Need To Save But Can’t? You Need A First, A Focus & A Fruit

 

Why is saving money so hard sometimes? It seems there is always something vying for the precious dollars we attempt to save. Sometimes savings doesn’t happen because of the bumps in life, like a medical issue, a job loss or an auto accident which requires immediate action. Sometimes it is because there are so many impulses vying for our money. Between TV commercials, social media, influential friends and peer pressure we are bombarded with reasons to spend instead of save. And there are many other reasons why we struggle to save. From a recent poll done by Forbes, here are the four top reasons Americans said they either could not or do not save:

  • Spending Money Offers Positive Short-Term Feelings, While Saving Money Does Not
  • Financial Goals Typically Take a Long Time to Achieve
  • Life Always Seems to Intervene
  • Unexpected emergencies

This contention for dollars results in a troublesome situation in America. MarketWatch reported in a 2016 study: “Americans are some of the worst savers in the developed world. U.S. adults currently save just under 6% of their disposable incomes, according to the most recent data from the Federal Reserve Bank of St. Louis. That number includes savings and retirement accounts.” Six percent is far below the levels needed to meet most family goals and obligations like retirement, college, new cars and the occasional vacation.

What’s more, the article found that: “Almost half of American adults could not cover an emergency expense of $400 without selling something or borrowing money, according to the Federal Reserve. And about 31% of non-retired adults have no retirement savings or pension at all.”

So, if saving is that hard, how do some people do it very well while most people struggle? After researching this issue extensively, and interviewing many spenders and savers in person, I think the answer comes down to this: People who save money well have a FIRST, a FOCUS and a FRUIT. Let me explain:

Good Savers Have A FIRST

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Meaning good savers prioritize saving FIRST, then spending what is left after saving. How do you do that?

Most of the people I have talked to accomplish their savings goals by consistently doing three things:

  1. They develop a set of goals and objectives and then budget, make and use a spending plan, to allow money to be put aside to meet those goals. In other words, they have a budget that ensures money is allocated each month toward their goals.
  2. Most good savers work hard to define and separate needs from wants. Needs are required for simple living and must be funded in the budget. Wants are something more and good savers usually are willing to fund goals before spending on wants. Good savers are willing to sacrifice wants in order to afford savings for important goals. By that, I mean, savers know what must be paid for, like basic housing, food, clothing and other essential needs.  For instance, let’s take housing. A good saver may be willing to afford basic housing (need) but forego something really fancy (want) because they want to save the money to fund an important goal.
  3. Last, good savers commonly use technology to pay themselves first, automatically and usually quickly so they never miss the money in their paychecks because they never see it. What are examples? Direct deposit into savings or 401K retirement accounts or 529 college savings plans. Many good savers also set up automatic payments to their credit cards so they never carry a balance. Only after all the savings and investments are completed does the remaining money become available for spending. And even then, some good savers automatically pay their important reoccurring bills automatically to make sure they never get behind on items like rent or auto payments.

 

Good Savers Have A FOCUS

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As mentioned earlier, good savers have clear goals which help them to FOCUS where their money should go. If, say, your goal is to retire from full time work by the age of 55, that will require a certain amount of saving and investing each month. Having clear goals helps the good saver stay focused on what’s most important.

There are two important mindsets that help people stick to saving for their goals that are used commonly:

Having “micro goals”. Good savers usually break down their big, seemingly far off goals into smaller goals that feel attainable and are easier to measure progress against. For some people, the goal of retiring in 30 years is not a good motivator to save because it is too far away. But if you broke that goal down into something more immediate and measurable, like “I need to save $275 from every paycheck”, it could keep a person on track to save the money.  As long as the end result of the micro goals contributes to your overall goal, this technique can be quite useful.

Focus on progress made, not the distance to the goal. When you’re working toward a big goal, it’s tempting to keep your eyes on the far off prize. After all, this is all about where you want to go, right? You’re moving in a positive direction. Why would you want to look backward? Well, because sometimes looking backwards focuses on your successes to date, which can motivate future successful actions. Case in point: saving for a big vacation. Doesn’t is sound more motivating to say “I have saved $4,000 toward our Bali trip”, than to say, “I need to save for another 6 months to afford our Bali trip”?

Having clear goals to save toward give us our “why saving is the priority” when we are tempted to spend in the moment on less important items.

 

Good Savers Have A FRUIT

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In order for people to save and/or continue to save, they need to see fruit from their saving efforts. Most good savers consistently do a couple things that bear fruit in their saving journey:

Celebrate small wins: They celebrate small wins to build momentum to continue the quest. Celebrating little wins does two things: It recognizes progress and it allows us to include others into the progress of meeting our goals. It also prioritizes the attainment of the goal over immediate gratification through meaningless impulse purchases.

