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5. Consider the Ant: Real Ways to Save

Alistair Huong

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This seminar presents a strategy for making the most impact on cutting down spending with minimal effort.  Real ways to start saving money right away.

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Alistair Huong

Executive Director of AudioVerse

Conference

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  • December 29, 2017
    9:15 AM
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This message was presented at the G Y C twenty seventeen conference arise in Phoenix Arizona for other resources like this visit us online at Deb you do if you don't view dot. Dot org. We're not officially starting I think people still trickling in but I do want to improve our time I don't want to waste any precious moments that we have so just curious how many of you were here for all four sessions yesterday Aha we're good how many of you here we're here for three of the four All right how many of you were here for two. All right and then one yesterday OK And then how many of you this is your first time to this seminar OK So we've got a good mix that's good so. I was a teacher for some time and we have a few minutes so I'm going to. Just get a little bit of feedback what's for those of you who were at any of the seminars yesterday just call out what's one thing that you learned or that you remember from yesterday anyone. Don't buy a new car. All right there's more where that come from today actually yeah. Yes OK So Ellen why does give the council we should take care of our own needs and then the surplus we can give back yes. You're OK though don't be a burden on the church so take care of yourself so you can help others right and suffer Quire and other people to help you very good yes or. Teach your children the value of money and what's a good way or one of the most important ways to do that or. I mean it's easy for me to say now right because I got my kids when I was a kid I'd be like. But I am thankful that I have had opportunity to learn to work as a young person so any any others we go a few more minutes here don't invest in because right. Now. You know I want to be fair right was it OK You know I was I wasn't too hard on it yesterday I hope I was being a little bit of balance I'm not against crypto currencies you understand I'm not against Bitcoin I'm not a hater I just think there's a lot of speculation going on and that can be dangerous but the technology I have nothing against technology I think it's great. Just want to clarify or any anything else that they're. OK we need to be willing to labor work hard for to earn money. There is no such thing as a perfect investment that's right apart from investing in the bank of heaven which means giving to the work of God and things like that yes be content thank you that is an underlying principle we have to remember all right it is nine fifteen and twenty seconds so we are ready to go are we good in the back OK I think our crowd is thinning else so let's pray and then we'll begin our final session in our personal finance seminar this week let's go ahead Father in heaven thank you so much for bringing us together again after a good night's rest for all the blessings we received here so far G. Y.C. and also for the practical counsels that we have been discovering from your word and your inspired counsels we pray that we might apply them and that we might be financially fit not for own personal gain but for your glory we pray in Jesus name in minutes. So we're going to try to get real practical today. Hopefully it's impractical to now but this one it's like all about what we can do today so consider the ant real ways to save session five and hopefully depending on how eloquent I wax and how the spirit moves there might be a little bit of time at the end today for some questions from the audience I know I've been going over every time but at least you've been getting your money's worth hopefully so save the crumbs are com For those of you who are here for the first time this is the personal finance Website my wife and I write on the website you can read for more information. Twenty fifteen two years ago we did a seminar there what I'm sharing today is brand new it's not found there but there's a lot of stuff there that's not mentioned this week so we get our title for this session from this passage in Proverbs six verses six to eight go to the ant Val sluggard consider her ways and be wise which having no guide overseer or ruler provided her meat in the summer and gather with her food in the harvest great nature object lesson that the Bible brings out and what's the lesson the rich were supposed to learn the ant is no sluggard the ant is diligent and what does that and do diligently provides her meat in the summer so meaning up meaning is saves up the ant knows how to save during a time of plenty to provide for a time of need gathering her food in the harvest presumably right when the winter comes they have something to eat and it's fascinating here that they do it with no guide overseer ruler meaning nobody has to tell them to go and provide for the future it's in their nature it's just what they do and we are can counsel to emulate to learn from the ant. And so I want us to think of the session here about how we can build in savings into our regular lifestyle so that saving is not a once in a while activity it's not like a once in a while diet where like I have to fit in this dress for this event I'm a bridesmaid or whatever for my sister's wedding enough to fit in this dress I'm going to really starve myself and if I once in a lifetime experience that's not how it works go to the end it's a consistent continual regular activity. To provide and to save So how do we do that actually before how do we do that ministry of healing fish to a six paragraph two I really like this passage. Many despise economy confounding it with stinginess and narrowness you've heard that I mean I have now come to wear the badge or I have come to take the term cheapskate and wear it with honor because I guess that's what I am I'm very frugal a prefer that term but for a black a better word sometimes I'm cheap and so people say that's being stingy narrow whatever yeah it's possible to go too far we don't want to be Scrooge but at the same time we have to understand that without economy without frugality economy is consistent with the broadest liberality without economy there can be no true liberality if we want to give to God we got to have something extra in the first place and we're not going to have extra if we're not being careful with our money. And here it is we are to say that we may give so that's the reason we're saving not primarily for our own needs even though that is part of it but it's all tamale so our needs are taken care of we're not a burden on other people and we have a surplus so we can be the lender not the borrower you know even in the secular world when we talk about wealth building there is an indicator the greatest single indicator of whether you're going to be wealthy or not it is not your income level it is not the rate of return on your investment and it is not the type of investments and you have the single number one biggest predictor of whether or not you're going to be successful in building wealth you know what it is it is your rate of saving that is the single most important factor because you might earn a million dollars a year but if you spend ninety nine percent of. You're not keeping very much you're not building any wealth so I'd like to put it this way wealth is not determined by how much you earn even though a lot of times that's all we associate over he's a doctor he must be rich Well that's not always the case if you talk with the students or doctors with gigantic student loans you realize. The picture is not always what is immediately meets the eye and also wealth is certainly not determined by how much you spend when you talk a little bit