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3. Counting the Cost: Relationships, Budgets & Your Life

Alistair Huong


Alistair Huong

Executive Director of AudioVerse



  • December 31, 2015
    1:45 PM
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Gracious heavenly Father, we are so thankful for the clarity of Your Word. And, Lord, as we seek to be wise stewards, careful Bible students, help us to apply these principles in a rational, reasonable way that gives glory to You and that demonstrates our faith that we truly believe what You have asked us, and that we will believe that You will enable us to do even that which we find terribly difficult. And so, I pray today, right now, and particularly this session as we talk about some nuts and bolts, looking at how to prepare a budget and think about the overarching tools at our disposal, I pray that You will teach us, and You will guide us. We pray these things in Jesus’ name. Amen.


All right, come on in, for those of you in the back. Let’s begin. So, session three, the title is “Counting the Cost: Relationships, Budgets, and Your Life. I am just making this little statement at the beginning of every seminar in case you haven’t heard it before. We, my wife and I, we have a blog, Savingthecrumbs.com, where we are writing on a fairly regular basis on financial topics, personal finance. A lot of it is just from our personal experience. We try to keep it lighthearted, try to keep it fun, and we actually share a whole host of fairly private information. Most people consider, you know, how much you earn and how much you spend and things like that quite private. But we figured that if it’s going to benefit someone, we actually share all that information.


And just as a little teaser, in a few weeks here, I’ll be doing our annual financial report on how much we earned, how much we spent, and how much we gave for the year 2015. And you can already see what we did in 2014 and the years before, but this is a special one because we had a baby, and so, how did we do? Did the baby break the budget? You’ll have to stay tuned, keep you in suspense.


But all of the handouts, or, rather, the slides that I’m using, a PDF handout has already been created. You can already access it right now through the GYC app. So, I know a lot of people have been asking me about this; it’s available on the app currently, right now. So you can get it and follow along, if you want, but, of course, you’ll be tempted to read ahead, and you’ll spoil the surprise. And also, in the handout, I don’t show you on the slides here, but in the handout there are direct links to articles that I’ve already written on topics we address in each seminar.


So, when we talked about why we should save money, and the importance of living a thrifty life and all those things, and even, even, specific articles (I know some have asked), like, I talked about how I have an unlimited iPhone plan that has unlimited 4G LTE data on AT&T’s network, you know, calling, texting, unlimited everything for 20 dollars a month. I’ve a whole series of blog posts talking about that, how I got my wife’s iPhone for 50-percent off, all this kind of stuff, you can find it on the website, okay, and a lot of other stuff, how to save on electricity, heating, cooling, solar panels and all the rest.


I can’t cover everything here, so that’s why I keep mentioning this, because, if you have further questions, chances are it might have been addressed already in a previous blog post. And we’re always writing more stuff as well.


So the title of this seminar is “Counting the Cost.” Where do we find this in the Bible? Jesus tells the story in Luke 14:28-30, “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it begin to mock him, saying, ‘This man began to build and was not able to finish.’”


This is a true situation for so many. And here is what I sort of cringe at, is that the Bible, Jesus Himself, gives us a very clear principle that it is wise to have a plan, right? We see that. But what’s the problem is that sometimes we associate moving forward with no plan, we say, “That’s living by faith.” That’s the problem, because, guess what? That ain’t faith, people, because faith takes God at His Word, and what faith looks like is, “God, you said that we need to look ahead, and we need to lay down our plans. We have done the best plan that we have been able to concoct, and we believe You’re leading us in this. And so, by faith, we will embark on the plan and trust that You will make up the lack.”


You see the difference between that and, “I don’t need a plan. God will provide.” You understand the difference? So, it might be a fine nuance, and you may not necessarily be able to tell the difference if you’re viewing from the outside, but internally I think this is important for us to remember as we apply it to our own lives.


So, what’s the lesson from this story? You must have a plan. And that’s what this seminar session right now is going to be all about: How do we make a practical, useful, financial plan that actually moves us towards our goals, helps us to be faithful to God, and be able to avoid debt and other pitfalls.


So there are roughly four types of plans we’re going to discuss, and they all interact one with another, and I’ll show you how they do in a minute. Number one: I call them Life Event Plans. And you can call them what you want, but Life Event Plans essentially is taking our goals in life, so, whatever it is in our lives that’s going to cost us money, we start with the goal, okay? The end. You’ve got to start with the end in mind.


And after we have a Life Event Plan, then we move into what I call the Savings Plans. And the Savings Plans are sort of two sides of the coin. There is the Long-Term Savings Plan, things that we need five years or more down the road, and a Short-Term Savings Plan, things that we need within five years.


And then, after we figure how much we need to save and a Savings Plan, then we move down to what we commonly call the budget. And what I call that is the Monthly Spending Plan. It’s the same thing, synonymous with the budget, but I don’t use the word budget mainly because I like the rhyme; everything’s a plan. And also, the word budget comes along with it a lot of negative baggage. People associate budgets with “tightening the belt,” “painful cuts,” “austerity,” you know. We don’t want that kind of connotation. What it is, it’s a plan to help us reach our goals. A plan is to help us get to our destination, and our Monthly Spending Plan is a part of the road map.


And then, finally, this is not exactly a plan, but it’s a context in which these plans are created and executed, and that is within the context of relationships. And so, let me just show you in the next slide. So, this is how they relate. Everything is going to start with our life events, and life events, again, are the goals that we have for our lives looking forward, and that will feed into our long-term and short-term savings, okay? And then from the long-term and short-term savings, it moves us into our monthly spending.


So, you notice, it’s like a funnel. We’re starting with the big picture: What are the goals we want to accomplish in our lives. And then it filters down into, “Let’s break this down,” okay? What are the long-term things I need, short-term things, and from there it flows into our monthly spending, which is what we will be looking at on a more regular basis. And then the monthly spending feeds back into the long-term and short-term savings column, and then we have a nice little loop of feedback. It comes back over the monthly spending, and then there’s a nice little loop there. You like that animation, don’t you?