Another fruit of good savers is knowing that giving up something “good” (an immediate purchase) in order to obtain something “great” (achievement of the goal), builds a higher level of satisfaction and ultimately, self-worth. It builds and shows character that leads to financial freedom!

BONUS – One More Thing – Prepare for Life To Happen

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No matter how wonderful your plans are, sometimes life just intervenes. Murphy’s Law. Whatever you want to call it. Life happens in the form of emergencies, crises, and unexpected costs.You lose your job. Someone gets sick. Your car needs replaced. Your hot water heater fails and floods your basement. Making it hard to make financial progress. And, with that, your plans start to go awry. The path you were on is suddenly diverted and the big goal seems farther away than ever. It begins to feel impossible.

It doesn’t have to be this way. Good savers can take action early to protect their progress toward big savings goals in the way of an emergency fund. Most savers start very early in making their emergency fund. They scrimp, save, live beneath their means and earn extra money to build a fund, usually 3-6 months of expenses, that is there in case of an emergency and make sure the fund does not get eaten away by other expenses. Once the emergency fund is establish and available, they stop contributing to it and start saving towards their other goals.

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Really, the emergency fund is self-insurance. Not only does the emergency fund prevent a run up of wealth-stealing debt, it provides the piece of mind and confidence that goals are attainable and worth saving toward.

Having Trouble Saving?

When it seems like you can’t save money no matter how hard you try, sometimes changing your focus can help. Yes, life happens and sometimes it gets unpredictable and expensive. But by prioritizing savings before spending, having a laser like focus on your goals and celebrating small wins as they big toward the larger goal can be just enough to keep us going and, eventually, realize the goals. That’s why good savers have a first, a focus and a fruit!

 

Should Financial Independence Enrich Our Lives Or Define It?

Recently, I was sitting amongst a group of thrifty friends discussing financial independence (FI) and how important it was to each of us. Some of the discussion was around the definition of FI, and I learned that the definition of FI differs from person to person. Some of the discussion was around dates and amounts of money needed to meet FI. Most of the discussion focused on how important FI was to the group. After about an hour or so of discussion, it occurred to me that FI was the only topic we discussed. There was no discussion of life goals (beyond FI), family, friends, work, sports (Go Astros!) or recent adventures. I found that a bit interesting. On the one hand, FI was a central theme to everyone there. That’s no surprise. Clearly, FI was a top goal for each of us. But on the other hand, is that all there is to our interests and pursuits? Don’t get me wrong, the conversations were interesting and spirited. I really enjoyed it. But it left me asking: Is there more to our lives and our friendship than financial independence?

Which precipitated the topic question in this post: Does financial independence define our lives or does it enrich our lives with the freedom to pursue the goals and dreams in our hearts?

Financial independence: What Is It?

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Financial independence (FI) is a term often used without consistent meaning. Typically, FI means having enough income to pay your living expenses for the rest of your life without having to work full time or be dependent on others.  It also usually includes being free from debt, worry and anxiety about money. Some simplify the definition and see it as simply being self-sufficient. While each person might define it differently, it was obvious that FI was the primary focus for each of us. But in this particular conversation, FI was the only thing being discussed. Aren’t we more than the pursuit of financial independence?

A Case For FI To Define Us

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Starting with a little help from Webster’s Dictionary, being defined by financial independence means to be described or identified with the nature or essential qualities of financial independence. In this case, that means, identified as being frugal (living below their means), having ample income outside of a regular full time job to meet all money needs, dependent on no one other than themselves, free of debt, free of worry and free to pursue one’s goals or dreams. Sounds worthwhile so far!

People pursuing financial independence are passionate people in their pursuit. Usually focused, committed and goal orientated, or obsessed. Saving and investing, combined with the magic of compound interest, is intoxicating and satisfying. Each goal met just increases the desire for the next FI milestone. In addition, FI can be viewed as a great way to provide or support your family, so it is easily perceived as honorable, wholesome and worthwhile. Still sounds pretty good to be defined by our pursuit of FI!

Sometimes, it helps to find answers by looking backward on life decisions, so it begs the question: On my deathbed, will I be satisfied that my life was worthwhile and all that it could or should be if I defined success as being financially independent? Does my pursuit and ultimate achievement of financial independence completely define me and my purpose on earth?  This view of the topic question starts to shed doubt in my mind that FI should define us because it seems too narrow. Why? Because it seems to me that life should be so much more. I can’t image my tombstone saying something like “Here lies Mike, who pursued and achieved financial independence.” I’ve never seen one of those tombstones. But I have seen tombstones that have listed many other attributes to define the deceased: father, husband, Christ-follower, man of integrity, leader, brother and son, to name a few. This leads me to believe there is more to life than just being financially independent.

