Credit/Debt – Matt About Money Simple. Meaningful. Success. Fri, 17 May 2019 10:44:29 +0000 en-US hourly 1 9092505 Profitable Ideas: Becoming a Financial Superhero, How Marketers Get Inside Your Head, and More Fri, 17 May 2019 13:30:34 +0000

Weekly roundup of some of the best personal finance articles from around the web.

Financial superpowers (A Wealth of Common Sense). If Stan Lee had come up with Money Man, here’s what he’d be able to do. It’s what we should all be able to do.

This common job advice is actually setting grads up for failure (Fast Company). The important difference between getting a job and building a career.

The latest victims of the student debt crisis — parents (CNBC). What the “PLUS” in Parent PLUS loans really means — more debt, more stress, and more years of work before retirement.

Why I’m saving and investing for the disaster to come (Monevator). It’s always something, which is why it’s important to have more than a little something set aside just in case.

Will Smith and Michael Eisner want to literally get inside your head (Fast Company). As the “target” of countless marketing campaigns, it’s good to know what you’re up against.

The impact you can have from a small space (Becoming Minimalist). Some people are waiting until someday, one day to make a difference. There’s no need to wait.

Are you a helicopter parent, a lawn mower, or worse: a payoff parent? (Kiplinger). We all want our kids to succeed, but maybe we’re doing too much of the work.

Young people, scrolling their friends Instagram feeds, feel pressure to overspend (USA TODAY). It should come as no surprise that the more time we spend on social media, the more money we tend to spend.

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A Money and Marriage Mistake to Avoid Tue, 09 Apr 2019 13:30:29 +0000

Throughout their marriage, John and Jessica had maintained separate credit cards and apparently didn’t talk about how they were each using their cards. After 12 years of marriage, Jessica was shocked to discover that John had racked up $68,000 of credit card debt.

Instead of asking for forgiveness, John asked Jessica to co-sign for a loan that would roll together their first and second mortgages, their car and truck loans, and his credit card debt.

While their names have been changed, it’s a true story described in an advice column in which Jessica asked whether she should sign for the loan.

While this couple’s story is dramatic, the underlying issues are all too common. Many couples live separate financial lives. This can be seen in the results of national surveys finding that 44 percent of married people say it’s okay to keep financial secrets from their spouse, 22 percent say they don’t tell anyone how much money they make including their own spouse, and over 60 percent say they don’t know when their own spouse plans to retire.

What we have here is not just a failure to communicate, but also a failure to commit to financial oneness. Married couples are best served by doing the money thing together, and one of the best ways to ensure financial oneness is to use a household budget that gives each spouse anytime/anywhere access to their household’s complete financial picture.

There are three equally important parts to a budget. The first part is a plan developed together for how household income will be given, saved, invested, and spent—preferably in that order.  The second part is a process for tracking how all household income is actually given, saved, invested, and spent. And the third part is an ongoing conversation about what adjustments need to be made in order to make household cash flow run effectively.

If the couple highlighted in the advice column had been taking those steps, they could have kept their separate credit cards while knowing the truth of what was happening with their finances.

What advice would I give the couple?

  • Don’t take out the loan. That will only deal with the symptoms of the problem instead of getting at the cause.
  • Stop using credit cards. They should both do this since the article indicated that the woman also has a propensity to charge up her card.  As I have written before, I believe credit cards can be used responsibly. But in this case, because of the couple’s age (he’s 59, she’s 62) and amount of debt, they need to be done with credit cards for life.
  • Find a great marriage counselor and begin the process of restoring their marriage.
  • Seek budget assistance of a trained counselor from Compass—Finances God’s Way or Crown, or contact the National Foundation for Credit Counseling and begin a debt management program.
  • Create a budget that provides complete financial transparency and helps eliminate all unnecessary spending.
  • Sell any unused assets to free up money for debt repayment.
  • Seek ways to maximize income for accelerated debt repayment.

It isn’t over for this couple. With the right attitudes and the right help, this difficult experience could be the catalyst for a forever-improved marriage. But it’s going to take some time.

What other advice would you give this couple?

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Cultivating the Lost Art of the Long View Tue, 19 Mar 2019 13:30:12 +0000

Waiting can be tough. We seem to be hardwired to resist it. And our culture does us no favors here. Whatever we’re interested in buying, there are ways — and we’re strongly encouraged — to have it now. Paying for it? That can wait until later.

