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4. Therewith to Be Content: On Debts and Budgets

Alistair Huong

Description

How do I get out of debt?  Is it ever OK to be in debt?  How do I buy a car without a loan?  How can I pay off my house sooner?  How do I make a budget and stick to it?  This practical seminar provides both the Biblical principle as well as the practical how-to for these important questions.

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Alistair Huong

Executive Director of AudioVerse

Conference

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  • December 28, 2017
    4:00 PM
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This message was presented at the July see twenty seventeen conference arise in Phoenix Arizona for other resources like this visit us online at Deb you Deb you Deb you dot. Org. All right everybody it is four o'clock. I apologize for going over the last time I guess I lost track of time. But we've got one more hour to go just curious how many of you were here for all previous three sessions. All right so. I guess all of you are going to get one free Bitcoin afterwards No just joking they're going. You wish. All right so. Let's let's get started we're going to we're going to continue finish off the day and we'll let you go hopefully I won't go as far over like I did last time so less power has together as we began. Father in heaven thank you so much for being with us so far this day with the various topics we've talked about giving as wisdom to how to analyze and deal with some of the issues that have come before us I pray that you will be with us now as we talk about getting out of debt and budgeting it was clarity of thinking as we manage our finances in accordance to your will in Jesus' name amen. So session for there with to be content so here this hour we're going to be spent focusing specifically on debt and budgets debt and budgets. For those of you who have been asking this is my website there is the those web address saving the crumbs dot com and also see two thousand and five beyond the tide is the name of the seminar if you want to go back and listen to that So debt. We share these two passages this morning verses says the borrower is servant to the lender Proverbs twenty seven also translated slave and Agnes home page three ninety three Paragraph four 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 small pox. Is it a sin to be in debt. No I can't I can't say that's a sin but is it a desirable state to be in debt. The illustration here is being in debt is being a slave and having smallpox it's not necessarily a sin to be a slave is not necessarily a sin to half smallpox but you don't want either one so that's the best illustration I can give you as far as debt goes you don't want it but it's not necessarily a matter of sin so we are a nation of slaves with smallpox and the article actually that I pulled this from the title said debt is as American as apple pie and this is how it looks average household debt in two thousand and sixteen is one hundred thirty seven thousand dollars average car loan is twenty nine thousand five hundred dollars. Average student loans fifty thousand dollars average credit card balances a little under seventeen thousand and credit card interest just the interest per year thirteen hundred dollars I don't know about you but this is frightening to me I am allergic to debt and looking at this just makes my skin crawl. So we have a problem and this then this kind of debt then translates into other problems I shared the stat earlier sixty three percent of Americans don't have cash to cover five hundred dollars Murden see so what do you suppose these people do when they have a five hundred dollars merge and see. They swipe their credit card and all of a sudden they've got a five hundred dollars compound interest going on in their credit card account on top of you know whatever ten fifteen thousand sixteen thousand credit card debt they already have. Fifty six point three percent of Americans have less than one thousand dollars in their checking and savings accounts combined. We talk about having the mergence an emergency fund earlier and as long as you have a fully funded emergency fund you can be assured that you will not be in this statistic but what does this actually mean the majority of Americans over fifty percent are one paycheck away from catastrophe that's the nation we live in. A nation of sleeves with small pox So what are we going to do about it before we get to how to address the debt problem we need to answer this question so is it ever OK to be in debt. And if so when how do we know we need some guidelines we need some some guardrails to keep us from falling off the cliff and being like everyone else in this nation of slaves with smallpox this statement comes from publishing ministry pushed to a nine paragraph four and five element writing I now write to ask you if you will let me have the use of two thousand dollars to help me in bringing out books that the people need if I should fall into conflict before the Lord's appearing my sons would carry for the work of circulating my books according to my plans when the expense of issuing my books is lessened the sales will soon pay up all my debts so that Elam I borrow money yes she did but what was she borrowing money for. To bring out books and those books generate income that will soon pay the debts off so this gives me two principles for determining when debt is appropriate or acceptable rule for debt number one never borrow money for something that only goes down in value and a corollary to that related borrowing is acceptable only if what you're buying can pay off the debt. These are the rule two rules for acceptable debt now there's this term good debt bad debt have you heard of that before this is generally the rules for what people consider good debt borrow money to make more money and theoretically pays it off now by most for profit tells me that being in debt is being a slave being in debt is having smallpox with that in mind it is very difficult for me to call any debt good debt OK so I shun away from that term I call this acceptable debt meaning it's OK if you must but it's still be still better off without it so these are the two rules so let's let's just quiz our application of these two rules let's take a look one by one do these things pass the debt rule student loans. Is in an acceptable form of debt student loans does it only go down in value can I pay it. Off the answer is yes student loans so an education is probably the most valuable thing you can ever obtain in life particularly if it's an education that gains you entrance into the heavenly kingdom of course but even here on this earth it increases your increases your earning capacity and all of that So theoretically unless you're you know the proverbial degree in underwater basket weaving that's not going to work but suppose you get a normal degree where you get a career that raises the level of earnings is should be able to pay itself off I have a whole series on student loan forgiveness I know there are some questions about that out there on my blog I'm actually not going to talk about it here but I crunched the numbers but even then they have been some some