Budgeting, Debt, Money Management, Saving

Ask Chuck: Time to Get Out of Debt?

By: Chuck Bentley

Dear Chuck,

I have been steadily paying down debt, and the end is within sight. I’m due a sum of money for the sale of some real estate and wonder if I should pay off the remaining debt or save it. Seems like a good time to be debt-free. What would you do?

Almost Debt-Free

Dear Almost Debt-Free,

I can think of only a few reasons why you would not go ahead and become debt-free if you are able. Of course, I don’t have your full financial picture, so I will try to give you a few things to consider as you come to your own conclusion.

Shifting Sands

There is a lot of uncertainty in the world right now. Covid-19 has created stress in many areas of our lives. A Pew Research Center survey reports that half of the non-retired adults say the economic impact of Covid-19 will make it harder to achieve their long-term goals. There are medical and financial pressures along with rising mental health issues. Add to that inflation, the instability in Afghanistan, forest fires, flooding, the possibility of a stock market, and real estate bubble… Need I go on?

A major benefit to being debt-free is that you will be in a much stronger position to weather the economic storms we may face. If your overall picture is good, then pay off all the debt. But, there is more to consider first.

A Safety Net

It is great to be debt-free, but uncertain times also require that you have savings available for emergencies. You want to avoid ending up in the same position six months from now. Therefore, I suggest you give a portion, fund an emergency account, and then apply the rest to debt.

Have you ever done the limbo? The object is to get under a bar without touching it. Budgeting is very similar. Your income represents the bar. Your spending must fall below the bar every month, or you lose.

In limbo, you must take carefully-measured steps to keep as far away from the bar as you can. The gap between your body and the bar is what I call “financial margin,” which we all need. This is the space that grants peace and financial protection in the unexpected storms of life.

It is possible to increase your monthly margin quickly by adjusting your lifestyle. Consider the benefits of choosing to live on far less than you make. Manage the common budget busters—food, entertainment, and transportation—to further reduce expenses.

Other Tips

Paying down the highest interest-bearing note first will save you money in the long run. Paying down multiple small notes can provide a psychological advantage. Repay any late mortgage or rent, utilities, HOA fees, taxes, and car payments so there is no threat of losing your home or car.

Do you owe family members any money? Do not ignore this responsibility. Be honest, and treat them as you would want to be treated so that relationships are not harmed.

Be Intentional 

Even if you do pay off all your debt, it is important to manage your finances well as you go forward. Just because you become debt-free does not guarantee that you will stay that way unless you manage what you have well. Here are my three tips:

  1. Plan ahead: Commit your work to the Lord, and your plans will be established. (Proverbs 16:3 ESV)
    • Budget wisely. This will keep you from creating more debt and will allow you to build an emergency savings fund. If needed, a crisis budget can get you to a position of financial strength. Here are instructions, an online fillable form, and a spending plan.
  2. Seek counsel: Without counsel, plans fail, but with many advisers, they succeed. (Proverbs 15:22 ESV)
    • Please consider my advice as only one source of those you will turn to for help.
  3. Make wise decisions: If any of you lacks wisdom, let him ask God, who gives generously to all without reproach, and it will be given him. (James 1:5 ESV)
    • God is the source of all wisdom. When we learn His Word and commit to live by it, everything in our lives will begin to take on new excitement and joy. Using money to fulfill God’s purposes for your life will be the best financial decision you can make.

Thank you for the question. I don’t think you can go wrong if you pay off the debt and commit to following the steps above.

For more guidance, especially if your debt is related to credit cards, please consider contacting Christian Credit Counselors. They are a trusted source of help.

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Budgeting, Money Management

You Don’t Need an Emergency Fund for These Financial “Emergencies”

BY DANIEL RODRIGUEZ

An emergency fund (or cash reserve fund) is important to your financial security. I would say paying off high-interest debt and building up an emergency fund are the foundation of your financial stability. This rings even more true during these unprecedented times. But, when should you tap into your emergency fund? What constitutes a financial emergency? I believe the list of actual financial emergencies is short. This would include unexpected life events such as losing your job, a large medical bill, an expensive auto repair, or a substantial home repair. So, what is NOT a financial emergency and how should you plan for those expenses? Here are some items that I would not consider financial emergencies:

Property Taxes. If you use an escrow account to pay for your property taxes, then you are funding your property tax payment every month. This is an easy way to ensure you aren’t surprised by your property tax bill. If, on the other hand, you don’t use an escrow account, then you should be prepared to pay for this expense every year by budgeting for it in your monthly housing expenses.

Most Home Maintenance Expenses. Owning a house means having home maintenance expenses. There are countless things that need to be fixed or maintained. It is important to have a line item in your spending plan for home maintenance expenses. You can use an average of your home maintenance expenses for the past three years to give you a ballpark estimate. You can then round that figure up to account for unexpected expenses. This will at least give you a baseline estimate, rather than having a $0 budget line item for expenses that will invariably come up.

Most Auto Expenses. Buying new tires is not a financial emergency! Your auto registration is also not a financial emergency. Just like with home maintenance, there should be a line item for auto maintenance expenses and auto registration. These expenses happen every year, so you should be prepared to pay for these when they happen.

Most Health Services. This one is similar to home and auto maintenance, but this one is for maintenance on yourself and your family! Every year, doctor, dentist, and eyecare expenses probably come up (some years more than others), so you should plan for them. This one is harder to estimate because these expenses are much more unpredictable. I always advise budgeting higher than anticipated to create a “buffer” in your budget. If you end up spending less, then great! But, if you end up spending more, then the financial shock won’t be as dramatic.