about that at the end of this presentation it's not the appearances that matter it's actually how much we're literally able to put away and that's what the ant does and we do it the motive for the Christian is so that we may give to advance the work of God So let's. I want to tell you the story first about Mr Theodore Johnson he worked for U.P.S. in the fifty's and he maxed out his his annual salary at the rate of fourteen thousand dollars Now this was back in the one nine hundred fifty S. So with inflation fourteen thousand dollars in today's money would be quite a bit more than that but that's not really the big part of the story the part of the story is that Mr theatre Johnson. He came up with a plan he said this was his reasoning his reasoning process was if Uncle Sam The government decided to tax me raise my taxes I don't know what the rate of taxes were back then but let's say it was twenty percent he was using twenty percent as his figure if the government decided tax twenty percent of my income I would not be happy I would be upset I would complain but at the end of the day I would pay the twenty percent tax so if I somehow would be able to conjure up the ability to pay twenty percent in taxes to the government why can't I do that to myself and so he came up with this idea of I'm going to tax myself twenty percent. He's not a Christian obviously he's not talk about tithing or that wasn't what he was reasoning but he was thinking from this perspective of others pay myself the twenty percent tax instead of paying Uncle Sam and I'm going to save that money and I'm going to invest it. So later on in the one nine hundred ninety S. He was an elderly gentleman at this time it became known what his net worth was because he was entering into the realm of philanthropy So anyone want to venture a guess fourteen thousand dollar peak annual salary saving twenty percent of his annual take home pay for approximately forty years and investing it what do you think was his net worth and he guesses. Five five billion Wow. OK are. Five hundred thousand OK half a million two million that anyone else one point five million Is that what you said let's take a look now with a seventy million dollars I don't know what he invested in I suppose he probably had some U.P.S. stock maybe but because the reason why this number came out into the public was because at that time he decided to give away thirty six million dollars and eventually that was his initial gift and then later on he he gave more I believe. So yes we might say you have a fourteen thousand dollars back then in the fifty's it's not worth the same today well look if you look proportionally fourteen thousand to seventy million that's a huge difference and how did he get there he got there by saving twenty percent taxing himself twenty percent consistently for thirty or forty years throughout his entire career so what can we learn from Mr theatre Johnson number one he lived within his means and when we say live within his means he didn't simply spend less than one hundred percent he spent less than eighty percent and he saved twenty percent so he saved twenty percent regularly invested consistently and here's the whole point he gave generously obviously for us as Christians we're not about hoarding up a generous sum of money to give one big check later I'm not proposing that's what we do we should be paying faithfully our ties and offerings now but if we are faithful I believe we can also have a surplus it might not be seventy million right but even if it's seven thousand or seventy thousand or whatever number if it's a surplus we can give back to God I want to have that for the sake of the gospel I want to be able to give generously so we learn from Mr theater Johnson you don't have to have a gigantic net income to build wealth and how did he do it by being like the ant consider the ant So here are our numbers I share this a little bit our first presentation yesterday for the year twenty sixteen this is my personal my family's percentages and if you care to know these things if you go to my blog you can find out the exact numbers actually how much we we earned how much we spent gave and saved and if you wait a couple weeks I'll be giving my financial report for the year twenty seventeen of which will be enlightening so we in our family in twenty sixteen the last full calendar year we had a twenty five percent rate of spending so this includes everything involved in living our life we gave away twenty six percent and we saved forty nine percent and we talk about what we're saving and what are the types of things that we're our goals in and all that kind of thing on our website if you want more information but what I'm trying to illustrate today we're going to be focusing right here because if we can get vis number down our expenses down it opens up the rest of the pie chart for the other two we have control or rather let me put it this way expenses are the more difficult aspect to manage that we need to start and then it flows into the rest. So how do we do it how do we cut our spending down Thank you very much. How do we cut our spending down how do we maximize the effort because everybody we want to save money there's not a person in the world who doesn't want to save money but it's hard at least that's a perception we feel the the strain when we think about it we think like oh I have to go run one hundred miles to lose weight that's the same feeling right so how do we maximize the effort get the most gain for the least amount of effort number one first we need to be willing to change our behavior and lifestyle Yes. But we need to also realize that the likelihood of success is greater the less lifestyle adjustments are required OK so we got to be able to play the mind game we always hear people talking like OK you need to stop you know drinking your Starbucks every day get out into this caffeine free only right Starbucks and I want to you means stop doing all the one hundred little things that you're doing all week long to save two dollars fifty cents every time and you'll end up with you know saving two hundred dollars a week well look that's making like fifteen or twenty or one hundred decisions all throughout the week that is extremely taxing and it's exhausting not to say that you should make those changes we need to be willing to make those changes but we need to understand that the greatest chance of success is not starting Very where you have to make fifteen hundred little decisions but the start in the places where you can make one big decision and say forever from now on we're going to talk about how to do that so we want to focus where we get the most return for the least effort. It might sound like cheating but we're trying to win this game and that's that's within the rule book we can do this so in order to do that first we have to create our detailed monthly spending plan we talked about that yesterday in our final session the the savings plan and the monthly spending plan we need to know where our money is going we didn't know the exact categories of what we're spending on and we have a clear picture of how much we're currently spending so if you don't know how much you spent last month the first thing you need to do when you go home is you pull out all your receipts the critic our statements your bank statements and create. A list of all your spending for the previous month and if you go back farther than that even better how much you spend on rent mortgage insurance cell phone plan food groceries eating out and that flicks whatever it might be listed all out categorize them because then once you have that chart of your spending we're going to look at the biggest and the recurring costs the bigger it is and the more recurring it is that's where we're going to focus our effort all right because you make one decision there and it can be worth more in savings than a thousand decisions at Starbucks or in the grocery checkout line so here's our numbers this is from my household in twenty sixteen to give you an