 

A Case For FI To Enrich Our Lives

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There is no doubt that money is absolutely necessary to live and the more you have of it, the more freedom, and choices, you have. So having money is very important. And making or getting money independent of full time work is extremely desirable. But money and financial independence do not define us, but enhance  our lives and the possibilities.

Money is just a tool for us to use to meet our goals and obligations. Whether those goals are to raise a family, travel, buy a home or eat dinner, money is just a mechanism to achieve those goals. So to define ourselves by being able to meet those needs, independent of full time work or any dependence on anyone else, seems to be too limiting. I’m not defined by other tools that I have, like a computer, a hammer or a pencil, so why would I be defined by the tool of money independently obtained from full time work?

 

Means To An End

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We are so much more than our money or possessions. Which means that we are so much more than our pursuit and achievement of being financially independent. We are (in my case) a husband, father, Christ-follower, businessman, leader, neighbor, friend, a brother, an uncle, a son, travelers and so much more. The financial independence we pursue is a better way to be all those things. But FI doesn’t define us. To let FI define us is to sell ourselves short. The faster we get to FI, the better, because we can spend more time doing what we want or are called to do, and less time working full time to make money. So financial independence enhances our lives.  It does not define us.

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So, going back to that conversation that started of this post: There’s nothing wrong with talking about something you are passionate about, like financial independence. And having deep conversations with friends and family about FI is encouraging, invigorating and informative. But since money is just a tool and being independent of full time employment is just a better means of making it, it stands to reason that financial independence is simply a means to an end. A means to achieve one’s goals in the best possible way. A means to freedom.

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Everyday More Salt & Less Pepper: FI Wisdom From Years Of Mistakes & Miscues

While recently getting my hair cut by the same person who has cut my hair for the past 12 years or so, she looked at me sheepishly and said “Mike, times are a changing…it seems like every time I see you, you have more salt and less pepper.” After a moment of bewilderment, I realized she was telling me that my brown hair was gaining more and more gray hair over time. Her statement, while funny, and true, was also a reflection of the years that have gone by in my journey to financial independence. Then I thought about it. Its been 30 years, 8 homes, 6 jobs, 3 kids and 2 careers since I started my FI pursuit. I have learned a lot. Some learning has come from wise decision making, but most, it seems, has come from my mistakes and the steps to overcome them. Here are four FI lessons from many years in the FI pursuit:

 

Tortoise & The Hair

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Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” – Warren Buffett

Warren Buffet, perhaps the single greatest investor of our time, is credited with this famous quote. Unfortunately, it has taken me the past three decades to get it through my head that loss prevention is the higher priority over the risk of chasing huge returns. See, I have been invested in the stock market all this time. And for most of the time, I only invested in what I knew, which was high tech stocks. At the time I was in the industry. The good news was that high tech stocks have had some incredible returns. Years like 1995 through 1998 come to mind when the annual returns ranged from 20% to 37%. The bad news is that those same stocks had some horrible losses. The years 2001, 2002 and 2008 come to mind. The net result was that I made, and lost, two huge fortunes in the stock market since 1983 with very little to show for it as of the 2008 financial crisis. Hence, starting in 2009, I started to put Warren Buffet’s rules into place and have been rewarded handsomely for it. What I have learned: Slow and steady wins the race, just like the story of the tortoise and the hair. You don’t have to chase high returns with high risk stocks to get a good return. Preventing losses is more important than sporadic years of high returns. In terms of my stock investing, that means investing in high quality stocks, with a proven record of profits, growth and good management operating in good markets. For the most part, I invest in strong dividend stocks which also helps guarantee a decent return. I also re-balance my portfolio to lock in profits and lessen the chance of large losses should the market turn. While I have not had huge annual returns in the past nine years, I have not experienced ANY negative return years. The end result is that compounding the small but regular annual returns have produced more wealth than the previous 25 years of investing combined.