And then all of this happens within the context of relationships. The fact is, we mentioned this very briefly earlier this morning, and that is, relationships, you know, and money can’t really be separated. You know, if you are in a family, guess what? The family’s finances, no matter how you slice it, they’re going to intersect. And also, if you really want to think about it this way, if you have life goals, life plans, it’s going to affect your relationships. And so, we can’t deny this aspect of the money picture. Okay, so this is going to be out outline of the day, what we’re going to be talking about.


So, let’s start with Life Event Plans, and these are the goals, all right? These are the things that we set. We want to set up for ourselves, going into the future, things that we want to be able to afford. So, college and a career. I think for a lot of students, that’s a pretty biggie. A wedding, that’s another example; that’s a major life event. We’ll talk more about that in a minute. A home purchase, that’s a biggie. Buying a car, going on a vacation, having a baby, that’s what we, my wife and I, we just had a baby this year. Debt payoff, of course.


Mission work, and I might add in here mission projects that you want to fund or mission work if you want to go. And I might also mention this, “I want to make sure I can afford going to GYC next year. I’m not sure.” Well, stick it in the plan. It’s a life event next year, “I want to go to GYC.” Put it on your Life Event Plan, and figure out how we can make it work, okay?


So, if you have children, your children’s education; that’s a big item to pay for in the future. And then, of course, retirement is one of the biggest ones.


So, obviously this is not an exhaustive list. A life event could be anything. If you want to start a business, if you want to have a big, you know, celebration of some sort, maybe it’s a big fiftieth anniversary for your parents. Whatever it is, you just need to have a plan. Think ahead and say, “Here’s what I want to accomplish.” Write it down on paper or on a computer, and let’s make a plan to actually be able to achieve it.


So, once we have these Life Events listed, what’s the information we need to know about them? These are the questions to ask, okay? How much money will it cost? I mean, that’s a pretty basic question, but that’s really what Jesus was saying. “How much is it going to cost to build this tower?” and substitute “tower” with whatever it is you put on the plan. “How much is it going to cost me to retire?” right, down the road, whenever your retirement horizon might be. “How much is it going to cost me to put my kids through school?” or have a down payment on my house. You’ve got to have a dollar amount.


And the question here is, not just how much will it cost, but, “What can I afford.” And at this point, you might have a reality check and realize, “You know what? What it is I really want is way beyond what’s rational and reasonable within my budget.” And at that point, you can adjust before you over-commit it. You see? You don’t want to start building the tower and end up realizing, “Uh, sorry, I don’t have enough to finish.”


Next question, “When do I need this money,” very important. You’ve got to have a time frame because, you know, if you’re retiring in five years, that’s a much bigger deal than if you’re 20 or 25, and you’ve got 40 or 45 years, right? So, you’ve got to know when you need this money. And, “How much do I need to start saving right now?” and that’s the pacing of the savings. And we’ll talk more about that when we get to our long-term and short-term savings plans.


So, going through these questions and laying down these plans, it helps us not to go crazy. What do I mean by crazy? Let me give you just one example. Let’s talk about weddings for a moment. This is the 2012 Real Wedding Study from the website TheKnot.com and the WeddingChannel.com, and this number right here, 28,427 dollars was the national average cost of a wedding. And you might not see the fine print. It says “excluding the honeymoon.”


So, wouldn’t it be a surprise if you say, right, and let me back up a minute. When we talk about weddings, weddings and having babies tend to be the two of the biggest moments in our lives where we throw all reason out the window. You’ve heard it before, right? “You’re the bride. It’s your day. Do whatever you want,” you know? “It’s only going to come around once,” and, you know, “Just live it up,” and that’s the message. And so, wouldn’t it be a surprise if you realize, “Oh, I have the beautiful wedding that I love,” and, bam! 28,000 dollars, oh, my.


So, having a Life Events Plan, asking those questions helps prevent the sticker shock. You can realize, “Hey, wait a minute. I want to have a nice wedding, but I don’t have 28,000 dollars to spend.” So, that’s what it can help us do.


So, this is my wedding day. I’ve got to, of course, throw a wedding picture in there if I’m talking about weddings. And so, you want to know how much we spent? We spent 3,000 dollars on our wedding, alright, and my wife actually wrote an entire series on how we did that. And, you know, 3,000 dollars for our wedding, you know, we were pleased with that. But I know many people who spent far less. And, you know, by the way, if you look at the picture, it wasn’t a courthouse wedding. Three thousand dollars, we actually had people; we actually had real food, and…It wasn’t just an online thing. So, 3,000 dollars, so, it’s possible to even spend less than this, and I’m not going to go anymore on this. You can read our blog for more information.


And so, that’s life events. You’ve got to plan based on your goals, and this is really the point. You’ve got to start with the end in mind and create the plan to help you arrive there. So, this brings us to the Long-Term and Short-Term Savings Plans.


So, what is the purpose of a savings plan? Well, the life events determine what we save for, right? That’s what the target is, so let’s start with that. It helps us to keep the end in mind. You know, a wedding day, that’s a pretty noble aim. And, ready or not, here it comes, so might as well have a plan to arrive all in one piece. It prevents the need to resort to debt because, you know, the 28,000-dollar wedding, the reality is, people just borrow money. They look at it like, “I’ve got to have this beautiful day. I don’t care if it’s 28,000 dollars,” or more or less, and so they borrow money. And so, if you plan ahead, you can still have a beautiful wedding. Praise the Lord, please, have a nice wedding, but you don’t have to finance it with debt.


And then it gives us a target to save for rather than simply what not to spend. We’re going to come back to this point because this is sort of a fundamental principle of why I structure our financial plans in this way. So, that’s the purpose of the Savings Plan. And the life events feeds into our Long-Term and Short-Term Savings.


So, long-term savings are things that we won’t need for five years or more, or more than five years. Short term, things that we need in less than five years, so that’s sort of the cutoff. When we say “long term,” we mean five years. In the long-term savings, this is the place where you can afford a little bit more risk, and you want to put your money in some higher-yielding accounts, different type of investments.


However, for short-term savings, things under five years, you want to make sure your money is secure. And this is getting into a little bit of investing, and we’ll talk more about this tomorrow, but this is just a little bit of common sense; don’t put all your eggs in one basket. You’ve heard that saying.