example of how this works this is not my entire monthly spending I'm just giving you four areas this is just four lines in my budget four out of I don't know twelve or fifteen or whatever it might be and these are some of the biggest ones in most people's budget so first rent or mortgage for everyone in the world generally here in the United States especially housing costs rent and mortgages generally the number one biggest expense in everyone's budget anywhere from twenty five to twenty five is on the low and up to thirty forty maybe even fifty percent of your take home pay goes to pay your rent or your mortgage so for my area OK I have to compare apples with apples so in my area near Chattanooga Tennessee for a house of my size which is about fourteen hundred square feet it would cost about twelve hundred dollars to rent so if I was renting my house basically it would cost me about them but what how much do I really pay you already heard the story yesterday talked about we paid off our house in two years we actually paid zero dollars because we paid off our mortgage. I have an asterisk there I'm going to come back to that because there's more to the story so utilities typically in my area. For a house my size on my electric with my electric company and my water company generally is about two hundred dollars average out the year for me we pay ten dollars a month because we have solar panels so we don't actually pay and the ten dollars for a water bill that's how much it costs every month and some of you in California are here Phoenix is like a ten dollars for water Lee when the world is like one bottle of water but that's how much it cost in Tennessee we have more water than we know what to do with so beyond that we have automobile and a household typical household like mine husband and wife and a child generally they own two vehicles and they generally own two vehicles with car loans on at least one vehicle and they commute to work so this hundred dollars this in two thousand dollars is an average It might even be a conservative average for my area for a household with two vehicles with average mortgage and the mortgage car loan and gasoline and you know whatever other associate a car costs now our average has been twenty four dollars a month why because we own one car and we hardly drive we consolidate our trips and we are fairly efficient in how we drive and we drive an old car so we don't have alone and we don't spend a lot on transportation but we did recently buy a minivan and so this number will go up in twenty seventeen but this is twenty sixteen numbers and the cell phones All right so we both my wife and I both have i Phones So we're not in the Stone Age. But for eighty and T. we've looked it up cost about one hundred twenty dollars for the equivalent plan that we have to our phones on eight hundred two usually is about one hundred twenty dollars but we pay forty dollars a month for unlimited everything also it's on cricket wireless We'll talk about that later which also runs of the eighteen thousand network so we get the eighteen to coverage but we pay one fourth the price so we add this all up OK this is just comparing for budget items from our budget we are we spend seventy four dollars a month on what in a typical household can be as much as twenty five hundred dollars do you do you see how this is a lot easier to accomplish then trying to save the quibbling amount by just cutting down on my grocery bill or my Starbucks or whatever little nickels and knickknacks that I might be spending money on you can be making like thirty thousand decisions to save this much money and now back to the asterisk here is that you know for us this is not entirely the picture because we actually get paid. Our property we actually have a rental unit and so we actually get rent back from our house so we actually get you know another six hundred fifty dollars for rent and we have solar panels so we get credit so we actually in the end if I'm being told transparent this number here would actually be a negative number so but at any rate that's not what normal people live like so I'm just going to use these numbers to compare So let's multiply this out OK for a whole year and now we really see the difference so in one month the typical cost in our area about twenty five hundred dollars That adds up to about thirty thousand dollars in a year that's very typical in many parts of the world for a family with a mortgage car loan you know two cars you know eighteen of Arisan a whatever you just add it up and it's like this is the kind of stuff that we we just assume is the cost of living life cell phone bill auto pay right our own home mortgage is just automatic every month that's what the the money just flows out we don't feel the pain we feel the pain when we go to the grocery store and we load up our grocery cart and we see the hundred dollar bill a two hundred dollar bill for an A dollar bill a Costco or whatever and we think that's where we're going to save the money well look I'm telling you don't start there. Because look at how much we save by focusing on just four areas right at the end of the year we are saving thirty thousand dollars just about twenty nine thousand dollars compared to the typical cost in our area so how do we do this right so this is just my numbers to give you a picture of what's possible your numbers clearly are going to vary your mileage will may vary of course as they say so let's get specific Now let's start with housing this is the number one biggest expense in most people's a budget so you have to look at this you have to look at this in the budget because it might be as much as half of what you're spending on. So this I think is one of the fundamental principles you have to remember is what I like to call the law of empty space and what the law says is that whatever space we have we will fill. You understand what what this looks OK. So how do you see how to solve this problem you shrink your space and you shrink your spending. Some of you might be saying Oh but I can't do that well maybe you and the situation will that were that's not necessarily easy to do but I will venture to say it's easier to make this a one time decision and then live with it more than having to keep up a consistent rate of frugal spending every time you go to the store for five ten years twenty years whatever it might be and also home ownership correlates with lifestyle inflation so I'm not saying don't buy a house but what I am saying is you have to be mindful to buy a house with this concept in mind because how do people buy houses they buy houses with their feelings not with their brain they look at a house and they say I love this house this kitchen is so big right I have a walk in closet Oh and there is a walk in closet for me and a walk in closet for him so you know what you know what the woman the thinking he doesn't need all that space so I can fill up all my closet and have his closet man there's a lot of space but you understand how this works like others giving example my house is a fairly small house fourteen hundred square feet my house is just one open floor plan we have our living room and then we have our dining room and then we have our kitchen but you know if you move up to a house and it's a three bedroom two bath house so if you move up let's say our house was about one hundred eighty five thousand dollars US by a three hundred thousand dollars house it must still be a three bedroom two bath house but the square footage goes up might be two thousand something square feet but you know where the space goes you're not getting three more rooms bedrooms what happens is now instead of a living room and the dining room and the kitchen you have the kitchen you have the eat in Eden kitchen you have the formal dining room you have the den and you have the living room. And you can leave all that space empty. You realize So how many sets of couches now do you need at least to write and if you're really really into it it's like you got all this extra wall space so I