changes to that program and it's worth it to consider whether that's a legitimate way to handle your student loans what about a home mortgage do that doesn't pass the rules are acceptable debt does a house only go down in value. Can a house go down in value yes it can but generally speaking it does go up it has potential to go up and can't pay itself off well in the form of saving on your rent it definitely helps a great deal so yes but i Phone ten. Yeah that's a give me right no but what about a car. Some people are saying no no but they're saying no like no. No. I have to borrow money to buy a car because I want the new Tesla Model three men. But does a car only go down in value. Yes And don't you start telling me oh my car's going to classic your Honda Civic will never be a classic. Will a car ever pay itself off. For personal use. Probably not now if you are a business like your driver even though all right probably not going to make that much but as a taxi driver or you have a business where you are delivering or you have driving then that becomes a business expense OK and that becomes a slightly different calculation if you're in a business before personal vehicles just driving commuting taking the kids to school soccer practice going to church whatever no does not pass the debt rules we're going to talk about how to buy a car with no loan here in a moment. Just because it's permissible to borrow money for certain things that doesn't mean that you must just remember that it is still smallpox it is still being a slave OK do it only if you must So let's talk a little bit about student loans a few fine prints as you think about your student loans. Federal student loans cannot be discharged in bankruptcy. What that means is that there are only two ways to get out of your student loans The first is you pay it off the second is you die. So I think I know which I would prefer in fact the Uncle Sam is so considerate if you file your taxes and you have student loans and you have a tax return he'll just save you the trouble and just garnish it out of your tax return tax refund because it'll just save you the postage isn't a nice he's like yeah you owe us anyway so I'll just keep the difference thanks. The government can even get garnish your tax returns I just talked about that just because you qualify don't take the max amount it just boggles my mind sometimes when I talk to people it's like yeah you know I qualify for twenty five thousand dollars or so yeah I took it how much did you need fifteen What why do you take more than you need and then Oh yeah and I got a living loan what in the world just because you qualified don't take the max amount take as little as you need because you can have to pay interest on this thing it ain't free money later on down the road all of a son is like oh I have to make payments on this. I forgot. Well don't forget because you going to pay the price later. Education What does Ellen White have to say about student loans she actually has something to say about it education twenty one paragraph two in acquiring education many students would gain a most valuable training if they would become self-sustaining instead of incurring debts or depending on the self-denial of their parents let young men and young women depend on themselves if you are here in our seminar this morning I am at this point depend on yourself God helps those who help themselves don't expect a handout even if you're a student and you know a lot of times I'm I'm getting off script here but I have to let this off my chest a lot of times I live near Southern at his university and a lot of times I look at the students that come on campus and they're driving like a brand new B.M.W. and I'm like What's wrong with you people and I look at them and I realize wait a minute they have not learned the most valuable training that Ellen White recommends Let's continue reading same passage they will best learn the student to learn to be self-supporting they will thus learn the value of money the value of time strengthen opportunities and would be under far less temptation to indulge idle and spendthrift habits these are the things you gain when you learn to work even as a student the lessons of economy industry practical business management stuff S. of the purpose thus mastered would prove a most important part of their equipment for the battle of life let me put it another way if you are a student and you are in school and you're working your way through school the work that you do is a more valuable training then the degree or getting it because guess what you might be the top of your class but if you don't know how to work you're not going to get a job I work for a ministry I'm in the ploy or and if you don't know how to work I'm not going to hire you it's just that simple I don't care what degree you have so I want to hear a say learn how to work it is no more important than even the degree you're getting in school and in the process you will learn all of these values were it right up here. And so all the students that have that given to them what talk about economic outpatient care this morning I'm just fearful for them that they are actually not gaining the equipment most needed for the battles of life all right. So let's talk about the story of our house so talk about getting out of debt let me share my experience with our house so this my wife and I own the house that we live in paid off in two years we bought the house closed on it I believe August one two thousand and thirteen we paid it off July thirty one twenty fifteen so here are numbers we bought our house one acre has two two houses on it we have a guest house that we rent out one hundred eighty five thousand dollars we have eighty five thousand dollars mortgage fifteen year fixed rate mortgage at three point four nine percent three percent interest our minimum monthly payments are six hundred seven dollars and twenty four cents but our average monthly payments came out to be thirty seven hundred dollars and one hundred thousand dollars down payment so everyone asked What's the secret how did you pay off your house and in two years well the last two items here that's the secret. You might be thinking that's no secret Well that's sort of the secret the secret is that there's no secret. The way to pay off a house is to save a ton of money and to just make gigantic hairy painful payments that's the there's no secret sauce you're going to pay it off so pay it off as soon as you can so my wife had a dream. Of buying her first house in cash and so long before I ever met her but before I got married she's already been saving up and so that's why we have such a huge down payment she worked as a nurse and she actually worked in a self-supporting institution and even then she was still saving money so I do all the presentations and I'm sort of the one that talks about this stuff but my wife's actually the engine that makes this thing go OK So a credit goes where credit is due but the big down payment that's where we got the money and of course I have saved up some but not nearly not the majority of course and big monthly payments nearly all of our extra savings went toward the mortgage so we were paying six times on average the minimum payments so we did and this