The Few, The Proud, The Life Goals

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“If you aim at nothing, you will hit it every time.”― Zig Ziglar

Early in my FI pursuit I had vague, long term goals: Something about retirement, kid’s college, independence and travel. Blah, blah, blah. I focused on climbing the corporate ladder and thought regular promotions would take care of meeting my eventual goals. It wasn’t until the first major stock market crash in 2001 that I realized that my goals were too vague and too long term to foster the best FI actions. It’s true, when you aim for nothing, you hit it every time…and go nowhere! What I have learned: Have specific goals in all aspects of financial independence. That includes quantitative giving goals, savings goals, investing goals, as well as qualitative goals for gratitude, contentment and peace. The reason why? The quantitative goals provide concrete targets that are easily measured for motivation and a sense of accomplishment. The qualitative goals help us round out the true independence spirit (Freedom from worry or anxiety) as well as give more meaning to what FI is all about.

Set It & Forget It

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When I was younger, I would invest regularly, but only after I paid all my bills. Some months I had a lot to invest, but others, not so much. It was irregular at best. Also, as mentioned above,  in those early years, I really didn’t have stated financial goals. The end result was I never knew if I was on track with my saving and investing. What I have learned: As I have aged, and truly learn to appreciate having financial goals and the power of compound interest, I have learned, first, to order the allocation of money as such: Give first, save second, then spend the rest. Meaning, I give to my church and God first because He deserves it. Then I save (pay myself) second after giving to ensure all my savings goals are met. Then, I make my spending plan (budget) based on what is left over, never spending more than I have. Here’s the best part: I use technology to automatically give, save and pay bills so that I am faithful, regular and not consumed with handling money. Simple and easy.

Sacrifice Good For Great

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“There is no progress or accomplishment without sacrifice.”
Idowu Koyenikan

Sacrificing to reach a goal has never been foreign to me. Sacrificing time and effort to get in shape to play high school and college sports was normal for me. Sacrificing fun and parties to get good grades was expected of myself. But somehow, when I got into the working world, and made good money, I didn’t want to sacrifice the trappings of success for the purposes of reaching a bigger, and better, goal. What do I mean by that? I wanted, and got, the bigger house, the nice cars, the big vacations. In some ways, I was trying to stay up with the Jones…and it was very unfulfilling. Bigger homes and nicer cars cost more money and take more upkeep. After a while it felt like my stuff owned me. What I have learned: Foregoing good things, like a bigger home or a nicer car, and using that money for great things like financial independence, helps speed up the process to independence and true wealth, in a big way! I have learned to cherish my smaller home (low taxes, less to clean, less room for stuff to build up) and my old car (paid for) so that I can use the money instead to fuel financial independence! Sacrificing good stuff for great stuff also helps me appreciate everything I have even more. And guess what? I don’t miss the bigger home or nicer car. Sure, they were fun to have but they are not as fulfilling as the long term goal of financial independence.

More Salt – More Focus, More Intention, More Better!

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“There are no mistakes, save one: The failure to learn from a mistake.” – Robert Fripp

Yes, the hair is getting gray-er and the time is flying by. But, a lot has been learned and hopefully, that knowledge can be helpful to others on their way to financial independence:

  • Consistent investment gains in solid stocks are better than the vicissitudes of high risk/reward stocks.
  • Quantitative and qualitative goals help focus FI efforts,
  • Automated Fin Tech tools help assure the Give-Save-Spend prioritized relationship,
  • And, sacrificing good stuff for the sake of great stuff speeds up achieving your FI goals.

Financial independence is not easy, but it is worth it! As one of my kids would say when they were young: It’s more better!

 

My Love Is Unconditional, My Money Is Not!

As parents raising children, we are called to love our children, equip them for life, and lead them in the way they should go to lead happy and productive lives. A large part of being a parent is to introduce our children to unconditional love. A love that transcends behavior and choices and focuses on loving them for who they are. A parent’s love truly is unconditional…

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…but that doesn’t mean they can be irresponsible or entitled with money! In fact, one of the first lessons parents need to teach their children about money is that money, and the making and spending of it,  is very conditional. Here are some basic tenets about money that should be impressed upon our kids:

  1. We are paid money for producing results. For the most part, we get paid in our work based on the value we provide. Provide lots of value, get paid lots of money. But the opposite is also true: provide little value, get paid little.
  2.  There’s a BIG difference between being financially free and making lots of money.
  3. Wants and needs are VERY different things.

