Category Archives: Psychology of Money

Thanksgiving and Black Friday Illusion

It is strange that we have Black Friday so close to Thanksgiving. Going from a time of thankfulness into rapid intense materialistic fueled buying, that the Wall Street Journal reported is just a rip-off anyway, more on that in a moment. Last year about this time, I wrote about Thanksgiving, because I think it is one of my favorite Holidays of the year.  It is a great time to be thankful for all of the good things that we have, and for the challenges that made us better. Having a thankful attitude is much healthier than any other way to think: it is felt contentment. It is at the core of happiness.  Although having a positive attitude is good, but sometimes that even leads people to depression. Funny, a book came out about a year ago that exposed this truth: The power of negative thinking, I wrote about that too. So before you jump from Thanksgiving into Black Friday, consider the following:

The Wall Street Journal reported today in Black Friday : A Retail Illusion, The Dirty Secret of Black Friday Discounts, is merely a manipulative ploy to get you to buy things you think are at the lowest cost of the year. In actuality, retailers are really smart, they know how to price things, and adjust the prices in anticipation of low Holiday sales, just to trick you into buying.

Is the practice legal?  According to the Federal Trade Commission, it is a violation to artificially increase a price just to run it lower on sale. For example, you can’t advertise the price of a car for $25,000 and sell it with a $5,000 discount from the beginning, unless it was advertised for $25,000 and sold it at that regular price before. How do retailers get away with it?  They know the law and they carefully do all kinds of little tricks to not cross the line. I imagine if a store offered a men’s dress suit online for or in the back of their store for a while at one price, with the full intent of later increasing the display and inventory, to move it out front for 40% off, then they could skirt the law.  Too bad most major retailers play the sale game to compel sales. When some do it, it seems all have to play the game, or face less business since everyone is doing it. Why don’t retailers just have high credibility and offer things at their lowest price already, and only discount at the end of a season to blow out inventory?

JC Penny tried to just have a low price, but they failed.  Earlier this year, new management (that is no longer there), tried to just price things competitively, save money on sales advertisement and other promotions, believing the consumer would see the value and buy. This approach failed. Other retailers and JC Penny learned that people want the feeling of a sale and discounts, since it makes them feel emotionally better at the cash register.

Low price teaser products are offered in small quantities to get you into the store. For example retailers like Best Buy will probably offer a HD TV for a deep discount, just to get you through the door. They might not make any money it on it, but once you are in there, you will buy probably buy a CD, computer, DVD player, game system, Cell phone (and service) or appliance. But who are you buying those things for?

Black Friday is not just for gift giving, since many people for themselves at those sales. This fact breaks many people’s Holiday budgets and adds a lot of money to retailer’s bottom line (and your credit card balance). If you are on a tight budget, watch out for these temptations. It always kills me to see….

People wait in line for days for the special teaser items. I have heard reports that people have been waiting in front of some stores for more than a week already, just to save a couple of hundred dollars on some piece of what will some day be junk!  Wouldn’t those people have been much better off, working a part-time job for those days, wouldn’t they have more money in their pocket from a paycheck and from not buying things? Yes.

Can you still get some great deals on Black Friday? Yes you can, but take your smart phone if you have one, to compare prices online, to make sure you are not getting fooled (some stores price match to online prices). If they run out, because you researched it and delayed shopping for it for a day or two, so what, there will be other sales before 12/25. The competition is fierce, and retailers will be competing. However, know what is a good deal before you buy, don’t buy into the…

Back Friday hype and hysteria. Instead of spending all your time fighting the crowds, traffic and for parking places; relax. I work too hard to spend all my day-off time doing something that literally gives me a headache. You can tell I don’t like to shop to begin with, but…

If you enjoy Black Friday shopping because it kick starts your Holiday spirit, then go for it, but have a budget; a list of the people, things, and price limits. Also, talk to your spouse or accountability partner before you go, and tell them you are going to call them for emotional support before you go off budget. It is good to have a checks and balances person, to avoid impulse spending and to get their opinion on a price before you buy.

I hope you have a great Thanksgiving!

The Power of Negative Thinking

This article kind of flies in the face of the popular feel good ‘positive thinking’ philosophy, but before you jump to any conclusions, read on. Also, this has many ramifications to personal finances, which I will get to at the end of the article.

The Power of Positive Thinking made popular by the Dr. Reverend Norman Vincent Peale in 1952, 60 years later has spread to many aspects of society, including teachings in business and religion, and adopted by many people in the ‘self-help’ movement of motivational books, tapes and CDs. You have probably heard statements like “your attitude determines your altitude.” This system of belief runs through much of our thinking and society, however, do we  take the time to dissect this, or do we just seem to accept it as truth? Coaches, teachers, preachers and counselors teach people all the time to think more positively, and that will lead to greater success, blessings and happiness- but will it, has it for you?

I hear people all of the time being labeled as negative or positive, especially in the business world. It is true, it doesn’t make healthy thinking and living to be like negative Eeyore from Winnie the Pooh, and only look at the negative possibilities – all the time. And we do limit ourselves from taking risks, trying new ideas, and living out religious faith- if we are consumed by negative thoughts, however positive thinking is being proven by research doesn’t lead to happiness and success either.

Maybe negative thinking has been given a bad wrap though.  Wandering through the library a few months back, I came upon an interesting book, The Antidote: Happiness for People Who Can’t Stand Positive Thinking, by Oliver Burkeman. Reading this book has given me some new perspectives, although I don’t buy into all of its points of view, a little which come from eastern religion.  Nevertheless, it makes a convincing argument that devotion to the positive thinking cult as a path to happiness has failed; the following are some excerpts from an interview of Burkeman:

“I think the premise from which I start is this idea that we have become fixated on the idea that relentless positivity and optimism is exactly the same thing as happiness; that the only way to achieve anything worthy of the name of happiness is to try to make all our thoughts and feelings as positive as possible, to set incredibly ambitious goals, to visualize success, which you get in a million different self-help books.

Whereas, actually, there’s a lot of research now to suggest that many of these techniques are counterproductive, that saying positive affirmations to yourself in the mirror can make you feel worse and that visualizing the future can make you less likely to achieve it. And so, what I wanted to do in this book was to explore what I ended up calling the negative path to happiness, which involves instead turning toward uncertainty and insecurity, even pessimism, to try to find a different way that might be more durable and successful.”

I think that what is counterproductive about all these efforts that involve struggling very, very hard to achieve a specific emotional state is that by doing that, you often achieve the opposite.”

Embracing fears and failures, moving through insecurities, though actually leads people beyond themselves and to a state better than happiness. Happiness is fleeting; it will not come through retirement, after enduring miserable years at a job you hate. Thinking accurately, truthfully, honestly and sincerely with yourself can help us on our paths, to more clearer thinking about what gives us something better than happiness; flourishing in our faith.

How does this apply to financial planning? Big picture: financial planning is outcome based. It often looks forward to retirement and the rewards and happiness it promises. On one end, some people avoid planning, because if they saw the actual numbers and really became aware of reality of not being able to retire comfortably, they fear how this will make them feel. They may have to embrace what that means now. It may mean change, or looking at life totally different. It doesn’t surprise me anymore, when people I sit down to counsel in their 50’s and 60’s who have no idea of their expenses and income. Often they are shocked to see how much negative cash flow they have each month. Embracing the reality now, instead of avoidance or positive thinking (a lot of people falsely believe inheritance will save them), can actually lead people to more a more flourishing life, now and later.  If they have to adjust lifestyles down, living simpler and search out that more meaningful abundant life Christ promises, whatever their age or financial status, they will be overall happier as they flourish in a new more realistic path, that is aligned with their gifts, talents and beliefs.