But there are great rewards for those who learn to wait. 

Read The Master(’s) Principle

And motivation can be found by seeing the big picture. A good starting point is to quantify your financial potential.

Money plus time = a lot!

Consider this: If you’re 32 years old and your salary is $55,000, by the time you’re 70, it’s realistic that you could have earned over $3.8 million! That’s a ton of potential! 

Try this exercise yourself by plugging your current age, planned retirement age, current annual income, and assumed annual salary increase (I used a 3% in the example above) into this calculator.

By nature, we don’t tend to think long-term. For many of us, it’s difficult to imagine the future. But it can be very motivating to do so.

Keep yourself gainfully employed, earn a small raise each year, and you’ll generate a lot of income over your lifetime. The question is, what will you do with it?

The eighth wonder of the world

With the big picture in mind, now consider how the seemingly small steps you take today could be magnified over time. 

Think about investing, for example. I remember reading a column by one of my favorite financial journalists in which he talked about the day in his youth when someone introduced him to the power of compounding—what Einstein reportedly called “the eighth wonder of the world.” 

He had never heard of the concept before, but when he saw compounding in action, it was as if a light bulb switched on above his head. It motivated him to find the money to start investing.

In your first years investing, compounding may not seem like much of a big deal. But give it some time, and it will turn into a very big deal.

Let’s say you’re 20 years old, start investing $200 per month, do that for 50 years, and generate an average annual return of 7%. After 10 years, you will have invested $24,000. But because of the power of compounding, you will have earned about another $10,000. Nice, but not super impressive. At least not yet.

Now let’s run the example out 50 years. At that point you will have invested $120,000 — a great accomplishment unto itself. But because of the power of compounding, it will have turned into over $1 million. Now, that’s impressive.

But what if you can’t find $200 to invest every month at age 20? Besides, you figure, you’re young; you can afford to wait. Finally, at age 30, you start investing $200 per month, do that for 40 years, and get that same 7% average annual return.

You’ve only invested $24,000 less than if you had started at age 20. However, because you waited 10 years, you end up with about $500,000 less! That’s quite a penalty for waiting.

This same type of thinking can be applied to every aspect of your financial life. 

A lifetime of impact

Let’s go back to the earlier example of a 32-year-old making $55,000. If she did end up making $3.8 million by age 70, and if she cultivated the habit of giving away 10% of her income along the way, she will have given way $380,000. That could have a ton of impact!

Give away a portion of every dollar you earn, and you could play an important role in addressing some of the world’s great needs — sharing Christ, helping to alleviate hunger or poverty, and so much more. So much impact. So much joy.

In the middle of writing this post, I checked my email (yes, while writing about taking the long view, I got impatient and fidgeted away to something else!) and there I saw an update from a missionary we support. The impact she’s having is amazing. More people are hearing the Gospel, more are coming to faith. And we get to play some small role in that. Incredible.

Saving for something special

My wife and I will celebrate 20 years of marriage this year. Four years ago, we started dreaming of what we might do to celebrate. And we began saving. 

Today, the airline tickets are reserved, the hotel is booked, and money for restaurants and other entertainment is in the bank.

Is there a special trip you’d like to take? How much of your kids’ future college costs would you like to cover? What else would you like to accomplish in the future? 

Thinking big is the starting point. Let those goals motivate you to add them to your monthly cash flow plan and start chipping away. A little bit of money set aside on a regular basis for a long time can really add up.

It works both ways

Of course, debt can have a compounding effect as well—a negative effect. Let’s say you have a $6,000 balance on a credit card that charges you 18% interest, and you carry that debt from month to month, making just the minimum required payments each month. It could take you more than 17 years to pay it off, and cost you $5,700 in interest!

So turn it into a win by chipping away at the goal of becoming debt-free. If you could put $300 toward your debt every month, you’d be debt-free in just two years. Run some what-if scenarios to see how much faster you could get out of debt. What if you could put an extra $20 toward your debts each month, or an extra $50?

How to make it happen

Making any of this work requires margin, that wonderful cushion between your income and expenses. 