Tax Preparation. If you have someone prepare your taxes every year, then you should factor it into your spending plan. I advise people to take their annual cost for tax preparation, then divide it by 12 to give them a monthly amount for their budget.

Holiday Gifts. This is another spending category that happens every year that seems to catch people by surprise. Similar to tax preparation, I would take the total spending on holiday gifts then divide it by 12 to give you a monthly amount for your spending plan.

How can you plan for all of these expenses in a simple way? I’m glad you asked! I would use a separate checking or savings account (“Irregular Account”) for most of your non-monthly expenses. You can then use one account to save for your property taxes, estimated home maintenance expenses, auto maintenance expenses, auto registration, health services expenses, and tax preparation fees. When you have large expenses in any of those areas, you can pay for them directly out of your Irregular Account or “reimburse” your main checking account. You can also include holiday gifts in your Irregular Account. Alternatively, you can set up a separate savings account for holiday gifts, then transfer that money to your main checking account right before you start your holiday gift spending.

I hope this was helpful in learning why you don’t need an emergency fund for most financial “emergencies.”

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Credit, Holiday Tips, Money Management

Should you buy now and pay later?

By: The Consumer Financial Protection Bureau (CFPB)

Buy Now, Pay Later

If you’ve shopped online recently, you may have noticed new payment options at checkout, including buy-now-pay-later (BNPL) credit, for purchases like clothing, electronics, furniture, and exercise equipment. BNPL is a type of deferred payment option that generally allows you to purchase items with little to no money paid upfront, followed by installment payments. Its use has spiked during the COVID-19 pandemic. According to a recent survey, 42% of American consumers have used BNPL at least once. Although features of BNPL sound similar to traditional layaway, credit cards, or other loans, there are distinct differences. It’s essential to understand the benefits and risks that come with BNPL (or any financial product) before making your next purchase.

How BNPL works

Products that are eligible for BNPL range in price from less than $100 to several thousand dollars. When you’re buying one of these products using BNPL, you will select that option at checkout online or in an app. If approved, the purchase is sent to you and the cost is split into a payment schedule – typically four fixed payments made bi-weekly or monthly until the balance is paid in full. Approval takes minutes, with no interest or finance charges.

Unlike credit card companies or other consumer loan lenders, BNPL companies generally don’t conduct a hard credit inquiry when you apply. Instead, most BNPL providers only require the following:

  • You’re at least 18 years old
  • You have a mobile phone number
  • You have a debit or credit card to make payments
  • They are able to validate your identity.

BNPL may seem straightforward and convenient; however, you should consider a few things before selecting this option to make a purchase.

Don’t overextend your finances

BNPL can be a tempting payment option for many consumers because it makes it easy to purchase something today and pay for it later. Because you can qualify for BNPL without passing a hard credit inquiry, make sure you have a good sense of your finances and whether the payments will fit within your budget. Just because you qualify for BNPL or any other credit product, doesn’t mean you should use it. Contact a qualified financial advisor if you need help creating a budget or check out the CFPB’s resources.

Understand credit reporting

Your repayment behavior on many types of loans and credit products is reported to consumer reporting companies. This can help you establish credit or build a credit score or hurt your credit profile if you make late payments or use too much of your available credit. Some consumers might assume that BNPL credit helps them build their credit history. It’s important to know that most BNPL credit is not reported to the credit bureaus and won’t impact your credit score. If getting or building credit is your goal, use our resources to better understand how to improve your credit record over time.

While most BNPL companies don’t currently report to consumer reporting companies, there are some that do. If you make a late payment, and the BNPL company reports your late payment to a credit reporting company, this can harm your credit history. Be sure to research whether or not a BNPL company reports to credit bureaus before using their service.

BNPL products can carry late fees

While many BNPL companies don’t charge interest, most do charge late fees if you miss a payment. In addition, you could be blocked from future purchases until you make past payments and could even have your debt sent to a debt collector if you fail to repay. Because lenders have different fees and policies, it is important to carefully review the BNPL terms and conditions to understand your obligations. Also, be aware that your bank may charge you an overdraft or NSF fee if you sign up for automatic repayment through your debit card or bank account and don’t have enough funds to cover the payment.

BNPL products don’t have the same protections as other types of credit

Like a credit card, you can use BNPL to make a purchase and pay for it later over time. However, BNPL loans currently lack the consumer protections that apply to credit cards. For example, BNPL companies don’t offer the same dispute protections as credit cards if the item you purchase is faulty or a scam. Returning merchandise bought with BNPL can sometimes be complicated. The BNPL company may hold you responsible for the total cost of purchase even after you’ve returned the product, so be sure to read and understand the merchant’s specific return policies.

Compare BNPL to other payment options

BNPL offers aren’t the only new payment option you might find when making an online purchase. There are other types of installment loans that let you repay purchases over a longer time, though some of these loans charge interest and may also charge late fees. Most of the other loan options also do a hard credit inquiry when you apply and report your payments to the credit bureaus, which could help or hurt your credit score.

As with any loan or credit offer, make sure you can afford to make the payments on time and that you understand the terms of the loan before agreeing to it.

 

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Finance, Investing, Money Management

Ask Chuck: Is Day Trading A Bad Idea?

By: Chuck Bentley, Crown Financial Ministries

Dear Chuck,

My son’s college roommate made some money in day trading. Now my son wants in on the action. I’m not sure what to tell him, except to avoid it!