So, long-term, you want your money to work for you more. You want your money to grow and have a longer runway, but if it’s short term, your goal is to save that money and keep it from disappearing. So, long-term savings, it’s going to be a monthly savings, which means you’re going to pace yourself because it’s a long haul. This is a marathon right here, so you’ve got to have the plan of how much I need every month for me to achieve my goals at the stated time; whereas, short-term savings, it’s a sprint. And so, you just knock them out as fast as you can in the order of priority. Okay, so these are the general differences of long-term and short-term savings.


And so, these are some examples of things that would go in either column. They may be different for you, but long-term savings would be things, larger debts, and when I say larger debts, it might be things like a student loan or a mortgage, okay? These are bigger debts. Smaller debts would be things like car loans and credit cards. Short-term savings, your emergency fund. I could spend a whole hour talking to you about emergency fund, its uses, why it’s important and all of that, but it’s very important, an emergency fund. That’s definitely a short term.


College fund? That’s a long-term thing. If you want to buy a house, long-term, but it might be a short-term for you. You might want to buy a house in under five years. So, you see, these things can flip-flop. And then weddings, vacations, and trips, generally you don’t plan those out farther than five years in advance. If you’re planning your wedding five years out in advance, good for you. Sort of unusual, but I guess it’s possible. And, of course, retirement is usually the longest horizon. And then other things, cars, toys, gadgets, big purchases, those would be short-term things. So this gives you somewhat of an idea of the difference between the two.


And so, I want to walk you through another hypothetical scenario and introduce you to Miss Frugal Fanny. And, of course, a fictional character, but I think using an example can help make the principles much clearer. And, as you can see here, she’s a registered nurse.


Alright, so this is Fanny’s Long-Term Savings Plan, okay? She’s got student loans that she needs to pay off. She has 35,000, and she wants to pay it off in 10 years, and this is how much she has to pay per month, 390 dollars. She also wants to buy a house in 10 years. She wants to have 20,000 dollars saved up for the down payment; that’s 160 dollars a month. And then she wants to save for retirement. She wants 750,000 dollars; that’s in 40 years; she’s about 25 years old, 220 dollars per month. This is the total amount she needs, and this is how much she needs to save per month.


So, the bottom line is that she must save a minimum of 770 dollars each month to reach her long-term goals. And this is an important point, because her long-term savings, there’s like a list of three things, but it’s hard to keep track of, “Well, there’s this, and then that and the other thing, and how much was it again?” This plan gives us one number to shoot for. “I need 770 dollars a month.” That’s it, okay? So, it gives us focus.


So, here’s her Short-Term Savings Plan. This is where things get a little bit interesting. She’s got credit card debt, a thousand dollars; she wants to pay it off ASAP. Emergency fund, 9,000 dollars ASAP, and this is for about three to six months of her living expenses. That’s the recommended minimum amount. She’s getting married in August, 3,000 dollars for that (375 dollars per month). And, by the way, you know, she might be…You know, we can substitute other things. This is just an example. It might not be a wedding. She might be saving up for her next trip to GYC next year, you know. You can substitute these things for other items that she’s saving for, and she’s got a mission trip coming up in October, 500 dollars. Car loan, her car loan comes up in 2017; she’s still got 5,000 dollars to pay. And then she wants a new computer in 2020, 1500 bucks. And this is how much, approximately, she needs per month. So, it’s over 900 dollars a month, and she needs 20,000 dollars for the short-term plan.


Alright, so the Long-Term Plan, it was pretty straightforward. She needs this much, and she has this much time, and this is how much she needs to save per month. For the Short-Term Plan, there are a few issues here, okay?


Let’s take a look at what some of them are. Number one: She’s got credit card debt, and she wants to pay it off as soon as possible because the interest is really high, and she wants to get out of debt, and then she’s got an emergency fund that she wants to save up for, and she wants it as soon as possible. Well, how are you going to drum up 10,000 dollars as soon as possible? Like, what does that mean? That’s one issue.


The wedding, okay, this one makes sense, 3,000 dollars. She just divides out by however many months between now and then, and that’s how much she needs to save per month. Mission trip, 500 bucks, same thing. Divide it out, how many months she’s got. Car loan, this is not necessarily 5,000 divided by the number of months; this is just the amount of the car loan payment that she’s been making. And then a new computer, you just divide it out, and 25 dollars a month.


So, we talked about the car loan a little bit, and this is where you may start picking up stones to throw at me, because when you look at a line that says “car loan,” at least in my mind, the first thing that comes to mind is, “Nobody should ever have a car loan.” And this is one of the biggest myths that’s pushed upon the American and maybe Western civilization as a whole public, and that is that you cannot buy a car without a loan. And in the next session, we’ll talk specifically about what are the rules for acceptable debt and what is not acceptable debt, and why it’s that way. And I’ll just spoil the surprise: A car doesn’t pass the test.


And so, whenever I see that there is a car loan on the line here, I immediately ask the question, okay, so let’s take a look at that and see if we can turn that for the good instead of just paying interest on a car. So, we’ve got these issues that have been highlighted, and as you will see, as we deal with the car situation, it will actually answer a lot of the questions about the other things. And so this may not be your situation, I understand, but this is an example, okay? So, you can apply how you will.


So, let’s take a look at the car situation for Frugal Fanny. Being a frugal lady, of course, she drives a Honda, right? So, she’s got a 2012 Honda Accord EX, which is worth about 13,000 dollars according to the Kelley Blue Book. And, by the way, if you want to check the value of your car, Kelley Blue Book is the place to go. And this is actually a real number, a 2012 Honda Accord EX, literally today, with average mileage and all that, would be worth about 13,000 dollars, and she owes 5,000 dollars on the car.


Okay, so you notice, the car is worth 13,000 and she still owes 5,000, and I don’t remember how much the car was worth before, and if you do know, you will be able to very clearly see how much a car decreased in value from 2012 to 2015, and you will realize that you have paid a lot more money for a vehicle that really isn’t worth what you paid. So, that’s the reason why we shouldn’t borrow money for cars.