could apply to some of you whether it's paying off the house or investing in something else we were both working at the time we didn't have a child yet and so we actually lived on one income and we saved and invested the entire second income actually we lived on less than one income because this is also a helpful tip for you who might be starting a family someday if you plan on having a stay at home mom one income home guess what you're going to be living on one income anyway so why not just start living that way now OK So by the time that your kid comes around and mom stays home you don't have to change a thing whereas if you were living to the max of two incomes and you want to have mom stay at home all of a sudden you have a crisis on your hands because you're losing half your income and you're adding a third mouth to feed so this is what we did we lived on one income we saved fifty percent or more and we just happened to put it all into the house and now some people are like you only had a three and a half percent interest rate on your mortgage should you have invested in something higher interest and all that yeah we could have done that but here's the reason why we did it the reason why we didn't was because we realize we did the math we knew we could pay it off in about two years and we were doing some family planning we knew we want to have a child and we realized that if we could pay off the house within that time and have a child after that it would lower our monthly budgeting needs so that we need lower cash flow when mom stays home so that's the reason why we did it was not to maximize our investment returns it was to minimize our cash flow needs that's for those of you who care before you. Before you you might choose to invest it in something else maybe in a rental property or index funds or something else but that's how we did it and that's the secret how we paid off the house and at the end it's all about the savings rate that's the bottom line if you can juice up the savings rate our savings rate was over fifty percent continuously for the past few years that's the only way that this could work if you're living ninety nine percent in Hell ninety nine point nine percent of your monthly income you're never going to pay off anything early the only way that's going to happen is you got to trim that expense we're going to talk about budgeting and how we're going to do that in the second half of this hour so stick around for that but this is the story of our house. So the benefits we now get to live rent and mortgage free rent and mortgage generally for most people's financial budget is the largest expense in their monthly expenses anywhere from twenty five thirty forty percent for us in zero percent now eliminating the single large expense in our budget now we own our home instead of the bank so there's no risk of foreclosure that's a great feeling you just have that security and we have more free cash for other things now so we put up solar panels so now the solar company or the electric company pays us every month so our electric bill is not just zero it's negative like they pay us and then we paid off the mortgage the same month that a baby was born praise the Lord the timing everything worked out so the same month we paid off the house my wife quit her job and our baby was born bam bam bam and so one less thing to worry about we praise the Lord for that and this is our backyard that's what it looks like and this was going to snowed a couple years ago it looks a little different now because I planted a whole bunch of fruit trees and it's a little messier but hopefully it will pay off today. And the other benefit of the benefit of course is that we saved a ton of interest so we had a fifteen year mortgage a conventional mortgage So imagine if this was thirty years you could have to multiply this number without much more so we had eighty five thousand dollars mortgage monthly payment if we just paid it every month for fifteen years we would've paid twenty four thousand dollars in interest which is actually not that much a lot of thirty year mortgages you'll be paying you know more than double but because we paid it off in two years we actually only pay thirty three hundred dollars in interest so over the life of our mortgage how much do we actually save we save twenty one thousand dollars in interest I don't know about you but that's a lot of money those are a lot of diapers All right twenty one thousand dollars. So that's mathematically speaking this is the benefit now let me make this point clear interest payments in the form of our mortgage is an invisible cost for most people it's painless but it's like death by a thousand cuts because every month you're making this payment you're just making the same payment every month and just getting this rote habit of it but what you don't realize is that over the life of your. Of your mortgage you've actually lost twenty one thousand dollars in this particular example without ever knowing it is like someone came in a stole money out of your bank account and just never knew that it was there so you want to pay off your mortgage for this reason you want to save on the mortgage interest and of course people open up the civil my taxes well with a new tax plan or whatever you're probably not going to itemize on your home mortgage interest interest anyway most people didn't to begin with and the reality is even if you did you're going to save more money paying off your mortgage than you are in the tax refund in the itemization of your tax or your mortgage interest So let's talk about the car all right this is the part where people with weeping and gnashing of teeth come to me and say How can you tell me that I'd cannot borrow money to buy a car I'm not saying you can't I'm just telling you that you would be extremely unwise if you did. Just because your friends jumped off a cliff would you jump to buying a car without a loan so how do we do it how do we do it the average car payment in the United States right now is five hundred dollars a month for sixty eight months. That means it's about thirty four thousand dollars roughly and here is the really amazing secret of how to buy a car without a long if you are capable of making the five hundred dollars payment after you buy the car so you can make the payment before you buy the car. Does that make sense because like if all of a sudden like I buy this car and I can magically come up with five hundred dollars a month why could you not do that before handing. It the math has to add up the money has to come from somewhere so this is the secret how do you buy a car with a loan pay yourself first. Instead of paying the paying car payment to the bank or to the dealer paid to yourself first and then you go into the dealership when you buy a car in cash this is how you do it let me give you an example. So you draw hopes sorry you drive a cheap temporary car these are the steps notice temporary OK just to calm everyone down you want to drive a cheap car would you think I have. Tempo relieve people. In the meantime pay yourself a car payment that's another way of saying save up use the mouse saved plus the equity of the temporary car to upgrade to a new car and cash rinse repeat as needed. This is how you do