Day Trading Fears

Dear Day Trading Fears,

The Bible talks a lot about investing, so I will be able to give you some of those principles to help direct your son. He is jumping on to a very hot trend among young people right now.

Here is a simple framework of my core beliefs about this topic:

  1. Investing is not gambling.
  2. Day trading is not investing.
  3. Investing should be done according to God’s principles.

Day Trading on the Rise 

Day traders are traders who execute intraday strategies to hopefully profit off relatively short-lived price changes for a given asset. On the contrary, investors look to maintain ownership of a given asset indefinitely to give it the opportunity to increase in value.

Recently, Felix Salmon at Axios.com wrote: “Never mind saving for retirement. Gen Z has embraced the stock market as a place to make short-term gains.” Technology, social media, and overconfident young people are causing the resurgence of day trading. Barriers to entry are low, numerous apps make trading easy, and they do not fear risk or failure. They only see potential wins.

According to Investopedia, active traders desire to profit quickly from price fluctuations and only hold trades for a brief period of time. They generally focus on stocks, foreign currency, futures, and options. Volume is necessary because price changes may only be in pennies. Day traders make tens or hundreds of trades per day. Swing traders open or close positions every few days. Active investing is slightly different. It involves ongoing buying and selling activity to beat the market. Portfolios are rearranged to adjust to the market. Passive investing is a buy-and-hold strategy for those interested in long-term investments with minimal trading. It is cheaper, less complex, and for those who desire to build wealth gradually. Each has pros and cons. But beware, some of these methods violate God’s principles.

Investing is Not Gambling

The only thing investing and gambling have in common is they both involve financial risk. However, they radically differ in one key aspect—how you create a financial gain. Gambling requires that other participants lose in order for you to gain. Investing requires that everyone must win in order for you to gain.

Gamblers do not care if others lose, only that they win. The Bible warns against this attitude.

But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction. For the love of money is the root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs. (1 Timothy 6:9-10 ESV)

Day Trading is Not Investing

While not actually gambling in the strict sense, day trading is certainly more akin to it than investing.

The Bible warns: “Steady plodding brings prosperity; hasty speculation brings poverty.” Proverbs 21:5 (TLB)

My friend, Tim Macready, former Chief Investment Officer at Christian Super, a pension fund located in Australia, says: “At a personal level, investing represents an opportunity to provide for our future needs by setting aside money today and growing it for the future. At a societal level, the assets we invest can be used for productive purposes—to support the creation of goods, services, and jobs that support human flourishing.”

People fail to recognize that investing is ownership in a company. Robin John, CEO of Eventide, says “The real issue that we face today is that investors are divorced from their investing.”

Investing is willingly placing your funds into a business, commodity, or other assets to allow it time to grow and increase in value. This takes patience, knowledge, and wisdom.

Proverbs 24:3-4 (NIV) says, “By wisdom, a house is built, and through understanding, it is established; through knowledge, its rooms are filled with rare and beautiful treasures.”

To apply this proverb to investing, we must read, learn, research, study, and understand what we are investing in to create lasting wealth. While many may claim the same approach to day trading, it is difficult to defend rapid trading as a wise approach.

Jonny Wills at FaithDrivenInvestor.org says, “An influx of novice investors is blurring the line between investing and gambling….How should I view the resources God has put in my hands? Is money a toy or is it a tool?”

Invest According to God’s Principles 

Vince Birley, CEO of Vident Financial, says, “Christians should see financial markets as a great test to ensure that their love and security stay with God and are not misplaced with money.”

Unfortunately, day trading is often driven by greed. Combine that with overconfidence, and you’ve got a dangerous situation. In Luke 12:15-21, Jesus told the parable of the rich fool. He said, “Take care, and be on your guard against all covetousness, for one’s life does not consist in the abundance of his possessions.”

Encourage your son to be a good steward of what God provides. Suggest that he takes a Crown course to learn more of God’s economic principles, as a foundation for how he approaches his finances. At Crown, we have many resources on learning God’s principles of investing.

I also recommend that he begins to read and learn from some of the great investors before making any trades or investments. Many resources are available, starting with works by Benjamin Graham, Peter Lynch, Sir John Templeton, or Warren Buffet. They offer experienced insights into becoming a serious investor. Young people desire to make a difference in society. Perhaps he would also be interested in learning about impact investing.

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Budgeting, Credit Cards, Debt, Money Management

Ask Chuck: My Spouse is an Impulsive Spender

By: Chuck Bentley, Crown Financial Ministries

Dear Chuck,

Do you have any advice for someone married to an impulsive spender?

Cautious Budgeter 

Dear Cautious Budgeter, 

Sounds like you may be married to an opposite financial personality; my wife and I can relate! 

Most of us have made an impulsive purchase at some point in time. Others struggle with it more frequently. Or they are married to one who does. I was the impulse spender in our marriage for many years. To be clear, impulse spenders buy what they want without considering the consequences. Their behavior negatively impacts others, and the financial stress can be terrible. 

It can be difficult to determine if someone is impulsive, compulsive, or materialistic. Some definitions will help here: 

Materialistic describes one who is excessively concerned with physical comforts or the acquisition of wealth and material possessions. This is an issue of the heart that drives the behavior. Often, people live ignorant of or in denial of this spiritual deception. 

Impulse buying is often related to anxiety or depression. Those who struggle with their self-image desire acceptance, respect, or attention. They shop whether they can afford to or not, in an attempt to meet those needs or boost their mood. Some call this “retail therapy.”   