So, what should she do? Sell the car. And I need to pause here because I know that a lot of us have an emotional attachment to our cars. And I understand, but you’ve got to remember it’s just a car. And there are things that are more important than just the car. And let’s see how selling the car helps Frugal Fanny towards her goals.


So, she sells the car for 13,000; she gets her Blue Book value on the car. She pays off her loan, 5,000 dollars, okay, so that’s subtracted out of the 13,000. And then she spends 2500 dollars to buy a temporary car. Key word: Temporary, because everyone’s like, “I could never drive such a junky, cheap car!” Guess what? It’s temporary, okay? You just do this for a little bit, and we’ll see how it actually helps you get ahead, and you can end up with a nicer car in a few short years.


So, right here, she has 5500 dollars free cash freed up just by selling her car and wiping out her car loan. You notice how she did that? So, let’s go back. Her Short-Term Savings, alright? So, we were right here with the car loan. She just scratched that out; it’s gone, 5,000-dollar loan, gone. And she got an additional 8,000 dollars back, okay? She spent it, 2500 dollars to buy a car, so she has 5500 dollars left. She took a thousand dollars, bam! Credit card is gone. The emergency fund, she basically covered half of her emergency fund. She needed 9,000; now she only needs 4500 dollars left. And all that because she was willing to say bye-bye to her beloved Honda Accord, and she is now driving a temporary cheaper car.


And, by the way, you can still get a pretty nice car for 2500 bucks, so I’m not asking you to drive a beater, junky car where the wheels fall off. But 2500 dollars, if you shop well, you can actually get a pretty nice one.


And so, here’s the key, alright. So, there’s that car, right? That car issue, “I gave up the super nice Honda Accord EX; oh, man, how will I ever live with myself again?” Well, notice this. She was paying 450 dollars a month towards her car payment. Instead of paying that to the bank, she just pays herself that amount, and she doesn’t change the time table at all. She just saves it up to the same time, 2017. And guess what? That totals 10,000 dollars, 10,000 dollars. And so, by the time that she would have paid off her original car loan, because she was willing to sell the car and step down for a temporary time to a lower-cost vehicle, she would have saved up 10,000 dollars in the same amount of time instead of just paying off 5. And there’s more!


You remember, she’s driving a 2500-dollar car. When it comes time that she saved up 10,000, she sells that car. I don’t know how much she will get back; let’s just say a thousand dollars. We’re being, you know, conservative here; she will probably get more than that, or 2,000, I don’t know. And so, she will have 11 or 12,000 dollars to buy another car. And by that point, guess what? Eleven, twelve thousand dollars, she can buy a car, still used, though, that is nicer and newer than the 2012 car she originally had. Does that make sense, what I’m saying, yes or no?


So the point is, a temporary decrease in the luxury in your life, and we are not compromising the utility, because you’ve still got a car to take you to work, right? And just for two years you drive the cheaper car, and within two years you can pay cash for a car that’s nicer than the one that you gave up, okay?


So, this is what I mean, of having your goals in place, alright, savings goals. So that was a slight detour about how she can manage her savings. So, we scratched a few things off here, and so we’ve still got these other things that we have to deal with, and in particular, that emergency fund. What are we going to do about it?


She still needs 4500 bucks. This is where it’s time to get creative, alright? Forty-five hundred dollars, believe it or not, you’ve probably got it sitting around in your spare bedroom and your garage and your closet somewhere. Have a garage sale. Sell it. Sell your stuff, eBay or Craig’s List (I should have put it on there). Just sell your stuff on Craig’s List. She’s a nurse; not everyone can take extra shifts at work, but she can take a few extra shifts of work, have a side job. By the way, you can consider going canvassing; that’s a great side job for Adventists to do. Somebody should have said “Amen” out there.


You can get creative, and you can do other things, right? You can have hobbies, that, instead of just costing you money, have hobbies that actually make you money. You love making crafts? You’ve heard of Etsy, is it? Guess what. Your hobby to make something that you enjoy can actually become profitable for you, alright, and there’s somebody crocheting in my seminar right now. Still paying attention, of course.


And so, let’s just say that, with a combination of those things, she sold some of her extra shoes, and I don’t know how much she would get for those, but she’s got a lot of shoes. So, she got 4500 bucks from her shoes and/or whatever else she did. Craig’s List, Etsy, all these kinds of things, and she got her 4500 dollars, okay? So, let’s just suppose that that happened.


So, this is now her new savings plan. Her emergency items up here that needed to be taken care of ASAP, she took care of them ASAP, okay? She took the knife, and she cut out the loan, and as a result, she’s on her way to a better and brighter future. So, she’s still got a wedding, mission trip. She’s saving up for a new car now, computer. She needs 15,000 dollars total, and she needs 900 dollars a month. Okay, so for the Short-Term Savings, this is not the figure we care about primarily. It’s this figure right here, okay?


And so, the bottom line. We’ve got long-term and short-term savings, so the short term is…This is a sprint now for the short term. We want to get to 15,000 dollars as soon as possible, and as we go, we’re just going to save up for the things that are in order of priority. We just go down the list. And then for the long-term savings, 770 dollars each month. Okay? So that’s it.


We boiled it down. So you notice what we did. We start with our life events. These are the goals we have in life. We organize it in such a way, and we ask the right question, we assign dollar amounts, we project into the future, we lay down the plans, when do we need this, and, of course, plans change, right? We’re not saying this is set in stone, but at least you’ve got something to adjust from instead of just wishing that things would turn out well.


And then, when we boil it down to its very essence, we’ve simply got two numbers that we’re focusing on, okay? Short term, I need 15 grand. Long term, I need to have a pace for this marathon I’m running, 770 dollars each month. That makes it very easy to focus. So, if for some reason you have a windfall, some sort of, you know, special gift or inheritance or something, and somebody gives you 15,000 dollars, guess what? You don’t say, “Oh, 15,000 dollars, what do I need to go spend this money on?” You already know! Right? You already know where the 15,000 is going to go. So it saves your hand from going into that cookie jar when it’s saved for something else.


