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Counting the Cost

Alistair Huong
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Alistair Huong

Executive Director of AudioVerse

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Conference

Recorded

  • September 3, 2017
    11:00 AM
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Father in heaven thank you for bringing us back together again. Give us alert minds help us to understand some practical ways to manage our or your money in accordance to your will teach us we pray in Jesus' name. All right let's get into a session to we're counting the cost debts budgets and your life OK So for those of you who weren't here earlier saving the crumbs dot com That's our website and then the seminar that I keep referring to audio verse beyond the tie it's a six part series from G Y C twenty fifteen. Get right into it we started on this earlier talking about debt the borrower is servant or slave to the lender proverbs twelve twenty two seven be determined never to incur another debt deny yourself a thousand things rather than run in debt this has been the curse of your life getting into debt avoid it as you would the smallpox and it's home page three ninety three paragraph or so debt is not desirable It's like a disease it's like being and in slavery so debt is bad very bad but not a sin OK it's still not something you want in your life but we can't say that it's a sin Exactly so this was a statement we read earlier that I think was somewhat of a revelation for those of us who have not been aware that Ellen White actually borrowed money publishing ministry page two and got four and five says I now ask you if you will let me have the use of two thousand dollars and at the end of the story here when the expenses of issuing my books is lessened the sales will soon pay up all my debts so this statement here actually hidden within it is the principle of what is permissible debt. The question was asked earlier is there such a thing called good debt. If I'm going to follow the Bible and. Debt is still smallpox and a still slavery so it's difficult for me to call any type of slavery or any type of smallpox. Good understand what I mean. However there are acceptable instances in which borrowing money is permissible you catch the difference is permissible but one is something permissible doesn't necessarily mean you have to do it OK so what's what are the rules OK what's the criteria of the L N Y through this excess example right here illustrates to us or shows us as the rules for debt. There are two rules and the related number one rules for acceptable debt number one never borrow money for something that goes down in value. When SAGAL illustrate this a little bit more later and number two is where Ellen White makes this very clear borrowing is acceptable only if what you are buying can pay back the debt cave you see how these two things are related if something can pay off the debt then it doesn't go down in value because it's generating value. Never borrow money for something that goes down in value number one borrowing is acceptable only if what you're buying can pay off the debt these are the rules if the debt violates these rules then no debt allowed Zakk clear Let's dig a little deeper so what about these things borrowing money to buy an i Phone Is that an acceptable use of debt. About a vacation. What about a car. Or if. You're saying no but you're saying like please don't say that. The answer is no. Is Right because guess what does a car ever go up in value. And you might be saying you're the smart alecs out there like oh might become a classic your Toyota Camry is never going to be a classic OK. And. Now I will make this exception for the car OK and that is if you run a business right and you use a car to generate money then perhaps there might be instances maybe your like plumbing company up by a truck or your driver or something like that so if the car is a business asset that earns you money then all of a sudden it pays for itself so that's a different scenario I'm talking about personal passenger vehicles right that we take to Starbucks. So let's take a look interest in depreciation here's a reason why we should never borrow money for something that goes down in value is because of interest and appreciation so we talk but I found vacation in the car and i Phone brand new i Phone six hundred fifty dollars That's last year's prices who knows what the new i Phone is going to cost. Price after one year that's six hundred fifty dollars phone now is only worth four hundred how do I know that because I only buy one year old i Phones That's one of my secrets for saving money by the way my wife and I we never buy current your i Phone three wait a year people buy it in the year there's still a warranty on it the battery is still good and I just saved myself two hundred fifty bucks for a phone that everybody else is paying full price for. Somebody should have said Amen to that OK I. Right so. If I borrowed money at ten percent interest I would have paid seven hundred fifteen dollars but after one year I pay seven hundred fifteen dollars for a four hundred dollars device meaning I overspent by three hundred fifteen bucks that's why you should never borrow money to buy an i Phone OK on a vacation right less is a two thousand dollars vacation the price after one year is zero dollars because you can't sell your vacation back you can't get a refund but if you pay for it with a ten percent interest credit card and good luck finding a credit card that only charges ten percent interest the difference is you paid twenty two hundred dollars Now am I saying don't go on vacation no go on vacation but don't go into debt to do it you're going to vacation to distress but you're only creating more stress by coming back and having this huge credit card payment right again the car everybody knows the money drive a car off the lot it loses its value it's true let's say you buy a thirty thousand dollars car that's a nice car price after one year twenty four thousand three hundred dollars if you pay ten percent interest I would've been thirty three thousand dollars just in the first year or so in one year you would have lost eighty seven hundred dollars you would never have felt it but that money surely has left you OK. Paying interest on depreciating assets there is no surer way to lose money so don't do it OK so I'm going to I'm skipping ahead a little bit but those are unacceptable forms of debt but what are some acceptable forms of debt what are some things that we for going to borrow money for that might increase in value or you can pay itself off. A home I heard schooling is another one those are the two big ones anything else. Business that's another one right those are really generally the three biggest ones OK is that if you borrow money for an education the idea is it increases your earning potential and then you can pay it off right and education is very valuable and then a house I house is different than a car because the home values can go up they always go OK let's not forget what happened in two thousand and eight K. especially in this part of the country. Housing prices went into the toilet and I'm not a prophet no the son of the prophet but I believe that day is coming again so. Don't borrow money for things that only go down in value All right so let's talk a little bit about credit cards All right our friend the credit card and this is where I differ from our friend Mr Dave Ramsey OK Mr Dave Ramsey if you listen to him he is a credit card czar he says no credit cards whatsoever under any circumstances no matter how you are whatever whatever whatever I don't necessarily take it that far I understand why he says that. But the issue is not the money or the card itself it's the love of money that's the problem right credit cards themselves are not dangerous they're just a piece of plastic. Credit cards with out self control is dangerous the problem is not in the piece of plastic The problem is in the person holding the piece of plastic. But I will say that in this day and age it is possible to live without credit cards OK those people that say oh you got a credit card oh in order to have a good credit score or whatever it is easier let me tell you it is easier if you want to borrow money for a house or things like that to have had a credit card bill have a credit history so I don't have a problem with that but if you choose not to live with credit cards I'm not going to beat you up over that either because it is possible and I if you know I admire your self-control if you choose to do that understanding your own weakness. Not entirely true it is difficult yes but I have rented a car with a debit card before so it is not entirely possible but you are correct there is going to be some inconveniences there will be in this day and age so it is something to keep in mind so credit cards do have benefits OK And I want to make this clear credit cards are not all evil. You do get cashback you know flight reward points and you know card points and things like that and I think it is a wise thing to take advantage of that as long as you're not going to debt to do it so what are the rules OK for proper credit card usage. Don't use them to buy stuff you don't need. That's the hard one because we look at something we say oh I can pay for it I can afford it because I've got a card that lets me walk out of the store without the security guard stopping me from shoplifting that doesn't necessarily mean we can afford it it just means we got something legally OK but how do you know what you need or don't need while we're going to talk about having a budget a savings plan and all of that never carry a balance pay them off every month that's the second rule if you break this rule cut the card if you violate a one time you have demonstrated to yourself and the world that you cannot be trusted with the nuclear code called a credit card because you're about to blow yourself up and I have some friends you know if they pay it they make sure that they stay disciplined they don't pay it off once at the end of the month my wife and I does what we do we just pay the full amount when the bill comes out but I have some friends they pay it off as they go so they buy something on the car and they pay it off that day it's a lot more work for them is like they don't want to risk running a balance if you need to do that do that OK. If you violate either of these two rules cut the car. You remember what Jesus says if your right hand offends they cut it off. Credit card it's much less pain cutting the plastic than your hand. Consolidate to concentrate rewards so you know there are a lot of websites out there you might have seen some of them the points guy whatever they teach you how to maximize credit card bonus points you get all these fancy vacations and flying first class for free and stuff you know and that's nice and all you can look into that but for me simplicity is something that is more valuable sometimes and merely the dollars and cents so keeping it simple means having as few cards as is necessary OK And there are some reasons for that because a lot of times credit cards