All posts by John

Christian saved by grace through faith.

Your Roadmap to Financial Freedom

Proverbs 22:7 ESV “The rich rules over the poor, and the borrower is the slave of the lender.”

Ouch, that one stings a little bit doesn’t it?  The borrower is the slave of the lender.  Maybe if more of our government leaders spent more time reading their Bible’s we could avoid some of our current financial misfortunes.  On the macro scale, this verse applies to our own country, continually borrowing to prop up a faltering economy.  But it’s like building a 3-legged stool and one of the legs is made from balsa wood.  You know, that really light, really breakable wood used in model airplanes.  How much weight do you think that could support?  The point here is our government is violating every basic economic principle and there’s no end in sight.  We can’t continue to borrow money and increase our debt exponentially in the hopes that it will return a profit.  It’s like borrowing $100, getting charged $30, in the hopes to make $50.  In what world does that remotely sound like a good idea?  But we just keep it up, borrowing more, spending more.  Just yesterday Congress passed a $3.5 Trillion (with a T) dollar budget.  Now let me ask you, if we’ve already had Trillions (with a T again) of dollars in bailouts and stimulus, wouldn’t it be a smart idea to tighten up the annual budget, instead of increasing it by 10% over last years budget?  I mean, I’m just saying….

There’s nothing anyone can say or do to make those in Washington understand these principles, but the truth is the government’s financial management is really no different than our own household finances, though on a micro level.  Would anyone reading this actually go borrow money on your credit card, with 20% interest, to pay your house payment?  Ok, don’t answer that, but if you did, you’d lose money on both ends of the transaction.  When you borrow money, you literally become slave to the lender.  Just look at all of the foreclosures that took place over the last year.  Continual borrowing is crippling.  But here’s where we need a plan.  A plan to relinquish the grasp of the lender, to no longer be their servant, nor to have money be our master.  If you follow these basic steps, you’ll be on your way to financial freedom and become a better steward of God’s blessings, instead of viewing your financial situation as a curse.  Ready?

Ok, first things first, I am not a financial expert, nor did I stay at a Holiday Inn Express.  This is just my take on a few principles that I’ve read over the years and have used in my own life.  I’ll be honest, a lot of them come from the principles of Dave Ramsey, though the plan below has some of my thoughts built in.  Like him or not, his principles are on the money, pun intended.  The first thing you need to do in this process is take out a sheet of notebook paper (or use a spreadsheet).  At the top, list all of your take-home income (i.e. after taxes); we’ll assume here that taxes, healthcare/insurance, retirement, etc. have already been taken out.  If not, you’ll need to account for them later.  Next, list all of your debts, smallest to largest.  This includes house payment, car payment, credit cards, student loans, any outstanding debts.  Then list your utility bills followed by an estimate of your additional monthly expenses (if your insurance is not taken directly out of your check, account for it here).  This is how much you spend on groceries, gas, medicines, things that you need in your daily life.  This DOES NOT include movies, going out to eat, buying music, iPods, video games, etc. those are not necessities, those are luxuries and we’ll make a spot for them later.  In my opinion, I think you should also include your tithing here.  If you make it a priority early on and include it in your budget, you’ll be less likely to forget or omit it later on. 

Ok, so now add up all of your expenses, I’ll wait here….Got it?  If this sum is larger than your take home income listed at the top of your page, congratulations, you’re now eligible to run for Congress and you have a spending problem.  My Rule of Thumb #1: If your car payment is greater than about $300 or if it’s greater than about 10-12% of your monthly take home pay, what were you thinking?  It’s time to sell it.  My Rule of Thumb #2: If your house payment is greater than 30% (though Dave Ramsey prefers 25%) of your take home pay, you fell for the Housing trap and there’s no bailout coming for you.  This probably means you are house-poor and either need to put it on the market, reduce spending in other areas to compensate, or get another job.  Hey don’t get mad at me, I’m just trying to help. 

If you haven’t violated either of those rules of thumb and your expenses still outweigh your income, then obviously you either have too much outgoing debt, or you don’t have enough income.  Convincing a lender to cancel or reduce your debt will probably prove to be a difficult or sometimes futile exercise, so you may have no choice but to get a second job to get ahead.  To recap, in order to get your monthly income to be greater than your monthly expenses 1) Reduce your car payment by going with a cheaper, reliable used car. 2) Reduce your house payment.  I realize this might be difficult, but sometimes to get ahead, we have to take a step backwards. 3) A part-time job might be the only other option to get ahead. 