Compulsive spending, on the other hand, is an uncontrollable desire to shop. It results in spending large amounts of time and money and tends to escalate over time. Mental Health America gives 4 stages of compulsive spending: anticipation, preparation, shopping, then spending. If impulse buying impacts budgets, compulsive spending can destroy them! 

Symptoms of Compulsive Spending:

  • Spending a significant portion of income on discretionary purchases
  • Accumulating a large amount of consumer debt
  • Spending continually, despite resolutions to stop
  • Hiding purchases from loved ones 
  • Experiencing more excitement in purchasing than owning 
  • Feeling let down or shame after buying something
  • Buying things not needed, not using what’s bought
  • Suffering relationship problems due to spending
  • Feeling ashamed of the spending problem
  • Getting agitated or excited when shopping
  • Feeling that the next big purchase will improve life 
  • Shopping is the primary or only means to cope with stress

A Change of Heart 

To help your spouse identify if he/she is struggling with materialism, consider doing an online Crown study together. Typically, the behavior will not change until the heart is transformed. In my own experience, I had to repent of the control money had over my life. I surrendered my life to the Lord’s control in order to escape my double-mindedness. 

Practical Tips 

Ask your spouse to consider some of the steps that will bring impulsive buying or compulsive spending under control. 

Pick a stress-free time and environment to set goals. Write them down, and post them in a visible place. Then, create a budget. Honor God and one another by staying within the spending limits for each expense category. Learn to give first, and then, pay your bills; use automatic transfers to specific savings accounts. Discover what the Bible says about money, and ask the Lord to work in your situation. 

Track shopping sprees. Discover the triggers, and note what is purchased.

Avoid shopping—period. Find a healthier activity to substitute for the rush. If you must make a purchase, determine your needs, make a list, use cash, then exit immediately. Take a spouse or trustworthy friend with you. 

Stop using credit cards. Put them in a very, very inconvenient location. Unsubscribe from store emails, and avoid online shopping. Professional counseling may be necessary. Just remember, “No temptation has overtaken you that is not common to man. God is faithful, and he will not let you be tempted beyond your ability, but with the temptation, he will also provide the way of escape, that you may be able to endure it.” (1 Corinthians 10: 13 ESV) 

Aim to be humble and transparent, committing to honesty in all transactions. This removes distrust in relationships. Seek accountability with your spouse and the wisdom of an older couple. Learn good communication skills. (Check out the numerous resources available at RightNowMedia.org.) 

Learn to appreciate things money can’t buy—like nature, health, and relationships. Ask God to remove the impulses so that you can fulfill His purposes in your life. He is “able to do immeasurably more than all we ask or imagine, according to his power that is at work within us….” (Ephesians 3:20 ESV) 

Pray for an eternal perspective—that the things of this world would lose their luster. “Do not lay up for yourselves treasures on earth, where moths and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.” (Matthew 6:19-20 ESV)

Christian Credit Counselors may be able to provide more guidance, as they are a trusted source of help to free individuals and families from the burden of credit card debt. 

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Bankruptcy, Home & Mortgage, Money Management

Ask Chuck: How Can I Disaster Proof My Finances?

By Chuck Bentley, Crown Financial Ministries

Dear Chuck,

I have several friends who are in deep financial trouble in the early years of their marriage. I want to avoid the stress they’re experiencing. Do you have any helpful tips so that I can guard my home and marriage?

Avoiding Disaster

Dear Avoiding Disaster, 

Being under constant financial stress is terrible at any age, but it is especially dangerous in the “early years.” This is a time when most couples are vulnerable to separation and divorce. 

I assume your friends are struggling with debt due to being unprepared for their lifestyle. It usually occurs in a series of small mistakes, as a result of one huge accident, or because of the assumption that “this is just the way it’s done.” Since I don’t really know what happened to your friends, I will give you some financial advice and also some general principles so that you can avoid the five most common causes of debt.  

1. Allowing a Get-Rich-Quick Mentality to Govern Decisions
If people only invested in get-rich-quick schemes with available cash, they would be more cautious. Somehow, it is easier to risk borrowed money because it appears to be free money. Like purchasing consumer goods on a credit card, it is easy to justify borrowing money to invest, especially when you think your returns are “guaranteed.” Speculating on the future is a practice in surety, which the Bible warns against. It’s presumptuous since no one can rightly predict financial markets.

Believers are particularly vulnerable, trusting so-called “Christians” who claim to have a special revelation from God when selling their scheme. My advice: Stay with what you know. Thoroughly investigate the product, company, and person presenting the offer. Make no hasty decisions. Always wait 24 hours, and pray before investing a dime. Borrowing money to speculate is not investing. It is a high-risk gamble.

2. Ignoring the Primary God-Given Advisor: A Spouse
Since opposites tend to attract, couples will not agree on everything. Learn to communicate respectfully to reach reasonable compromises. Husbands are to love their wives. That includes seeking and listening to their advice before making any financial decisions. Wives are to honor their husbands and to respectfully give their opinions. God created a husband and wife to function as a single working unit. This enables them to capitalize on each other’s strengths and avoid errors in judgment.