got to fill that because I have to make my house look like Pinterest what else am I going to do with all the space right so this is what I'm talking about the law of empty space we're now thinking about in the sense of hey how will I buy a house most efficiently we're buying a house to say what can this tell other people about how nice I am or how fancy I am right it's becomes a a projection of ourselves and I say there's a part of that we want to be able to rightly demonstrate a tasteful classy life to properly represent our faith I believe that is important I'm not saying live in a dumpster. What I'm saying is when you think this through Finke what you actually need and what you actually will use and buy as little as uni by efficiently is what I'm saying because even though I use myself as an example even though I might be a cheapskate I am subject to lifestyle inflation as well and here's a clip here's a perfect example this is a storage shed that I had to buy earlier this year cost me three thousand dollars and what is it what I do with it I store my junk in it I mean it's not junk right it's my lawn mower and my gardening and Quicken and this stuff valuable stuff it's a ten by sixteen so there's one hundred sixty square feet do you realize that there are people who live in houses the size the Tiny House movement you've heard about it and I've got a tiny house on my land for my lawn mower so you know you might think oh man this guy save so much money and like not really not really so even for me. Buying a house like OK I buy this house oh I've got an acre of grass I have to cut so I can't do this with a push mower you know what I'm saying like OK I've got to buy a big mower or you go by being more you don't have the tools to change the belt you have the oil change kid you've got to have the gas cans Oh and then you've got a vessel with the gas and all of this stuff starts adding up this is what happens right you you move into a house and the lifestyle inflation it just goes through like a mushroom cloud. So yesterday some some young people came up and said OK I'm in the town of student debt OK student loans maybe some of you are in the situation because housing is the biggest expense and most of our budget if you've got massive loans you will not be able to get over that unless you take a hard fast look at your housing. So what am I recommending continue living like a student as much as you can until you pay that debt off like I'm serious about this if you've got I'm not going to bear so anyone you don't know who these people are but you know medical school dental students you know four hundred five hundred thousand dollars in debt. And you've got your work cut out for you like you might consider you know something like this. And once you pay that off guess what you can move up into a nicer house and you can even have a house with a den and a living room all right so saving on housing number one choose smaller housing to stall lifestyle inflation I'm not saying everyone has to live in a tiny house I sort of like that I think it's sort of cool but it's not possible for everyone it's not so this is how I try to measure and my wife and I we had conversations OK to put it in nicely we have conversations about this so we've looked for a house my thinking process is whatever size I really really want I'm going to bring a notch down. Just a hair smaller than what I really want because that's how I check myself because usually what we do is we say I want to house of this size and then we're always like inching up oh the next one is just a little bit more I mean it's not that much more open but I get a whole thousand extra square feet or whatever it might be but to think the mind game is you start where you want to go and knock it down and why because it forces us to think efficiently to be creative to be innovative to use our space in a smart way instead of going up bigger and bigger and like OK I'll just I'll just buy more stuff and I'll just fill it up a lot of empty space if you are renting some of you I'm not buying them I'm renting the same applies rent a smaller place right but I think that's logical but another one I think is very important to consider is consider a roommate that's one of the easiest ways to save I know some of us is OK I've gotten used to my privacy but it depends on the situation if you really are trying to get out of debt what are you willing what costs are you willing to pay right making this one decision can save you a lot more than in other places now if you are owning a talk about this yesterday pay off your mortgage early save a lot of interest and your cash flow needs but also this is an idea that may work for some people not everyone is considered renting a part of your house so if you can rent out part of it you can subsidize. The cost of buying that place and number one area to save housing I just mentioned this if you have massive debt to pay off you've got to manage your housing expenses because it is so big generally and we're going to talk about this a little bit more later but that emergency fund can help us save on our insurance policy by allowing us of a higher deductible but we'll get more into that in a moment so related to the house we have to talk about energy or utilities or electricity more specifically so in the same vein we have to think about electricity focusing on the biggest recurring costs and working our way down and these are the big four culprits pretty much if you can control your electricity usage in these four areas your electric bill is going to come would be way we would down number one is your eighty C. air conditioning and heating that's absolute number one and number two is the hot water heater clothes dryer and the lighting Now what talk about specific ways to save in those areas in a moment but this is our our solar panel system on our house it's only we only have fourteen panels and we have to you have to understand something people think oh solar panels Oh yeah you got it easy well it's not just a matter of buying solar panels because if you buy solar panels solar panels are not super cheap if you are not being energy efficient in your electricity usage you my buy a solar panel system but you might be using all of it and more and you're not really saving that much you're saving just a little bit so the only way that this type of renewable energy system works is if you have it coupled with a low energy usage energy efficient home you understand because if I'm using the typical amount of electricity of a whole my size in my area I would need a double or triple size solar panel Ray than what I have so you understand what I'm saying you've got the work in tandem to really save So how do we do it OK So let's look at those four big culprits in energy usage number one if you see AC and heating the number one most important thing to do is you've got to insulate your house this might be an initial investment or if you're building your own house think this one through because this is one of those invisible costs of people don't think of they just pay the electric bill and we complain about it but whether you live in some places really cold or really hot the most important thing is to keep your house insulated so that it doesn't have to run as much it modernized the temperature more. Another thing is southern exposure this is an easy trick really easy trick if you live in the northern hemisphere if you're in Australia or New Zealand it would be Northern Exposure but in the winter time the sun is low in the southern horizon open your window shades don't open the window but open the chaise let the sun come in from the southern facing windows and that can sometimes raise your home temperatures depending on how big your windows are and all that it can raise your home temper sometimes as much as five degrees and a save you that much from having to use your heating system and in the in the summer clothes are shades in the hours are the day same concept so Number two hot water heater whether it's gas or electric hot