very well for one a lot of them they have annual fees so if you have multiple cards you're going to pay multiple annual fees and if you have multiple annual fees and you're not earning enough rewards on those cars in the gate the impact you're not even breaking even so you're actually losing money OK but the other point besides annual fees is that a lot of them you have to reach a certain threshold on your card reward system before you can cash anything out so you might need a twenty five dollars fifty dollars one hundred dollars or so many points before you can redeem for a ticket or whatever and you spread out your spending over ten fifteen twenty thirty cards everything's got like a little bit a little bit a little bit but you can't use any of it. So far better to consolidate your cards into one or two that you can actually maximize the rewards and you pick what kind of rewards work the best for you if you're a big travel travel person get a travel card obviously you know all the moms here probably has a Costco card so right you got to get cheap gas somehow here in Southern California and you know it might be a cash back car that's what my wife and I use we have a two percent cash back card this is not an advertisement I'm not paid by Pay Pal but I just read before I came here they just came out with a two percent cashback card no limits on the rewards you can redeem it for any amount of points you just out of a Pay Pal account I don't have that card it just came out last week. So you know you can look around and the point is if you're able to if you're able to responsibly use credit cards the rewards can be worth it if you're not earning money is not going to make you a millionaire by any stretch of the imagination but to get a two percent discount let's say cash back on every purchase I'm going to take it right so what what's my position on credit cards use them responsibly know your own limits be willing to cut them up if you cannot control yourself and keep it simple if you are cards generally Trump having lots of fancy ones so that's my two cents that's my two percent cash back for you on the credit cards there so paying off debt let's talk about that let's say you've got debt already how do you pay it off number one you got to the debt don't make excuses and don't play the victim you know it's popular nowadays to always blame someone else and it's not just personal finance you know you hear about our government oh you know so and so racked up the national debt some more it's always someone else's fault Well if it's our debt it's our problem and we're never going to get overcome it if we just keep blaming other people take ownership of this thing and let's say OK I'm not going to blame anyone else I'm not a victim I'm going to I'm going to beat this thing back there is no alternative to making big payments OK that's a second point about paying off debt we just have to remember that the only way to pay back the debt is to pay it off there's no magic that somehow all of the money will disappear now yeah I know some of your thinking about federal student loan forgiveness programs and things like that I have like I think it's a three part article series on my blog talking about the student loan forgiveness program and you can read it I crunched the numbers and I think you'll see that it's. Actually not much of a forgiveness program at all. So there is no alternative to making big payments sometimes you can negotiate with creditors but that won't eliminate the debt so if you're in a serious bind like you are on the verge of bankruptcy right sometimes you can negotiate and say look you can get ten cents on my dollar of my debt or I can file for bankruptcy and you get nothing. That might help them to negotiate with you a little bit but it probably won't eliminate the whole debt and by the way my personal philosophy I believe the Bible tells us he that's where through his own hurt and change is not that's a statement. Bankruptcy should not be a Christians for a first option. That shouldn't be in our tool kit as a viable path if we gave our word let our Yea be in a yea and our neighbor if we said we're going to pay this back pay it back OK that's being true to our word but that's not to say that bankruptcy should never be considered same time student loans perhaps probably not with the federal government if it's a private loan maybe maybe. So on the next point here met make debt pay off the number one priority in your short term savings plan we were going to get to the savings plans in a minute but then you've got to squeeze every dime out of your monthly spending plan to do it so when you are trying to pay off the debt it's got to be a priority if it's going to be like number three four five on your priority list it's never going to get done because it's too convenient to keep putting it off and then don't worry about other investments until your debt is paid off so a lot of times people ask me I'll be investing in my retirement you know I might get four percent whatever in my IRA But but you know my student loans charge me you know eight nine percent like. Pay that off first don't worry about saving for in your retirement yet because it is an investment paying off your debt is an investment you get a return on that money by reducing the interest you have to pay and this is where I do agree with Mr Dave Ramsey and that is the debt snowball method that's I believe the most effective method of paying off debt so what is the debts the snowball so you take all of your debts and you list them in order from the smallest to the largest balance how much you still owe. Smallest to largest and you pay minimum on all of the debts except the smallest one in my field counter and counterintuitive but follow me here and then you want to focus your intense efforts to pay off the smallest debt then roll all the extra payments to the next one on the list Yes QUESTION. Yes. It's not by interest rate good question so it's by the balance OK so you're not taking credit interest rate into account necessarily and I'll explain the reason for that and you just go from the smallest amount you pay that off whatever you are pouring into that smallest amount rule it on to the next one and then when you're done with that one you roll. To the next one OK and in the meantime you're trying to inject as much extra capital as you can into the snowball until your paid off so here's an example this individual has four loans credit card number one thousand dollars credit card number two twenty five hundred car loan ten thousand and student loan twenty five thousand. So thirty eight thousand five hundred dollars total in debt so if this person has a thousand dollars per month that can be put toward the debt. In the first month credit card number one gone forever in three and a half months or four months here both credit cards gone so in essence when you look at it on the list in a matter of four months it feels as though he's halfway there it's a psychological game dollar amount wise he's nowhere near halfway but on the list of priorities it gives you the. Sense of accomplishment. And then in thirty nine months or a little over three years bam bam bam you keep rolling it up and you're done in less than three and a half years but of course that's without adding to the thousand dollars per month OK so why do I say snowball and not avalanche and when I say avalanche S. when you pay off your debt in order of highest to lowest interest rate OK because some of you might be thinking you know if I order my loans in the order of highest interest rate to lowest interest rate it will save the most amount of money and if you do your math you'll see that that's correct. So why go by order of balance instead of the order of interest rate and it's all because of the human behavior we are easily motivated when we see progress but if we don't see progress the math the sheer numbers by itself may not be enough to help us grind it through so imagine if you go back here and let's say we go in reverse order because the student loan is the highest interest rate for some reason and you know the other ones have lowest interest rate twenty five thousand dollars at a thousand dollars a month you're paying minimum payments for these three for twenty five months that's over two years and you're looking on this list and it's like man it's been a year and a half it's been twenty four months and I haven't made any progress. You might actually be saving money if this had the highest interest rate but you're going to have a hard time sticking with it for two years it's going to look like I'm not getting anywhere but if you're able to flip this thing around and within a matter of months you like man I just crossed off two things off my list. In a matter of months it's going to feel like all right I can do this right like if you're like me you're a list person right to do list like sometimes I do something that wasn't on the list and I put it on the list after I've done it just so I just scratch it off OK it's the same it's the same way of thinking it's to help you motivate yourself and so yes you might lose a little bit of money but in the end at the end of the story it's better to lose a little bit of money and actually get out of debt than trying to save that little bit and never get out of debt so that's the point paying off the debt your debt is the best investment if you regret being debt free it's easy to undo it so this is this is this is the sales pitch high Have you ever been debt free. Everybody's in debt what have you tried it you know well try it out for a while and if you don't like it you know all alone use the money right or you can go borrow something else so give it a try maybe you will want to stay in a debt free state so the two biggest debt scenarios we've mentioned this already earlier student loans and the home mortgage and we've already discussed that yes. And yes dot dot dot They are permissible forms of debt and I don't I didn't list the business loan here but Ellen White's request earlier to borrow money to print books that's a business loan she's asking for money to create more assets that's going to be sold at a profit so student loans and home mortgages Let's talk about that a little bit just because it's permissible doesn't mean you must let's remember that just because you can borrow money. Doesn't mean you must do it and it doesn't mean you must take out the maximum amount tomorrow morning for our morning devotion I'm going to be sharing my story of part of my story of how I actually worked my way through my graduate program and how the Lord provided for that so I could have borrowed money but I chose not to and the Lord opened the way and I'll share that story tomorrow but the student loan fine print a few things we need to know about this federal student loans can't be discharged and bankruptcy. I remember that there are two ways and I'm not I'm a private student loans OK I'm a federal student loans so there are two ways to get out from under student loan debt number one is to pay it off Number two is to die. I think I know which one I prefer. And you know there was a sad story not long ago I read in the news there was a