On the other end, those that have a solid retirement plan, and are enduring a job they hate now, positively thinking a lifestyle of leisure is going to lead to a more happy existence would be well advised to think this through. Have you ever taken some time to really imagine what daily life would be like in retirement? Really go there, and imagine the routine, thoughts and feelings. I used to ride the bus with dozens of corporate workers in a state of mild depression. I see them today at local coffee shops, and they seem lost, sometimes they are angry grouches focused on cable TV news.  I enjoy being around those in retirement that found meaning and value outside themselves, and contributed time, talent and money to things and people that will improve the world around. This starts before retirement. It makes better life now and later, whether you can retire in your 60’s or must keep working to save into your 70’s.

Applying this in a practical way to our personal finances is important too. If we have fear about our real budget, the return on the rate of return we are getting, the concern about a planner’s advice, or underperforming investments- it makes great sense to call it all into question. Dig deep to learn more, ask a lot of questions, assume a negative posture, and don’t stop until you get good answers. Sometimes you have to press through fears of insecurity looking stupid asking bad questions, or looking at our bad decisions, or finding a new advisor who we were afraid to confront, but glad we did.

Applying this our Christian walk is vital. We have all heard ‘financial prosperity’ and ‘word of faith’ preachers, but often they emphasize ‘faith in our faith,’ and faith in positive thinking, moving us away from faith in God.  It is very healthy to examine failures and success, and learn from both. However, it is important to not dwell there, and overly focus not on our circumstances, but on God’s promises and goodness.

In conclusion, I think there is value in a ‘both-and’ approach to this. We don’t have to entirely choose one or the other: I think it is possible to smartly combine or switch between both negative and positive thinking, on our paths to a more flourishing faith-filled life.

Does Less Money Mean More Happiness?

Rather than consider how much money we need to be happy, why not turn the question on its head and think about how too much money could make us unhappy. It may be a cliché, but there is truth in the saying, “money can’t buy happiness.”

In a recent study profiled on the New York Times, researchers found that above a comfortable standard (defined as an annual income of  $75,000), more money did not translate into greater happiness. While many of us think higher salaries can buy us the latest technology, a better house, and even an excellent education, it turns out the hard work and sacrifice we make to acquire that money could prevent us from having the time to really enjoy any of those things, or more importantly, our relationships with the people around us.

It is no surprise that people who make enough money to live comfortably are much happier than those who live in poverty. It seems that money impacts our happiness most when we don’t have enough to enable us to do the things we need and want to do to be fulfilled. If we’re worried about how to put the next meal on the table, there really is no time to ask the question, “Am I satisfied with my choice of career? Am I following God’s call?”

But too much money can also negatively impact our happiness. Continuously working extra long hours inevitably takes it toll after a while. Sacrificing a more flexible work schedule for a higher salary might not be the right choice in terms of happiness. And with more money also comes the stress of managing it well. In short, when we have too much money, we can easily desire more of it, until we lose track of our true priorities and become blind to life’s more abstract aspects.

Especially for those in comfortable financial situations, how we spend our money matters a lot more for our happiness than exactly how much of it we have.

As we already know from the Bible, and as this study reaffirms, there’s something to be said for under-indulgence, or occasionally depriving ourselves of small pleasures that we come to take for granted. It is through these small deprivations that we can get back in touch with the essence of our lives. Through under-indulgence, we become more aware of ourselves. If we eat ice cream every day, it becomes easy to think that we must eat it in order to be happy. Not eating the ice cream for a while gives us the opportunity to realize what in life actually does make us happy (or to deal with feelings of unhappiness, without burying them under spoonfuls of Ben and Jerry’s). Eventually, we can go back to that half-pint of Phish Food and appreciate it in all its fatty, sugary glory. It will taste even better if we’ve stayed away for a week or two.

It turns out that spending money on others brings us a level of happiness that we can’t even come close to when buying things for ourselves. This is part of the beauty of being made in the image of Jesus: we derive happiness from sharing our bounty with others, just as Jesus selflessly sacrificed for us. No matter what income bracket we fall into, maintaining this spirit of giving will increase our fulfillment with our lives and our sense of community with each other and God. Rather than lament the fact that we cannot make an annual contribution of thousands of dollars to charity, why not give time in the form of service, or even a smile or kind words to a stranger?

Deriving happiness from money is only possible when we realize that it’s all about what we make of what we have – and not about more, more, more.

Angie Picard is a writer for NerdWallet, a financial literacy website where you can find advice to better answer the question, “am I saving enough?”

Hedonic Adaptation

Hedonism isn’t a word we use very often. If loosely defined it means happiness achieved through feeling pleasure. Many psychologists say that one of the greatest barriers to happiness is ‘hedonic adaptation.’ When you are getting ready to buy something, you anticipate the pleasure it will bring. However, after you own it for a short while, it gets relegated to the background of your consciousness. You get used to having it, and it doesn’t provide as much joy.

Psychologists say this same principle applies to almost everything, from buying electronics to marriage. They also say that when we think about losing things as a result of unfortunate circumstances, we feel the pleasure again. This negative thinking reverses the adaptation’s effect and shifts it back to where we experience pleasure once again.

I can think of several applications this has to the Christian mind.

  • Fasting from things that bring pleasure can making us appreciate them more, and giving us time to think about Holy things.
  • Hesitating: Knowing that an item I want to buy will soon after ownership deliver less pleasure than I imagined it would may cause me to hesitate before purchasing.
  • Appreciation: When I’m thankful for the things I have, it is okay to think that I could lose them: the opposite of positive thinking can lead to more happiness.
  • Giving: When I let go of money and possessions, for the moment I experience pleasure and pain together: I’m re-living the feelings I had when I originally acquired them, but now I know that it will be gone forever. I can imagine the happiness it may bring others. It forces me to consider that God is the source of my comfort and pleasure. These are perhaps the emotions the rich young ruler had in Matthew 19:16-26.
  • Relationships:  Friendships and marriages in particular require ongoing investment, since our tendency is to relegate them to the background, yet we want more from them as we get older. Doing all of these things is good for my relationship with my wife: focus on her needs, not mine (fasting)–hesitate and think of her first, appreciate her, and give things and myself to her.

Conclusion: To be a good manager of one’s personal finances, it is important to understand the thinking involved when one makes purchases of wants and not essential needs. Marketers of products know what motivates buying decisions. It may be wise to evaluate our emotions when we are getting ready to buy a new car, a new technology gadget, a house, new sporting equipment, and really anything other than basic food, shelter and clothing.

Do You Worry About Money?

Can you imagine what it would feel like if you had one day without worries?

Does the thought of not having enough money worry you?  Are you anxious about what would happen if you lost your job? Are you fearful that when retirement comes, that you won’t have enough or you will run out of money?  Do you have so much money that you fear what your life would look like if investments fared poorly, or a lawsuit left you high and dry?

Personal and business finances are probably the area of life people worry about the most. People from developed industrialized countries worry more about money than people in developing countries. Worry is not good for our health; stress is right up their with smoking and obesity as big causes of health problems.