Once you’re at the point of [Income greater than Expenses], you’re making progress and you can now begin working towards financial freedom.  Your next critical step is to save up $1000 towards an emergency fund, or as our grandparents used to say a “rainy day” fund.  And let’s face it, the skies are looking pretty dark about now.  The focus is on funding this emergency fund as soon as possible.  To do this, take the remaining balance from Income – Expenses = Allocate to Emergency Fund.  Easy enough so far, right?  After this is funded with $1000, you’ve got a small security blanket and you can start focusing on your debt.  Remember those debts that were listed smallest to largest?  You now need to take the monthly amount that was going to your emergency fund and start applying it to your smallest debt, until it is paid off. 

Example: It took you 5 months to save the $1000, by setting aside $200/month.  You listed your smallest debt as a $5000 credit card with a minimum payment of $80/month.  Using the above strategies, you were able to pay $200 a month extra and were able to pay it off.  Your second lowest bill was $8000 remaining on a car loan with a payment of $250/month.  Now you have an additional $280 to apply towards it for a total of $530/month!  Continue this method until all of your debts are paid off, except your house (this comes a few steps later).  Dave Ramsey calls this, the “Snowball Effect” because as you can see, once debts become paid off, the amount you pay on your next debt increases with each payoff. 

The important thing to remember when listing your income and then subtracting monthly expenses, is to make sure that every dollar is accounted for.  It’s ok to create small allotments for movies and an occasional dinner out, but if your focus is on paying off debt, these need to be limited early on.  Once you get your debt under control, you’ll be surprised at the freedom you’ll feel and how you’ll be able to experience God’s financial blessings.  Sometimes dealing with finances can be a bit confusing and overwhelming.  I highly recommend attending the course entitled Financial Peace, developed by Dave Ramsey, or at least purchasing the CDs.  To see the rest of this plan (without my opinions), including a 3-6 month emergency fund, paying off your house, investing, and giving, see Dave’s book The Total Money Makeover.  I’ve included the link to below. 

“Live like no one else, so you can Give like no one else” – Dave Ramsey

Tithing Redux

A few weeks ago, I felt compelled to post a blog on the importance of tithing.  With this week’s trend of money posts, I’d like to continue to build upon those thoughts and readdress what some might consider a controversial subject, the tithe.  Yesterday’s post, Gain, Save, Give highlighted the importance of being a steward of God’s financial blessings, because as we learned in Luke 16:10-12, if we’re unable to manage worldly wealth, who will trust us with the true riches of heaven?  While few of us would debate the importance of gain, more might debate the importance of saving, and increasingly more might debate the importance of giving.  That’s the point I want to hammer home. 

To be a truly unselfish giver, we must first realize that our money, our income, our possessions are not ours at all.  They’re all God’s; blessings that he’s entrusted us with.  The second truth that we need to understand is to realize that it’s not about giving out of abundance.  Again, I’m not focusing on the amount or quantity of any of that, but instead how you manage what you’ve been given.  This very point is illustrated in Mark 12:41-44, 41Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. 42But a poor widow came and put in two very small copper coins, worth only a fraction of a penny.  43Calling his disciples to him, Jesus said, ‘I tell you the truth, this poor widow has put more into the treasury than all the others. 44They all gave out of their wealth; but she, out of her poverty, put in everything-all she had to live on.'”  The third principle that must be realized is that tithing is not giving.  Let me say that again.  Tithing is not giving.  I’ll explain what I mean in just a minute. 

A tithe, or tenth, is 10% of our income and in my opinion, our pre-taxed income (if anyone would like to debate the importance of giving to God before giving unto Caesar, let me know).  Proverbs 3:9-10 says, “Honor the Lord with your wealth, with the first fruits of all your crops; then your barns will be filled overflowing, and your vats will brim over with new wine.”  First fruits, pre-tax, not leftovers.  The reason why I stated earlier that tithing is not giving, is because it’s already God’s, this is the amount that He asks for.  Since it is already His, we’re not giving, but rather returning to God what He asks.  Anything above the tithe, or 10%, is giving.  I know it sounds like semantics, giving vs. bringing, but I think if we look at it in this light, we’ll be more likely to faithfully tithe.  I used the following  illustration in the last post on tithing, but I think it helps relate the point in modern terms.  Think of going out to eat at a restaurant.  Most of us would realize that the “expected” tip amount is 15%, it’s societal courtesy.  Anything above that would be exceptional and anything below would be seen as insulting.  If we’re under the mindset that 15% is the expected amount to give a waitress, how can we possibly justify giving less than what God expects in a tithe?  Malachi 3:8 addresses this point, “Will a man rob God? Yet you rob me.  But you ask, ‘How do we rob you?’ “In tithes and offerings.”