Taking these very basic money rules into account, here are four parent teaching moments in the lives of our children when it comes to money and the path to financial independence:

Money Does NOT Grow On Trees

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It does not take very long for a child to learn that if they want something, they say: “Mommy, I want this?” To which, sometimes, the mommy pulls money out of her purse to pay for the desired item. Mommy gives the clerk some money and then the child gets to keep the desired object. Wow, that’s easy. It seems, at least to the child, that it is even easier when mommy “pays” for the item using that little piece of plastic called a credit card: Pull out card, swipe and voila! Easy and fast. The realization that money, especially when using a credit card,  can be rapidly exchanged for desired things is quickly followed, usually, by the fact that the child can find many wants. “Mommy, I want this, and this, and this….well, you get the picture. Which brings us to the first set of Money Lessons and Conditions (Yes, I said set of lessons):

  1. Money is in limited supply, it does not grow on trees (or magically within a credit card)
  2. As a child, mommy or daddy get to determine the best use of the family money
  3. Big finish: The child MAY get to use some of the money, but they are NOT entitled to it! Especially not whenever they want it.

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Wants And Needs Are Two Different Things

As stated earlier, a child learns very quickly to express the desire for many things. The request for stuff can be endless as most kids have seemingly endless energy to express those wants…until a parent teaches their child the difference between wants and needs, as well as the difference between yes and no! A need is something the child requires to grow (like nutritious food), wear (like proper school clothes) or develop (maybe athletic shoes, glasses or some pencils). But a want is strictly discretionary. My favorite line with my kids, when they were old enough to understand it, when they started expressing all their wants, was to say “Well, I want a Ferrari, but we don’t always get what we want.”

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Which leads us to the second set of Money Lessons and Conditions:

  1. Wants are completely different than needs. Your needs will be provided for. Your wants will be taken under consideration.
  2. Your (the child’s) desire for a want will be noted, and when a parent decides either to purchase, or not to purchase an item, that parent’s yes means yes, and a no means no. Period.

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Fair Is A Place To Take Rides And Eat Bad Food

“That’s not fair!” A parent may hear this often. “It’s not fair that a classmate got a new bike, or new video game or new app”…so the child exclaims. The list of unfairness can go on and on. It is important for parents to explain that fairness has little to do with anything, and frankly, that life is not fair and you better get used to it. Fairness stems from comparison. And comparison can lead to envy and discontentment. We compare ourselves to friends, neighbors or what we see on TV. It is important for parents to remember and teach that what our neighbors do should have no bearing on what is best for our family.

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Which leads us to the third set of Money Lessons and Conditions:

  1. Wants are completely different than needs. Your needs will be provided for. Your wants will be taken under consideration.
  2. Just because a neighbor or friend gets something doesn’t mean you automatically get it. (Don’t covet)
  3. Funding family goals and dreams are a priority over instant gratification

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You Do Your Part, I’ll Do Mine

This one is my favorite. We must, as parents, teach our kids that work, and good behavior, gets rewarded AND that the opposite is also true: You don’t do your work, or you have a bad attitude, and you will not be rewarded (or paid). You get paid your allowance when you do all your chores. Don’t do your chores, don’t get paid. In my family, a school aged kid has one priority: learn in school to the best of their ability. Essentially, school is their job. Don’t do your best in school? You lose privileges. If you don’t study for a test, then get a bad grade, you don’t get sleepovers and shopping trips to the mall. Essentially: You do your part and I’ll do mine.

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Which leads us to the fourth, and final set of Money Lessons and Conditions:

  1. There are rewards and/or consequences to our actions. If you do your part, I’ll do mine. But if you don’t, then I won’t either.
  2. Responsibility brings value (and is rewarded). Irresponsibility, not so much
  3. I don’t care how much you want something if you’re not willing to do your part of the agreement (Earned vs. entitlement)

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Final Note – Unconditional Love Means Money Conditions

It’s our responsibility as parents to train our kids in the way they should go…in their actions, behaviors and decision making. Especially when it comes to money because neither our school systems or our culture will or can give them the solid foundation they need when it comes to money and the pursuit of financial independence. The first time I heard a parent use the phrase “my love is unconditional but my money isn’t” seemed a little harsh. But the more I processed the concept, the more I realized it was both responsible parenting and very loving. Teaching our kids that money, rewards and promotions are very conditional helps our kids develop the work ethic and fiscal responsibility they need to take care of themselves and form a proper relationship with money.

My love is unconditional but my money isn’t!