So, Fanny’s savings plan, okay, it reveals the clear priorities in her life, and that’s important because it’s taking real life and putting dollars to it and giving us a plan to achieve the things we want in life. All extra money, like what I just talked about, has a place to go instead of just being spent. It gives a target number to save for in monthly spending, and we’ll talk about the Monthly Spending Plan next, and it gives a final target number for total savings. Any surplus can be given away. And I want to come back to this point. The whole point that we’re talking about is saving up for our needs. We don’t need more than what we need. I mean, by definition, we have enough.


And so, if we reach this target. If she reaches all of her savings goals, and that’s all, every dollar after that can just flow into the treasury of God. And, listen, that’s where I want to be.


All right, “A budget is telling your money where to go instead of wondering where it went.” So that’s what we are trying to do, telling our money where to go. So let’s talk about the monthly spending now. Again, this is what most people call the budget, the big “B” word. And so, we’ve got long-term savings, short-term savings, and now we have those two figures, 770 dollars a month for long-term savings, and then [900] dollars a month [for short-term savings of 15,000]. This now tells us in our monthly spending how much extra do I need to be able to manage to squeeze out of my earnings after I pay for all of my bills, okay? So that’s the question we’re asking.


So we list our projected monthly income. So this is how we construct our Monthly Spending Plan. You start at the top with your projected monthly income. And so, most people who have a regular paycheck, you pretty much know. Or you figure, “I work so many hours, and this is my hourly wage, and my take-home pay,” right, after the taxes are withheld and whatnot.


It’s pretty straightforward for many of us, but if you have irregular income, let’s say you’re a contractor or you have your own business, you’re going to have to project as best you can. You take a broad view, you average things out, you know when your high- and low-seasons are, if you have seasonal activity, and you do the best you can, okay? And you just project what you think will come in, and then you list your projected monthly expenses.


And now, how do we know how much or monthly expenses are? First session we talked about you’ve got to track your spending. You’ve got to have a detailed tracking of what your spending is. And Ellen White confirmed that in the Spirit of Prophecy; we read that quote earlier.


We want to assign dollar amounts to each category of expenses for the next month. So, you’re categorizing your expenses. And the goal is to reduce spending so as much can go toward savings as possible. And this is where my spending plan is a little bit different.


A lot of budgets, they give you recommended percentages, like, you should be spending 25 to 30 percent on housing, 12 percent to 15 percent on lights and utilities and whatnot. And it’s almost like, when I look at it, it’s like, “I’m only spending 10 percent on my housing. Well, I’ve got to figure out a way to spend 25 percent because I’m not doing it right.” Well, that’s not the way I think about it. The reality is, the way we look at it in my home is that the ideal spending for any category is zero. That’s the ideal. Obviously, that’s not always possible, right? And you just simply allow the expenses in your life as they become necessary.


So, if you are able to spend far less than what the typical budget recommends, good for you! The key is, do you have your needs met? That’s the key. And so, for an example, in our home, we pay zero dollars for electricity. So our budget line item for our electricity is zero. And the reason is because we’ve saved up, we invested in solar panels. I told this story earlier. Some of you may have heard it. And so, the electric company actually pays us. So, maybe zero isn’t the ideal. Maybe getting paid for your electricity is ideal. But you see the point. If you think in the manner of, let’s see how we can economize to still provide for my family and have our needs and have a comfortable life and all of that, while reducing the need to spend, it’s far more effective and efficient than simply shooting around in the dark and saying, “Okay, well, I guess I need to spend 30 percent,” or whatever the recommendations might be.


And then the aim is to hit the targets that we have derived from our savings plans, okay? And then you just want to review it monthly; that’s why we call it the monthly spending plan. You review it monthly to make sure you’re not spending more than you have allocated, and then you just adjust for the next month. So, this is the Monthly Spending Plan.


So, this is Fanny’s current spending. She’s a nurse, and so her take-home pay is about 3600 dollars, and you notice that all of her expenses taken together, and this is a sample budget, income and expense. In business it would be called the income statement or P&L statement. And she’s got 90 percent of her expenses taken up with all of these things. And then she’s got a 10 percent savings rate.


So, for most people, if you listen to the financial world, she’s doing actually pretty good. Ten percent, a lot of people would pat her on the back and say, “Keep it up. You’re doing pretty good.” If you hit 15 percent, 20 percent, it’s like, “Whoa!” You are, like, rocking it. But there’s a problem. She’s doing good by the typical measure, but let’s take a look and compare with her savings plan, okay?


Let’s review her savings goals. So, she’s got a 10 percent savings rate, which means she is saving 360 dollars per month for long-term savings, but she needs 770 dollars a month to reach her long-term goals. Hmm. And she needs 15,000 for her short-term goals. So, if we just do the math, you apply 360 dollars to 770, you haven’t even topped up that 770 dollars, so you’ve got nothing for your savings short term, and when is she ever going to reach 15,000? She’s never going to get there.


So, you see how the savings plan now helps inform us when we’re doing our spending plan – it gives us a target. It’s like, I don’t just say, “Oh, I’ve saved 10 percent; I’m doing pretty good.” Well, 10 percent may not get you where you want to go, okay? So, what is she going to do? What are her options?


Okay, looking at the situation, she’s got the big picture before her now. She’s got several options. Number one, she can adjust her savings goals. She can go back and say, “You know what? Maybe this is too much to spend on a car.” “Maybe this is too much to spend on a wedding,” or retirement, house down payment, what have you. She might adjust her goals downward; that’s one option.


The other option is she can increase her income. Work more shifts, overtime, find a new job, whatever, negotiate a raise.


Three, she could live up to her name; she’s Frugal Fanny, after all, and cut her spending, right? Or, she could do a combination of these things.


But one thing that should not be on the table is debt because, guess what? Debt is like the “get out of jail free” card. If we use it…Except it’s not free, by the way. So, it’s like, if we keep that option on the table, it becomes the go-to option all too often. I can just pull out my credit card and solve all of my problems. What we just don’t realize is that we’re just kicking the can down the road, and we’re going to suffer for it later. And so, just take this off the table, take it off the table, and see if we can adjust ourselves and our living instead.