How do you stop worrying? If you listen to any advertisements, all of your worries can be alleviated if you buy the advertised products. The financial industry will take care of your retirement when you get too old, the bank if you need to borrow quick cash, and investment firms if you will just trust them. You can insure everything you own: insurance is available for your health, life, auto, income (disability), house, belongings, and even your cat. If you have enough money, you can be insured against any calamity: fire, theft, death, sickness, earthquake, flood, hurricane, law suit, error or omission and even your own mistakes or stupidity. But at the end of the day, you will still worry even if you have all of these things- life is still uncertain.

I have only met about three types of people who don’t worry–those with strong religious faiths, sociopaths, or those that generally don’t seem to care about much. Christians worry and are anxious quite a bit of the time, but they don’t have to worry; start by reading Matthew 6:25-34:

25 “Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food, and the body more than clothes? 26 Look at the birds of the air; they do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they? 27 Can any one of you by worrying add a single hour to your life? 28 And why do you worry about clothes? See how the flowers of the field grow. They do not labor or spin. 29 Yet I tell you that not even Solomon in all his splendor was dressed like one of these. 30 If that is how God clothes the grass of the field, which is here today and tomorrow is thrown into the fire, will he not much more clothe you—you of little faith? 31 So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ 32 For the pagans run after all these things, and your heavenly Father knows that you need them. 33 But seek first his kingdom and his righteousness, and all these things will be given to you as well. 34 Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.

Worry is future tense, but it is impossible to live in the future. It is smart to make financial plans and insure for your future. It would be ignorant to not plan and not worry. Even people who have good plans still worry. All you can do today is only what you can do today, and that is it. You can’t change tomorrow. You can minimize problems tomorrow by making good plans today. No wonder Jesus says we can’t do anything about tomorrow by stirring it up in our heads. We can pray for tomorrow, but we should also really pray about what we are doing, thinking and saying today, and we should live at peace in our minds.

Last week my pastor preached the best sermon I have ever heard on this subject, “Why Do You Worry?”. Click the link to listen to it. Rich Nathan said the Greek basis of the word means divided. To worry means to have divided thoughts–thinking in the flesh with half our brain, and thinking God-like in the other half. People in turmoil worry.  To worry means to divide our thoughts between today and the future. Having a divided mind means to have hidden agendas if God’s agenda doesn’t work so well.

Financially peaceful, worry-free minds don’t come from having a lot of money so that we don’t worry. Jesus covered this in Luke 12:19-20, talking to the rich who say to themselves “You have plenty of grain laid up for many years. Take life easy; eat, drink and be merry.” God’s response is, “You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?”

Likewise he never says to have no plans for the future and consume all of your money today, but to be wise to save for rainy days:  Proverbs 6:6-8: 6 Go to the ant, you sluggard; consider its ways and be wise! 7 It has no commander, no overseer or ruler, 8 yet it stores its provisions in summer and gathers its food at harvest.

To not worry means to follow Jesus and stop worrying. It means seeking first his Kingdom. It means working on the troubles, challenges and today’s work–even planning and budgeting. Not worrying requires mindful discipline, work, and not yielding to the what-ifs of tomorrow. Not worrying is freeing and life changing–another one of the beautiful gifts of Jesus.

Comic Strip Coffee With Jesus, Viewpoints on Life and Money

The funny comic strip “Coffee with Jesus” recently hit on some Christmas money themes. It prompted me to write this short article. I read this daily on Facebook. It’s from Radio Free Babylon. RFB usually makes me chuckle and it sometimes pokes my conscience. I feel a certain kinship with RFB, since we both are trying to bring Jesus’ perspective on things–RFB about anything in the American culture, and JesusMoney on personal finances.

It seems as if many aspects of our culture have hijacked and contorted the true messages that Jesus taught. This Americanized view of culture, money and even religion sometimes waters down our faith and marginalizes its effectiveness in our lives. My pastor challenges me to think differently, that I should first consider everything through the lens of the Bible. For example, sometimes we can easily interpret things from our political or financial perspectives first, then somehow to try to make it Biblical. This can be backwards.

Take for example this comic* appearing last week: Lisa is discussing with Jesus how thankful she is for the basics in life. Lisa wasn’t thinking of the wonderful blessing of the thousands of basic things that make life in America wonderful, but cable TV and smart phones. We take for granted for so much of what we have, and only appreciate some of the really cool glittery things.

Check out Coffee with Jesus on Radio Free Babylon on Facebook, and like it to follow these daily challenging short messages.

* Used with permission from RFB


Should I Buy an Ereader? and The Benefits of Waiting

I love to read, so a few weeks ago I had a burning desire to purchase an Ereader. I had a lot of reasons for purchasing one, and came up with a great list of my rationale:

  1. Ease of getting a book and reading it without the delay of going to the bookstore or library
  2. Ability to look up words in the dictionary with a simple touch, or references on the web
  3. Inventory quotes that I can later use for blog articles I am working on, and for a book someday
  4. Portability, since I could have all the books I am currently reading, which is about 4 right now, and easily take them anywhere
  5. Read about book recommendations, and then quickly add them to my wish list on the device
  6. Less distractions, since when I am reading on the laptop, I get distracted checking email, Facebook, and Twitter

These reasons gave me excellent justification for the purchase. I had a few hundred extra dollars from a writing project, and a little gift money. I prayed about it, since in the end it is God’s money, and it would be his Ereader. Since I provide financial counsel to hundreds of people, I have to follow my own advice and “ask the master what to do with the master’s money.”

I thought about it a lot, prayed a little, and compared products. I felt it was okay to purchase, with my initial allowance of $150. However, that quickly expanded when I saw all of the products being offered. I could easily buy just a good Ereader, like the new Kindle Paperlight. All Kindle Ereader dedicated products have all the great tools for reading, weeks of battery life, and the great Amazon library and services. Then I started to wonder about the Kindle Fire products. They allow you to do much more (in color) in terms of Internet and email, since they are really mini tablet computers. These can be purchased from $150 – $200, so I could stretch the budget a little.

If I was going to buy a mini-tablet, this expanded my choice of products. The Kindle Fire’s were somewhat limited in their application to computing, so I looked at the ones from Samsung and Google. Google Nexus 7 is newer than the Samsung 7-inch mini-tablet, has a faster operating system and runs the latest Android Jellybean system. The 8 GB was $199, and the 16 GB was $249. More memory was important, since the Nexus doesn’t have expansion slots (unlike Samsung’s). Now my budget stretched to $249, about $100 more than I started with.

However, I felt compelled to wait, and not to purchase. During this pause some interesting things happened. The Apple iPad Mini was introduced. iPads are amazing machines, but their price starts at $329 and goes all the way to $659, depending on memory capacity, WI-FI, and Cellular capability. Then there was talk that the other manufactures were lowering prices, expanding base memory, and offering new devices. More reasons to wait and think about it some more.

During the wait, I was given a few books to read. One was a free from a publisher, to review a theological tome on possessions. None of these were in digital format. A had a few books I wanted to read digitally, and I was able to download them from my local library and read them on my laptop. I downloaded the Kindle app and it works great. I also downloaded the newsreader and customized it for the periodicals I wanted to scan.

My burning desire to purchase an Ereader diminished. Although I would still like to have one, I am enjoying reading the various formats of books, magazines and newspapers, and the money is still in savings. I can still do everything I need to do quite nicely for personal computing, entertainment, blogging and writing.