tragic story of a young lady she was killed in an accident and her parents were surprised to see that. They were being asked to pay the rest of her student loans. She was dead and you know the reason why. They cosign the loan Yeah so parents I know how much you love your children but don't cosign their loans. The Bible says Don't cosign anybody's loans so it's just a word to the wise if the bank requires a cosigner Why do you think that it's because they don't expect the person to pay and so the parents are going to be responsible so don't cosign But remember this student loans can't be discharged in bankruptcy you're still going to have to pay the government can't even garnish your tax returns my friend Ed Reed he is a. You know he was a former stewardship director for the North American division He's written books and he's given seminars he told a story where he's on he's also a lawyer and so there was a mother who came up to him just quite frustrated her daughter got a summer job and earn like three hundred dollars or something and then I'm sorry she earned a couple thousand dollars and she was expecting a three hundred dollars tax refund when she filed her taxes before April fifteenth and she did all of her numbers and everything all you got three hundred dollars going back but then when the letter came in the mail the IRA said thank you so much we have out of convenience to you applied your three hundred dollars toward your student loan just to save you the trouble and so this mom went to Ed Reed who's a an attorney and said Can you help us with the I.R.S. and he's like well you know no lawyer is going to take up this case for three hundred bucks but the point of the story is just this you're borrowing money from Uncle Sam. Uncle Sam is the one who's responsible for giving your tax refund. For all intents and purposes Uncle Sam doesn't see this as our money it's his and he's just trying to be nice to save you the postage of having to write that check and send it back so we might be in for a surprise if we expect Uncle Sam to play nice sometimes just because you qualify I don't take the max amount because it ain't free money just boggles my mind sometimes when you know the students are like oh yeah I got full student loans and a living loan and a car loan and of loan to go on some crazy vacation I mean it's like whoa. What are you thinking oh you let me slap you boy. Because someday the borrower is still going to have to pay back the lender and until that day the shackles of bondage are still on and so don't take the max amount just take the minimum you need OK even though it's permissible right is permissible don't take more than you need. And you know I'm. I'm going to just go say this. How often there are young bride I bushy tailed young people say I want to work for got to go to school without counting the cost of the good ab the schools take maximum loans through undergraduate medical school dental school whatever and then they come out the other end of like oh man I want to work for God but all I can I've got four hundred thousand dollars of debt. That's not even a line go check out the mail in a dental school four hundred thousand dollars. And we wonder why are young people are so stressed right and I believe a lot of them genuinely want to serve the Lord they do. But no man can serve two masters that's a fact you can't serve God and Mammon at the same time and so if we can only think through things properly going in to minimize the debt load or like some of my friends I was just talking to there's a deferred missions program with all Melinda or other options out there let's try to make sure that we don't inadvertently become enslaved to Mammon through the debt or of our student loans when God actually has use for our youth and our energy to serve them in the field. All right. So this is a story of our house OK So let's talk about home mortgages a little bit so we paid off our house in two years this is our house by the way this is it and what you don't see is our backyard and also there's also a guest house on the side I think there's a picture of it later so it's a one acre land about ten minutes from Southern out as university with two houses on it here the numbers we bought the house at twenty thirteen for one hundred eighty five thousand dollars. I know I mean this is Tennessee. I'm not lying but yes here and here and look at California that's like a dog house I know. You should start thinking about some country living here guys so our mortgage was eighty five thousand dollars. We got a fifteen year fixed rate conventional mortgage at three point four nine percent interest. And our minimum payments on a monthly basis were six hundred seven dollars and twenty four cents. But our average payments because we paid it off in two years exactly two years to the day in fact thirty seven hundred dollars average annual payments or actual payment sorry. And one hundred thousand dollars down payment so people I What's the secret to paying off the house well the secret is in these two lines on the bottom. OK And you're like That's no secret. There's no secret you've got to pay our pay off the house so how do we do this right. So here's the secret for the big downpayment my wife had a dream to buy our first house in cash and so I've been saving up ever since she graduated from school and in our home between my wife and I I'm the spender she's a saver and she's the one that had this dream and so since she was a time in college and after she was she's a registered nurse so she did nursing and she just saved everything she could she live like a student after she graduated and she just piled up a whole bunch of cash. And then the big monthly payments is the other part of the story nearly all of our extra savings went toward the mortgage we averaged six times our minimum payments so when my wife and I were paying off the house we didn't have a baby yet and we knew that once the baby came we wanted to have a stale mom want to be able to stay home and so while she was working we just lived on one income we just adjusted our lifestyle so that my income covered all of our living expenses and everything that she made one hundred percent of her income plus additional amounts and I made went towards paying off the house and of course we did have student loans so if we have student loans that might have been a priority we might have put this off later we might have other debts right so your situation your mileage will vary I'm not saying you have to be exactly like us but this is what we did and so we realize that if we paid off the house it would reduce our living expenses by six hundred seven dollars per month and Deborah's income would go away and we would never have to pay for housing again no rent no mortgage just insurance and things. And property tax and things like that but we're looking at significantly smaller amount and and also we were able to. Install solar panels so now we have no electric bill so there are other things that we were able to do right because we were able to save up and to make the big payments so we adjusted our life for that priority and at the end of the day it's all about the savings rate that's that's it's all about how much you save as a downpayment ahead of time and how much you're able to save to apply towards the bigger payments while you're paying it off so here are the benefits we get to live rent and mortgage free eliminating the single largest expense in our budget so most people housing is the biggest portion of their budget usually is about a quarter to a third of the take home pay imagine if that in your budget was just wiped out what would you do with all that extra money we own our home now instead the bank so there's no risk of foreclosure that's nice and so we have more cash for other things solar panels for example we install solar panels and at the time we were able to get you know an incentive from our electric company and the federal government and so now our solar panels earn us money not only do we get a zero dollars bill the electric company pays us every month. So better than having a zero on dollar amount for your budget is letting someone pay you for it so we paid off our mortgage the same month that our baby was born and so it's just one less thing to stress about OK So those are some of the things that we did and this is this is our backyard and our pond we have fruit trees now that's not in there and that's the guest house OK so our snowy winter day. So a little bit of country living does a soul good. All right but here is the other part of the numbers that is important to remember. We saved a ton of interest because we paid off the the loan early and yes it's true everybody always asked well you only had a three and a half percent interest mortgage when you have earned more if you invest in something else or earn more while you save that money and pay their mortgage off a little later the answer is yes that is true we may have done that in other circumstances but because we knew we did the time table we did the math we knew we could pay it off in two years we decided it was more worth it for us to have the freedom of having never stay home to reduce our monthly cash flow needs rather than necessarily just maximizing our Hmong term investments so that was a personal decision that we made for cash flow purposes the New York case it may be better to keep a lower interest loan a little bit longer like in a house and paying off other things or investing in other things first but your mileage may vary so let's take a look at the numbers so we got a fifteen year mortgage OK. Eighty five thousand dollars monthly payment if we had just gone with the minimum on the Mount of interest we would have paid in fifteen years is twenty four thousand dollars sounds like a lot of money but most people go with a thirty year conventional mortgage and this number would be more than double So there's only for fifteen year but we paid it off in two years so in two years. This thirty three hundred dollars here is actually the actual amount of interest that we paid for a whole house slightly over three thousand dollars in interest that's it and so how much do we save in interest compared to a full fifteen year twenty one thousand dollars. Now when you stretch that out over fifteen years if feels a lot less pain painful because you're looking at it in small chunks and pieces and you're paying only six hundred dollars a month but in the end you are still twenty one thousand dollars behind you may not know what. But you are so isn't a mortgage gets my taxes. So we've been told. That's a question. But it's also a myth. Because only the interest from your mortgage payment can be deducted from your taxes not the full payment. Is that interest so early on in your payments you have more interest if you look at your more to say Sion chart and all that you'll see how they break down hardly any money goes to the principal at first most of it goes toward interest so yeah there's going to be some deductions but remember it's a tax deduction not a tax credit so the interest rate that you're deducting all it does is it subtracts that amount from your taxable income and so you're