it let's take a look at some numbers so first buy a two thousand dollars temporary car you might have to sell your current car all right you might have a car with a car note on it sell that thing pay off the car note save a little bit of money go out there bought. By a two thousand dollars car and I'm being generous because two thousand dollars you get a pretty nice car I drive a car for five hundred bucks that's what is worth it's a great car save the five hundred dollars a month or whatever the car payment amount might be for the car that you want save it in the bank account put it somewhere where you won't be tempted to spend it OK Save it for twelve months and in twelve months you have six thousand dollars then in just one year you go and you sell a two thousand dollars car and when a car is only worth two thousand dollars you're not going to depreciate that much in twelve months OK you might be able to sell it for more than two thousand dollars in twelve months that's the beauty of driving cheap cars sell the temporary car and upgrade to a seven or eight thousand dollars car so in one year you've gone from a two thousand dollars junker to a seven eight thousand dollars car go go a second year now five hundred dollars a month for twelve months six thousand dollars sell that car seventy eight thousand and now you can upgrade to twelve fourteen thousand dollars car shall I continue you can do that for a third year and you're up to twenty thousand dollars car you can practically buy a new car almost for that amount or you can do another way you buy a two thousand dollars temporary car and then just go all out sixty eight months five hundred dollars a month thirty four thousand dollars then you sell a temporary car and you can buy an entire fleet of vehicles in just a little over five years. Is there do we need to borrow money to buy a car no am I saying you can drive a nice car No all I'm saying is you need to be a little bit patient you just can't have that now but you can have it later is that acceptable thing to say in this car of the audience you're going to stone me right you can drive a nice car and I hope you do drive a nice car but you don't have to go in debt to do it pay yourself first save up upgrade as you go all right is that clear. Are we are the end everyone OK they're not fainting on me. So a car is a depreciating asset purchase it as you would a tool that will never increase in value so the rule of thumb never borrowed to buy a car and we're going to talk about this a little more some people are like What about a zero percent financing Well I'll just mention this now in case you know here tomorrow when you finance a car you are obligated to purchase full comprehensive and collision coverage on insurance so you can pay more in your insurance and there are other things I'm sure that are included in that so you don't want to borrow money to buy a car buy in cash credit cards are got to talk about this credit cards are not dangerous credit cards use without self control is dangerous you catch the difference you know about guys like Dave Ramsey right he is anti credit card credit card is worse than cancer it is anathema it is sin I don't go quite as far as Dave Ramsey I believe I agree with him to the extent that it is possible to live without credit cards so of people out there choose not to living with credit cards I don't have a problem with that I actually say good for you for having self control self discipline knowing your limits I've got no problem with that but at the same time I have to admit the credit cards do have benefits. Reward points cashback travel whatever and you know the statement Dave Ramsey always says nobody's ever served that I got rich off of credit card points well that might be true but I'd have known of plenty of people who would be able to travel to see family for example go on vacations that they never would have otherwise been able to do without it so there are benefits OK I'm trying to be fair to both sides All right you understand I'm trying to do I'm not hating on credit cards but I'm not saying everyone should have a credit card either so we've got to have self control and we need to have the balance of how to deal with this so what's proper credit card usage number one don't use them to buy stuff you don't need. If you buy something you don't need time to cut up your credit card never carry a balance pay them off every month these are the two rules if you violate either of these two rules Time for some plastic surgery as they call it. Jesus actually SAYS If your right hand offends the what do you do cut it off and I would rather cut the piece of plastic that's in my right hand rather than literally cutting my hand right. But if you do use credit cards all right if you do use credit cards here's the big to consolidate your credit card use is to as few cards as absolutely necessary because a lot of times people are like oh I want this bonus all of this one has the cash back with this other travel points for that this was for this airline this was for that airline and all of a sudden you've got all of these credit cards with like fifteen dollars worth of rewards like spread out real thin and you're never able to cash it out so if you want rewards that you can actually use have minimum number of cards for my family we have one car so just a cash back card the reason is because we spend so little that we never earn enough points that's worth anything so we just give us the cash back but if you're a big Cosco user or whatever the cost Costco card you might get four percent on this is that the other thing and Costco you know you're spending you know thousands of dollars there anyway so consolidate your usage so you maximize the rewards and of course pay them off every month so credit card usage. Use them responsibly it's a financial instrument of mass destruction so if you can't control yourself put it away cut it up paying off debt All right talk about this how do we pay off debt first step we need to own the debt don't make excuses and go play the victim we will never be able to get out of debt if we're always blaming someone else for our problems is the government's fault is Obama's fault is trying is my debts fall is my teacher's fault Well guess what doesn't matter whose fault is maybe you're right but your still the one that's going to pay it off so just stop with the excuses only this thing and let's just you know. Take care of business don't make excuses there is no alternative to making big payments that's just the ugly fact if you can to pay off your debt you can have to pay it off and the only way you going to pay it off sooner is making bigger payments that's it you might be able to negotiate sometimes with creditors if you're in real distress and they might lower it you know you might get you know ten cents on the dollar payment payback or something but it's unlikely to eliminate the debt you need to make debt pay off the number one priority in the short term savings plan we're going to talk about savings plans in a moment and then squeeze every dime out of your monthly spending plan to get rid of that debt and don't worry about other investments until your debt is paid up a lot of people like oh is there a secret investment you know maybe is