Waiting taught me a few things. It is good just to wait and to refrain from purchasing things. It felt good to be in control. I used the devices I already have, and now I don’t have another one to maintain or another battery to charge. Having a cell phone, laptop, and internet TV, I can do everything I need to do. I would like to have a smart-phone PDA, and either a tablet or a mini-tablet, and in a couple of years I will need a new laptop. However, with all the new things Microsoft is trying to do with Windows 8 to blur the lines and capability with smart phone’s app driven world and touch screen capability, I think the wait will be good. With my next technology purchases, I am considering going all Apple for the simplicity, ease of use, and fewer technological messes than Windows based systems always seem to have. The benefits of waiting mean I will get better technology in the future since products are constantly improving, or I can buy a good used device while protecting my savings in the meantime.

If you are considering a purchase, do your research, and take your time to wait. In the end you will probably make a better decision about what you really want, while protecting your savings in case some emergency pops up.

Financial Thanksgiving

The attitude of being thankful is one of the foundational feelings we can have for helping us do well financially. When we are thankful for the things we have, we are content and are not in the “I’ll just be happy if I have…” mindset. Contentment and satisfaction are internal feelings; they can’t be obtained from external sources other than God.

When I want something that is beyond my basic needs, I am telling myself that I will be more happy and satisfied when I have obtained it. We all know that after we have purchased something we desperately wanted, in a short while we will want something else again. It seems as if the cycle never ends. Emotions really come into play in this game, much more than logic (except of course when I want new tools 🙂 ). Marketing firms know just how to craft ads to make us feel incomplete, and to suggest filling that gap with their products. We are emotional beings, and our emotions can often fool us.

If I had been a more thankful person, I would have avoided purchasing many things I have over the years, and I would have borrowed a whole lot less money. In the end I would have had more money in savings and investments, and I probably would have given more money away too- bringing more joy to others, to God, and to myself. When I own fewer things, I love having more time on hand, since everything comes with a maintenance schedule. Thanksgiving might be the best American holiday, for it is a great reminder for us to be thankful for all the things we have. Being thankful and content with what we have makes us happier people, something we all want. It is really sad that the day after Thanksgiving is the largest shopping day of the year. In addition, it can be one of the worst times to buy things, since I reported earlier that prices go up on many items during the Holidays.

The most quoted Bible verse of all times is probably the 23rd Psalm, which starts: “The Lord is my shepherd: I shall not want” (NKJV) and “The Lord is my shepherd, I lack nothing” (NIV). Most versions have worded it similarly to these two–either I shouldn’t want beyond my basic needs, or what the Lord provides is totally satisfactory and in him I don’t lack anything I need to feel content. Both ways of looking at it speak volumes to me in the way I need to think about material things and possessions.

My Pastor, Rich Nathan, wrote about Thanksgiving recently in his monthly congregational e-mail:

Like Advent, Christmas, Lent and Easter, Thanksgiving offers an important rhythm in our year to practice something essential to human happiness – in Thanksgiving’s case, gratitude!

Thanksgiving: Our Response to God’s Extravagant Grace

The author, Os Guinness, quotes a famous artist who said, “The worst moment in the world for an atheist is when she is genuinely thankful, but has nobody to thank.” When your heart bursts with gratitude at the birth of one of your children or grandchildren, or you look at a gorgeous sunset, or you hold your spouse and you are so happy that you cry tears of joy, or you have a prayer miraculously answered – how horrible it would be to be filled with gratitude and have no one to whom to say “thank you.” Christians have someone to say “thank you” to – Jesus Christ.

It is often said that for Christians salvation is all grace and obedience is all gratitude. My love for you, Jesus, is my grateful response to your love for me. I love you, Jesus. You have been so good to me. My tithe is my way for me to say thanks to you. Whenever you write a check and put it in the offering basket, whenever you serve in inconvenience, whenever you make the hard choice of showing kindness to someone who has treated you shabbily, you are saying, “Thank you, Jesus.”

Michelangelo once did a pencil drawing of the Pieta for a friend. With the dead body of Jesus supported by angels at her feet, Mary doesn’t cradle her son as in Michelangelo’s other renderings. In the pencil drawing of the Pieta, Mary raises her hands and her eyes are lifted towards heaven. On the vertical beam of the cross, Michelangelo inscribed a line from Dante’s Paradise, which is the focus of the drawing. The line is this: No one thinks of how much blood it cost.

It is very rare that we kneel with our eyes turned upward to heaven and say:

I haven’t said thank you recently for how much blood it cost for me to know you. I haven’t said thank you recently for how much blood it cost for your church to exist. I haven’t said thank you recently for how much blood it cost to forgive my many sins and to show me grace despite my frequent disobedience.

Gratitude – a recognition that we have nothing that we haven’t received – will keep us as a large church from becoming full of ourselves. It is gratitude that will get our eyes off of our accomplishments and onto Christ’s accomplishments. St. Augustine once said that the Christian life was supposed to be a Hallelujah from head to toe- the praise of God saturating our lives.

Thanksgiving: The Neglected Key to Joy

One of the biggest happiness boosters (this was discovered through a grant from the National Institute of Health) is through practicing gratitude. How do you practice gratitude?

One of the exercises that psychologists gave to people was a gratitude journal; taking time every day to write in a gratitude journal things for which they were thankful. What psychologists found was that if people took time to conscientiously count their blessings every day, life satisfaction markedly increased in just six weeks.

Martin Seligman, the Father of Positive Psychology, has tested similar practices at the University of Pennsylvania and in huge experiments that he’s conducted over the Internet. Seligman believes that the single most effective way to turbo-charge our joy is to make what he calls a “gratitude visit.” This means writing out a testimonial thanking a teacher, or a pastor, or a grandparent, or anyone to whom you owe a debt of gratitude. Then visit that person and read your letter of appreciation to him or her. Seligman said that the remarkable thing was that people were measurably happier a month after they paid a gratitude visit to the person to whom a debt of gratitude was owed. Saying thanks produces ongoing joy.

Seligman also recommends what he calls “three blessings,” taking time each day to write down three things that went well that day (in other words, counting your blessings), taking time to journal what’s going well and intentionally savoring good moments by journaling them. Why not consider creating a gratitude journal, paying a gratitude visit, or savoring good things in your life by journaling them?

Thanksgiving: The Need to Practice Becoming a Thankful Person

Thankfulness is something we have to practice. It is like learning how to play the piano. Just as anyone who wishes to play piano well has to practice scales over and over again, thanksgiving must be practiced continually. One thing our family does is to go around the table at Thanksgiving and share at least one thing for which we are grateful. Saying “thank you” does not come naturally to us self-centered people, who believe that all good things are ours by way of entitlement; who are naturally greedy; or who are forgetful. You know you have practiced the scales of thankfulness long enough when you can play the really difficult melody of “thankfulness in all situations” (Philippians 4.11-12). You have become a skilled giver of thanks when, instead of grumbling and complaining, instead of sinking into self-pity and depression, you are able to give thanks in all circumstances!

How to Help Others Financially

Most financial articles are self-help so I thought it might be good idea to discuss how to help others. I suspect most people can’t fix their own finances without some kind of help from someone else. Yes, ultimately it is still up to each individual person to apply financial wisdom, but they need your help.