just getting taxed on a slightly less them out they're not giving you that money back at one hundred percent. And this by the way only applies to those who itemize deductions so you know the standard deduction when you file your taxes and itemized deductions the most the vast majority of Americans only take the standard deduction and if you take a standard deduction your mortgage interest rate makes no difference because you can't deduct it because you're not doubling anything and so only if you itemize deductions does the mortgage interest rate even do anything for you and even with that OK even with that you save more money by paying off the loan than you get back in adduction. So it's like when you pay the interest for your mortgage let's say you pay one thousand dollars you might get back twenty two hundred fifty dollars in your tax return tax refund so it's like paying a a dollar to get back twenty five cents and if your accountant or someone is telling you you need to keep your mortgage in order to maintain your mortgage reduction deduction it might be time to find a new accountant. But am I saying that you should not take the mortgage deduction no if you can and you're paying off the house take it take it but I'm just saying don't put off paying off. House in order to keep the mortgage deduction OK so if you do have to take it take the edge off that's for sure. So that's we're talking about debt OK So we need to move quickly here because we need to now talk about. Budgeting. And the Bible tells us in Luke fourteen twenty eight to thirty which of you design a bill tower does not for us sit down and count the cost whether he has enough to complete it otherwise when he has laid a foundation 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. So we talked about paying off the debt so for now we have to look about building right debt is like digging ourselves out of the hole we're like underground we pay off the debt and now OK we're ground level now ready to build up and when we're building the tower Jesus here basically says you've got to have a budget for the project before you start or you might not have not have enough money to finish and if you don't have enough money to finish. It was going to laugh at you. So we need to be able to budget to finish and we need to have a plan OK So this is where we talk about our financial plans and this in a nutshell is how I structure our household budgets and I don't call them budgets because budgets are sound like such a bad work I call them plans there are three types of plans and if we have time to get to that point about relationships we'll see how how we go but there is this thing called life the bent plans and the long and short term saving plans and then the monthly spending plan and the monthly spending plan is what we usually refer to as the budget now what's a life event plan OK let's take a look at that life event plans essentially are the one off events in our lives that require money so it could be college or a change in a career like a big move to be a wedding would be the purchase of a home like a downpayment could be buying a car or taking a vacation or having a baby paying off your debt mission work like a mission trip long term short term. Or even saving up to go to the next G Y C conference children's education that's a big one every time so these are life events that we need to plan ahead for that's going to cost money just like if we're going to build a house OK or build a tower got a budget and have a plan. So the questions to answer when we're trying to construct a life event plan is how much will it cost. That's the obvious one. But a corollary to that question is What can I afford. Those questions may sound synonymous but sometimes they're not because just because we know what something in cost the something costs may not mean that we can drill Istiklal afford it right. We might know that you know the dream car that I have cost one hundred thousand dollars. But that's not what I can afford so when I know that then I have to adjust my expectations. OK The other question we have to ask is When do I need this money there's got to be a time associated with this can't be just an open ended some day by. Type of thing and then how much do I need to start saving now in order to have what I need WHEN I NEED IT THAT'S IT three questions to plan your life events so as an example we want to go crazy with stuff this is the average wedding cost in North America as of twenty fourteen they have actually updated this number I haven't updated in my slides here but in twenty fourteen the average wedding cost nationally is thirty one thousand two hundred thirteen dollars and it's gone up since then it's like thirty five thousand now you know. A wedding is a significant day. But just because everyone and all the marketing that you hear says to the bride here's your big you deserve your prince and you should have whatever you want. Is this a good way to get your marriage started on the right foot. After the wedding you come back from the honeymoon and you're staring at a three hundred or thirty thousand dollar bill on top of all the student loans and car loans and whatever else. So yeah a wedding might cost this much but be realistic with what you can actually afford OK so a life event planned goes into thinking through all those details and so for our wedding this is our wedding day. We paid three thousand. So thank you that did not include a honeymoon though. The honeymoon was about the same so six thousand altogether so not actually the cheapest wedding I have some friends who came as a ha we paid a lot less than you so yeah we applaud them and if you're getting ready to get married. There are ways there are ways to do it for a lot less and by the way my wife have a whole series of articles on our blog about what we did for a wedding how we saved on the invitations the flowers the dress all that stuff. So the life event plan then leads into our long term and short term savings plans and what in summary the long and short term saying is just a collection of all of the life events that we're saving up for that's basically what they are. So a savings plans are life events and you know what we're saving up for it helps us to keep the end in mind everything the big picture and the prevents the need to resort to debt because we can plan ahead and this is important as bottom point it gives us a target for which to save rather than simply what not to spend OK we're going to come back to this point when we talk about the monthly budget. As if this is sort of the the picture we start off with all of the list of life events that we've got we figure out how much we need when we need it and then it flows into one list essentially or two lists if you want to think of it that way. That aggregates those numbers in one convenient place and it gives us. The targets this is what we're shooting for so what's the difference between long term and short term savings. It's really just a time table long term savings things more than five years away short term savings things are five years or less OK So things and money that you need within five years treat it as a short term savings if it's something that's beyond five years look at look at it as a long term savings and you treat them differently because in the long term scenario you will want your money to work harder for you to earn more over the long term and because you have more time you can take on a little more risk and so you want higher yielding accounts in your investments things that earn you a bit more than if you were in a short term savings in an insured account like an F.B.I. So you're N.C.U.A. account because in five years what you're trying to do is you're trying to preserve your capital you don't want your money to all of a sudden lose value right when you need it whereas in a longer term scenario even if the money goes down there's time for it to come back. And the way that you treat it is you have regular monthly savings so long term it's a marathon you pace yourself you figure out OK You know I've got this plan next ten years twenty years fifteen years seven years whatever it is I need to say five hundred dollars a month and every month you just chip out chip away at it regularly every month. But short term savings is a sprint because you need the money in the short term you need to run for it and to cover those expenses as fast as you can so you just save them in the order of. And we're going to illustrate this more in a minute. And so what are some examples of long and short term savings so in the long term savings you're talking about some things are like a longer term debt so maybe like a mortgage for your house or college fund if you've got kids or you're saving up for their college maybe a house down payment if you're early on in your in your in your planning and of course retirement usually is the longest term savings short term savings we're talking a smaller debts credit cards things like that an emergency fund usually emergency fund runs three to six months of your living expenses you need to have that cushion to save you from being like those people that can't pay for a five hundred dollar emergency and also weddings vacations trips usually you're not planning those things out more than five years in advance and then anything else like cars toys gadgets big purchases usually fall under the short term savings so to illustrate this I'm going to use a fictional example meet frugal Fanny She's a registered nurse and we're going to take a look at her budget her savings planned as an example so she's got a long term savings plan OK long term she wants to save these three things student loans she wants pay it off in ten years thirty five thousand dollars house downpayment she wants to save twenty thousand dollars Also in ten years and retirement seven hundred fifty thousand dollars in forty years and so she does the math Bam Bam Bam with the conservative rate of return monthly she needs to save these amounts so she figures she needs seven hundred seventy dollars per month to reach these goals OK So this is how these were her life events these are the individual life events that she's planning for she aggregates them together and this is our long term savings plan and. Her pace for this marathon she is running the piece she needs to run at this seven hundred seventy dollars a month the bottom line is she must save a minimum of seven hundred seventy dollars each month in order to save from for long term goals so far so good. What about her short term savings. She's got a few more things here she's got credit card debt a thousand dollars she wants it paid off right now emergency fund nine thousand dollars right now A.S.A.P.. She got a wedding Congratulations Fannin she's getting married in eight months she's read her blog so she wants to keep it to three thousand dollars. In ten months they're going to go on a mission trip once they get married five hundred bucks she has a car loan she's been paying off and she's got two years left on her car loan and it's a four hundred fifty dollars monthly payment and she just got a new computer but she knows and about five years she's going to need a