good coin or something else that I can earn a whole bunch of money and then I can pay off my debt Well no that's borrowing money to go invest essentially is the same concept unless you've got a credit card and it's charging you what let's say twenty five percent interest you will have to find an investment that exceeds twenty five percent guaranteed in order for you to even make a difference I'm not sure I know of anything that can do that reliably whereas the interest on a credit card it is guarantee you are going to have to pay that so paying off your credit cards let's say is a credit card twenty five percent when you pay that off every time you get extra payment the money that you're putting into that credit card debt you are getting essentially a twenty five percent rate of return on that money so getting out of debt is your best investment until you are out of debt so how do we do it what's the methodology we want to use the debt snowball so what's the debt snowball how do we do it we list the debts from smallest to largest balance smallest balance to largest balance we pay minimum of all of the other big debts except the smallest one and we focus intense efforts to pay off the smallest and then when we're done with that we roll all the extra payments into the next one into the next one into the next one and so like the snowball picks up speed you're adding the minimum payments of the other payments as you go along and so this is an example of this person has thirty eight thousand five hundred total in debt credit card number one two car loans student loan if he has a thousand dollars to put towards debt each month in the first month the credit card is gone and for months both credit cards are gone and a little over three years everything will be gone you just go one at a time at a time and the benefit of doing it this way instead of going based on interest rate because a lot of people say well you'll save more money if you pay a high interest rate to lowest interest rate Well that's true the problem is let's say let's say the car loan. Is the highest interest let's just say and you start there and you're putting in the thousand dollars a month how many months would it be before you feel like you have made any progress will be ten months before you pay off the first thing. Have you ever tried to sustain intensity for ten months in something maybe for you ten months is not such a long time for a lot of people ten months is like a marathon and a lot of times after three four five six months you feel like you haven't made any progress people give up whereas if you are going the does not all method within one month bam you can as big a big red line across the list red light yes this thing's gone forever in four months you have to so in four months you get the feeling like you're halfway there we're as going the other way ten months later you're not even a quarter of the way done so that's it's a psychological game that you play with yourself and perhaps you will save more money the other way but paying off by balance versus interest rate is a psychological motivation that helps us sustain our momentum that's the key so that's how you pay off the debt paying off debt is the best investment if you regret being debt free you can always go back easy easy state to undo so give it a try right try it out see if you don't like it if you don't like it go borrow some money all right so we need to talk about budgeting now because we talk about getting out of debt but how do we stay out of debt the only way to do that is we got to have a plan. A budget Jesus says this and Luke fourteen twenty to thirty for which if you design to build a tower doesn't offer a 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 Jesus is simply saying before you start make a budget get a plan for your money tell your money where to go instead of wondering where it went all right. So how do we do a financial planner or how do we create a budget the way that I like to think about it is in three categories and they flow one into the other we start with life events what are life events life events our individual. Instances or needs or purchases that occur in life that we need to budget for. Could be weddings college buying a house a vacation mission trip what have you anything that needs money individual type. Events and all of those things we consolidate into our long term and short term savings plan which is just a list of the things that we want to save up for short term savings or things that are we need within five years long term savings or things that we don't need for five years or more and then that information will help us as we create our monthly spending plan and the monthly spending plan is what we typically know as the budget the monthly budget. And you see the arrows it flows this way and then the information flows the monthly spending but our monthly spending plan and the savings plans has a feedback loop and it guides us in how we make our decisions and we're going to illustrate how this works but this is the general overview of how to create a budget that aligns our goals with our income and also our our plants so life event plans I mention this already what are life event plans these are some of the things that we talk about retirement big expenses purchases cars home purchases weddings things like that having a baby. So a life event plan we need to answer a couple questions for each of these when you have individual budgets we need to ask how much money will it cost so let's say it's a wedding how much will this wedding cost you might go through the numbers and this one is going to cost fifty thousand dollars that's impossible because we realize we can't afford it so sometimes going through the process of listing out the things helps us before hand realize OK we need to make an adjustment before it's too late before we bought all the decorations and we have the dress and the cake and everyone's coming and we realize oh man we need another ten thousand dollars and we're stuck right so this is why we do it when do I need this money how long do I have and based on how when do I need this money how much joy need to start saving now OK these are the questions we need to ask on our life's events and this feeds into our long term and short term savings so to illustrate how this works I have calling upon our friends Bill and Penny Saver fictional couple. To show us their financial budget they are a two income home making about sixty six thousand dollars take home pays after taxes and suffer withheld they do not have children newly married young This is their long and short term savings plan so these are their various life events that they have budgeted for sorry for you guys in the back I know the numbers a little small Try to read them off for you so they're long term goals they have three of them they want to have a down payment for a house of forty thousand dollars in ten years they have student loans that they want to pay off in twelve years sixty worth sixty thousand and they want a million dollars in retirement in thirty five years so the total amount they want in their long term goals is one point one million dollars And based on all these numbers we figure that they will need to save approximately fifty a fourteen