In writing this, I did a quick internet search on tithing and was quite surprised at the results.  I’m amazed that some “Christians” can honestly justify that tithing is not biblical, or even required.  Justifications included that it’s a Mosaic law and not part of the new covenant or that salvation is through grace, not through giving.  While yes salvation is through grace, to me, these are just excuses of a selfish heart.  One article that I came across was a CBS news story from 2008. LINK The article states that on average Christians give 2.5%, not 10% (actually I’m surprised the amount was that high).  Just to put this in perspective, a person that makes $30,000 would bring $14 a week.  That’s barely a lunch or two and won’t even get 2 people into a movie.  Frankly, it’s a convicting statistic.  Another item the article mentions is those churches that value the dollar more than the Gospel and place their focus more on getting, rather than giving.  We’re all aware of those that teach prosperity doctrine and I want to clarify, I’m not advocating the methods of these questionable pastors or networks.  Tithing is much bigger than those people and they will get their end reward. 

I know some people might read this and think, how can I possibly give 10%, when I’m struggling to make ends meet, living paycheck to paycheck.  Well later this week, I hope to post a blog that will show you how to re-structure your finances in a way that will free up money, not only for tithing, but for improved stewardship.  Ultimately, tithing should be something we pray about.  God knows each of our financial circumstances.  Ask the Lord to show you the importance of it, how much you should bring, and pray before placing your tithe in the offering plate, that God uses those funds for His glory.  I want to close with one final verse, “Each man should give what he has decided in his heart to give, not reluctantly or under compulsion, for God loves a cheerful giver.” II Corinthians 9:7


“There cannot be a surer rule, nor a stronger exhortation to the observance of it, than when we are taught that all the endowments which we possess are divine deposits entrusted to us for the very purpose of being distributed for the good of our neighbor.” – John Calvin

Gain, Save, Give

Having led off the week with a post on the love of money, I really feel like there is so much more that can be said regarding it, especially in light of the emphasis it has on our culture.  When briefly researching an idea for this second post, I kept finding one central quote.  As you might have noticed from time to time, I’ll include brief sermons from John Wesley and hope to include other historical figures, but for now, let’s focus on the familiar quote from Mr. Wesley’s sermon The Use of Money.  He states, “Having First, gained all you can, and Secondly, saved all you can, Then ‘give all you can.'”  To many of you Dave Ramsey fans, this might sound familiar, because his mantra is “Live like no one else, so you can give like no one else.”  Do you notice a central theme here?  The idea is to DO what we can, to honestly GAIN what we can, so we can GIVE all we can.  I think too many times we’re focused on the gain and not on the give.  Note the following excerpt from John Wesley:

But let not any man imagine that he has done anything, barely by going thus far, by “gaining and saving all he can,” if he were to stop here. All this is nothing, if a man go not forward, if he does not point all this at a farther end. Nor, indeed, can a man properly be said to save anything, if he only lays it up. You may as well throw your money into the sea, as bury it in the earth. And you may as well bury it in the earth, as in your chest, or in the Bank of England. Not to use, is effectually to throw it away. If, therefore, you would indeed “make yourselves friends of the mammon of unrighteousness,” add the Third rule to the two preceding. Having, First, gained all you can, and, Secondly saved all you can, Then “give all you can.”

As Christians, our role is to be Christ’s faithful stewards.  Among other things this means responsibly handling the monetary gain that we have been given.  It’s not about how much we make as a dollar figure, but how we manage what we do have.  God tests our stewardship to see how we handle what He gives us.  Luke 16:10-12 says, “Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much. 11So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? 12And if you have not been trustworthy with someone else’s property, who will give you property of your own?”  If we view our personal finances with that perspective, we’ll ensure that we are proper stewards of God’s blessings.


“One of the great dangers of having a lot of money is that you can be quite satisfied with the kinds of happiness money can give and never realize your need for God.” – C.S. Lewis