  • Encouragement is one of the best gifts you can give to someone. Encourage means to give courage. Tackling financial problems isn’t easy, and people feel defeated. You can help them by telling them they are smart, intelligent and creative people- because they are, everyone is, in their unique way. You can encourage them by telling them how you struggled or avoided it, and how you clawed your way out. Tell them they can do it, and to keep trying. Few people totally succeed with their first few efforts and encouragement really helps.
  • Financial study is key. Tell them how particular authors, blogs, or financial personalities helped you. Great writers and speakers like Mary Hunt and Dave Ramsey too where nearly, or were bankrupt, and they learned from others how to dig their way out. Point people you know towards these writers.
  • Taking classes is essential too. We lead two Financial Peace University (FPU) classes each year, because they work. They work because Dave Ramsey’s video lessons teach everything people need to learn to get their house in order. In addition, they have small group breakout discussions so that people can get extra help and accountability. Go to to search by zip code for classes nearby- they are offered all over town, and start soon. If someone lives hundreds of miles away from civilization, they can pay a little more and get the do-it-at-home course.
  • Sponsor someone to take the class, but don’t pay the entire amount. Most people need to have some skin, or investment in the game. If people don’t invest a few dollars into it, then they will not be committed to the class. Some people don’t like help, but come up with a creative way to pay some of the cost (usually around $100), or babysit their kids while they are in class.
  • Help them budget. If you know someone who is having a tough time, tell them you will sit down with them and show them how to manage their income and expenses so that there is money left over at the end of the month. Research says 70% of people live paycheck-to-paycheck, but most people don’t know how manage their monthly finances or balance their checkbook. Use simple paper and pencil forms, or great software like, on their PC or mobile device.
  • Lead a FPU class, if you have already taken the class. Leading FPU is easy, they provide all of the ‘how-to’s’. Lead a class in your neighborhood, apartment complex, Bible study group, work lunch break, or local community center.
  • Be a good example, by being wise with savings and investments, and spending. Have a good attitude and tell people who helped you. You can have a lot of nice things, but don’t flaunt your wealth, but be grateful for the good things God has given you and walk in humility. My brother Barry, and my pastor Rich Nathan, have been lifelong examples for me of managing money wisely.
  • Be generous. Give to churches and organizations helping others with their finances, jobs and other essential lifestyles skills. Help others with basic needs if they are going without food, or utilities. However try to offer it with humility, along with offers to help them budget and take financial classes if appropriate. If people are making bad decisions, and you don’t provide wisdom along with cash, at least at times you might be hurting them more than helping them. Many churches offer benevolence assistance with bills for people that are struggling, and provide it with accountability. Get involved in your church’s benevolence ministry and help them do just that.
  • Pray for those who are struggling. Lead a small group financial Bible study, like those offered by Compass.
  • If you are in the position to start a business, consider doing so. Nothing helps people financially more than a good job with benefits.
  • If you are a leader in business, get behind offering financial education classes to your employees. Several studies have shown that they help people with their finances, and help them be better employees.
  • Lastly, teach your children how to manage finances at home, and lead financial classes for youth at church. Some financial institutions have sponsored financial classes in schools.

Helping others will be good for them and you. It is satisfying, and character building to do the hard work to help others carry their burdens. Finally, when we help others we are following what Jesus called the second greatest commandment in Matthew 22:39 ‘Love your neighbor as yourself.’

Are the Educated Smarter With Finances?

A new study shows that prior to the current economic crisis, it was the highly educated people that were more inclined to have unmanageable levels of debt. The percentage of Americans with more than 40% of their income going to debt payments increased from under 15% in 1991 to 27% in 2008.

You would think college-educated people would be less likely than those without a college degree to make this mistake, but the study showed more of them exceeded 40 percent. The study provided some clue as to why this happened–optimism. College educated people with large amounts of debt were more optimistic about future economic conditions. Did they think they were immune to economic problems because they had advanced degrees, so they had less fear when they borrowed? That is the conclusion Sherman Hanna, co-author of the research and professor of consumer sciences at The Ohio State University, reached.

It wasn’t that those with advanced degrees didn’t understand debt as well as those with less education, but perhaps they thought economic conditions would always get better for them.

What caused the economic crisis? There is no one group to blame, but you could probably categorize them two ways: institutions and people. Institutions are guilty, especially those in the sub-prime industry (including the lenders), mortgage security issuers (investment bankers), and rating agencies. Some people place blame on the government’s excessive borrowing, and for not watching the institutions closely enough. At the end of chain are the consumers. We were borrowing too much and not saving enough. Can we blame one group of people more than the others? Some have opined that it was the lower-income and less-educated people that borrowed for mortgages too much.

However, the study found that the debt crisis wasn’t caused by homeowners who took out mortgages, since 35% of renters had heavy debt compared to the debt that 21% of the homeowners had in 2007. They concluded that we can’t blame the uneducated, the homeowners, or the educated.

The study appeared in Consumer Interests Annual and the International Journal of Consumer Studies.

How can I use the information, I ask myself. It provides more information when recession conversations come up. More personally, it forces me to examine my own thoughts about my financial plan. What do you think–comment below, or tweet or Facebook others if you found this interesting.

Are Young People Saving More Money?

Do you think your children are learning from their parents’ financial woes and are practicing better personal finances, such as saving more money? The Wall Street Journal yesterday reported on this subject in “Watching Parents Fail Sparks New Rebellion: Saving Money.”

I think this could indeed be true. I know we have been transparent with our kids about things we have learned, sometimes the hard way, and their attitudes about finances are very spot on. It seems as though for prior generations finances were sometimes more secretive. Today in light of the fact that parents perhaps have not saved enough or budgeted like they should have, the recession has exacerbated family financial problems; the kids have witnessed these problems first hand, and they don’t want to go through the same thing.

I know when we lead the Dave Ramsey Financial Peace University class it seems there are almost two groups of people: those in their 20’s who want to get it right for a lifetime, and those who are older who have gone through difficulty and have regrets. There are about 20% who actually are doing okay but just want to do better too.

Have you noticed teenagers and young adults trying to take control of their finances more these days?

Financial Diligence Is Required More Now Than Ever

Various news sources last week reported that inflation-adjusted median incomes haven’t increased since 1995. The recession is partly to blame, since many higher paying white-collar jobs are gone. Over the past 20 years many factories have moved overseas, so higher paying blue-collar jobs are rare.

As if those challenges aren’t enough, those with modest incomes have a tougher uphill battle than ever before. Gasoline has doubled in price since 2009. Grocery costs have gone up, and package sizes have come down. Many people living on the margin are driving older cars, needing more repairs.

Health insurance costs climb at rates faster than inflation, and with higher deductibles common with many plans, consumers have to pay more out of pocket. Many people don’t have health insurance even though Obamacare was passed (but it will not be fully implemented until 2014), and still business owners haven’t really figured out how to pay for benefits for low income and uninsured workers. So many modest and low income people continue go without regular health care, so they must pay everything out of pocket.

I know many people that are going back to college to get degrees in nursing or computers in order to find better jobs. Yet college costs have increased way beyond normal inflation, and many people graduate with burdensome loans. When financially strapped with debt, many exhaust their savings and are forced to use credit cards and check-cashing stores. Those with modest incomes and the poor are further hit with high interest rates, making it all the more difficult.

Is Obama or Romney coming to the rescue? Well I have been listening closely to both presidential candidates, and I hear they are concerned about all these challenges, yet I haven’t heard either articulate about their actual plans; their rhetoric remains abstract.

With all of these challenges, Financial Diligence is required more now than ever. Politicians and government in the end might help some, but it will take quite a long time. To make changes to present circumstances, it is up to me and you.