new one and she budget is about fifteen hundred dollars for a new computer so she adds it all up as so far of the bottom four here she needs at least nine hundred dollars a month but she's got these two up here so she's got a total of twenty thousand dollars. So she's got a problem OK so what is she going to do now with her short term savings plan she's got these items that she needs to address right away ten thousand dollars worth Well I look down her list. And you knew this was coming because we talked about how it's not good to borrow money to buy a car right now so she's got a car loan her car loan still has five thousand dollars left on it two years and four hundred fifty dollars So let's see if we can do something with that OK So let's ask our question. About a car it's got a Honda Accord. Two years old is for thirteen thousand dollars Still she owes five thousand so what should she do when you think. Shisha sell the car now you know this is an emotional decision for some people I can I guess sort of relate maybe a little bit you know you have a car you've driven for a long time I mean this car is only two years old so I don't know how much of a relationship you've built in two years with a car but sometimes of the Oh but I can't give up this thing we cross-country with and you know I got stranded in it once and now we've bonded and. You can get another car you know it's a it's a travel appliance and so if you if you just sell the car here's how the numbers work out so the car is worth thirteen thousand her loan is five thousand and then she takes out twenty five hundred dollars from the thirteen to buy another car temporary car and she's got fifty five hundred dollars left. I mean this is a nice neat example right as fictional but you know a lot of times where we're upside down on the car so if that's the case then you're sort of stuck because you owe more on the car than the car is worth and frequently that happens if you've got a long payment time and the car depreciates really fast and you drive a lot of miles of whatever so in this particular scenario and I tried my best to base it on real numbers in my research it worked out for her OK she didn't drive it too much or not the car is a nice condition and all that. And this is an important point right here I want to mention is that I'm not saying you need to just go without a car and if you can great Don't buy a car you have more money another twenty five hundred dollars let's say you live across the street you know she's a nurse she lives across the street from the medical center and you can just walk to work right or ride her bike if you can do it if you're a student living on campus and you don't need a car sell the car you can buy later but if you do need a car which is many of us. Twenty five hundred dollars is a temporary car OK A lot of people they think oh I can drive a beater twenty. Five hundred dollars you can get a pretty nice car all right because I drive a car that's worth far less than that and it's it's great Honda Accord the six leather I mean it's got everything I need so twenty five hundred dollars you can probably move down you know a thousand dollars and still get a reasonable car and the key here is it's temporary OK I want you to remember this this is this example here is just to show the sometimes us making a temporary adjustment can help us over the long run to make a significant improvement in our financial standing so let's illustrate what I mean right here so we got fifty five hundred dollars back from the car the sale of the car and now we're driving an older car cheaper car but we have fifty five hundred dollars of the credit card debt is immediately paid off. And we wanted I believe it was nine thousand dollars for an emergency fund and so five thousand dollars of that or forty five hundred dollars of that is now paid off so she's only got that much left for emergency fund and what's fascinating is that this line here we took out the car loan and that she was paying four hundred fifty dollars a month for but we're keeping the four hundred fifty dollars payment but instead of paying it to the car dealer or the bank she's just going to save that amount. And guess what in two years miraculously she has ten thousand dollars sitting in a bank account and what's going to happen in two years she's got a twenty five hundred dollars car let's be generous and let's just say her car went down in value you know a thousand dollars it's unlikely but let's just say she got another she lost a thousand dollar depreciation on her car she sells it for fifteen hundred how much money does she have now to buy another car. Eleven thousand five hundred and guess what for eleven thousand five hundred dollars she could buy a nicer car than the one that she sold at the beginning of the story. It'll probably not be a new car OK but if she buy. That car and she's keep saving her forty fifty dollars in five years right she'll have another I don't know what it is forty thousand fifty thousand something in the somewhere in there maybe and the price of that car that she sells and by that point she's moved up to in the range of getting a newish car. So she never needed to borrow money to buy the car so this example with the car is just to show you that it is possible to still drive a modern save reliable vehicle you just have to pay yourself first instead of paying in the car and paying for later. You can have a temporary car not be so driven to having the latest and the best right away but within a few years you can get there. So here frugal Fanny now is looking at a slightly different picture now with her financial position her short term savings so what can she do with her emergency fund. Forty five hundred dollars here are just a few ideas if you're trying to just drum up a one time increase in your savings a garage sale got a lot of junk one man's trash is another man's treasure as they say E.-Bay Craigslist lots of stuff that can be sold she's a nurse so perhaps she can put her name in for extra shifts of work she might be have some hobbies she can do side jobs the point is you can get creative and it's a lot easier when you know the big picture is like OK I know that this forty five hundred dollars if I just give it my all for like the next three months to like just grind this out then after that I'm going to be free for ever. It can give a lot of motivation to put forth a little bit of effort for a short amount of time but if we're looking at it like oh man I'm never going to make the bills I'm never going to be able to save for retirement I'm not going to constantly have to work extra shifts and at the seams like a never ending cycle that's when people get burned out and so that's where the savings plan helps us see that and right we've got a goal post we don't have to feel like this is forever. So let's just say that she sold some stuff she works extra shifts and she's got her emergency covered emergency fund covers and now we're left with everything left here so she's got fifteen thousand dollars. She needs to save and is nine hundred dollars a month or she needs approximately before savings plan we're trying to save it up as quickly as we can so the bottom line for her short term savings she needs to get to fifteen thousand dollars asap right away as quickly as possible and for the long term now she needs to pace yourself at least seven hundred seventy dollars each month OK So all of that illustration to show when you have your life event plans lined up you have your long term and short term savings plans lined up this is what you're getting at you're not looking at fifteen different targets you're not thinking about a good zillion different things you've got to juggle in your mind you're thinking about essentially two numbers this is a target this is what I'm shooting for. And it's a lot easier to focus your attention when you're looking at these two things instead of looking at this right so this is just our work to get to this fifteen thousand as soon as possible and then seven hundred seventy seventy dollars each month so her savings plan reveals the priorities in her life and you know when you have your savings plan put together I think it'll be very revealing to us specially if you work it out together with your resume or spouse if you're married all of a sudden you realize what's most important in your life because you realize whatever's most important I'm going to have to prioritize my money for is my kids' education is paying off the house is buying that new car vacation all of a sudden up do I really value this Paris vacation more than getting out of student loan debt and. You begin to ask those questions as you're working through this process and then also this is important all that quote unquote extra money has a place to go instead of just being spent we can't we can no longer say like you just find a hundred dollar bill or you know get a bonus that work is like oh wow you know let's go shopping so I wait wait wait wait wait. What. About the wedding what about the mission trip what about a kid's college fund there's a list of stuff now that you're saving for you can be an adult about it now right. And also it gives us a target number saved for in a monthly spending plan we're going to get to the monthly spending plan in a minute and also gives us the final target number for total savings and having the target yet it's motivating it's great but more importantly any surplus above that now can be given away you know what your needs are remember our last session prosperity is having our needs met and how do we know what our needs are but we've got to have the plan count the cost to know we can build the tower and guess what if we have more money than we need to finish the tower we don't need anymore we can give it away right and we can give it away without worrying about not providing for a family a budget is telling your money where to go instead of wondering where it went John Maxwell that's this is indeed what we're trying to do telling our money where to go and so now we get to the monthly spending plan OK monthly spending plan and this is how the flow chart works the life events create along a short term savings the list of things that we're saving for and those bottom line numbers the amount that we're saving for now is going to help inform us in our monthly spending because our monthly spending now is going to be all driven by our savings. We're going to be spending our money every month with the goal of saving enough at the end of the month to achieve the goals that we have outlined here OK and that's a slightly different way of thinking about budgeting. So the monthly spending plan we need to listen are projected monthly income if your on payroll somewhere and you just get a regular paycheck or a salary or something that's easy but if you're you know a contract worker or a seasonal worker or you're a business owner and things are irregular you're going to have to average things out the best you can to you can have to do some projections average it out as best you can and then you list your monthly expenses this is from our expense tracking exercise we just talked about in the last session everything