3. Failing to Schedule All Expenses
Plan on financial disaster if you fail to plan for unexpected expenses. These are often things that have yet to come due or the unexpected costs of maintenance, repairs, or health issues. Anyone with a car, home, children, or pets understands this. Ignoring the inevitable or not working expenses into a budget creates credit card dependency. Adjust the budget to include setting aside money into an Emergency Account. Though temporarily uncomfortable, it is very wise long-term. It is best to have 3-6 months of your monthly expenses in an Emergency Fund.

If you are struggling with credit card debt now, contact our friends at Christian Credit Counselors. This should be done before you dig a deep hole.

4. Buying a Home You Cannot Afford
Purchasing a home too early in marriage or paying too much for one creates problems. A house payment for the average family’s budget should not exceed 40% of net spendable income after giving and taxes. Include the mortgage, utilities, HOA fees, property tax, maintenance, and repairs. Destroying the budget to get into a home is not logical. It restricts the ability to give, save, and invest. Only purchase if the numbers work, preferably based on one income only. If you cannot put 20% down before you take on a mortgage, it is best to rent and save until you can.

5. Buying a Car You Cannot Afford
Most people look at the monthly payments for a car instead of the overall price. Interest translates into paying significantly more than the asking price and being burdened by the debt for years. Unlike a house, a car depreciates in value the moment you drive it off the lot. So, do not finance something that will lose money. Save, and buy reliable used cars with cash.

Disaster Proofing the Marriage  

There is no silver bullet to protect “your home and marriage” from a disaster. Satan prowls around seeking to cause havoc in all relationships including the best marriages. Having your finances under God’s control is a sign of wisdom, and I highly recommend it. At the same time, let me give you a few tips that have helped us through the hard days.

Pray together, often. This took us years to get comfortable with, but it is now a way of life. Often, we take long walks and pray aloud together the entire time. 

Seek to grow as Christ’s disciples. When you are both pursuing this goal, you will experience the fruit of the Spirit which is a glue to make any marriage even better. 

Invite your spouse to be your most intimate, trusted advisor on all decisions. This trusting submission builds confidence and leads to better outcomes in all things as you work in unity. 

Be humble, gentle, and quick to apologize. Nobody escapes hurting their spouse in a marriage. We can escape becoming indifferent about it by showing mercy, kindness, and grace when we are offended. 

A good marriage is a financial benefit. A divorce is emotionally and financially devastating. My wife and I wrote an entire book on the topic of money and marriage, called Money Problems, Marriage Solutions. It is a step-by-step guide to growing in unity. You can get your copy here.

I made many of the mistakes that you are hoping to avoid. By God’s grace, He kept our marriage together, and we worked through the mistakes. Today, we are in a much better place and stronger because of our ability to work together. There is always hope when you fully trust Him and apply the principles of God’s economy.

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Home, Money Management, Personal Goals

Can You KonMari Your Money?

By Jeannie Rodriguez | Dr. Budgets

Recently, I watched the entire series of “Tidying Up with Marie Kondo” on Netflix (along with seemingly everyone else in the world) and I was inspired! One by one I watched as Marie Kondo helped people transform their homes and, eventually, their relationship with stuff. I tackled organizing my daughter’s clothes and the new sight of her beautifully folded clothes brought me tremendous joy! It got me thinking…can people apply KonMari principles to their money and experience the same joy? Being married to Dr. Budgets, I can confidently report that it can be done! Here’s how:

1) Does It Bring You Joy?

KonMari method principle:

Collect all your clothes (or papers, or miscellaneous items) in one place and hold each one…ask yourself if it brought you joy. If it did, keep it. If it didn’t, thank it and let it go.

KonMari application to your money:

Open a Mint.com account and link all your bank and credit card accounts. Mint will import all your expenses for the last three months. Look at each purchase and ask yourself if it brought you joy. If it did, great! Incorporate it into your budget. If it didn’t, thank it and let it go.

Some examples:

$100 for a monthly housekeeper or massage – think about how you feel after this experience. Does it bring you joy? (I know that I feel joy after a massage!) Great, now work it into your budget.

Now, what about these?

  • $100/month on-the-go coffee
  • $100/month gym membership
  • $100/month for a storage unit

Maybe you love the daily indulgence of a coffee shop cup of coffee and it truly brings you joy…great! Or you LOVE your gym membership, or you are thrilled to have a storage unit because it keeps those items out of your home. Those $100/month expenses should bring you the same joy as the massage or housekeeper. If they do, work them into the budget.

Alternatively, maybe you are shocked to discover you spend $1,200 a year on coffee that doesn’t, in fact, bring you joy. Or maybe you haven’t been to that gym in months or you’re not even entirely sure what you have in that storage unit, maybe seeing those expenses does not bring you joy. That’s okay…take a moment to thank them, and then take steps to get rid of them.

2) Organize in a Way So That You Can See Everything

KonMari principle:

Fold your clothes in a special way so that they can stand up in your drawers and you can see everything at once (not stacked on top of each other). Put smaller items in boxes and display sentimental items so you can see/appreciate them.

KonMari application to money:

Organize your money so that you can SEE it. This will be a little different for everyone, but here are some ideas (you can combine these methods):

  • Use a money tracker (like Mint.com) and categorize/review your spending monthly.
  • Use the envelope system wherein you allocate actual cash money in an envelope for spending in categories such as dining out, bills, and groceries.
  • Create a visual way to track your progress toward your financial goals and review them each month. Here is a fun way you can try!

3) Commit Your Time to this Project

KonMari principle:

Set aside time to go through everything and commit to getting it done. Trying to do it little by little doesn’t work. Make a commitment to go through the entire process.

