Where to spend your money…
Priorities: God, your family, and others.
- Charitably give time, talent, and treasures (e.g., 10% tithe, volunteer in the community)
- One gives freely yet grows all the richer; another withholds what he should give, and only suffers want. (Proverbs 11:24)
- Whoever brings blessing will be enriched, and one who waters will himself be watered. (Proverbs 11:25)
God has given us two hands – one to receive with and the other to give with. We are not
cisterns made for hoarding; we are channels made for sharing. – Rev. Billy Graham
Whoever has a bountiful eye will be blessed, for he shares his bread with the poor. (Prov. 22:9)
The best way to get rich quick is to get rich slow. When it comes to wealth building
perseverance wins. Sprinters do not. True wealth-building is hard, and it takes time. If wealth-
building were easy, everyone would be rich! It is rough, but once you get there, it puts you in a
position to bless others and to change your family tree. It is worth it to persevere. - Dave
“Dig a well before you are thirsty.” – Proverb
“A penny saved is a penny earned.” – Ben Franklin
“A slack hand causes poverty, but the hand of the diligent makes rich.” (Proverbs 10:4)
“Money is a wonderful servant, a terrible master, and an abominable god.” – Warren Wiersbe
from Francis Bacon’s quote
1. First make a budget
2. Establish $1,000 in an Emergency Fund
3. Pay off all debt such as credit cards, cars, etc. (except the house)
4. Create another fund with three to six months in expenses for long-term emergencies.
5. Fully fund 15 percent into pre-tax retirement plans and ROTH IRA (if eligible)
6. Caring for immediate family such as a spouse, children college fund, etc.
7. Pay off home as early as reasonably possible.
8. Build wealth (Mutual funds and real estate)
The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to
poverty. (Proverbs 21:5)
“A budget is telling your money where to go instead of wondering where it went.” – John C.
“Better is a little with the fear of the LORD than great treasure and trouble with it.” (Prov. 15:16)
1. Formalize your budget. Setting up a budget can be tedious, but it will help you visualize your net worth and spending patterns.
a. If you do not have one, start by tracking your expenses for two to three months (without judgement). This includes “every” dime including coffees, snacks, drinks, etc.
i. Tracking every expenditure is vital as the first.
ii. This is essential if you are serious about building wealth and exiting the “rat race” ASAP. This is necessary for 99.9% of those living in the middleclass.
iii. The pain you go through to understand where your money is currently going allows you to decide if that is what is best for your family’s long-term future.
b. Once you are aware of where your money goes, you can set realistic, concrete goals rather than vague ones.
c. Remember, a budget is not meant to force you into an ascetic lifestyle or create a nonnegotiable blueprint for spending. It is a flexible tool to prioritize your goals and achieve them based on the resources you have.
d. Tools. Use a budgeting worksheet on paper, electronic spreadsheet, or using some of the following: Mint; You Need a Budget; Personal Capital. Household Budget Worksheet (kiplinger.com)
2. Common Money Trap – Skimping on an emergency fund.
Twenty-four percent of all Americans have no emergency savings and only one in five people have three to five months’ worth of expenses saved, according to an August 2020 Bankrate.com survey. Key. Funnel part of your paycheck automatically to a separate account until you reach your goal.
3. Buying a Car
“I am not against toys, just against toys eating your lunch. If you cannot pay cash, you cannot
afford it.” – Dave Ramsey
The average monthly car payment is $378 (as of 2017). That means you are spending almost
$5,000/year for a “depreciating” asset. Investing $378/month in a good growth stock mutual fund from age 25-65 will be worth more than $4.4 million at age 65. Likewise, a one-time $25,000 investment left sitting for 30 years (same terms) would clear $495,000.
Cars drop over 40% in value in the first two years. Buy a slightly used vehicle and get 25% off sticker.
I. Tips to buying a car.
a. Only buy a new car if you are rich.
b. Only drive cars that are two years old or older since the 40% depreciation is over.
c. Pay cash for the car. (Caveat. Run the numbers. A low interest rate or a zero % interest rate might work for your situation.)
d.The total value of all your vehicles (e.g., cars, boats, trucks, motorcycles) should not
exceed half your annual income.
e. Do not lease!
II. Smart Money magazine says the most profitable thing on the car lot in priority order is:
a. Financing contract
b. Repair shop
c. Extended warranty. (don’t) 87% of a warranty covers commission, overhead, and profit.
d. Sale of vehicles
4. Borrowing Money
“The problem is not our incomes, it is our expectations. It is not the high cost of living that gets us, it is the cost of living high.”
The rich rule over the poor, and the borrower is the slave of the lender. (Proverbs 22:7)
I. Three important considerations to remember when planning to borrow money.
a. Avoid borrowing money.
b. Avoid borrowing money.
c. Avoid borrowing money.
2. If you must borrow money…
a. Always make your payments first before buying essentials such as food, clothing, etc.
b. If for some reason you miss a payment, call the creditor to make it right ASAP.
c. Negotiate with your creditor if there is a life event that impacts your payments.
3. If you must have a credit card…
a. Never carry a balance over a payment period. (Period!)
b. Minimize the number of credit or debit cards you have.
c. Avoid carrying a significant amount on debit cards.
d. Never pay off credit with credit.
4. Remember Uncle Sam and other government organizations always get their share first.
a. Payroll taxes. Employees pay a Social Security tax of 6.2%, and employers also pay 6.2% of the employee’s salary, for a total 12.4%.
b. Income taxes. Federal and State tend to be “progressive” taxes. (Some states are flat.)
c. Sales taxes. States, counties, and local jurisdictions are different.
d. Telecom taxes. Government creates ways to tax business and transactions.
e. Value added tax (VAT). The VAT is common in other parts of the world. Do not be
surprised when it comes to a location near you.
f. Capital Gains. Short-term is under 12 months from time of purchase and long-term is
over 12 months. Income level often determines the percentage owed.
g. Other taxes. Leisure, luxury, alcohol, tobacco, hotel, etc.
5.Buying a House
“Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.” (Proverbs
“Success is the intersection where dreams and hard work meet.” – Lynn Goldblatt
General financial guidelines when buying a house.
I. Emergency fund is fully funded, and you have no other debt.
II. A 15-year mortgage (or less) saves you the most money. A 30-year mortgage works depending on what you do with the extra money (i.e., invest it).
III. Put down 20% if possible.
IV. House payments should not be more than 25% of your take home pay.
V. Never buy homes with people you are not married to.
A home is often more than an investment. However, as an investment you should engage in the
opportunity cost discussion (i.e., liquid assets, diversification, etc.). Selecting one type of investment eliminates another type of investment. Meaning, making mortgage payments eliminates being able to invest the mortgage payment amount in a stock, mutual fund, bond, etc.
“You shall remember the Lord your God, for it is he who gives you power to get wealth, that he
may confirm his covenant that he swore to your fathers, as it is this day.” (Deuteronomy 8:18)
“One gives freely yet grows all the richer; another withholds what he should give, and only
suffers want.” (Proverbs 11:24)
“Someone is sitting in the shade today because someone planted a tree a long time ago.” –
The best opportunities for building wealth occur in healthy, growing economies. Plus, your chances of building wealth exponentially increase the earlier you start. If you start with $10,000 and achieve a 10% annual return it is worth $25,937 in 10 years, $67,275 in 20 years, $174,494 in 30 years and $452,592 in 40 years.
Those who don’t understand interest pay it. Those who do understand interest collect it.