water heater uses a lot of energy and the simplest way without changing much in your lifestyle is to use what's called a low flow showerhead It's a shower head that puts out it feels like the same amount of water but uses half amount of water so it's a double win because you're saving on your hot water and you're saving on your water bill at the same time and in that same time you're just taking a normal shower we use this at our house it feels no different it's just the shower head is designed in a way that the water comes out more efficiently so that you can because like ten dollars for a shower clothes dryer All right clothes dryers a run the I ran the numbers from electric clothes dryer the ping on the electric rates in your area anywhere between fifty to seventy five cents per load right so if you're in a family you're constantly running the dryer every time you run that thing is fifty to seventy five cents so the quickest over the easiest way to save on that is to handwrite your clothes we do that you might feel you don't have time for that so just hang dry some of your clothes still going to say and what's ironic really when we think about the appliance itself a lot of times we think oh I should buy a new dryer because a new electric dryer or even gas dryers could be more efficient and that's not true for the electric heating element if you can make it more efficient is just it is what it is so a newer fancier you know bigger flashier with digital readouts whatever electric drive you're not going to save any money so don't waste your money on that if you are going to upgrade your appliance grid your washer and Stet and how you like how does that help me with my drawing my clothes well a high efficient washer where there's a front load or top load high efficient washer they spin the clothes dryer so that means you have to dry it less in your dryer. All right and it uses less water so saves on a hot water heater as well so if you're thinking about upgrading your appliance focus on the washer not the dryer you can use an old beat up dryer and it's going to the same amount of energy as a brand new flashing ones and therefore lighting if you are still using incandescent or halogen light bulbs you slap yourself and go buy only the bulbs when you go home L.E.D. bulbs are so cheap now they'll pay themselves off in like two years everyone should be using only the I don't have to say anything else about that all right saving energy All right transportation if you're a glutton for more punishment about cars get ready because we talked yesterday we're going to talk a little more about cars right now so here's the basics how do you save on transportation this is sometimes the number two or three biggest expenses in our budget drive less you might be thinking Oh as a possible well there are creative ways shorten your commute some times I'll even say this sometimes you will save more money by moving your house to a slightly more expensive home closer to where you commute to all the time then to have a cheaper house farther away you just have to run the numbers in your situation because owning and operating and driving a car is very costly and I'm going to make that point clear in just a moment we mentioned this yesterday a car is a transportation tool it is not an appreciating asset so as any tool you want to buy it as affordably and as high quality as possible and then you've got to take care of it and you going to make it last as long as possible that's how we ought to use our cars and if you not fix your own cars even better. And here's the here's the bottom line the more car you own the less wealth you'll build there's a direct inversely proportional relationship here the more expensive the more number whatever of cars you have to look at the slower your rate of wealth building will be why because your car is this vampire this sucking your net worth by constant is just dropping every day every day every day I'm going to illustrate this with real numbers in just a second. And so on as little cars you need so this is when people say how do I save on cars own as little cars you need I'm not saying buy a car like this but that's a picture to illustrate the point so having two cars is better than having three cars having one car is better than having two cars having no car is the best of all. And the people are like how can you not have a car well if you live in a in a city if any of you live in big cities I grew up in Hong Kong nobody owns cars in the big cities it's not a big deal in certain places but in many places you probably will need a car so slightly used is better than new now people always are like oh you all mean drive a beater car no I don't drive a beater car but if you want a sweet spot from what I have this is just my personal opinion but I think it's based on some some facts sweet spot is somewhere between three to five years come your old car generally someone still have the original warranty on them you can still get the new car smell and some of them and their stay haven't gone to the point where you're going to need to put in a ton of money to fix them up so two three year I'm talking a slightly used and smaller is better than bigger you know this in the United States everybody wants an S.U.V.. We can be weird and not drive an S.U.V. And I'm going to go out on a limb and say if you want a bigger car a minivan is with a more efficient and cost effective than an S.U.V. And real men drive minivans. So. Beyond that mpg is better than horsepower some mpg more and more than horse power and you can utilize some of these other techniques carpool bike walk use public transport and lift prudently so. You know lift our mazing it's like magic you pull out your phone you press a button and the chauffeur magically shows up and takes you where you want to go can you imagine Ellen White coming nowadays as I know you need a ride someone shows up she gets it like what kind of sorcery is this right but when we think about that we think oh lift is so expensive it's not expensive if you are using it intermittently and it replaces your need to actually own a car OK but if you own a car and you're using Oberon lift then you know that's not a good idea. So let's talk about the cost on a car because I want to really prove this point to you I'm comparing the same vehicle does a Honda Accord the six is near top of the stack comparing twenty seventeen and twenty twelve model so the sweet spot right by five years old compared to a brand new one so the cash prize brand new for this model about thirty two thousand dollars five hundred for two thousand and twelve model costs now about fourteen thousand. So that the drivers driving the same amount from year to year. And the Edmunds website some of you might be familiar Edmunds dot com is a reputable car website they have the tool called the T.C. zero it's the true cost to own calculator you put in the car the mileage and it gives you how much estimated cost on will be in five years estimating all the various costs and I'll give you the graph of that later and so Edmunds estimate for two thousand and seventeen model for the first five years is this vehicle will cost thirty nine thousand dollars to operate OK just the first five years. And this one the two thousand and twelve it cost ten thousand dollars less so what that means is for the first five years on a per mile basis the twenty seven thousand Honda Accord cost fifty two cents per mile and notice it is not just the price of gas and for the twenty twelve model cost thirty eight cents so if you're driving a brand new Honda Accord driving down the road imagine every mile you drive fifty cents gets burned up in your wallet that's what's happening and the two thousand and twelve you will a little under forty cents so the twenty twelve model a cost twenty five percent less to operate and you are saving ten thousand dollars in just the first five years and it multiplies on top of that. So I want to show you the table this is the actual true cost on table for the vehicle that I took off