So, as I mentioned before, my preference generally is to cut the spending, but, of course, increasing her income is good, too. So, let’s just suppose she can’t raise her income, okay, and she wants to maintain her goals. So, where does she need to be in her savings and her spending in order for her to still achieve these goals?


So, this is a Savings-Driving Spending Plan now. So, she’s looking at her goals over here and saying, “Okay, how can I manage my expenses so that I can hit those goals? I really want to have a nice wedding, and I really need to save up for it and not have to go into debt.” So, she figures that once she gets up to 35-percent savings rate, she can save for everything that she needs. So that goes up from 360 dollars a month to 1260. Now she can apply her 770 dollars a month toward her long-term savings and have an extra 490 dollars per month towards her short-term savings. And she will reach 15,000 dollars in three years, which, if you look back, and also because once things get started paying off, it’s sort of a snowball that actually gets faster as you go, she can attain all of her goals.


So, the key here, she needs to be able to save 35 percent instead of 10 percent. Wow, that’s a lot, right? So, now we’re seeing the full circle. So, the long-term and short-term savings, it tells us, okay, how do we have to manage our spending? And then once we manage our spending, we take a look at the short-term savings, and there’s a feedback loop here that we adjust as we go. So that’s the illustration for that.


So what this means is she needs an extra 900 dollars per month, and that sounds like a whole lot of money. If you break it down, that’s just 30 dollars per day. Still, she’s going to have to make some changes, and this is the point. Sometimes, for us to reach our goals, it’s simple to understand and look at the numbers, but it may not be so easy to do, alright? So, I’m not saying it’s going to be easy, but there are sometimes a need to take a reality check and see what we’re willing to accomplish to meet our goals.


Alright, so here is what she did, and this is just an example of some of the options that Fanny has to cut her spending down so that she can save 35 percent, okay? This might be different for you. Actually, I’m sure it will be different for you, but just some examples.


So, her tithes and offerings, she’s been giving 15 percent; that doesn’t change. So, rent, she saves 400 dollars in rent. How does she do that? She gets a roommate. I know as a single person, sometimes it’s very difficult, right, to give up the space. I understand; I’ve been there, done that, but this can be a temporary thing, you understand? You can look at it and say, “I have these goals,” and you just have to weigh, is it more important for me to reach these goals, or is it more important for me to have my own place? That’s a question you have to answer, but that’s an option, right? Leave that option on the table. And so, in her case, she decided to get a roommate. So she splits her rent in half, and she has a roommate.


Utilities and cellphone, she saved a hundred dollars from there. She switched from Verizon to a prepaid plan or something like that. She saved a lot, and also, her utilities now, because she got a roommate, she saves on utilities, too. A hundred dollars a month.


Food, okay, she saves 50 dollars a month on food. Listen, do you know how much that is? That’s like eating out one less time a week, okay? And she’s spending 250 dollars a month on that, which is still enough. You know, she’s still able to eat. She just eats out less once a week.


Okay, transportation, 200 dollars, she saves 150 dollars. She commutes; now she carpools. That’s an option. If she’s close, instead of driving, she rides a bike or she walks or takes public transport. There are options. There are options for her, and she saves that much just on gas. And maybe her old car, you know, she replaced her car; she got a fuel-efficient car. I don’t know what that might look like.


Insurance, this is one of the things about insurance. It always pays to shop around. Sometimes you’d be amazed that you are paying several times more than what you need to be for the same or lower coverage than what you could get with another insurer. So, she shopped around for all of her different insurance plans, and she saved 80 bucks on that.


Okay, personal effects, and personal effects might be the hygiene products and cloths and stuff, 20 dollars a month; that’s like buying one less pair of shoes or something, alright?


And recreation, 50 dollars, she just cancels her cable subscription – Bam! – 50 bucks a month right there.


So, these are just examples of things that she could do. Your situation may look different. You probably have other options on your table. You don’t have to do exactly like what I’m suggesting, but the point I’m trying to illustrate is that there are options out there that sometimes we are not willing to consider because we think, “I can’t live without that,” or, “I must have this,” but it all comes back to what is the higher priority for you? To have this luxury or this certain lifestyle that you feel you are entitled to or you need versus the goals that you have set. Is it more important to pay for that mission trip? Have that wedding? To pay for the house down payment and whatnot? Okay? It’s a value comparison, and this is what the plans help us to do.


So, that brings us to the end of the spending plan section, but I do want to sort of recap how we view budgets differently. Okay, so most of the time when we think about budgets, it’s usually spending control, meaning, you need to spend less money. And so, you have a budget to control your spending. But the way we look at it is we’re trying to maximize the savings. And there is a big difference in our perspective here because, when you’re saving as the goal, it answers the question of “Why?”


So, you’re in the department store or a Black Friday, and you see a computer or dress or whatever, and, like, “I need that.” Well, how do I know? Why shouldn’t I buy that dress? Why shouldn’t I buy that gadget? If we are looking at our budgets simply as a method of spending control, we’ll say, “I shouldn’t buy it because I shouldn’t spend this money.” But what if you’ve got a special gift or a birthday gift or a Christmas gift, and you have an extra 20 bucks or whatever, and, like, “I have the money, so I’m not overspending.”


But if the goal is, “I have this target that I’m saving for,” it answers the question of why I shouldn’t buy this dress? It’s because it will set me back from being able to achieve the financial goals that my family and I have agreed on. You see the difference? It’s the difference between the means versus the end. So, spending control is like, “We are trying to not run out of money, to not spend beyond our means.” Whereas, the end is, “What’s the goal that we’re trying to achieve?”


So the illustration I think of is like, imagine if I said, “Today, we’re going to go on a road trip, and my goal on this road trip is to not run out of gas.” Is that even a goal? It’s almost like a prerequisite, right? It should go something more like this, “On this road trip, my goal is to go to the Grand Canyon.” And it is assumed, it’s an assumption, that you’re not going to run out of gas or else you’re not going to get to the Grand Canyon. So, that’s the purpose; when you look at savings first, and then your spending is derived to achieve the savings goals, it’s the means versus the end question, okay? It keeps the focus on the savings rate, and, as I mentioned earlier, that’s the number one most important thing to wealth building, and achieving goals makes budgeting more motivating.


