with money. You can spend it, make debt payments with it, save it, invest it, and give it away.
In countless ways, that’s the order our culture conditions us to choose.
So, we start earning our first salary and our first thoughts turn to what we can spend the money on – where we can live, what type of car we can drive, where we can shop for clothing.
When spending comes first, debt always seems to come second. There’s just something about a spend-first life that leads to spending more than we make.
If any money is left over after all that spending and all those debt payments, maybe a little will be saved, invested, and even given away. But there usually isn’t much money left over.
Pulling a Financial 180
What if we set our priorities differently? What if we turned that cultural order completely around?
With every dollar that came into our household, what if we first gave away a portion, then saved a portion, and/or then invested a portion? What if we avoided all debt except a reasonable mortgage? And what if then and only then – after we’ve given away a portion, saved a portion, and/or invested a portion – we looked closely at how much was left and then decided where we could live, what type of car we could drive, and where we could shop for clothing?
Do you know what then? Then we’d have a remarkably good financial life.
Getting to a Better Financial Place
Is there something about your financial life that isn’t working very well right now? Does it seem impossible to find the money to save or invest? Does the whole money thing leave you feeling worn out, stressed out, or unhappy?
Try this. Take a look at my Recommended Spending Guidelines. You’ll see that there are different guidelines for nine different household incomes and four different family sizes. Find the income and household size closest to yours and see what it would look like if you followed those guidelines.
You’ll notice that the guidelines call for no debt other than a mortgage that requires no more than 25 percent of your monthly gross income, including your property taxes and insurance. If you have a credit card balance, a vehicle loan, or a student loan, you’ll have to take money from other spending categories in order to cover those payments.
But stay with me. I’m going to be talking a lot more this year about how to get out of debt and stay out of debt forever.
For now, just set up an ideal spending plan based on my recommended guidelines.
What are the biggest barriers to bringing your real financial life in line with this ideal financial life? Let me know in the comments below.
I firmly believe that anyone with even an ordinary income can create an extraordinary financial life. I’d love to help you get there.
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Sam – Great to hear from you. And I’m with you on the simplicity front. Good for you that you’re able to live off the interest. That’s a goal that lots of people have, but unfortunately the recession has turned it into a dream for many. You’ve obviously been doing lots of things right!
Howdy Matt,
My priority is to become debt free when I decide to retire, which is why I’ve crafted a pro forma budget and net worth outlook to make it happen.
Given that I’ve discovered a potential business online, I’ve decided to sell one of my income properties and just simplify life and just live off the interest in the equity.
All about simplicity the older I get!
Best, Sam
Lanette – Wow, you know how to stretch a dollar! And you’re stretching it for the benefit of so many others. It’s really encouraging to hear how you’re making the most of what has been entrusted to you.
Grateful – Thanks for sharing what you’ve learned over time. It’s a very affirming story of the power of priorities, starting with generosity. There are so many good lessons in what you shared. I hope you’re sharing your story with others in your sphere of influence.
I have a $10,500 credit card balance with a credit union @ 10.25 interest. Plan: to pay it off in 18 months-as long a my job keeps me at $1,000-1,200 per mo
I pay tithe on the gross of my work check & Soc Sec.($503 mo)
I support 2 girls in Latin Amer for school @$32 mo each
I support 7 missionaries @ $20.00 mo
I give to a trust scholarship fund for our church
headquarters $16 mo
Savings equals $10.00 mo automatically goes in.
And do what I can with the rest.
I give to local 6 charities on a rotating 2 per mo
of $20
God blesses the rest.
For years I felt that my husband worked so hard that I didn’t want him to think that he couldn’t spend what he wanted, even tho we were careful with what we spent, we hardly saved anything back then.
Today, we are on the same page and both know where it all goes.
We spend it all on paper at the beginning of the month:
First our tithes, God owns it all and He doesn’t need our money, but we are to be good stewards and give with an open heart and hand.
Next, savings, retirement, food, clothing, shelter, utilities, taxes, etc. Now, thankfully, we are debt free and continue to spend less than we make.
We pay with cash, and do not use credit cards. Remember, the borrower is slave to the lender. We save a certain amount per month for big purchases, and will continue to do so, so when we are in need of our next car we will have the money–NO LOANS!
We have a 4-month emergency fund and are continuing to add to it for future months in case of an emergency.
We didn’t save for retirement in our early years and wish we had, and it took some time to get to where we are, but are thankful to God for providing.
We have to remember that we don’t have to be like a lot of our friends who “seem” to have everything and are always looking to buy “stuff” with money they don’t have. We don’t need the peer pressure, and are very happy with what we have.
Matt, you have been a true blessing in our lives and countless others–Thank you for all you do for all of us with such a caring heart! God bless you.