of Edmunds I know the numbers are really small you don't need to know all of them are read off the big ones the first one here for the first five years is depreciation and you notice that the depreciation is about sixteen thousand dollars in the first five years and if you remember the cost of the car initially was thirty two thousand so in the first five years you lose fifty percent of the value of a car and just as a rule of thumb if you want to figure this a quick mental math is your vehicle value if you're driving about fifteen ten fifteen thousand miles a year your vehicle value will roughly half go in half every five years so first five years ago from thirty two to sixteen thousand in another five years it will lose about eight thousand in another five years lose four thousand and five years two thousand and then your car by that point is going to be worth like a thousand then you just junk it so sixteen thousand dollars depreciation That's the lion's share of the cost of a new car is just going it's going away to nowhere you just losing that value but you also notice here financing is part of the cost that they factor in and so one of the easiest ways to drive down the cost to own is to not finance a car we talked about how to buy a car without loan yesterday so you can immediately save nearly four thousand dollars off of interest cost by buying it in cash All right so and down here maintenance of repairs you know the numbers here are not super high and we're going to see on the next slide how they compare with the twenty twelve Honda Accord so twenty twenty twelve Honda Accord you notice here it was fourteen thousand so in five years again it's about half of the but losing seven thousand dollars is a lot better than losing sixteen thousand dollars that's just what the math tells me sorry but down here met the maintenance and repairs this is the biggest argument people have for driving a used car it costs more to repair. Now let me just be honest with you a five year old Honda Accord is unlikely to require a lot of maintenance or repair unless you've got a lemon or something but other vehicles sure maybe so but even with that factored in you notice here the repairs and maintenance is significantly higher for the two thousand and twelve model than the twenty seven thousand model it is still still WAY cheaper to drive the two thousand and twelve with a little bit more maintenance or repair cost then the twenty seventeen because of the depreciation so this is the argument that people always have and that is I don't want to buy a used car because as unreliable that is a bunch of baloney if you buy a slightly used car don't buy a twenty or thirty year old car buy a three to five year old car and you'll be saving approximately ten thousand dollars in five years and the operating costs twenty five percent less and the maintenance cost is not enough to negate the difference in depreciation is that clear what I'm trying to communicate so you can buy a used car and buy it in cash and you'll be saving both on interest and operating costs and it will also save on car insurance OK Buying a used car slightly older will save you in car insurance and I explained exactly how in just a moment but the lead up to that we need a home and auto insurance together because this is another big expense. So home insurance or property insurance we have to understand how it works home insurance primarily insurance for damage or destruction of the structure and the valuables inside your home it's insuring the property the replacement cost if you will and secondarily property insurance also insures against liability so if somebody comes to your house you know they slip on to your front doorstep and they crack open their head and they sue you liability now for a business it might be a little bit flip so if you're a storefront maybe you're a cake shop or something and yet the customers coming in and out liability is going to be probably a bigger part of insurance than a personal private residence where we go is it the case property insurance is primarily insuring the structure in the valuables So this is how you see on your property insurance is you need to have an adequate emergency fund that is fully stocked that will enable you to pay. A higher deductible on the policy. So if you have a home insurance policy and your deductible and the deductible is the part that you are personally responsible for before the insurance picks up the bill so if your insurance looks at you and you have a one thousand dollars five hundred dollars deductible they view you differently than if you had a five thousand dollars deductible you might be thinking it's just a proportional thing like oh yeah you know I'll just they'll just proportionally lower my monthly premiums it's actually disproportionate and this is what the insurance industries have discovered what they've discovered is that the type of people who of who can afford a higher deductible overall as an entire class is a lower risk to them. Meaning they're more responsible people and they have all the charts and graphs and data to analyze this and this so what they realize is if you are buying a five thousand dollars deductible and seven thousand dollars deductible we're not as in give you a small price break we're going to give you a big price break because you are not the type of customer who's going to come to us every time any little thing comes up to ask for payment so you understand the having an emergency fund and being able to have a five thousand dollars deductible is ses you for ever because your insurance is going to like you more going to give you a better rate so an insurance policy I recommend having an emergency fund at least to cover the five thousand dollars deductible and that's what we do in our home and our insurance premium comes way down and of course we know this we bundle our home and auto policies together with the same provider and you get savings that way so let's talk about auto insurance home insurance and auto insurance in many ways or inverse of each other car insurance frequently people assume oh it's insurance to protect the car or to replace the car that's not what car insurance is about car insurance is primarily to insure the liability of the driver because you know what's going to bankrupt you more it's not losing your car it might be ten fifteen twenty thousand dollars what's going to bankrupt you if you hit someone and they sue your pants off that's what your insurance is there for is to protect you in case of a lawsuit so that's why insurance car insurance is required. Secondarily you can buy what's called comprehensive income collision coverage for your car and that's what covers the destruction or the damage of your vehicle vandalism hail a car crash whatever it might be and what's important member is a collision and comprehensive coverage might be optional in certain circumstances. So again the emergency fund can help you save in this regard because having a higher deductible on the collision and comprehensive coverage will reduce your monthly premiums Yep that's great and nice but what's even better OK this is the whole point I was building up to about driving a used car driving an older or cheaper car reduces or might even eliminate the need to have collision and comprehensive coverage at all you may not even need it OK and here's the reason why let me give you my numbers so this is from Geico actually pulled this number of these numbers from Geico a couple weeks ago this is my car I own a two thousand two hundred accord so it's an old car is worth twenty five hundred dollars according to Blue Book and then that same twenty seven Honda Accord that we've been talking about thirty two thousand five hundred dollars Well here's an interesting thing if you are financing or leasing a car you are required to have comprehensive and collision coverage you know why because you don't own the car you're paying someone else off who is loaning you money they own the car and they say I need to protect my investment so you