Read One of the Sweetest Concepts in All of Money Management

It requires not spending too much on a house, not having a car payment, and being proactive and intentional about day-to-day spending. Some people reading this may see it as impossible. But it is possible.

I once had $20,0000 of credit card debt that I thought would never go away. It took time and it took patience. It wasn’t much fun along the way, but today I’m glad that it took four and a half years to pay it all off because it took that much time to change my way of thinking and to cultivate better habits.

Read How I Found Financial Freedom

Take the long view. Get a sense of your financial potential and start chipping away at whatever it is that motivates you, whether that’s getting out of debt or going on a special trip. Along the way, pray for patience. In our have-it-today culture, it will take some commitment to live differently.

What if?

Wouldn’t it be a shame to look back on your life and wonder, “What happened to all the money I made?” By the same token, wouldn’t it be satisfying to look back and know you made the most of what was entrusted to you?

Getting a feel for your financial potential can be very motivating. Be sure to take the next step, though, and turn that potential into a plan.

Profitable Ideas: The Science Behind Your Money Habits, A Money Mistake Many Couples Make, and More Fri, 08 Mar 2019 14:30:42 +0000

Every week, I look through lots of personal finance articles. Here are some of the best.

What science reveals about your money habits (Magnify Money). There’s more going on behind the scenes of your financial decisions than you realize.

The easiest retirement choice (Of Dollars and Data). Boiling retirement savings down to one especially important decision.

We have to fix fashion if we want to survive the climate crisis (Fast Company). This article is mostly directed at companies, but of course we have an important role to play. It’s about buying fewer, better pieces of clothing.

You’re the ‘money person’ in your relationship? That’s problematic (NY Times). It’s natural for one person to take the lead, but too much leadership can be a mistake.

Follow the leader is a child’s game — not a retirement strategy (A Teachable Moment). Social proof proves harmful.

Just a little bit more (The Irrelevant Investor). The fallacy that happiness is just one more purchase away.

The stigma of choosing trade school over college (The Atlantic). College isn’t for everyone, and other paths can work out just fine.

Credit freezes aren’t foolproof (Kiplinger). Just because you put your credit on ice doesn’t mean you can let your guard down.

To receive more ideas and encouragement for using money well, sign up for a free subscription to this blog.   

The Warmth of Winter Wed, 06 Mar 2019 14:30:44 +0000

As another winter stretches on, I’ve been longing for spring. And isn’t that how it is whenever we go through a wintry financial season? We can’t wait for a better one to begin.

In my mid 20’s, I inherited $60,000 from an uncle. I used the money to create my dream job, a newsletter for people who take golf vacations. The money enabled me to play some of the greatest golf courses in the world: Pebble Beach in California, the spectacular golf courses of Spain’s Costa del Sol, and many more.

Two years later I woke up to the hard reality that I had transformed that gift into $20,000 of credit card debt. I had become so acclimated to the life I was enjoying and so blind to what was happening with my finances that when the money ran out I just kept funding my adventure on credit cards.

The next four and a half years, during which I paid it all off, often felt like one long winter. I couldn’t wait for the debt repayment process to end. But along the way I found some encouragement reading about an affliction faced by the apostle Paul.

“To keep me from becoming conceited because of these surpassingly great revelations, there was given me a thorn in my flesh, a messenger of Satan, to torment me” (2 Corinthians 12:7).

Boy, could I relate. My debt felt like the nastiest of thorns that had been twisted into my flesh.

“Three times I pleaded with the Lord to take it away from me” (2 Corinthians 12:8).

Three times? How about a gazillion times?

“But he said to me, ‘My grace is sufficient for you, for my power is made perfect in weakness’” (2 Corinthians 12:9).

When I read those last verses I felt a tremendous weight lift from my shoulders. God had already used my financial difficulties to draw me into a relationship with him. But Paul’s words told me there was an additional purpose for what I was going through. I realized God was using that time to teach me not to lean on my own understanding, to trust in his provision, and to help me develop more patience.

Ultimately, that financial train wreck led me to my life’s work: writing and teaching workshops on how to manage money according to the timeless wisdom of God’s word.

If you’re in the midst of a difficult financial season, it’s very natural to just grit your teeth, tough it out, and focus on getting to a better place. But my encouragement is to look for all that God wants to teach you during this trial. It’s probably more than you think.