that you spent in the categories listed all out and then from there with the categories that you listed out now instead of simply reacting to what you spent you look at that and that informs what you do now you assign dollar amounts to each category so how much do I spend on food how much should I spend on housing how much I spend on transportation insurance cellphone plan and all of that and the goal is to reduce spending so as much as possible and go towards our savings as possible that's the goal and the every every spending line right on the budget line the goal is to get to zero. And let me explain what I mean it's not possible right we're not we're not going to be able to live on nothing. But we have to think in this perspective a lot of times when we talk about a monthly budget you see these worksheets and they're like these recommended percentages you might have seen them it's like housing thirty percent groceries twenty percent insurance ten percent it almost seems to indicate like this is how much you supposed to spend like no that's not how much you're supposed to spend that's just a guideline of don't go over this but we need to come out of this way the ideal amount to spend on every budget on any budget line is nothing. And we only spend what is necessary to accomplish what we need so in our situation housing right. Housing is not free but we have prioritized our saving this such a way that now our mortgage and red line is zero Same with our the solar power our electric bill is zero and so it's the amount I would have been spending on those things now is flowing into my savings for the long term and short term goals. And the aim is to hit the targets for my saving plans all right and then review monthly to make sure you don't spend more than what you've allocated and adjust for the next month and this is the thing this is not a law of the Medes and Persians you know you can't you can change it and if you go over one month they just realize OK maybe I didn't budget it properly this time I'm going to just it and maybe lower lower it somewhere else is going to be a work in progress and most of the time if I recall is going to take you around nine months to a year to really get the hang of doing your monthly spending plan because there are a lot of expenses that are seasonal they don't they don't come around every month and you know Christmas time rolls around and all of that as I owe while this was really different than the last few months and then you realize that the next year OK I'm going to the just some things so you just want to review and adjust as you go so this is Fanny's current spending plan OK she makes take home pay is about thirty six hundred dollars I think that works out to be about forty three thousand dollars a year or something for a nurse these are her expenses OK so I'm not going to go through all of this right now but she takes home she spends ninety percent of it and she saves three hundred sixty dollars per month. If we're just looking at this just as this as our budget just flat out without any other context we say she do she's doing OK She's not overspending she's not going into the negative she's actually coming out ahead three hundred sixty dollars every month so she's actually saving something that looks good and in fact a lot of our. Financial guru friends and researchers and whatnot they actually recommend a ten percent savings rate so ten to fifteen percent. And so she's in line with what they are suggesting however we know the rest of the story we know how much she needs to save for her long term and short term priorities and so how does that work what does I look like so let's review her savings goals at a ten percent savings rate she says three hundred sixty dollars a month her long term savings she needs seven hundred seventy dollars a month in order to reach her long term goals she needs fifteen thousand in a short term savings but I three hundred sixty she doesn't even get to seven seventy and she'll never save enough to get fifteen thousand so she's never going to achieve her goals. So with the holistic picture now with all the life events the saving long term short term savings and her monthly budget now we realize oh yeah. Through Google Fannie quote unquote is living within her means right we use that term limits stay within your means she is within her means but is she accomplishing any of her priorities not really and so you see how all of a sudden it reveals to us even though we're not spending all of our money every month we may not actually be a to achieving what we're trying to achieve. And that's the purpose of all these plans. So frugal family has several options she can adjust her saving goals she can go back and say you know what I am trying to save up for is unrealistic and sometimes we need to be honest with ourselves and realize I can't afford that. I may have to cut some things or not have somethings she could increase or income. Right she could get a higher paying job or work more hours she could cut spending that's another option she could do a combination of these but number five is important she needs to commit to not getting into debt for this OK. Because of all the things that we're talking about their not investment type things in our business they're not you know things that go down I'll go up in value or pay things off so let's take a look at what are some options that she can do let's say she is able to increase her savings rate to thirty five percent now if she's able to increase their income great this will just make it that much easier but let's just suppose that we're going to try to cut her spending she's called frugal Fanny afterwards after all so let's bump or savings rate up to thirty five percent so that's a jump twenty five percent jump so hers and that savings every month will now be twelve hundred sixty dollars So up to twelve in a sixty dollars she applies seven hundred seventy dollars per month to a long term savings and she has four hundred ninety dollars left per month towards a fifteen thousand dollars short term savings which means she will arrive there in three years all of a sudden. It's possible. She just has to move from here to here. That's a nine hundred dollars difference well before we get there so this is how the flow chart now looks we got life events long term short term savings we've got the bottom line numbers our target numbers that number informs our monthly spending and the amount that we save every month now flows back to subtract out what we're trying to achieve so now we have this virtuous cycle here how much do we need to save how much we can save from our monthly spending from month to month so this is the flow of our. Our spending and our saving plans. So what does this mean she needs an extra nine hundred dollars per month and in a way that's only thirty dollars per day that's my sound like a lot more that might sound like not much depending on your perspective let's take a look at what you can do OK and these are a few tips that perhaps you might find useful and I'm not going to be exhaustive So what you need to do is you need to look down her list of spending items and save find nine hundred dollars somewhere is that possible can she do it she still single right now and so her rent is four hundred dollars if she gets a roommate just paying a hundred dollar. Before she can cut that and happy getting a room and perhaps when she gets married this number is going to change right she's getting married and I don't remember five months or something like that utilities and cell phone OK If she's got a roommate utilities are also cut in half and cell phone let me just make this point for my wife and I we both have i Phones we have unlimited data plans we have night nationwide roaming and runs on the eighteen thousand network it cost us twenty dollars a month per phone. If you were to go to eighteen to your horizon for the same plan you're paying at least sixty eighty dollars a month per phone so we're saving more than half all right so this is just the tip of the service we use it's called Cricket wireless if you're interested visit my blog. I am actually going to make you a promotion here you can get twenty five percent dollar twenty five dollars off with my promotional link but that's not the only service that's out there don't just look at the Big Four right Verizon A.T.M. T. T. mobile sprint I mean some of them they're going down and prized but look for what they call the mobile virtual operators these are the people who use the same towers but they sell prepaid no contract services and sometimes they're my father in law he has a cell phone plan that's free he bought the phone and he can call it two hundred minutes a month for free Lazear old dollars OK so for us who are still paying like two hundred dollars for a cell phone plan like you're getting ripped up like. I'm not trying to be mean but you are losing money so it's time to shop around OK So cell phone saving one hundred dollars on a cell phone plan if you're like on of Horizon plan for example it is so easy right it's possible OK food so she was spending three hundred dollars she just has a save fifty dollars food not fifty bucks that's like not eating out like twice right or depending on what kind of. Transportation. Same thing carpool look for ways to save on transportation walk more ride a bike if you're closer to work public transport look for ways to save in this area insurance this is one of those things where we never really like to talk about it because it's not fun or exciting but it's worth it to shop around for insurance one of the things with insurance that's amazing is that it's a one time decision that saves you money for a long period of time so if you're if you're if you're looking for it if you're able to sign up for a cheaper insurance plan you make a decision want to do the homework it might take you a few days you might need to talk to a broker or research on line let's say a savior one hundred dollars a month. That's one hundred dollars a month every month now with no more additional effort with no effect on your quality of life. How much effort is it going to take for you to save one hundred dollars a month on your grocery bill every time you check out or you're going to be costly slapping your hand constantly biting your tongue constantly feeling so deprived so for the same amount of savings you shop around for insurance it takes like way less effort way less pain way less like you know masochism. Same with personal effects right if you she want to save twenty dollars as like being buying one less outfit. Or something like that recreation OK fifty bucks it could be subscriptions that's the other thing right if we have a bunch of subscriptions let's say a gym membership or membership some whatever entertainment you know music plans or Netflix plans you made without one time decision to cancel that and it saves you every month from then on with no more additional effort so those are the types of things that you can think about and also I'll go back to you till it is for a minute you may not be able to have solar panels on your roof but if you're still using incandescent light bulbs right