hundred dollars per month for their long term goals Well the short term goals things that they need within five years they have credit card debt one thousand dollars they want to pay that off in the first month they have an emergency fund three thousand dollars they want to have that within four months have a mission trip that they're going in ten months they need two thousand dollars they want to new car because it was in my seminar that are going to borrow money for a car anymore seven thousand dollars in two years and so approximately they need a little over a thousand dollars a month but really the number down here they want a total of thirteen thousand dollars how do we use this information by organizing their goals in this manner we don't have to focus on seven different things we really only have two things to focus on we have this number here for two hundred dollars a month and then we have this number here thirteen thousand. So the bottom line with their budget is this in the short term they need to get they need to sprint to thirteen thousand dollars as soon as possible for the short term goals it's a sprint so they're just going to pay things off or the save up for things as quickly as they can as they need them but for the long term they need to say fourteen hundred dollars each month that's a marathon OK So the short term and the long term savings of one's a sprint one's a marathon the long term savings the only way you're going to finish the race is you have to be steady you have to keep a steady pace that's why you have to set up how much do I need to save every month systematically whereas on the short term we just got to knock this thing out let's save as much as we can as quick as we can but we have to keep these things distinct from each other because we just focus on one we're going in the glass the other and then we're going to end up either not having our money in the short term or in the long term we keep putting it off and we never end up saving for long term goals and so we have to to so this is their bottom line numbers thirteen thousand for the short term fourteen hundred a month for the long term so Bill and Penny saving plan that does several things for them the savings plan it reveals clearly their priorities in life because everything costs money in life and if we can organize our budget in such a way where we can think through these are the things that we want to do you know what that is actually a way a prioritizing your life priorities because if it's like everything comes first before paying off the house because of paying out the house it is not a priority for you if having a new car going on vacation is always at the top of the list you can know and anyone looking at the budget can know that your priorities are that these things are more important than these other things OK so it helps us know ourselves that's one of the benefits and all the extra money quote unquote extra money that we receive as a place to go instead of being spent you know we get a maybe as a birthday a birthday card someone gives us twenty bucks if we don't have a savings plan we might be like oh twenty dollars Yeah let's go shopping but when you have a savings plan you don't have to say I don't know what to do with this money you know exactly what to do with this money because you already have your goals lent lined up OK you know exactly extra money I know exactly where it's going to go it's going to help me pay off my credit cards that much sooner is going to help me buy that new car that much sooner because you've made the plan all right. And also gives a target number to say for in our monthly spending plan we're going to talk about that in a moment it helps us know in our monthly expenditures how much I need to have left over because if I don't have that goal I'm just going to be spending a lot and spend everything so I must be OK well look at that in a moment and also gives us a final target number for total savings we know what we need because we've thought it through we've created a budget for it so if we exceed Let's say that they reach their target ahead of time they saved up the thirteen thousand or whatever and they saved up their one point one million or whatever it is early they have a surplus money they can get it back to go without compromising one bit their lifestyle their comfort their goals but God's work can be benefited but this only happens if they've planned ahead what Jesus said count the cost first before you start building. So let's take a look at their monthly spending now shall we and then we'll see how these interplay with each other the monthly spending and their savings plans so Bill and Penny's monthly spending they bring home fifty five hundred dollars a month this is after taxes take home pay just to make it nice round numbers but their expenses are forty two hundred so they spend about seventy six percent and they save twenty four percent thirteen hundred dollars a month now if I were just looking at those numbers without any context I would say they're doing pretty good I mean they're saving nearly a quarter of what they're bringing home I'd say that's pretty good most financial gurus today out there they recommend somewhere between ten to fifteen percent savings so they're double that and these are some of their expenses you know these are just roughly in my area I tried to use you know general numbers in Tennessee where I live so if you're in San Francisco New York City obviously these are realistic but based on my area so this is how we use the monthly spending this number here. And the spend and the saving plan numbers and how they work together all right we need to review our savings goals so that they have a twenty four percent savings rate so the net savings of thirteen hundred dollars a month their long term savings they need fourteen hundred dollars a month to reach their goals and their thirteen thousand dollars that they need to save up for so even vote they are saving twenty four percent they are not even able to meet the fourteen hundred dollars a month target that they have you see that. And that means at the rate that they're going they don't have any extra to go towards the thirteen thousand dollars short term savings goals so you see how these two things work together it helps uncover the reality of our needs and our savings we might look at them assuming you're saving a quarter of your take home pay good for you but based on their individual priorities and their goals what we realize now is they're never going to reach their so they're going to make some changes so what are the options. Bill and Penny has a couple options number one they can adjust their saving goals they can go back to the savings and say you know this wasn't really realistic let's just let's change there's nothing wrong with making changes to your budget it's not the law of the Medes and Persians you can change it deadlines they might say something like you know what this credit card thing you know maybe you know maybe we'll extend it to two months or something else we can extend a little bit longer so we can pay off the credit card first whatever might be in their particular situation they have that as an option they could try to increase their income it's easier