What is he revealing about the true source of the problems you’re facing? What does he want you to remember about his character and his concern for you? How might he enable you to use this tough time for the good of others?

Whatever trial you’re going through, you can rest assured in God’s promise to provide for you and know that he has a purpose he wants to accomplish.

The other night as I walked our recycling can to the curb and turned to make my usual quick dash toward the warmth of our home, I glanced up and was stopped by the beauty of trees coated in fresh snow glistening under a full moon. I stood there for a moment just taking it in. Then I did something I do far too infrequently: I thanked God for the winter.

Profitable Ideas: New Insights Into the Money/Happiness Connection, Finding Financial Margin, and More Fri, 01 Feb 2019 15:00:19 +0000

A weekly roundup of some of the best personal finance articles from around the web.

Time for happiness (Harvard Business Review). Why using money to free up time can boost happiness, and why so few of us use money that way.

Spending happily (Humble Dollar). More on the money/happiness equation.

7 ways to use emotional intelligence to beat procrastination (Fast Company). Some habits that’ll help you get unstuck.

One big thing (Of Dollars and Data). In many areas of life, including financial, one piece of information can make a big difference.

Secret experiment suggests one key way to boost retirement savings (CNBC). Envisioning the future isn’t easy, but it does have the benefit of being profitable.

This is what I’m teaching my kids about money (that I learned the hard way) (Fast Company). Lots of good ideas here for anyone with kids.

A woman who studied 600 millionaires discovered where you choose to live has two effects on your ability to build wealth (Business Insider). This is one of the least appreciated yet most effective ways to create financial margin.

Virtual credit card numbers cut fraud risk (Kiplinger). The future of credit cards is here, at least with some issuers.

What are your thoughts on any of the above? Let me know by leaving a comment below.

Interested in more ideas and encouragement for using money well? If you haven’t done so already, why not sign up for a free subscription to this blog?  

Got Debt? Get Out Of It Slowly Tue, 15 Jan 2019 14:30:43 +0000

When I woke up to the reality of having $20,000 of credit card debt, I had to face this hard truth: I didn’t get into debt overnight, so I’m probably not going to get out of debt overnight.

In fact, it took me four and a half years to pay off my debt. There were plenty of times throughout that journey when I wished for an easy way to just wipe it all out. But there was no easy way. I don’t recall ever considering bankruptcy. I racked up all that debt. I needed to pay it all off.

So I did. Slowly. Month after month, I sent big checks to creditors, paying dearly for trips I had taken long ago and restaurant meals I no longer remembered.

Today, with the perspective that time brings, and with lots of experience helping others struggling with debt, I honestly believe that the slow and steady way out of debt is the best way.

For many people buried under a mountain of debt, bankruptcy looks appealing. A quick way to end the pain.

However, past studies have shown that one year after filing for bankruptcy, many filers were struggling to pay routine bills, and some said their overall financial situation was similar to or worse than when they filed.

Instantly wiping out your debt may feel good for the moment. However, for many people, ditching debt without addressing the underlying causes often turns out to provide only short-term relief.

Lasting Changes Require Changes of the Heart

When I was blindly digging my way into debt, I saw buying stuff as the route to feeling good about myself. I bought things I couldn’t afford in order to tell the world I was somebody.

I also saw carrying a balance on credit cards as normal behavior. It seemed like something everyone did.

I probably could have learned some helpful new behaviors around money without changing my attitudes about money — how to use a budget, how to set up an emergency fund, and the like. But without a serious attitude adjustment, especially seeing things from a biblical perspective, I doubt I would have been interested. Or, if I did start dabbling in new habits, they probably wouldn’t have lasted very long. 

A friend who’s a psychiatrist tells me that attitudes and behaviors work in circular fashion to bring about change. Behavioral changes tend to alter our attitudes, and attitudinal changes tend to alter our behavior. However, they don’t usually happen on the same schedule. While we may be able to force ourselves into some short-term behavioral changes, attitudinal changes take time. You can’t just slap on a new conviction like cologne.

Getting on the Slow Track

To be sure, getting out of debt requires behavioral changes. You need to stop going any further into debt. You also need to gather the facts. How much debt do you have? Write it all down, and add it all up. Create a cash flow plan (AKA, a budget). Then set a debt freedom day and start moving toward it.