So, how motivating is it to stand there and say, “I shouldn’t spend this money because it’s not in the budget”? That’s the way we view budgets, right? Like, “I just can’t spend this money; it’s not in the budget. I know I shouldn’t. I really want to. I just shouldn’t.” But wouldn’t it be far more motivating to say, “You know what? If I don’t spend this, it gets me to my goal two months faster. I can imagine two months earlier getting that vacation that I want to save up for.” You see the difference in the motivation factor? And that’s why we view budgets differently.


So, in the last few minutes here of this seminar, we do need to talk about relationships, and this is the context in which all of this happens because, what are the goals? The goals have to be agreed upon with the family. Long-Term, Short-Term Savings Plans have got to be agreed upon with the family. Monthly spending? You’ve got to be in cahoots, alright, with the people that are in your life. So, relationships form the context in which money decisions happen.


So, I’m going to talk to singles, and then I’m going to talk to those who might be engaged, and then I’m going to talk to those who are married. So, if you are single, remember, who you marry is the single largest financial decision you’ll ever make. Key words here: Financial decision. Financial incompatibility is one of the most common contributors to divorce. It may not be the sole cause, but it always finds itself in all those stories, okay? Money issues can bankrupt a marriage figuratively and literally. I don’t need to share the horror stories with you, but I think you understand that.


Make sure to find someone who is financially compatible; this is so important. So, if you are single, how do you know? How do you know if they’re compatible, okay? We could spend a whole seminar talking about this, right, but I think the relationship seminar is next door. And, actually, he told me he’s dealing with managing conflict, so, if there are conflicts based on my seminar after this, listen to Pastor Keala, and he’ll sort you out.


So, how do you know if you’re compatible? Well, take a look at the career. Is this guy just living in mom’s basement and playing Play Station? Or is he actually being serious with his career? Does he have debt problems (or her)? Okay? Watch their shopping habits. Gentlemen, you can tell who is a high-maintenance lady by the stores that they frequent, okay? What are their family’s money habits like? The apple never falls far from the tree. And you can take that one to the bank. And what kind of gifts do they expect from you? Okay, that’s a very practical one. What kind of gifts do they expect?


This is where I need to share with you that story that I hinted at Wednesday night on stage. You know, my wife, I was ready to propose to her, and I bought her a watch, except I didn’t pay anything for it. You see, I bought it on Amazon, and, I know, I know, I know, Amazon – it must be a cheap watch. No, actually, it was a nice watch. It wasn’t diamonds or anything like that; it was a nice watch; it looks nice and all that, but I had some other point system that I had earned all these points, and so I was able to get this watch for free.


And I know some of the ladies would think, like, “If any man does that, he’s out of here,” right? Like, “So insincere, horrible, I can’t believe it,” and to a degree, I do feel guilty, but she said, “Yes,” okay? So, it still worked. So, here’s my point, though, with that story. More than the watch, my wife loved the fact that I didn’t pay for it even more. Okay? So, what am I trying to say? The point is not the gift in and of itself, but is there a compatibility in the tastes and the mindset towards gift-giving and the money between you and your perspective spouse to be?


So, in terms of my wife, we looked at the situation, and I realized that that is a value that she would appreciate, okay? Men, don’t do this to the ladies if this is not their way, because you’ve just got to understand what the compatibility is with them. So, obviously some ladies, you know, anything less than an actual watch or gift that you paid for with your hard-earned cash would be less than adequate. It might not be enough. But others might be like my wife, okay? That’s up to you to determine based on evaluating the compatibility between each other.


So, if you’re engaged, remember, now is the time to make sure there are no money secrets, okay? This is a short period of time between singleness and married life; there should be no money secrets. So, you need to have the money talk. You need to discuss openly your views on money. You should be transparent and honest.


So, after we got engaged, my wife said, “I need to talk to you,” and I was like, “Oh, boy! Uh-oh.” I knew she needed to talk to me about something about money, and I was thinking in the back of my mind, “Okay, this is where she tells me she’s got this massive loan and some massive money secret, and it’s going to be like, ‘You better sit down for this.’” And so, she did. She’s like, “Sit down. I need to tell you something.” But on the contrary, what she told me was that she has saved up a huge sum of money, and she realized that it could alter the dynamics of our relationship because she has all this money, am I going to want her for her money now, right?


And the fact is, she was not a doctor; she was a nurse. She worked as a nurse for only two years, and then she was in self-supporting work. She worked at Wildwood and other places like it. But she managed to save up this war chest, and her goal was to buy a house in cash. We’ll talk about that more in the next session, and you might even be able to figure out how much she saved up in the next session.


But she had this talk with me, and she was worried what my response would be. And so, I looked at the number, and I asked a few questions, and my response was not, “I can’t believe you have so much money! Why didn’t you tell me?!” It wasn’t like that. And I don’t know why I did this, but somehow the Lord knew, and so I told her, “You know what? You have been putting your money in accounts that have earned, like, no interest. You could have had, like, twice the amount that you have now.”


Looking back, I’m like, “Why didn’t she slap me?” But on the contrary, my wife, actually prior to that moment, she, you know, was looking at my spending habits, and she was actually concerned that I spent too much money, which, you know, I have a phase, and I am still the spender of the family. I confess to that. And so, she was worried how this was going to change things. Like, “Is he just going to want to spend it all? Or, how is he going to view this? Is this going to change things?”


And when I came back, and I explained to her, “You were very safe with your money, but you actually could have earned a lot more and not really jeopardize the safety,” like, you know, put it in a CD that’s a little higher yielding or, you know, something like that. And she realized, “Yeah, this is the right guy for me.”


She was like, “I’ll do all the saving; you can figure out the rest, and you can do the investing.” And so, we had the money talk, and as a result of that talk, we were able to agree on our money goals before we got married. How much are we going to spend on this wedding? If we get all this extra, what are we going to do with it? Who are we going to give the money to first, right? And then, what are we going to save the money for? I was going to school. Are we going to, you know, borrow money for me to go to school, or are we going to work our way through? Is she okay with working?