Money, Motley Fool and the Cost of Christmas

Silly title, I know. But the financial advisory firm, Motley Fool, reported that the average American household spent about $929 on Christmas presents last year. Here. There’s no reason to believe we won’t spend even more this year given the economy and the American people’s confidence in it. Then I got to thinking…
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We are just about one quarter of a year, 13 weeks, away from Christmas. It made me think about smart ways to steward our money so that we can fulfill your Christmas shopping desires without going into debt or breaking the bank.
Then I thought that it has been a while since we discussed together God’s plan for each of us to live in financial freedom so that we are able, and free, to worship Him!
Galatians 5:1 “It is for freedom that Christ has set us free. Stand firm, then, and do not let yourselves be burdened again by a yoke of slavery.”
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Here are some simple ways to experience financial freedom, including saving money for Christmas presents, if you haven’t already started:
1. Put aside $72/week, starting with tomorrow’s paycheck, to pay for Christmas
2. While your saving anyway, increase your savings to $120/week and put aside $30/week towards your emergency fund and $20/wk towards your 401K plan, why?
a. your Christmas presents will be paid for by the time Christmas arrives
b. you want to have a readily available emergency fund for life’s little bumps…sometimes expensive bumps (this is called “sleep well at night money”)
c. most companies have a matching 401K plan where you get free money just for participating in the plan…who doesn’t want/need free money?
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3. Another way to save money for Christmas is to cut back expenses. Now is a great time to see if you are getting the value for your money on:
a. subscriptions (software, magazines, wine of the month club, etc)
b. gym memberships
c. phone apps and reoccurring monthly phone expenses
d. everything Amazon
e. cable and internet…are you taking advantage of all the features (and costs)?
Maybe you can save some money by cutting out things you are not getting the value from.
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Make every effort not to go into debt to afford a merry Christmas. God said, through King Solomon: The rich rule over the poor, and the borrower is slave to the lender.
Don’t become a slave to debt. Live financially free to love and serve the Lord!
 
Psalm 119:45 “I will walk about in freedom, for I have sought out your precepts.
Financial freedom (and a debt free Christmas) is not easy…but worth it!

What Do Aging Athletes And Financial Independence Have In Common?

I am passionate about sports and I have been that way for as long as I can remember. More so playing them than watching them but nevertheless, passionate. It was football, baseball and basketball in high school. Then, football and baseball in college. Followed by softball, basketball, tennis, cross-fit and competitive running thereafter. And all the while, I have lifted weights and worked out as a way of life. I love it. It makes me fit, I feel good and it’s cheaper than a psychiatrist when it comes to working out your daily problems! But over time, or more specifically, advancing in age, has a way of catching up to you when it comes to physical performance!

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I remember playing sports in my twenties and it was so easy to perform: Stretching the muscles was easy, as was gaining strength and endurance. If you got a little bit out of shape, you were able to get it back really fast. It wasn’t until I turned 34 that I realized my first reduction in athletic ability. I lost a step. I was moderately fast and running the bases while playing softball I was thrown out going from first to third on a base hit. For the first time ever!  This was my first dose of reality that athletic ability diminishes with time.

Then, I went into my forties. Now I was introduced to regular soreness after working out, coupled with a longer time period to fully recover from the workout. What used to take 24 hours to recover now took at least 48 hours. In addition, it took considerably longer to get in shape. At a twenty something, it felt like three weeks of solid work would produce a great fitness level. But by forty something, it took every bit of eight or nine weeks to feel really fit and even then, I wasn’t sure if I had reached the highest level of fitness. The other side of it was also true: As a forty something, it felt like six or seven days of not working out resulted in losing every bit of fitness and you had to start over again from the bottom of the fitness ladder!

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Then I reached my fifties…and a further reduction in athletic ability, with more aches and pains, and longer recoveries. It was in my fifties that I had to fully accept my physical limitations as an athlete. I could no longer deny that past performance levels were long gone and unreachable.

What Do Athletics Have To Do With Financial Independence?

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At this point, you might be asking, what does athletic ability have to do with financial independence? And I would understand if you did. But follow me here for just a moment. Because the lessons learned as I have aged as an athlete are directly applicable to the process of obtaining and maintaining financial independence. How, you might say?

First, It’s About Time

As an aging athlete, it takes time to get ready to perform. Much more time than it used to as a younger athlete. You need to take the time to fuel your body right before the workout. You also need to stretch and stretch a lot. In other words, you need to be patient  and prepare correctly before you can really perform.

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The same is true with the pursuit of financial independence. It is over time that one can develop wealth. It usually doesn’t happen overnight, and, expectations to the contrary can build unwanted anxiety or stress. To build wealth that can lead to financial independence requires saving and investing money over a long period of time, in order to produce a return. This patient approach to building wealth, and as a result, financial independence, is both time proven and considerably less stressful. There’s one more piece to the time element to develop wealth and that is compound interest.