said than done in certain cases but if you can work extra shifts over time whatever maybe that's the way to do it but that's not always a pop an option maybe they're going to sell some stuff on Craigslist e-bay whatever cut spending their name is Bill and Penny Saver So I think I know what they're going to do and then number four you can do a combination of these things but number five what is not an option is no debt when we have this plan the whole point of having a plan is so that we don't need to borrow money so we're going to borrow money to pay off certain things of the debt that sort of defeats the purpose so let's take a look at what can they do so I upped their savings rate to thirty five percent. And we just play with the numbers and say OK if we save thirty five percent are we able now to reach our goals there Nessie things now scuse me would need to be in one thousand nine hundred twenty five dollars. They would have enough for the fourteen hundred dollars a month and they'll have an extra five hundred twenty five dollars per month and they will be able to reach thirteen thousand dollars in two years now I will be clear you're going to go back and look at the slide later on you going to see a you were wrong in your math yes perhaps it may not necessarily work with the exact timeframe that they have but with a just moments with the deadlines and a few things that they can work out in the short term savings five hundred twenty five dollars a month will be able they can manage to get thirteen thousand dollars within two years for their goals so when we look at it that way what we realize now is this feedback loop that we talked about between a savings plan and the monthly spending plan them interacting together we realize now we have a target for monthly spending how much we need to shoot for as far as how much to save. So what this means is we need to save an extra six hundred twenty five dollars per month that factors out to just twenty one dollars per day OK So can we do it let's take a look at their new spending plan these are a few things that I have suggested for them to do so they can move to slightly smaller place nine hundred dollars and seven hundred dollars it would save two hundred dollars Now this is just an example that they don't they may not need to move to a different place if they can squeeze an extra two hundred dollars out of these other aspects of their monthly spending you understand so this is just some examples of what they could do the utilities and cellphone they move to a smaller place utilities or less they get a cheaper cell phone plan we'll talk about how to do that tomorrow for those of you care about that they save a hundred dollars on food that means eating out a few less times a month transportation they start carpooling to save a little bit on gas it's a fifty bucks insurance to shop around they might say fifty dollars personal effects thirty dollars is like buying a few less articles of clothing or whatever it might be recreation they don't go out to the movies as much if they go out the movies I don't know but here we have thirty five percent now of savings and there are one thousand one hundred twenty five dollars so all of this here is just to show you you can make a lot of little changes that doesn't affect your lifestyle in a monumental way. That will help you drive the numbers here to a point where you can actually reach your long term and short term goals so you need to look at your you need to start with the end in mind first in order for us to know how to accomplish this so now with this in mind there is able now to reach their goals so what we have just illustrated is how the life events flow into long term and short term savings and the monthly spending and the long and short term savings they create a feedback loop we compare the numbers back and forth how much do I need to save in order to reach my goals Well these are my goals but I'm not saving enough so what can I do to trim my spending do I need to adjust my goals by deadlines and this interchange now becomes basically what we manage on a month to month basis in our financial planning sessions with our with our spouses at home so saving goals drive the planet so you might be thinking well this is a little bit different than the way that we think about budgets usually people when they talk about budgeting is like here's a list of all the categories here isn't recommended percentages just make the numbers add up to zero that's not how we think about. We have a different view of budgets most budgets are designed to be a spending control mechanism meaning there are a set of handcuffs to keep you from overspending that's the ultimate goal but the way that we run our budget is it's a savings maximisation tool you realize the difference we're trying to increase the amount that we save not necessarily merely lowering the amount that we spend and what why is the difference because it answers the question of why we as human beings from a very early age we want to know why why should I not buy this dress because the bug is not in the budget that's not a good enough reason OK Why should not and why should I not buy this you know new phone or new new i Phone or go out to eat in this place why why what we need to have an answer for the question why and when we have a savings plan in place we know the reason why I should not buy the south I should not buy this phone because it will inhibit me from going on that vacation it will keep me from being a pay off my debts in time will keep me from getting that new car I want in two years it gives us a very clear picture of what is preventing us from accomplishing it's the means versus the end it makes the distinction between the means vs the end it's like this a picture of the Grand Canyon it's hard to see on the slides but it's like. I guess we're really close of a grand canyon here but usually when I do some of our far away but even here all right let's say we're going to the Grand Canyon we're never going to say the goal of this road trip is to not run out of gas. We never say that we always say the goal of this or the destination of this road trip is the Grand Canyon but understood within that statement is that in order for us to accomplish that we're not going to run out of gas so when we talk about budgeting it has to be what's the end destination what's the goal and not overspending is merely the means to get us to that goal OK So we think about budgeting is not don't buy this don't buy that because it's not in the budget no no no it's you shouldn't buy this right now because it will stop you from reaching the Grand Canyon does that make sense and this is incredibly important it keeps the focus on the savings rate number one reason or number one way to build wealth and this is was so key it makes achieving goals the the purpose and makes budgeting much more motivating because you go through the checkout line and as I know I should buy this and we're like self flagellation like we were giving ourselves the guilt of like oh my husband's going to be so upset Oh I know I should do this oh but I feel so good we're telling ourselves this but then what but what we should be doing is look instead of focusing on what we can't do let's focus on what we are going