However, getting and staying out of debt also requires the slower work of heart change. Start by taking a close look at your financial attitudes. Are there any ways of thinking that have contributed to your debt? Have you been buying things you can’t afford in order to feel better about yourself, like I did?

Acknowledging those attitudes is the first step toward changing them.

One of the key attitudinal factors that helped me turn things around was accepting responsibility for my debts. The credit card companies didn’t manipulate me into carrying balances on my cards. My parents didn’t fail me in some way. 

It wasn’t about beating myself up about my debts; it was about acknowledging the truth. I was responsible for my debts.

To be sure, some people with debt problems have gotten into financial trouble by way of horrendous life circumstances. A divorce, an extended period of unemployment, catastrophic medical bills. I don’t mean to be insensitive to any of that. But it’s been my experience that when a person with debt owns their role in the debt — and most people with debt played at least some role — they have a far greater chance of getting and staying out of debt.

If you have a lot of debt and you’re just beginning the process of getting out from under, I’m sure the idea that it may take several years doesn’t sound the least bit appealing. However, I’m thankful to have taken the long way out. It took time to change my money-related attitudes and cultivate some healthy financial habits.

I firmly believe that taking the slow road was the key to making changes that have stuck.

If you have worked your way out from under a heavy load of debt, what lessons could you share that may be of help to others?

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Profitable Ideas: The Lessons of 2018, Toward More Ethical Uses of Money, and More. Fri, 04 Jan 2019 14:30:05 +0000

A weekly roundup of some of the best personal finance articles from around the web.

The 10 most valuable financial lessons I learned in 2018 (The Simple Dollar). There are some good lessons for all of us on this list.

The 10 best financial resolutions for 2019 (Forbes). I like these resolutions a lot (although I don’t agree with the advice to use Robinhood for investments). Feel free to adopt some of them as your own.

Mindless resolutions (A Wealth of Common Sense). Point well taken about the importance of prioritizing systems over goals, process over outcomes, and philosophy over tactics.

6 ways we’re looking to cut expenses in 2019 (Three Thrifty Guys). Good money-saving recommendations.

You should freeze your child’s credit. It’s not hard. Here’s how. (NY Times). In this day and age, it’s really important for parents to do this.

8 simple, inexpensive ways to be a more ethical consumer in 2019 (Fast Company). Some good ideas for doing less harm to the world through the products we buy.

Monopoly for a new generation (Kiplinger). As the classic money game tries to connect with a new audience, it may have missed the mark.

The true cost of homeownership is higher than you think (Rockstar Finance). Good words of warning for future first-time home buyers.

What are your thoughts on any of the above? Let me know by leaving a comment below.

Interested in more ideas and encouragement for using money well? If you haven’t done so already, why not sign up for a free subscription to this blog?  

Top 10 List for 2018 (Plus a Few Extras) Mon, 31 Dec 2018 14:30:29 +0000

As I look back on 2018, I’m grateful for many things, one of which is that you’ve chosen to subscribe to this blog. In case you missed any of these, here are the 10 most-read posts from the year, along with a few others that I especially enjoyed writing. 

1) The absolute best way to teach kids about money. The best way to teach kids about money is to make it real. Here’s how.

2) How NOT to invest. Are you making any of these mistakes with your investments?

3) The happiest uses of money. How to connect your use of money to what matters most.

4) How much should I spend on a house? Some practical guidelines that’ll give you one of the most wonderful financial benefits of all — margin.

5) Are you using one of your credit card’s most valuable benefits? Your credit card may hold the secret to getting the absolute best price on the things you buy.

6) A TV cheapskate’s guide to paying for cable TV. How we do TV in our household.

7) Life’s biggest financial decisions — the later years. Ideas for navigating late-stage career management, retirement planning, healthcare, Social Security, and more.

8) One habit that will greatly improve your finances. You can’t manage what you don’t measure.

9) Life’s biggest financial decisions — the early years. Ideas about paying for college, buying a car, buying a house, marriage, and more. 

10) How I found financial freedom. I didn’t start learning how to manage money until I had mismanaged a lot of money.

Here are a few extras—some posts I especially enjoyed writing.