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Saving money over time is only the first part of the equation. The second part, and largest part, is investing the money and letting compound interest work to develop an exponential wealth effect. What does that mean? It means that investments over time will produce far more profits than the amount of money you actually put into the investments. It is a multiplying effect. An example: A one time $2000 investment with a 6% annual return will yield $xxx after 40 years. But if you left it accumulate for only 20 years, half the time,  you don’t have half of the 40 year amount, you have only xx% of it. It takes an investment in time, using compound interest, to develop wealth, and it grows more and more each year. Just like it takes time as an aging athlete to prepare for a workout to produce athletic results.

Limitations Can Be Your Friend

As an aging athlete, you have to recognize your limitations or else run the risk of hurting yourself. When I was 21 years old I ran a five minute mile as part of a fitness test in college as we were getting ready for my junior year of college football. I’ve got NO CHANCE of running that same five minute mile now, regardless of my preparation or efforts to perform at my best. I need to accept my limitations or risk being deeply disappointed or getting hurt when I tey. In essence, I need to be content with my diminished performance level.

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Contentment is also a key foundational element when it comes to financial independence. Without contentment (Being happy where you are, while on your way to where you are going), what you have will NEVER be enough. You will always think in your mind: “I need more to be happy, or rich, or successful, or wealthy, or (fill in the blank).” Part of being financially independent is to be independent of envy or perceived need for something to make you complete or happy. In fact, only when we can learn to be content in the moment, combined with gratitude for what we have, can we be truly independent of envy, covetousness and the sense of lack. There is certainly nothing wrong with ambition, but when that ambition prevents you from ever feeling secure, peaceful or blessed, you can never truly be financially independent.

Three Cheers For Consistency

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As an aging athlete one of the most important fundamentals of working out is consistency. You need to consistently stretch, consistently eat right, consistently hydrate and consistently work out because of what I mentioned before about losing your fitness level fast! When you can get into the appropriate consistent rhythm, your workouts and performance can be very rewarding.

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The same is true when it comes to financial independence. I have found that most financially independent people I have met didn’t hit the lottery or write a best selling novel to develop instant wealth, but built that wealth over time with consistent savings and investing. What do most of the financially independent people do consistently:

  • They save money consistently
  • They invest consistently
  • They live on a budget in order to meet their goals consistently
  • They track goals consistently to stay focused and on track

Consistency also lessens the sting of living below your means. If you consistently put money into an emergency fund, a retirement fund and a vacation fund, you eventually get used to that money being “gone” and you don’t miss the spending power in your day to day budget. Consistency is so important to old athletes and people pursuing financial independence alike.

Taking Advantage Of Technology

As you get older, an aging athlete is wise to take advantage of new technology to increase their performance, and comfort. There are new fabrics on the market that wick away your sweat while you perform. Running in the Texas heat, I depend on moisture wicking clothing. There are new shoes of all types that help you run faster, farther and with more comfort. There are new training apps that help you work out at peak performance. There is an abundant amount of new technology that can help you better perform.

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There is also new technology to help you obtain financial independence. There are tools like Mint to help you track your expenses and budget, Acorns to help you save spare change, Robinhood to help you invest and most banks now have automatic deposit and withdrawal for 401K plans and emergency savings accounts. Use technology to achieve your financial plans: In most cases it is easy, cheap (as in free), automatic and efficient.

Last, Know Your Why

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Motivation is paramount when it comes to working out or achieving financial independence. People ask me all the time: At your age, why do you workout so hard, and so consistently? It’s easy. I do it because it makes me feel great, it clears my mind, it challenges me and it helps me sleep so soundly. In other words, my “why” is to feel better and, God willing, live longer. It is worth it to me to put the effort in now, to feel better later. We need to “know our why” in the pursuit of financial independence too. We need to know why we are budgeting, saving and investing because it sure would be fun to live life unrestrained now. It would be fun, but it would not help us reach our goal of financial independence. Our financial independence “why” we sacrifice now is so that we can be independent later. Independent of money worries or stress and to be independent to follow our heart’s desire. To move working from something we have to do to survive, to something that we choose to do if we want to. Financial independence is not easy and it does not happen overnight. Just like trying to get into and staying in shape as an older athlete. But by using time to our advantage, practicing contentment, being consistent, taking advantage of technology and knowing our why, we can better enjoy the process and eventually achieve the goals of feeling good and experiencing financial independence at any age!

If you want more information on financial independence and/or the steps to get there, consider Dave Ramsey’s book “The Total Money Makeover”. Click the image to enjoy instant savings.