switch. L.E.D. light bulbs with zero effort you will have saved at least half of your lighting bill just by doing that OK Another tip in our home we don't use our clothes dryer unless it's raining outside we hang dry our clothes it might take a few minutes but we did the math at least with our house it costs about fifty cents. Per load of laundry and we've got a little baby now so that's a lot of laundry for higher rates of electricity might be more like seventy five cents and so just over time if you're using little things like this you just hang your clothes a little rack or whatever you're saving seventy five cents every time OK And over time it doesn't add up so let's just say you're right she has all of these little ways that adds up and now she is up to a thirty five percent savings rate she's got her twelve hundred sixty dollars a month seven hundred seventy dollars savings long term and four hundred ninety dollars short term savings so now she is able to achieve her goals. So I want to talk a little bit about how we view budgets differently OK so we just talked about this the monthly spending plan and the monthly spending plan you see it's driven by something. And it's driven not by spending control so much as it is savings maximisation there's a difference in how we approach our budgeting when we think about it this way because when we talk about budgets we frequently think of them as handcuffs that tell us what we can't do. But instead a budget should be telling us what we need to do to achieve what we want to see the difference and so when we when we are a savings driven goals driven financial management strategy we're no longer just telling ourselves what not to do or telling us selves what to do in order to achieve our goals. It answers the question of why write so why should I not buy this dress Why should I why should I not go out to eat this weekend why should I not have this subscription it answers that question is because it helps me accomplish X. Y. and Z. on my savings goals it helps me achieve this so much faster and so forth and it is the means versus the end so when we think about our monthly spending plan it is simply a means to get us where we need to go as opposed to an end in itself so it's like an example and to use it sometimes when we go on a road trip we never say the goal for our road trip is to not run out of gas. We never say that. We say the goal or our destination for this road trip is the Grand Canyon or the Empire State Building or whatnot and to not run out of gas. Is an assumption the means by which to accomplish that goal and so when we talk about our monthly spending the goal the point is not so that I don't run out of money. That's not the goal that's simply the means to achieve your goal yeah we're not going to run out of money and I don't want to run out of money because I want to be able to afford this mission trip I'm going on next month I want to be a before without debt on my kids' college education I want to be able to retire with dignity I want to go to pay off my house in five years or whatnot so those are the goals and not running out of money every month to be able to save up each month is simply the means to those goals doesn't make sense. It's a difference in perspective and so it keeps the focus on our savings rate it gives us to target that we're shooting for and this is important point again it's human behavior achieving goals makes budgeting much more motivating it's a lot more motivating to say that's what I'm driving toward That's what I'm going to get at the end of the road rather than simply slapping ourselves on the hand to say don't do that don't do that oh why did you do that and so they want one more slide so. How are we doing. Can I take ten more minutes are you OK because. This is where I can conclude if you are just dying. But if we're able to continue I can wrap things up in about ten minutes it's all right so let's move on now and because we need a relationship so sorry one more. So within all of this we're looking at the numbers and we're looking at the you know human behavior and all of that but there's another aspect to this that we need to remember and that is that money is especially if we're operating in a family environment money is closely into time with relationships if you're married you will know. You cannot do this alone it's a team effort if you've got kids it affects them and so when we talk about this savings plan it's all wrapped around relationships right there is this wrapper that ties everything together everyone's got to be on the same page people have to understand where we're coming from. And so if you're single OK. You have to remember this who you marry is the single largest financial decision you will ever make. We don't usually think of it that way right it is a big decision. But it is also the biggest financial decision. Because it could literally bankrupt you. Financial and compatibility is one of the most common contributors to divorce it's not to say that money is the reason why they get divorced but money frequently contributes to the problem it makes things worse it makes a bad situation worse if the financial and compatibility is in the mix money issues can back up the marriage figure to Livy and literally and so you must make sure to look for someone who is financially compatible obviously the question is then how do I find someone like that how do I know you're a few questions you need to ask how is their career what are their debt problems right you know especially for parents fathers of young ladies who are being wooed by potential suitors frequently the question is what kind of job do they have you know I understand that sometimes there's a frustration particularly within you know parents who perhaps don't have you know Mission minded mindset and all of that. But we don't want to throw the baby out with the bathwater and that is that there is an element of out a man's character that is revealed by their career I'm not saying you have to be a doctor or a lawyer or anything but it's the work ethic is I'm talking about is able to provide because we read earlier the Bible says if you don't provide for your household you have denied a fate worse than an infidel there is a responsibility there and what Ellen White called the husband right it's literally a house band the husband I suppose a whole the house together and if a man is not able to hold down a job pays debts pay his bills that is showing you something OK So ladies watch for that and men Same thing with the ladies they only know how to spend and don't know how to save. And then watch their shopping habits right that's the next thing. What are the family's money habits like OK this is an important metric. The apple doesn't fall far far from the tree as they say so if you're interested in the young lady don't just look at the young lady look at her mother. How did she train her daughter. She might not look the same but inside it's the same D.N.A. OK. This is. This last one is a very revealing one what kind of gifts that they expect. What kind of gift they expect so when I was. About to propose to my wife you know we do the whole Adventist thing right we don't get the ring we get the watch and so I got her a watch. From Amazon and it was a nice watch but it was a watch that I paid for with points from all of these different services that I used. So basically it was free and some of the ladies you know in the room if someone were to propose with a watch that was free would probably say you insincere man how can you know no. But the thing is I knew my wife. And the fact that it was free was more impressive to her then the watch itself. Thank you thank you so. So the point here is financial compatibility right. If I had gone my wife you know you heard my story yesterday you know the diamonds right forty million dollars whatever if I got on her something like that it would have been a flat out no way I'm never married. But there are some women right who would never settle for anything less and if that's the case young men who want to serve the Lord right away. You are financially in compatible. And incapable. So the point is there are these little ways to determine to sort of to figure out who this person is in these areas in their lives right there could be other things like what kind of food that they expect to eat you know what kind of restaurants they expect you to take them out to when it's time to go on a date like all of these things you've got to be thinking if you're in the you know courtship period because it's the biggest financial decision you ever going to make right and compatibility here will save you a lot a lot of grief later on. And if you're engaged OK Now is the time. To have make sure there are no Money Secrets. You need to have the money talk discuss openly your views on money you must be transparent and honest and you must agree on money goals before getting married so after I and proposed my wife she just say yes. We one night she was like you know we need to talk and somehow she made it clear it was some something about money and I thought oh great this is where she's going to tell me she's got some secret debt some huge amount of loans somewhere that I didn't know about before so I was bracing myself OK fine OK let's sit down OK and she gave me her checkbook she said Look at that and I said OK I looked at it and I don't remember the exact amount but it was some huge amount of money because you remember I told you the story about the house we had one hundred thousand dollars down payment and most of that not all of it but most of that was saved up before we met and so she had a large amount of money in our bank account and I looked at and I thought what. And she said and she said So what do you think there was a and. It was something like that. Yeah I do I do right now was that's not what I said but I don't know what got into me but I said something like I asked her So where is this money been sitting she said Oh it's been in some CD she explain what she's been doing moving them around in C.D.'s you get a little bit more interest and I don't know why I said this but this is what I said something to the fact of you know if you had just put your money over here you would have earned like twice as much and she she was silent she was like. You would be impressed right well I was impressed but somehow you know I guess we had already gone to a point our relationship where we can talk openly and transparently about things that and show her mind started working and later on she told me in her mind she was thinking oh wow this can really work. I can do all the saving and he can just invest it. And she realized at that point yeah this is going to work out. So we had to talk that night right and that's at the that's the point in which we discussed OK so how are we going to handle this if you have this amount of money and it's very it was very wise for my wife to wait until that point in which it was a little bit more commitment in the relationship to talk about that because if it was before hand you know it would have clouded the whole relationship. But now that we're you know locking step in and ready to you know get married be