KonMari Application to money:

Exact same idea – set aside time to organize your finances, determine financial goals and set yourself up for success.

4) Take a Moment to Reflect

KonMari principle:

At the beginning of each episode, Marie would find a spot in the house, sit on her feet, close her eyes and introduce herself to the house. She encouraged the people with whom she was working to join her and take a moment to thank the house for everything it gave them and imagine how they want to feel after the process.

KonMari application to money:

Take a moment to think about your money. What does your money do for you? How does it make you feel? How do you want it to make you feel? What do you want to get out of the process of organizing your finances? Just take a moment to set the tone for the journey you’re about to take.

5) It’s Your Decision

KonMari principle:

Marie Kondo does not question the decisions of the people on the show. She doesn’t suggest that they should let go of an item they decided brought them joy. The “afters” of these spaces aren’t the typical picture-perfect homes you’d expect on a makeover show, and I love it! These are real families with real homes, not pages in a magazine.

KonMari application to money:

How you spend your money should be up to you. If you’ve done the work to set financial goals and made the decision to be intentional about your spending, then you can buy those fancy shoes or have a spa day or buy that new gadget. Your budget should not look like my budget because we have different goals and priorities.

6) It’s an Ongoing Process (but you’ll probably feel better about it now!)

KonMari principle:

Going through the KonMari steps wasn’t the end – now the families need to do a little bit each day to keep their homes in that state. However, after going through the steps, each of the families appeared to feel better about their stuff and their home. It seemed that the task of keeping up their homes wasn’t as overwhelming as it may have felt before they worked with Marie Kondo.

KonMari application to money:

While some of your budgeting tasks can be automated (and should be!), you’ll need to be actively involved in your finances. Many consumers talk about an “out of sight, out of mind” mentality about their finances, but almost all admitted that wasn’t the best approach! Setting aside a little time each month to review your spending, whether it’s in Mint.com, on a spreadsheet, or with a money coach, is going to be the key to keeping that joyous feeling about your money. If the idea of doing that now seems daunting, understand that you’ll likely feel better about it after you go through the initial process of organizing your money and setting up a spending plan.

7) You Have the Potential to Improve Your Relationships

KonMari principle:

So many relationships appear to be transformed in the series: peoples’ relationships with their homes, with their stuff, and with each other. It is no surprise that if you have a sense of chaos or stress associated with a major part of your life, it’s going to affect your relationships. Going through the process, at the very least, opened a dialogue between the participants. In many of the episodes, it seemed to improve partnerships and family relationships…and I think that’s something that truly sparks joy!

KonMari application to money:

Since money touches so many aspects of our lives, it’s no wonder it can be a big source of stress and tension in relationships. Similar to the physical items in your home that are always there, such as paper, clothes, photos, books, and boxes of Christmas decorations, the financial items such as bills, budgets, statements, income, expenses, and debt aren’t very different. You can try to pack them away and forget about them or work around them and get by, but unless you deal with it all (ACTUALLY deal with it), it’s probably constantly stressing you out and affecting your relationships. In many ways, I think sorting through the money stuff is a lot like sorting through the stuff-stuff…once you dig in, it’s not as scary as you thought and you’ll wish you had done it sooner!

Conclusion

As it turns out, there is a lot about the KonMari method that can be applied to money! Have you applied any of these principles to your home? How do you feel about doing the same with your money? If you’d like help with the process, Christian Credit Counselors could be like your own Marie Kondo for your finances!

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Budgeting, Credit, Credit Score, Debit & Your Credit Score, Money Management, Personal Goals

Financial Spring Cleaning Tips

BY DANIEL RODRIGUEZ | DR. BUDGETS

Spring Cleaning can mean more than buckets, mops, and brooms! There are many reasons why this time of year is great for cleaning up your finances:

  • We’re 4.5 months into the year, so you are starting to get an idea of how the year is shaping up, including earnings, spending, and debt repayment.
  • You’ve just done your taxes (or filed an extension) and can start getting organized NOW for next year’s taxes.
  • There’s something invigorating about the time between winter and summer – birds are chirping, flowers are blooming, and you might feel motivated to do some spring cleaning!

Here are some things to consider when you do your financial spring cleaning:

Review Budget (Spending Plan)

We are about a third of the way through the year, so now is a good time to check in with your spending thus far. How are you doing with your spending this year? Have you spent more than anticipated in some areas? If so, consider spending less in those areas during the next few months to balance your spending in those categories. Have you spent less than anticipated in some areas? If so, consider setting that excess money aside in case you end up needing to spend in those categories later this year. Remember to stick to your spending plan even when you seem to have the extra money in your bank account…that “extra” money will come in handy when those semi-annual or annual payments are due (or over the holidays!).

Declutter Paper

Even with all our technology and cloud storage solutions, we are still overrun by paper! Paper clutter can be stressful, and it is probably costing you money (and time!). Consider using this time of the year to declutter your paper. Some examples of things you may find include bills, bank statements, notifications for membership renewals, and payments for Flexible Spending Account (FSA) expenses. You can scan, then shred items that you need (be sure to back up the files!) and toss or shred items you don’t need anymore. For more info on what to toss and what to keep, check out these articles from Forbes and USA Today.

Return, Sell or Donate

Do you have unwanted stuff lying around the house? Are there things you haven’t used in over a year? Those items can sometimes be returned (if you purchased them recently), sold, or donated. If you can return the item, that will be your best option since you will be able to get back what you paid for it. If you have nice clothes, here are 13 of the best places to sell used clothes for money. For other items or electronics, consider using Craigslist or eBay. And if you have unwanted gift cards, try a website like CardCash to get cash for those.