have to buy comprehensive coverage to replace the car in case it crash or something to is damaged so for this vehicle it cost one hundred dollars a month or twelve dollars a year for insurance to cover that car for my car with Geico. Liability only is thirty five dollars a month and if I had comprehensive coverage it doubles to seventy dollars a month so here's here's the big thing. If my car is only worth twenty five hundred dollars why should I be paying eight hundred forty dollars a year to replace the car. Look I'll just be frank with you if my twenty five hundred dollar car crashes today I have the money to go buy another one of the equal value tomorrow that's why I have an emergency fund my car is worth so little that it makes no sense for me to pay that maximum amount for comprehensive coverage so I just get thirty five dollars a month insurance for liability so I don't go bankrupt if someone sues me but if you look at the difference driving an older car and I'm using my car of course if you have a slightly newer car the numbers might be a little different the difference between this number and this number here are the ones I really have to compare and notice the difference it is about one third of the price for car insurance so that's another area of savings a couple in your emergency fund with paying a car off in cash driving less having an older car it just saves all the way around. Is this enough Are you convinced. All right let's move on so that's what I have to say about cars I think that's the end of my beating on this dead horse it's so cell phone it's so cell phones have changed a couple years ago everyone got a flip phone and cell phones are like these cheap things you can sign up for plan and get a phone for free and that's good enough but with the advent of the i Phone and now Android phone all of a sudden we have this new expense it becomes like this in the quads I need that we don't really need it but you know life would be really inconvenient without it so smartphones has become part of our lives whether we like it or not but the problem is we used to used to be a free thing but you just sign of the plan you get a free flip phone now we're talking six hundred fifty seven hundred dollars a thousand dollars for a phone that pretty much only lasts a couple years before the screen cracks or a battery goes dead or something so how are we going to manage this how are we going to keep this under control without just breaking and blowing up our budget or first of all we have to understand that the smartphones that we have today. Our little super computers that have more processing power than the space shuttle that went to the moon so we have to understand that these things are not toys we have to take care of them and my i Phone is up there I'm not going to grab it now and so what's also happen in the industry with cell phones is that it has matured to a point that you don't or you're not getting the massive improvements one year to the next if this was you know five six seven years ago you know there would be significant improvements from one model to the next now it's not really the case anymore you can get to a phone two years old and they'll do everything pretty much that we need. So with that in mind how do we see on smartphones since this is something we're going to have to replace on a regular basis I recommend people buy their phones used and you might be thinking oh I'm going to get a lemon and it's all going to be terrible Maybe so but I've bought four or five of them for family members and different things and I've never really had a problem the way to do it is this is the key so these are two services that I use once call swap and one is called glide. I would actually recommend swap them more than collide at this point because it's more transparent and you get to communicate directly with the seller of the phone and you get pictures you know exactly what you're getting and so what I do is I go on swap It's like an A but it's optimized for smartphones and tablets and electronic devices and you get to communicate with the seller and they get pictures they tell you exactly what it comes with you can ask them specific questions and this is what I look for I look for a phone that is less than one year old so it's the previous year's model but purchased more recently than on opening day. The next big thing you ask You want to ask them for is what's the battery life you want to see what the health of the battery is especially if in that i Phone that doesn't have replaceable battery actually I need to come back to that point about the battery i Phones in a moment and also the warranty so a lot of these phones because they have they were purchased maybe five six months before you're buying it they still have six months left of their original manufacturer's warranty on it and generally speaking whatever major issues if it's a lemon if it's a lemon it'll come within that time frame so I usually get my phone some of them I've gotten as much as half off not just half off the original listing price half off the manufacturer discount you know new price after the new phones come out and that you can get Android phones the same way but that's not really the biggest area to save now before I go on before going on you come back to this point there's breaking news breaking news this morning. Recently it came out so that those of you who have i Phones you might be interested to know this it does affect me and my family is that. It came out in the news that Apple has been manipulating I don't know if that's the right word but adjusting the performance of all i Phones based on your battery life and we've noticed this my wife has i Phone six Plus And the thing is like almost unusable I mean it's just jumpy and you know things don't load a super slow and it turns out that they're throttling the performance of the phone when your battery degrades but it cost like eighty dollars to replace the battery and we're too cheap for that so Apple today announced the starting later next year that they will be discounting the replacement of batteries for phones i Phone six and later down to thirty dollars from eighty dollars And so if you have an older i Phone i Phone six six seven I would recommend you pay thirty dollars replace the battery and it'll be as good as new better than going to buy a thousand dollar i Phone ten just my two cents that's probably what we're going to do with my wife's phone so but back to what I was saying the phone device itself you my save a couple hundred dollars but it's your plan it's the cell phone plan where you're going to save the thousands because that's a recurring monthly expense and so what do I recommend people do go prepaid go with a prepaid plan instead of the big carriers like Horizon eight hundred eighty I will say T. mobile is pretty good as far as their plans go but Sprint and T. Mobile their coverage service is not that great so for prepaid services what it is is you pay monthly upfront and there's no surcharge if you use more you don't get charged for it they might throw all your speed a little bit and that's about it and as far as. As far as my family goes we use cricket wireless and recently they changed their plans and so unfortunately we're grandfathered in on the older plan their newer plans are not quite as good so we have a family plan five member family unlimited everything the only limit is we only have five gigabytes of high speed L.T.E. which to this day I've never used up and beyond that you don't get a surcharge you get a slower speed but everything else is unlimited unlimited many minutes texting and all that is on the eighteen thousand network you get the visual voicemail you get all that stuff and we pay twenty dollars per phone tax inclusive everything so twenty dollars a month for unlimited everything bring your own phone device i Phone The latest thing I'm pretty happy with it I have to say but I have to tell you that's not the cheapest plan OK that's not the cheapest plan so if you want to save on a cell phone