Financial Diligence

  • Making personal finances a priority
  • Committing time to do banking and budgeting
  • Investing time and money to take a class, e.g., Dave Ramsey’s Financial Peace University
  • Being smart and wise with decisions
  • Planning shopping trips and putting limits on grocery buying, eating out and entertainment expenses
  • Not borrowing for consumer goods
  • Saving for emergencies
  • Getting cost savings books from the library and implementing homemaking cost reduction measures
  • Obtaining advice from a financial coach about all areas, and especially before all major expenses
  • Being a great employee–learning extra skills or going back to school, and asking for more work when you have down time
  • Lastly, praying for wisdom to make good non-emotional decisions, and asking for all kinds of heaven-sent help for such things as financial miracles, raises, jobs, and good health for you as well as for your possessions that might break down and require budget-breaking expenses

Conclusion: The challenges are greater now than ever, yet it is not hopeless; it just requires greater concentrated Financial Diligence. You are smart, intelligent, and gifted; you can do it! You will repay debt, make more money, accumulate savings, and have more for good and fun things in the future. Don’t be discouraged–I have seen it happen to people over the past few years as they endure and improve through difficulty.

Credit and Gift Card Positives, Negatives and Innovation

The banking industry has never been known as innovators or centers of creativity. That’s why an article in the Wall Street Journal caught my attention today: Ice-Cream Bank’s Rocky Road. I’ll get to the article in a moment, but my gripe with credit cards and gift cards is that although they provide a definite convenience, their negatives outweigh their positives for many Americans.

Credit cards and debit cards are definitely handy. No one wants to carry thousands of dollars around when making large purchases. and the cards are necessary for making flight, hotel and car rental arrangements. Cards also provide reward points (maybe a small percentage of the purchase) that can be used for gifts, cash, and travel.

Then there are the negatives: retailers are charged 1.5% – 3% on purchases, automatically resulting in inflating the cost of goods we buy. The credit card industry makes a lot of money on these fees. They also like it when people don’t pay off their balances each month, because they charge up to 30% interest on unpaid balances. The credit card issuers are really nice when they offer you a card, tempting you with points and no interest for the first year, and maybe an offer to waive the annual fee. However, if you run into hard times and miss a payment, many of them increase your interest rate to their highest rate (nearly 30%), making it even harder for you to catch up.

Research shows that people that use plastic instead of cash to buy goods feel less pain psychologically and spend more per purchase.

In summary, you use credit cards for convenience.The retailers charge more for the goods to cover the cost. You spend more money, and you may end up paying high interest rates. In return, all you get is convenience and points. Now some people have awesome discipline and don’t spend more, so they really profit from the points. I wouldn’t recommend this to most people, but if you are really disciplined, the points can cover your vacation costs every year, potentially saving a few thousand dollars from your budget.

Gift cards, on the other hand, are a nice way to buy gifts for people. Some people buy them at grocery stores and get reduced gasoline costs; Kroger and Giant Eagle are common grocery and gas bundlers in our area. Some people do this when making large purchases at other retailers. The negative side of gift cards is that they can sometimes get lost in the mail, we may forget or lose them once we receive them, or they may lose value if not used within a specific time.

Now back to the story about an Ice-Cream Bank. Seems there’s this boutique ice-cream parlor in Pittsburg that pays 5.5% interest per month on its cards. The interest can be redeemed for items they sell, such as ice-cream and coffee. The banking regulators are in turmoil trying to shut down this parlor offering bank-like products, but so far they haven’t figured out how to shut down the niche the proprietor found in banking and securities regulations.

I like innovation, and I admire Ethan Clay (the owner) for his creativity and courage to come out with an interesting idea to attract and reward customers. This got me thinking: Why don’t the credit card and banking industries, as well as major retailers, come up with ideas not only to add convenience and points, but also to encourage saving money on purchases and perhaps provide discounts on purchases if you use their cards? Wouldn’t it be cool if a credit card company rewarded people who finally paid off their balances, by depositing money into a special savings account (redeemable only in the future) for each month that the balance is reduced? Maybe they could even increase that amount for every month that this is maintained and the balance is finally repaid. They probably cook up ideas like this all the time, but they are not approved when they get to the executive team for fear of lost revenue, since they make more money on interest and fees. But like Ethan Clay’s small Whale Bone Cafe, small companies can try new ideas. Maybe a smaller credit card issuer will read this story in today’s Wall Street Journal and provide a card that has positive innovations to help people more.


Pros and Cons of Being Rich

In the back of our minds, it seems as if a lot of us have a desire to be rich. This thought reminds me of Tevye. The central charachter in the Tony (10) Award Winning Play, and Oscar (3) Winning Movie, Fiddler on the Roof, Tevye shows us his interesting story about poverty and wealth.

This Broadway musical started in 1964 and was one of the longest running shows. It was the first to surpass 3,000 performances for almost 10 years. The movie version released in 1971 remains a timeless classic; it’s on my top-ten list of best movies and plays of all time. These productions made many people wealthy, yet the story’s focus was on a poor dairyman in early 20th century Russia.

Tevye is a likable character, yet he has complaints about his situation: suffering from poor transportation (lame horse), family discord (daughters not following tradition and a disagreeable wife), oppression (Jewish and political), and modest lifestyle (laborious job and humble belongings). Throughout the film Tevye is constantly conversing with God. It is in this discourse and transparency that we see his internal struggles.

In a couple of scenes he is complaining to God about his suffering and poverty, and he looks up and says:

  • “It may sound like I’m complaining, but I’m not. After all, with Your help, I’m starving to death. Oh, dear Lord. You made many many poor people. I realize, of course, it’s no shame to be poor… but it’s no great honor either. So what would be so terrible… if I had a small fortune.
  • “Money is the world’s curse.  May the Lord smite me with it. And may I never recover.”

We all think at different times that financial wealth is a solution to our problems, or society’s ills; we are no different from Teyve it seems; I guess that is why I think of him.

What are riches?

If we count the things we have, most of us are really quite rich, especially compared to most other humans on the planet. Tevye had many things to feel bad about, but he had good things to appreciate too.

  • Family: he had beautiful, intelligent daughters full of promise who loved their father, and a devoted wife who was good to him, a loving partner in the struggles of life
  • Job: he had a job that provided income, even though it was not glamorous or easy, but it was important, filling a vital role for his community
  • Friends: he had friends and family surrounding him, providing connection, solace, humor and companionship
  • Community: he had the community of faith and neighbors, who helped each other generously through life’s ups and downs
  • Shelter: Tevye had a house that he owned, a place to lay his head down at night and to sup with family and friends
  • Country: this Tevye didn’t have; his people faced upheaval, something most of us will never face–the forced immigration with only the belongings on our backs, a situation some in Africa and middle-eastern countries face today
  • Faith: knowing a God that cared for him, provided guidance in scripture and at temple, promised a great eternity and peace and joy in his heart
  • Transportation and pets: he had a cart, a horse and a milk cow to help him get along and to provide for his needs

We could list many more things for Tevye, and for ourselves, with an inestimable total price tag. Most people, even those with less, after adding things up, are indeed rich, again especially by entire world comparatives.

Having a higher income has its benefits, don’t get me wrong, such as better health-care, safer neighborhoods, better schools, and overall healthier environment. Going from higher income to riches has its benefits too, such as better homes, cars and vacations, but there are disadvantages too. There is the worry of keeping the money, living with some fear of having to return to living as those with less means do. Wealthy people often have spoiled children to deal with, and they find that facing financial adversity often upsets marriages and friendships. Living modestly has benefits too–the opportunity to be happy and content with what is really important: character not based on wealth, appreciation for what one has, and the joy of being generous to those around us who are in financial need.