to achieve together you want to go to Paris OK let's put our our savings plans so it's like OK I'm not going to buy this thing and I'm you know I might hurt right now but boy it's going to feel so good when I'm on that vacation you see if flips the whole discussion around where it's one of my trying to accomplish instead of what I am prevented from doing all right so this is why we view budgets so differently a budget is telling your money where to go instead of wondering where it went John Maxwell so I need to close on this point and that is but it's is so hard we have this tendency to think of but it's so hard to control my spending Ellen White actually has a few things to say about this council's astute to push to fifty one paragraph two and this ties in self-discipline and debt and having a budget all of these things I have seen poor families struggling with debt and yet the children were not trained to deny themselves in order to aid their parents in one family where I visited the daughters expressed a desire for an expensive piano gladly with parents of gratified this wish but they were embarrassed with debt. It today it might not be an expensive piano it might be a new i Phone It might be a new car might be a camera it might be something else write fill in the blank what you will continuing the daughters knew this and had they been taught to practice they would not have been and who would not have given their parents the pain of denying their wishes but although they were told that it would be impossible to gratify the desires the matter did not end there the wish was expressed again and again thus continually adding to the heavy burden of the parents on another visit I saw the coveted musical instrument in the house and knew some hundreds of dollars have been added to the burden of debt I hardly know whom to blame most indulgent parents or the selfish children both are guilty before God. This one case will illustrate many these young persons although they profess to be Christians have never taken the cross of Christ for the very first lesson to be learned of Christ is the lesson of self-denial I'm a Jew I see Surely this doesn't happen anyone here young people today and you are see we've all learned a lesson of self-denial we never ask our parents for stuff when we know that they are in financial distress Christ the very first lesson to be learned Christ is a lesson of self-denial so that our Savior if any man will come after me let him deny himself and take up his cross and follow me in no way can we become disciples of Christ except by complying with this condition so what's the problem with this family they didn't have a financial plan and as a result we see the example L.-Y. herself saat it brought family discord parents having to break their children's heart by saying no and then finally the children adding to the parents burden of debt because they kept nagging and nagging and nagging but the issue is a spiritual one the inability to stay out of debt and to live on a budget is a symptom of a spiritual problem and this is an important point what is that problem it is the problem of discontentment. The Bible tells us in first Timothy six verses six to nine but godliness with contentment is great again for we brought nothing into this world and it is certain we can carry nothing else and having food and raiment let us there with to be content but I want to close with this passage and this is a promise because some of us might be feeling it's so difficult I really have a hard time keeping my spending under control to have a plan and stick with that to get out of debt I'm embarrassed with debt just like that family I just have a hard time with it we have to understand number one it's a spiritual problem underneath it we need to look to Jesus for that help and we talk about the financial loss of health early and lot of our it is trusting got and here's Philippians four verse eleven and thirteen there's a powerful promise that I want to tie up not just the session but everything that we talk about today Paul writes Not that I'm speaking of being in need for I have learned for I have learned in whatever situation I am to be content I know how to be brought low and I know how to abound in any and every circumstance I have learned the secret of facing plenty and hunger in abundance and need Paula saying I have learned this important lesson that you need to learn I have abounded I have been a based I've had plenty I have had nothing I've been hungry I have been full but I have learned being content in every situation that I have found myself in and how did I do that here's the problems we're ready for I can do all things through him who strengthens me I want to point out this very important fact about the context of this verse. We read this verse in isolation frequently and we claim this promise for everything under the sun I need to take this test I can do all things through Christ who strengthens me I need to lose weight I can do all things through Christ who strengthens me I need to overcome the sin right my temper whatever I can do all things that strengthens me I really like that girl and I need to go talk to her I can do all things through Christ a strength is me but Lotus noticed the context here is very specific what is it that Paul says I need the strength of Christ to help me with to be Kung tent brother Allister. Zero. Zero zero as. I didn't know that. So this is the promise I'm going to leave with you Philippians four thirteen it is not it is a wonderful promise a claim for all of those other circumstances OK Don't get me wrong we sure memorize this verse we should claim this promise but for those of us who are struggling with our financial situation with budgeting with having a plan with getting out of debt with being able to control our desires in such a way that we can keep our financial house in order and not go down in flames the provide for our families save for the future all of these things this promise is for us and meant I could do all things through Christ who strengthens me and by His grace we can learned in whatever state we are in there with to be content let us close with prayer. Father in heaven we thank you for your marvelous promise that we indeed can do all things through Christ who strengthens us. Whether it is something as mundane as making a budget or getting out of debt we know you can help us so for those of us who may be struggling with questions of what to do how to manage their money and time and resources give them wisdom Lord as we trust in you we know that you're able in your own Macallan of Thousand Hills You have given us principles which which if we apply we will find true success so bless this congregation be with each individual may they find that those answers that they need in Jesus and bless us the remainder of this G Y C weekend we pray Jesus and. This message was recorded at the G Y C twenty seventeen conference arrives in Phoenix Arizona. G Y C A supporting Ministry of the Seventh Day Adventist Church seeks to inspire young people to be bible based Christ centered and soul winning Christians to download or purchase other resources like this visit us online at W W W dot she Y.C. Web dot org.

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