Improve Credit

This is a great time of the year to review your credit. First, check your credit reports for accuracy at annualcreditreport.com. If you want to check your credit reports for free throughout the year, check one of the three credit reports every four months (for example, Experian in April, Equifax in August, and TransUnion in December). To help increase your credit score, try to bring your debt utilization rate under 30%. Here are 5 tips for winning the credit utilization game. Finally, pay your bills on time every time! According to Investopedia, paying your bills on time is the most important component of your credit score. With that said…

Automate Bill Payment

If you can pay most or all your bills automatically, that can streamline your finances, reduce stress, and improve your credit. You can also avoid those dreaded late fees! If you are concerned with having enough in your checking account when your credit card payments come due each month, consider setting up your automatic payment for the minimum payment, and then paying extra toward your cards manually when you have the additional funds to pay down your debt. A bonus tip: save automatically! If you can automatically save money, it has been proven to increase your overall level of savings. Just be sure to pay off that high-interest debt first!

These are my 5 tips for financial spring cleaning. Happy Spring!

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Debt, Economy, Money Management, Personal Goals

Ask Chuck: Coping With Economic Anxiety

By: Crown Financial Ministries

Dear Chuck,

I don’t think I have ever felt more uncertain about America’s economic future than I do now. Do you see any light at the end of the tunnel? My anxiety levels are growing! 

Anxious American

Dear Anxious American, 

Your question prompted me to see if there was some measurement of the sense of uncertainty that so many of us are feeling and I found one! The International Monetary Fund published a graphic of the “World Uncertainty Index” in context over the past 25 years. The interesting takeaway for me is that the index peaked with news of the Coronavirus but has decreased by about 60% since the middle of last year. Take a look:

The point is, you are not alone. The world is in a history-making shift right now and most of us are experiencing greater levels of concern and anxiety.

Dealing with Our Unknown Future 

If we focus our minds on all of the uncertainty we are truly in right now, it will no doubt breed anxiety. Financial anxiety begins when we start projecting how our future will be impacted by current events. Not knowing if our needs or expectations will be met creates worry. Dwelling on the unknown can propel us into a vortex of hopelessness. Doubt, disbelief, and negativity will eat away the peace and confidence that God wants us to experience. 

In July of 2020, AnxietyCentre.com released an article with data and facts worth reading to get an idea of how serious this issue is. It states:

According to The Economic Burden of Anxiety Disorders, a study commissioned by the ADAA and based on data gathered by the association and published in the Journal of Clinical Psychiatry, anxiety disorders cost the U.S. more than $42 billion a year, almost 1/3 of the $148 billion total mental health bill for the U.S.

Anxiety can raise its ugly head concerning health, money, education, careers, family, on and on. However, this is not new to humanity. An idiom came into use in North America during the mid-1800s. You’ve probably heard some form of it: “don’t borrow trouble.”  Worrying solves nothing. It wastes time and energy and distracts us from more important things. Most of what we worry about never happens and reveals our lack of trust.

That idiom is nothing new. The Bible addressed the issue centuries ago:

  •  “Anxiety in a man’s heart weighs him down, but a good word makes him glad.” (Proverbs 12:25 ESV)
  •  “When the cares of my heart are many, your consolations cheer my soul.” (Psalm 94:19 ESV)
  • “Therefore do not be anxious about tomorrow, for tomorrow will be anxious for itself. Sufficient for the day is its own trouble.” (Matthew 6:34 ESV)
  • “Humble yourselves, therefore, under the mighty hand of God so that at the proper time he may exalt you, casting all your anxieties on him, because he cares for you.” (1 Peter 5:6-7 ESV)

Because we cannot know the future, we will always be prone to experience financial anxiety if we dwell on all the “what if” scenarios that race through our minds. Here is a simple framework that may help. When financial anxiety is rising, remember S.O.S. Stop. Organize. Start. 

Stop!

If you are overspending, accumulating debt, and living with financial stress to make it to the end of the month, declare that you will stop repeating those mistakes now. This is the first step in gaining financial wisdom that will reduce your anxiety. Stopping is progress! 

Humble yourself and recognize your need to place full confidence in the Lord. Repent of mishandling the money He entrusted to you. Don’t blame others or beat yourself up. Simply agree that you want to discontinue old bad habits with your finances. 

Organize!

Make a plan to repair the problems you have created. They will not disappear by winning the lottery or ignoring them. Get help and seek training to address your issues and establish goals. 

Begin a process to right the wrongs. Ask the Lord to help you persevere through this step with discipline, self-control, and hope. This will reduce your anxiety even more. God promised that we will experience tribulations and storms but He will never leave us or forsake us.

Start!

Once you have stopped and organized, you are 2/3 of the way there. God wants you to start doing what is good and faithful with money. His goal is not that we simply have freedom, but that we use money for His purposes, not our own. 

It can be helpful to find wise mentors and gain knowledge from others who can guide and encourage you. Prioritize your life around the basic principles of giving first, saving second, and living on the rest. Restructure your lifestyle within a defined budget and renew your mind daily. 

Light at the End of the Tunnel

I truly do not know what lies ahead, although I enjoy watching trends and keeping up with events that threaten our financial future. I just released a new book called 7 Gray Swans where I discuss many of these trends. I also know that there is always a reason for hope. Most of what we worry about will never happen. If it does, God will work it together for our good. We can find His Light shining brightly, no matter how dark our circumstances may seem. 