In conclusion, striving to be better, to succeed, to have a business that grows is a good thing, but sometimes the measuring stick is financial. Striving for integrity, strong character, strong community and  justice are higher goals, and ones our country’s Founding Fathers held high, something that I am reminded of by mentors of mine.

What is the worst financial advice you have been given?

Someone once gave me advice when I was young and eager in business, to live just below my means. Have a nice car and loan to go with it, and other niceties of life, I was told that this would motivate me to succeed.  He said that living on the edge this way would keep me hungry to work hard. One of the worst things that sales people and self-employed people should do, which I was both of, is to live near, at or above their income. Earning an income through sales and self employment is hard and stressful enough without the added pressure of bills. If you don’t have a steady pay-check, one should live well below their means, and have adequate savings to keep one afloat during difficult seasons. When one is desperate to make a living, sometimes this leads to creative ways to work, but for me it was just more distracting and exhausting. Err on the side of wisdom should have been my reaction, but the appeal of living a nice lifestyle was attractive to me then, and I bought into the advice.

What is the worst financial advice that you have been given? Comment below…

Money Etiquette: 6 Mistakes to Avoid

The other day Dave Ramsey’s newsletter  had the Money Etiquette: 6 Mistakes to Avoid, I thought they were pretty good, funny and worth sharing. Dave’s newsletters are really good and worth signing up for (they’re free):

  • Tipping poorly.
    Dear Mr. Bad Tipper: Nothing says, “Thank you for taking my order, bringing my food, refilling my drinks, and providing good overall service,” like that $1.56 tip you left on your $20 order. Just think: If your server invests that $1.56 tip in a 12% growth stock mutual fund, they’ll have $17.20 in 20 years! How fancy! In all seriousness, here’s a tip about tipping: Unless your server cursed at you and threw grilled eggplant at your wife, tip him 15–20%. Is that really too much to ask for someone who helped you put food in your belly?
  • Talking about how much money you make.
    Unless you’re calling into Dave’s show to make your debt-free scream, your household income really isn’t relevant information in everyday conversation. Usually, people who freely share this type of personal information are high-earners, so it only comes across as bragging. Every conversation is a new opportunity to share their income: “Hey Jim. What about that storm last night? Thought a tree might fall on my house, but I make 250k a year, so we could’ve handled it. How’s your wife?”
  • Talking about how much you give.
    This one is just as bad as talking about how much you make. No doubt that building wealth and finding financial peace is all about giving to others and changing your family tree. But that doesn’t mean you should broadcast the amount you tithe and give to charity like it’s a tattoo on your forearm. Genuine givers are humble and even secretive when it’s called for. If you’re giving in hopes that one day you’ll have a county bridge named after you and a statue in town square, then you’re giving for the wrong reasons.
  • Bumming off your friends all the time.
    Every group of friends has one. The bum. The mooch. The guy who always realizes he’s “forgotten” his cash right when the check arrives. Don’t be that guy. Here’s the thing: You might save a couple of dollars here and there, but at what cost? Everyone in your group of friends knows what’s up. They aren’t stupid. You’ve been labeled as the “group mooch.” And, before long, you won’t get invited to dinner, and then you’ll become “the guy who invites himself to dinner,” in addition to being the group mooch. Then you’ll become a social pariah and never score another date—all because you weren’t willing to pay for a $3 taco.
  • Making unreasonable offers when negotiating.
    One of the quickest ways to end a negotiation is to make a ridiculous offer. It shows the seller that you aren’t serious about buying and you think they’re stupid. You’re saying, “Hey idiot. You obviously have no concept of the cost of physical objects that exist on this Earth. But, tell you what, I’ll humor you and offer you 40% of your asking price. You’re welcome. Dummy.” How do you know if you’re making an unreasonable offer? Put yourself in their shoes. Would you take $150,000 for a house that’s listed for $275,000? Would you take a quarter for a lamp that’s priced $10 at a garage sale?
  • Putting business over friendships.
    Dave says all the time that business partnerships are a bad idea. Why? Because business and friendships rarely mix. There are too many complications and emotions involved. But good friends part ways all the time because someone decided to throw business into the mix. It’s the guy who thinks his buddy with a nice office job is obligated to make a spot for him. It’s the guy who gets into a multi-level scheme and proceeds to badger all of his friends to “not miss this opportunity!” It’s the athlete who signs his first big contract and feels like all of his childhood friends deserve a cut. A business opportunity may improve, but a friendship will soon end. You can count on that.

So please, whatever you do, no matter how much or how little you make, don’t be a financial faux pas repeat offender. Slip up once or twice? That’s okay. But don’t become the “group mooch” or the “poor tipper” or the “income bragger.” Those are well-earned labels you want no part of. Don’t let a $3 taco ruin your friendships.

Mega Lottery – Mega Rip Off

There has been a lot of news the past few days about the $600+ million Mega lottery. If people knew the facts, they would never spend the money. It is crazy to see all of those people lined up with pockets full of cash to buy a chance at winning. Consider the facts:

  • Tax on the poor: The majority of lottery players are low-income and sometimes in deep poverty. Whatever money isn’t used to pay lottery workers and advertising, and winners goes to fund education for middle and upper income kids
  • The odds of winning are 1 in 176,000,000, it is a sucker’s bet
  • Most winners don’t know how to deal with large sums of money end up less happy often facing bankruptcy, divorce, and estranged from family and friends (source Foxnews). Reminds me of the phrase “A fool and his money will soon part,” or the more modern rendition “… are soon partying.”

Proverbs 11:28 He who trusts in his riches will fall, but the righteous shall flourish as the green leaf.

Commingle Personal and Business Finances? Never!

Today’s post comes from Mary Hunt of Debt Proof Living, and author of 7 Money Rules for Life

Dear Mary, I am reading your book, “Debt-Proof Living,” and have begun tracking my expenses. I have a home-based business. Should I include business expenses or just personal expenses in the tracking? Lucy, Vermont

Dear Lucy,You should keep your personal and business finances completely separate. As a business owner, you have to think of yourself as two people: 1) Employer and 2) Employee. You the Employer should be tracking all of your business expenses and income separately, in a business-like manner. And You the Employee should be doing the same with your personal finances. You’ll thank me one day when you get audited (you will, sooner or later) that you’ve been diligent to keep your business completely separate from your personal finances.

Do You Have a Financial Compass?

It seems Scripture indicates that we should plan:

  • But let all things be done properly and in an orderly manner (1 Corinthians 14:40)
  • For God is not a God of confusion . . . (1 Corinthians 14:33)
  • The plans of the diligent lead surely to advantage . . . (Proverbs 21:5).
  • Any enterprise is built by wise planning, becomes strong through common sense, and profits wonderfully by keeping abreast of the facts (Proverbs 24:3-4, TLB)

Many people do not have a financial compass, and they are constantly blown around by the financial winds of the day. The winds come from many directions; the demands of our personal and business needs, wants, emergencies, the emotions of the stock and bond market, and from sales offers from a wide range of investment and insurance institutions.

Make 2012 the year to get a financial plan. Your plan will be the ’compass‘ that you refer to when making all financial decisions. A financial plan is your personal mission statement for your money. It’s a centralized location to record all of your financial information, formulate goals, your individual style of investing, and outline the steps you must take to reach your future goals.