An investor’s got to know his (or her) limitations. What climbing some mountains taught me about fear — and investing.

Where are you setting your hope? Financial lessons from the best non-financial book I read in 2018.

The importance of being known, financially and otherwise. Reflections on a couple of shocking celebrity deaths.

Blessings to you as you reflect back on 2018 and pray about the year ahead.  

How’s Your Financial Health? Tue, 06 Nov 2018 14:30:46 +0000

There’s a new report out that says very few Americans are financially healthy. Working with researchers at the University of Southern California, the Center for Financial Services Innovation (CFSI) developed an eight-question survey that was taken by a representative sample of U.S. adults, leading to what it calls the U.S. Financial Health Pulse. Its results were not encouraging.

According to CFSI’s analysis, just 28% of Americans are “financially healthy,” 55% are “financially coping,” and 17% are “financially vulnerable.”

Survey questions asked how people’s spending compares to their income, whether they pay their bills on time, how long they could live off their savings, how manageable their debt is, and more. For the most part, they were good questions, but the survey seemed somewhat incomplete.

If I were to develop a survey to assess people’s financial condition, I’d include the following 10 topics. As you read each description, rate yourself on a 5-point scale, with 5 being the most positive score.

Biblical financial worldview. How well do you know what the Bible teaches about money and to what degree have you put biblical financial principles into practice?

Income. While there’s no such thing as guaranteed employment, evaluate your employability. Are your skills up to date and in demand? Are you taking steps each year to hone your skills? How’s your network? Unless you’re independently wealthy, your ability to earn income is the foundation of your financial life.

Planning. Do you use a budget to proactively manage your household’s cash flow? Some people say they have a budget, but really what they have is a big picture idea in their head of how much they can spend. What I mean by a budget is a written plan that allocates your income toward giving, saving, investing, and spending.

Giving. Are you giving at least 10% of your monthly gross income to Christ-centered causes? I know some people get uneasy with specific generosity guidelines, but I believe 10% is the biblical starting point.

Saving. Would you be able to live off your savings for three to six months if you lost your job tomorrow? If you’re single and rent an apartment, you’re probably fine with three months’ worth of savings. If you’re married with kids and a house, you have what I call more breakable moving parts and should have at least six months’ worth of essential living expenses in savings. This emergency fund should be in a dedicated savings account, not mingled with your checking account money.

Also, do you save for periodic expenses, such as an annual life insurance premium, Christmas gifts, or other expenses that aren’t paid every month but will need to be paid at some point in the year? And do you save for the replacement of big-ticket items, such as your car?

Debt. Are you debt-free, with the possible exception of a reasonable mortgage—one that requires no more than 25% of monthly gross income for the combination of your mortgage, property taxes, and homeowner’s insurance, and preferably no more than 20%?

Investing. Do you know how much you should be investing to build a nest egg for your later years and are you investing that much? If you have kids, are you investing to help pay at least a portion of their college costs? And are you investing knowledgeably?

Protecting. Do you have adequate insurance—health, vehicle, homeowner’s, life, and possibly disability insurance?

Spending. Are you proactive about controlling your spending, being intentional about managing to the numbers in your budget?

Temperament. Especially if you’re married, knowing your temperament and your spouse’s temperament can be really helpful in managing money as a team. Even if you’re single, understanding how God has wired you up, and the financial tendencies that are associated with your temperament, can help you learn to play to your strengths. So, do you know your temperament and its financial implications?

Since there are 10 topics, there are 50 possible points. How did you score? While this is certainly subjective, I’d say if you got 45 points or higher, you’re in “very good” shape financially, 40-44 points means you’re in “good” shape, 35-39 points means you’re in “fair” shape, 30-34 means money is probably somewhat of a struggle for you, and anything less than 30 means you’ve got some work to do.

I know this list may feel overwhelming, but use it as a diagnostic tool that can help you develop goals for the next 6-12 months. Start with the topics where you gave yourself the lowest scores. Then search for articles about those topics on my site for guidance. Or if you’re part of a church with a stewardship ministry, see what classes are being offered and sign up.

Money is one of those things we never get fully right. We all have room for improvement. Hopefully by honestly assessing where you’re at with the 10 topics above you’ll be able to focus your financial improvement efforts in the right places.