We offer a variety of online courses and other resources to ground you in Biblical financial principles and fortify you for the days ahead. Christian Credit Counselors can help you eliminate credit card debt. Their Christ-centered values and experienced team of professional counselors can help you overhaul your finances. That step alone will reduce your anxiety.  

Pray for our nation. We are in a turbulent time. We need you and all believers to be the salt and light that Jesus created us to be for such a time as this.

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Finance, Goals, Money Management, Saving

Rebuilding toward a Brighter Future with Emergency Savings

By: Consumer Financial Protection Bureau (CFPB)

This year, for many Americans who experienced financial challenges as a result of the coronavirus pandemic, preparedness means taking small steps toward rebuilding and resilience.

If you are ready to think about your bigger financial picture for the first time in months, what’s the first step?

Consider – or start – your emergency saving fund. As you build it over time, it will help cover unexpected expenses that may come, whether that be a natural disaster, unexpected illness, car trouble, or other financial downfalls. It can become an important means for avoiding unwanted debt and help you more quickly realize your dreams. In short, it can become a strong foundation for your financial future.

There are different strategies to get your savings started. These strategies cover a range of situations, including if you have a limited ability to save or if your pay tends to fluctuate. It may be that you could use all of these strategies, but if you have a limited ability to save, managing your cash flow or putting away a portion of your tax refund are the easiest ways to get started.

Strategy #1: Create a savings habit

Building savings of any size is easier when you’re able to consistently put money away. It’s one of the fastest ways to see it grow. If you’re not in a regular practice of saving, there are a few key principles to creating and sticking to a savings habit:

  • Set a goal. Having a specific goal for your savings can help you stay motivated. Establishing your emergency fund may be that achievable goal that helps you stay on track, especially when you’re initially getting started. Use our savings planning tool to calculate how long it’ll take you to reach your goal, based on how much and how often you’re able to put money away.
  • Create a system for making consistent contributions. There are a number of different ways to save, and as you’ll read below, setting up automatic recurring transfers is often one of the easiest. It may also be that you put a specific amount of cash aside each day, week, or payday period. Aim to make it a specific amount, and if you can occasionally afford to do more, you’ll watch your savings grow even faster.
  • Regularly monitor your progress. Find a way to regularly check your savings. Whether it’s an automatic notification of your account balance or writing down a running total of your contributions, finding a way to watch your progress can offer gratification and encouragement to keep going.
  • Celebrate your successes. If you’re sticking with your savings habit, don’t miss the opportunity to recognize what you’ve accomplished. Find a few ways that you can treat yourself, and if you’ve reached your goal, set your next one.

Who is this helpful for: Anyone, but particularly those with consistent income. If you know you have a regular paycheck or money consistently coming in, you can create a habit to put some of that money towards an emergency savings fund.

Strategy #2: Manage your cash flow

Your cash flow is essentially the timing of when your money is coming in (your income) and going out (your expenses and spending). If the timing is off, you can find yourself running short at the end of the week or month, but if you’re actively tracking it, you’ll start to see opportunities to adjust your spending and savings.

For example, you may be able to work with your creditors (like your landlord, utility companies, or credit card companies) to adjust the due dates for your bills, or you can use the weeks when you have more money available to move a little extra into savings.

Who is this helpful for: Anyone. This is one important first step in managing your money, regardless of whether you’re living paycheck to paycheck or have a tendency to spend more than your budget allows.

Strategy #3: Take advantage of one-time opportunities to save

There may also be certain times during the year when you get an influx of money. For many Americans, a tax refund can be one of the largest checks they receive all year. There may be other times of the year, like a holiday or birthday, that you receive a cash gift.

While it’s tempting to spend it, saving all or a portion of that money could help you quickly set up your emergency fund.

Who is this helpful for: Anyone but particularly those with irregular income. If you receive a large check from a tax refund or for some other reason, it’s always good to consider putting all or a portion of it away into savings.

Strategy #4: Make your saving automatic

Saving automatically is one of the easiest ways to make your savings consistent so you start to see it build over time. One common way to do this is to set up recurring transfers through your bank or credit union so money is moved automatically from your checking account to your savings account. You get to decide how much and how often, but once you have it set up, you’ll be making consistent contributions to your savings.

It’s a good idea to be mindful of your balances, however, so you don’t incur overdraft fees if there’s not enough money in your checking account at the time of the automatic transaction. To help you stay mindful, consider setting up automatic notifications or calendar reminders to check your balance.

Who is this helpful for: Anyone, but particularly those with consistent income. Again, you can determine how much and how often to have money transferred between accounts, but you want to make sure you have money coming in. If your situation changes or your income changes, you can always adjust it.

Strategy #5: Save through work

Another way to save automatically is through your employer. In addition to employer-based contributions for retirement, you may have an option to split your paycheck between your checking and savings accounts. If you receive your paycheck through direct deposit, check with your employer to see if it’s possible to divide it between two accounts. If you’re tempted to spend your paycheck when you get it, this is an easy way to put money aside without having to think twice.

Who is this helpful for: Those with consistent income. Again, if you’re getting a check from your employer on a regular basis, pay yourself first by putting a portion of it automatically into savings.

It might seem impossible to save enough to get you and your family through something like a furlough, job loss, or reduced hours. But any amount can make a difference and it’s never too late to start. The more you can save, the better you can weather the worst, and the faster you can recover when it is over.

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