one flesh and all that we need to have we need to be a teen so we need to understand and be in concert with how we going to handle this money what are our values OK I at that point was already thinking of going back to school to get a graduate degree are we going to borrow money are we going to pay it off you know with the money that we have saved up and I'm going to work my way through what are we going to do right we talked about all these things and of course planning the wedding where we're getting there. How we talked about how much we want to spend what kind of wedding do we like all of those things we got it out all on the table and we were able to agree before we said I do at the marriage altar if you aren't clear on where each other stand on money you just simply aren't ready to get married there are that's just too much of a risk delay the wedding right put it off you've got to know and Ellen White even measure makes the statement better to have to break an engagement than to be unfortunately married for life. And planning the wedding together it will uncover a lot a lot about the person how do they plan how organized they are you know budgeting and all of that you can do a life event plan that's a great place to start putting the family budget together laying it out ahead of time. And if you're married OK you've got to remember money is a team sport. You can't just say Oh you do it because inevitably something's going to come back to haunt you. Once you're married you have become one flesh that means your bank accounts too. And I want to be clear about this I'm not saying that you can't have separate bank accounts per se. But make sure that your spouse has your password. There's no secrets that's the point. How someone is spending his or her money when you're married there's no his business and her business it's our business. And that's one of the biggest problems is when people start splitting their accounts and people don't have that level of trust so yes if they are for business reasons or whatever you got to have separate accounts that's fine just make sure each other have access to each other's accounts. This next one is important you need a dozen a one person to be the primary financial caretaker you know the saying too many cooks in the kitchen. It's the same way because when you're dealing with money you know if someone comes in and makes an adjustment and then person comes in and makes the same adjustment you know it's easy to just have too many hands overlapping just for the sake of keeping things more organized have one person be the designated person to keep the books. But you want to create and review your savings and spending plans to gether So you set your goals together but someone executes the will of the group of the family firm and pick the person who is more savvy with numbers right if you have two people one person is more comfortable with numbers. That person handled the budgeting let let's you know play to each other's strengths. And here's another helpful tip set a dollar amount over which no purchase occurs without joint diskette discussion it's a simple rule but a saves a lot of trouble imagine the guys calm and say hey we we want to go on this trip golf or skiing or snowboarding or whatever. Well you know let me go talk to my wife first. Are you the man oh man you got talked your wife and get permission first now it's just something we agreed to I'm not submitting my you know headship in the home under my wife no we just agreed to it I'm loving my wife as Christ loved the church so you imagine you come home and you're like oh yeah you know you know the friends you know they want to go out and that I do this your wife says. That's ahead of her three week how dare you oh guys I'm not coming. So a simple discussion like that save that man a month sleeping in the doghouse right but it could be any other number of things right the the man comes home with a new toy so he drives home with a big boat on the trailer the wife like their girls my vacation their girls my new kitchen where the wife comes home with a new fur coat in the white and the husband like what they do and then all of these things even though you might think oh yeah that's funny you can get over it but you know what those little things those little agitations little distrusts build up of resentment and bitterness happens and all of a sudden when there's a big argument down the road especially for the women every single misdeed of the man's life calms into vivid color you remember when you bought this without telling me you know I have to sacrifice this or you can go on that trip that are the up. But if we had this in place a rule right OK if it's over one hundred dollars or two hundred dollars or fifty dollars or whatever dollar amount you want to say it's just a family agreement we're just going to talk about it it's going to save you a lot of grief. But you want to include some fun money for each other in the budget as well so this depends on your personality OK it's the pending a personality for my wife and I we find pleasure in saving the money so it's it's painful for us to spend money on ourselves so we're weird like that but I understand not everyone is like us so if you are like OK we really need some a skate right we're really intense and paying off debt you might just given each other maybe you know it might just be a ten dollars write a week at first you can up that one you're paying off debts and stuff and it's just you can do whatever you want you don't have to ask you not to talk about it you can get something for yourself you can go have fun you can go get something for your family whatever include that as an escape hatch you know for some release of tension and then you want to celebrate the victories together so you pay off the house do something fun right you pay off your student loans do something to commemorate that victory together right you want to make it so that when you have successes it's something that is an associate with positive feelings positive family memories and you want to make the finances a point of unity for the family rather than the point of conflict. And especially for children right if we're having let's say you know talk about the self-denial box in the house you know Sabbath school investments missions offerings things like that it could be something like sponsoring a child in India or Africa or something and the family comes together and it's like a team goal so you know little Johnny and Susie whatever you know they will they have their allowance money or they're selling lemonade or they're helping the neighbors grass and they're saving money and the parents contribute or whatever and they're contributing to a family project it could be to build a church it could be the sponsor child you'd be to go on a trip to mission trip or something you want to create those opportunities while the family is still young right especially the little kids to get them to understand that money is a it's a two. Rule for advancing the mission of God and it's something that is in joy a bull in the family it's not like the only time i Pads ever talk about money is when they're in an argument right so you want to make that opportunity for the family to enjoy it and so in the end it can even be fun so here's one last point for those who are about to get married or of those who are married this is a life hack for couples so let's just say for one year after you get married you live on just one income and invest a second plus all cash when yes you might be done saving for retirement completely OK So there's a life after retirement but you might use this instead of retirement it might be for student loan payoff it might be to pay off the house right. Let's say you get married at twenty five and both spouses work one income plus all one in cash equal fifty thousand dollars invested at eighty eight percent for forty years that's fifty thousand will have turned into almost one point two million and that will yield approximately forty eight thousand dollars a year of retirement income that's based on some conventional numbers and assumptions now I don't want to get too hung up on the numbers but the point I'm trying to share here is for a couple to be on the same page. It can result in real financial returns over the long term in actual dollars and cents in this case they've saved up you know a huge nest eggs they can retire at sixty five for another couple and might be saving enough so they are completely debt free really early for another one like you know in my wife in my case we paid off our house in two years so the point is get on the same page save as much as you can work your savings plan and your monthly spending to save as much as you can so again here's a flow chart life events long term short term savings feeding into monthly spending and amount that we save goes back to meet our goals so let's wrap things up here you've been very gracious I've gone way over time so the summary never borrow money for anything that goes down in value borrowing is acceptable only if the purchase will increase in value or generate income that can pay it off later credit cards are dangerous in and of themselves but credit card use without self-control is dangerous and paying off debt is the best investment OK and you should use the debt snowball method which would minimize the student loans and mortgages upfront and pay them off as soon as you can do not inflate a lifestyle to. In order to pay them off pay the biggest downpayment you can muster pay as large a monthly payment as you can that's the only way to pay debt off faster is to make bigger payments and you must have a plan or you will never reach your destination that's why we have the whole savings plan and the monthly spending plan and our financial plans reveal our priorities in life OK it's a helpful reflection to think through our priorities and we need to plan ahead for life events instead of relying on debt and our saving goals should drive our monthly spending decision. OK that's an important point here and marriage is the most important decision we will ever make and money is a team sport husband wife must be united. So last slide OK I can leave this up. So let's pray as we conclude thank you for your time Father in heaven we are thankful for all that you have taught us Lord help us to be mindful with the money you have given it or care it all belongs to you it's not ours but we want to be wise stewards to provide for the necessities of the ones you have placed on your care but also to have a surplus and extra to place back into the work of God If we give sacrificially merely be faithful with. US it will be careful with how we spend it we save prudently May we ultimately be able to give floor to many souls in the kingdom because we have increased the talents that you have placed into our. Us now the remainder of our camp here this weekend when you ask Jesus. This media was brought to you by audio a website dedicated to spreading God's word through free sermon audio and much more if you would like to know more about. If you would like to listen to more sermon. Visit.

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