You know, all of these things, we’ve got to talk about, and if you aren’t clear on where each other stands on money, you aren’t ready to get married; that’s just the fact.


And plan the wedding together; it will uncover a lot. I know a lot of men, they’re like, “Oh, that’s a woman’s thing. Let them deal with it.” And then they get the bill. It’s like, “Maybe I should have participated more.” So, plan the wedding together, and it becomes clear. Through the process, it’s like a mini experiment of how you’re going to make plans for other events later in your life, because you’ve got your whole life ahead of you, and you’ve got to make sure you guys are compatible.


So, if you’re married, okay, let’s conclude here. We’ve got a few more minutes. Remember, money is a team sport. Money is a team sport. You can’t just go it on your own. You’ve got a teammate with you. So, you have become “one flesh,” and that means your bank accounts, too, okay?


So, I need to make this common, and that is, when I say, “Your bank accounts, too,” it doesn’t necessarily mean you’ve got to merge all your accounts necessarily. You can have (quote/unquote) “separate accounts” as long as you both have access to each other’s accounts. The point here is no secrets. If you’re married to this woman or man, if you’re keeping secrets from her, shame on you. This is not appropriate, okay. So, if you’ve got two different accounts, it’s okay, just make sure you have access to each other’s information.


And I know, I know that there are some families, that’s the way to help prevent one family member from spending the whole family’s money. Okay, so, that might be something that needs to be put in place if that’s what works in your family, but just make sure everyone has the passwords, accounts, everyone can see the statements; there are no secrets. That’s the bottom line.


Okay, and then you should have one primary person be the financial caretaker. You don’t want to have too many cooks in the kitchen, so to say, but you want to create and review your savings and spending plans together. You want to work on your goals together, but one person can be the primary executor of the plan that the family council has agreed upon. And pick whoever is better at math, just saying. And then set a dollar amount over which no purchase occurs without joint discussion.


So, this is very important because it gives some level of freedom. You know, whatever the dollar amount that you agree on, it’s a rule. You’re not going to harp on someone’s case because they spent, you know, five dollars on something that they didn’t talk to you about first. But they’re not going to go out and spend 5,000 dollars without telling you either, right? It’s an agreement in the family firm. And, you know, for some families, the dollar amount might be really high, because, you know everyone’s on the same page. So that’s something between you and your spouse to work out together.


So, include some fun money for each other in the budget; this is important. Christ isn’t, you know, Jesus doesn’t want us just to be constrictive and deprive ourselves. We talked about this in the last session. It’s okay to have some money for appropriate recreation and things for the family. And make sure to celebrate the victories together, okay? If you get out of debt, you pay off your house, celebrate it. Make it a big deal. Help the kids see that the family is in this together. Make the finances a point of unity for the family rather than the point of conflict.


So, if you have the goals, right, listed on paper, the kids can know about it. The husband and wife agree on it. When you reach the goals, you can celebrate, okay? And so, it becomes a point of joy. Finances is not like, “Oh, drudgery.” “Oh, we don’t have enough money.” “Oh, we’re complaining, and then we have conflict, and we’re arguing about it again.” It’s more like, “Hey! How close are we to raising the money that we’re going to give to this church plant project in Africa?!” or something, right? It could be, “How close are we to paying for our trip to GYC next year?!” Right? Make it a point of unity. Or, sponsoring a child in another country.


Make it something that we can drive towards a goal instead of always slapping each other’s hand and saying, “Don’t buy that.” “Don’t do that.” “Why are you spending that money?” Don’t make that the conversation about money in the home. And, you never know, it might even become fun. You might even decide to start your own finance blog, too.


So, let me just share this final life hack real quick. We’re about out of time here. So, this is a life hack just to throw out there just to inspire you about what is possible. Okay, so let’s say you get married, and for just one year after you get married, if you live on just one income and invest the second, assuming both of you are working, and invest all of the second plus the cash wedding gifts, you might be done saving for retirement completely, okay? This is a potential, not a guarantee, but it is something that could happen.


For an example, suppose you get married at 25. Let’s say both of you are 25, and both spouses work. And let’s say one income plus all of the wedding cash gifts from the wedding equals 50,000 dollars. Let’s just suppose one-year income plus all the wedding gifts, 50 grand. If you invested it at 8 percent…And we’ll talk about 8 percent tomorrow. I know there were some questions about that; if that’s realistic or not. And then in 40 years, so when they turn 65, that 50,000 dollars has turned into almost 1.2 million. So, it’s just one year, and they don’t save another time.


And, notice, this will yield 1.2 million at a 4-percent withdrawal rate, which is what most people recommend as a safe rate of withdrawal. That’s 48,000 dollars a year. And, notice, 48,000 a year is nearly 50,000, nearly what you put in just that one time. This is the power of compound interest that we talked about earlier, and having the family firm on the same footing, maybe tightening the belt for a short period of time, and then guess what? You don’t have to save another dime for 40 years, and this is an opportunity for freedom for the family to do more for the Lord.


So, this a summary. We have our Live Events, Plans, Long-Term and Short-Term Saving Plans, feeds into our Monthly Spending, a feedback loop here with our Savings Plans, and all happening within the context of relationship.


So, let’s summarize real quick, and then we’ll end. You must have a plan, or you will never reach your destination. That’s the point of Christ’s story, count the cost when you’re trying to build a tower. Financial plans reveal our priorities in life. It’s about real life and achieving real goals in real life. It’s not just theoretical math problems anymore. Plan ahead for life events instead of relying on debt, very important. Saving goals should drive our monthly spending decisions. Okay, this dynamic right here helps us to have a goal for which to shoot for. Marriage is the most important financial decision we will make, and money is a team sport. Husband and wife must be united.


So, these are summary points for this session, so this brings us to the end of session number three here. And I am a little bit over, so let me pray, and I’ll let you go.


Father in Heaven, we thank You for giving us guidance, even in a drowsy, sleepy and warm afternoon. I pray that You will guide us as we seek to make appropriate plans to attain the goals that you set before us, and be with us in the remainder of this GYC conference and also the next session here. We pray in Jesus’ name.


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