Your financial plan should cover many areas including the following:

  • Balance Sheet: this provides an “at a glance” statement of your net worth (assets – liabilities), and helps you track your overall progress over time.
  • Specific Goals: identify how much savings are needed to obtain specific financial goals, such as how much more you need to save to reach retirement, fund college or save for large future purchases.
  • Risk Management: plan the prudent use of insurance to protect you and your family in case of death, disability, long-term-care, property and casualty protection, and professional and business needs. Having the right amount and type of insurance will prevent unexpected events from de-railing your plans.
  • Debt management: helps you to monitor the level of debt that you carry so that it doesn’t get out of hand.
  • Investment profile: covers the right mix of investments that meet your tolerance for risk and expectancies for rate-of-return.
  • Estate planning: wills, trust, powers of attorney, life insurance and health care directives to plan where money goes upon death and how your assets are managed after death, if you become legally incompetent, or need to direct doctors or family members regarding end-of-life issues.

When you have a plan, and someone offers to sell you insurance, you can refer to your risk management section to determine your needs. If someone recommends an investment, or you are in a panic because of the stock market swing, then refer to your investment profile to remind you of your investment philosophy, how investments function over the long-term and the overall make-up of your portfolio.

Before an impulsive purchase, refer to your plan to decide which of your other goals you are willing to delay. A financial plan will help you to determine where you will allocate additional money from a raise or bonus. It should be used as a reference guide before incurring new debt, spending emergency funds, and on and on.

Having a financial plan doesn’t control you, but becomes a tool you use to control your future. It is like a master plan for a house. As you build each room of the house you must refer to the master plan to make sure that each room is built with the correct proportions. In other words, you don’t want to end up with too much square footage in the laundry room and no room for a sofa and TV in the family room. Without a plan, you may be allocating too much square footage, for example to your ‘debt’ room and not enough to your ‘retirement room’. Your master plan should not be cast in stone. Perhaps the ‘house’ will need to have a ‘nursery’ room added. Your master plan should change as your life’s goals and priorities change. Most written financial plans just sit on a shelf to gather dust after they are created. However, once you go through the time and effort of creating your plan, you should periodically refer back to your financial compass whenever faced with major financial planning decisions.

Common Financial Mistakes

1: Negative Spending
Have you created a budget and do you stick to it?  If not, you may be spending more money than you make.  People who have created a budget have a good idea of their monthly income and expenses and can accurately diagnose their financial condition.  Other signs of negative spending include the inability to pay off credit cards each month and spending money on fun things before you have paid for necessities. (Proverbs 27:23-27)
2: No Rainy Day Fund
Do you have little or no money in savings accounts, retirement plans, and investment portfolios?  When something breaks, or difficult circumstances such as unexpected medical expenses or a job loss happens you must draw down what little savings you have and go deeper into debt. Emergencies will happen to everyone (Matthew 5:45), so it may be wise to prepare.
3: Too Much Debt
Do you have so much debt that you are having difficulty meeting your expenses each month?  Are you ‘borrowing from Peter to pay Paul’?  You may have re-financed your home or consolidated debt to get cash to pay for other debts (maybe more than once).  Re-financing or consolidation can be a very good tool to help you, but the ultimate goal must be to reduce debt. (Proverbs 22:7)
4:  No Plan
Do you have a written financial plan, to help you plan for unexpected things and future goals?  A comprehensive financial plan covers all the important areas, so you will be sure to not miss something really important. (Proverbs 21:5)

 5: Optical Rectitus
The condition in which your optical (eye) nerve gets crossed with your rectal (anal) nerve and you see the world through a cruddy disposition.  You can choose to be negative or positive.  Whichever one you choose will set the course for your life.  You can either make the best of what you have, or be a victim of circumstances and spend your life blaming others for your situation.  Having a positive attitude creates the state of mind for success and overall health. (1 Corinthians 13:7)
6: Self-Centeredness
You live mainly for yourself without thinking of the world around you.  You buy things that please you alone, and then you don’t share.  For instance, what good is it to buy a new gas grill then never have a cookout?  You are enjoying your holiday meal without even a thought about donating to a soup kitchen or food pantry.  Your children are enjoying opening their holiday gifts, but you didn’t think about donating a gift for a needy child.  You don’t give money and time away.  You spend your time and money on yourself, or on those in your very small circle.  You will find liberation if you think of others and ‘higher things’ before thinking about yourself. Giving money away can be the best “investment” in how you feel about yourself and the world around you. Consider James 3:15 “For jealousy and selfishness are not God’s kind of wisdom. Such things are earthly, unspiritual, and demonic.” NLT.
7:  You and Your Spouse Don’t See Eye-to-Eye on Money
Perhaps one of you is a procrastinator and spender and the other is a saver and has a ‘get-er-done’ attitude about finances.  This problem can be overcome, but it requires a lot of work from both of you.  Financial counseling may be in order in extreme situations.  Sometimes separate checking accounts, but joint savings and investments can help.  Creating and sticking to a budget is essential so that the ‘spender’ isn’t always blamed for financial difficulties.  Also, remember that a lot of marriages break up over fighting about financial matters.  The small amount of time planning and working through financial responsibilities is well worth marital harmony.
8:  Either Trust Too Much or Don’t Use Advisors at all
You assume that anyone can make financial decisions and that everything will work out in the end.  You don’t keep up with the news so you were unaware of things such as predatory lending practices on your ‘interest only’ mortgage or the 400% interest you paid to the ‘Get Cash Now’ store.  You are excited about the $250,000 you will get when you send $100 to the address overseas that was on the e-mail from that poor, poor woman.  You are certain that the odds are truly in your favor to win this time so you are buried in magazines that you bought to increase your chances to win.  Your basement is filled with products that you will sell someday; you just had to get the minimum amount so that you could be an official distributor and save more money.  Remember, if it seems too good to be true it probably is.  Also, of all the fools in the world, don’t be the one who was born on this particular minute.

Have you put off seeking help from financial, insurance, legal and tax advisors.  Many people procrastinate to the detriment of their financial condition.  We all have to pay taxes and we all need insurance and a will.  Perhaps you don’t want to make the hard decisions that they may tell you to make (like saving more money and buying insurance, or delaying the purchase of things you want now).  Tax and legal advisors may save you money and legal entanglements. (Proverbs 15:22)
9: Living Large
Do you spend money on homes, cars, vacations, or hobbies at or a level above your income bracket versus a notch or two below?  Bigger homes, and cars, more sophisticated appliances or whatever you buy, will cost more to purchase, fuel, maintain and insure.  The nicer vacation spot will cost you more for your lodging, meals, and for everything else while you are there.  Have you ever allowed warm fuzzy feelings to dictate the purchase of a pet without properly budgeting for all of the expenses it would entail?  We once bought a hamster for our children for .99 cents.  Unfortunately the cage cost $80 and the food and supplies cost another $20.  Without properly planning in advance (without our children present) we ended up with a $100 hamster (that bites – literally and figuratively).  Don’t buy anything if you can’t afford all of the expenses that will come with it. 
10: Laziness
For some, the desire to pay bills, budget, and plan finances falls somewhere below getting a root canal without anesthesia.  Sometimes procrastination or a desire to avoid difficult topics (like thinking about your death for Life Insurance or creating a Will) can keep you from achieving your dreams. (Proverbs 6:6)

Being successful with the money you have is not easy or quick and there are no short cuts.  Continue to educate yourself about financial matters.  If you work hard to achieve the goals and avoid these mistakes you will be well on your way to funding your dreams.