plan check out some of these other carriers Republic Wireless You can go down as far as five dollars a month Freedom Pop My father in law he doesn't use this phone very much it's like two hundred minutes a month or five hundred megabytes of data or whatever it's zero dollars a month he had to buy the phone for eighty dollars but literally he pays zero dollars It's a free service so for people who are paying by two hundred dollars a month for a cell phone plans I don't get it like do you like wasting money because you don't have to do that so if it were me and I'm being perfectly frank if you're paying more than forty maybe fifty dollars for an unlimited plan you're paying too much Shop Around be smart about this because look if you are paying two hundred dollars a month that's twenty four hundred dollars a year whereas if you drop that down to twenty dollars a month that's only two hundred forty dollars a year I mean that difference is like an order of magnitude difference so don't waste money on a cell phone plan you want to be smart with it. All right so a couple of the quick points recurring expenses we want to eliminate all interest payments pay everything off eliminate all unused subscriptions we have music T.V. software gym memberships all that stuff subscription programs are designed to make money for the business not to help you save money so be very careful where you subscribe for scribes only do things that you really need ignore the marketing trick of monthly instalment prices like you get these things in the mail you can buy a car for only one hundred dollars a month OK how many months right they don't tell you and then you can use discount gift cards this is a really quick tip you go to place a card poor raise and you buy gift card for the Met for the retailer at a discount and then you go to the disk and then to the retail and used to gift card so for me we buy Wal-Mart gift cards for example might be three percent off I take the gift card and I go to the Wal-Mart gas pump and if you use a Wal-Mart gift card at the gas pump to take three cents off every gallon so I buy with my credit card I get my two percent cash back I get a three percent discount on my card and I get three cents off every gallon so it's not we're not talking huge amounts of money but every little bit counts and then you can use online rebates a similar concept you click a link through to an online retailer you shop as normal and you get a cash back rebate to your account so pretty much any time you shop online you should always use a rebate All right so we've got to finish on this point social media we have to talk about this social media we need to stop following our friends. We need to follow our friends we can follow our friends but don't follow follow follow our friends what I mean by this social media is the equivalent of advertising these days this is where you got to understand the marketing people understand this Facebook influence is over half of consumers online offline purchases this was and twenty fifteen that number has gone up and twenty seventeen the increase they've doubled more than doubled their social media advertising budget and ninety percent of advertisers plan to run Facebook video ads in twenty seventeen everybody is using Facebook Instagram Twitter whatever to promote their products this is an insightful quote from a guy named Jim Herbert from digital commerce he's the guy who actually in the article with all the stats he's a marketer social media marketing this is what he says peer pressure has always been a powerful influencing factor when it comes to making purchases that is true social networks aimed at our personal lives rather than our professional lives are translating this online translating what online peer pressure is being translated online retailers need to ensure that Social media is integrated throughout the entire customer journey and that they manage the social channels to make a real impact on personal behavior let me summarize what he's saying marketers out there capitalize on the power of peer pressure using social media to get people to buy more of your stuff that's what they're saying do you know the Ellen I have something to say about this Ellen Y. has something to say about social media did you know that. Particularly how social media and peer pressure relates to our purchasing behavior notice what she says and of us on page three eighty four paragraphs two it is not best to pretend to be rich or anything above what we are and I don't know about you but that's what it seems like on Instagram and printer as people pretending to be something they're not frequently not always frequently. Humble and followers of the meek and lowly Savior we are not to feel disturbed if our neighbors build and furnish their houses in a manner that we are not authorized to follow how must Jesus look upon our selfish provision for the indulgence of appetite to please our guests instead of guess maybe our social media followers or to gratify our own inclination it is a snare to us to aim at making a display or to allow our children under control to do so so what is Elmo saying Dole worry what your friends are by she says here don't be disturbed to see how they decorating their houses well you know what social media does back in her day the only way to know what our friends are doing in their houses is go to visit them now we don't have to go visit them they might be in Australia or Singapore somewhere else in another country we just go on their Facebook Instagram account and we can see exactly how they're living their lives and you know how it is they've done a nice vacation and if it's a bunch of Asian people there while the eating a lot of nice food. Every day they're eating some nice food man I want to eat some of that So this this becomes peer pressure in the social media there's a sphere and it leads us to feel like we need to also indulge our appetite and to make a display and to have a nice. Social media presence to show what we are living like as well and then I says it is best not to pretend to be rich or anything above what we are so stop following your friends and I'm not saying don't communicate with your friends but social media if you are out of control Yeah Get off social media if you need to but we need to understand the social media is a force that affects our spending behavior. Proverbs thirty eight and nine this is our second to last quote remove far from me false and lying give me neither poverty and or riches feed me with the food that is needful for me lest I be full and deny you and see who is a lord or less to be poor and steal and profane the name of my God this is one my personal favorite personal finance quotes of all time the goal is not to be in poverty the goal is not to have super big riches it is to have our needs met to have enough to be satisfied with what God has given to us and so in conclusion the theme of our whole weekend here in the seminar for the love of money is the root of all evil which says while some come at it after they have air from the feet and peers themselves through many sorrows and I hope that through this five hours we spent together you've been able to learn some things to help manage your money in a way that glorifies the Lord to keep our spending under control to be able to say for the glory of God to invest prudently and to be able to do more for God's kingdom and I apologize I went over I was going to have Q. and A but I guess I talk too much. OK The blog is saving the crumbs stuck on. Saving the crumbs dot com So let's pray and we need to go get ready for outrage so let's bear heads together Father in heaven thank you so much for the clear counsel you've given to us and the practical ways that we can use to save money every day may be able to use these means of vaster work in your kingdom is our prayer in Jesus' name. 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 entered and so when 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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