The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

Three Common Misconceptions About Money: A Biblical Perspective

I am passionate about the pursuit of financial freedom, which begins with putting money in its proper perspective as a tool to be used to provide for ourselves, our families and to fuel our goals and values. I am equally passionate about dispelling misconceptions of money which can distort our view of money into something that it is to not. I have found in my life that the single best financial management book of all time is God’s Word, the bible. It is from the bible that we can truly discern what money really is and how to properly use and manage it.

All that being said, here is some straight talk from God’s perspective, about some common misconceptions about money.

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Misconception #1: Having Money Is Evil (Or The Root Of All Evil)

You may have heard that money is the root of all evil. That argument goes something like this: “Money is evil because having money makes people greedy, and not having money makes people desperate. Both tend to make man evil. Doesn’t the bible say that having money is the root of all evil?”

Let’s set the record straight. God did not say money is evil. God said the love of money is a root of all kinds of evil: 1 Timothy 6:10

“For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.”

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God neither hates or loves money, but He gives it to us to use for His purposes: To provided for ourselves, our families and to worship Him and His purposes, including helping others around us. God wants us to work hard and earn money. Proverbs 10:4

“Lazy hands make for poverty, but diligent hands bring wealth.”

God also wants us to enjoy the money He provides for us. Ecclesiastes 5:19 states this:

“Moreover, when God gives someone wealth and possessions, and the ability to enjoy them, to accept their lot and be happy in their toll – this is a gift go God.”

God also wants us to use money to provide for our families: 1 Timothy 5:8

“Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever.”

Last, God wants us to use money to help others: Luke 10:35. This is the story of the Good Samaritan, who took pity on a man found in the street after being robbed and beaten. The Samaritan tended the man’s wounds and took him to a local hotel to heal:

“The next day he took out two denarii (money) and gave them to the innkeeper. “Look after him,’ he said, ‘and when I return, I will reimburse you for the extra expense you may have.'”

The Samaritan man was able to help because he had money to do so. Money was a tool he used to help a person in need. It is quite possible that if the Samaritan man did not have the money, he would not have been able to help the man in need.

Money is not evil. It is just a tool that comes from God to be used for God’s purposes. We should not feel guilty about building wealth, nor should we worship the wealth we do build, but view it as the tool that it is.

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Misconception #2: Wealth Should Be Equal

It is common to hear children, when playing a game, say something like “That’s not fair!” when they think someone cheated or broke the rules.  It is also common for children to demand equality when candy or prizes are handed out, and to say something like “He got more than I did” when there is inequality in the handouts. I have heard adults apply some of this same logic when it comes to money and wealth. They might say “All people deserve the same money, regardless of job or skill level.” Or, “All wealth should be divided equally among all people.” But, being fair does not mean being equal when we look at wealth in the bible. In fact, God says that each should receive according to his ability: Matthew 25:15

“To one he gave five bags of gold, to another two bags, and to another one bag, each according to his ability…”

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I believe God wants each of us to use our God given talents to the fullest. From those talents we will develop our wealth. And since our talents are all different, the amount of wealth may be different. There is no reference in the bible about everyone getting an equal share of wealth regardless of talent, effort or responsibility. You might say being poor is not fair. And that might be true. There are many reasons for poverty. But God recognizes that poverty exists and also recognizes that wealth is not to be systematically equally distributed to those in need. In fact, God wants those that have much (wealth) to help those who are in need. Psalm 112:9

“They have freely scattered their gifts to the poor, their righteousness endures forever; their horn will be lifted high in honor.”

Jesus, when confronted whether or not a considerable amount of wealth (in the form of perfume) should be donated to the poor or used to worship Jesus, said: Matthew 26:11

“The poor you will always have with you, but you will not always have me.”

 

Wealth should be developed by each of us, according to our talents and efforts, for the purposes of providing for our family and for those in need. But the idea of equal wealth and equal pay regardless of talent and effort is counter productive as it demotivates those that are capable of developing wealth and encourages an attitude of entitlement and unfulfilled human potential.

Misconception #3: We Eventually Outgrow The Need For Budgeting, Saving & Stewardship

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Budgeting (a spending plan), saving and stewarding (managing with honesty and prudence) the money and wealth God provides us fundamental for all of us to do, regardless of the amount of wealth we have. There is no amount of wealth where it becomes unnecessary to manage that wealth wisely. First, let’s look at budgeting. God says this: Proverbs 29:18

“Where there is no vision, the people perish.”

We are responsible for managing this wealth and that requires a plan (vision) and in that plan is a spending budget. You might say, “But if we have extraordinary wealth, why bother with a spending plan because we will never spend too much?” But look what God says in Luke 14:28

“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?”

We must budget our money because its the only way to ensure our goals and dreams can be fully funded and realized.

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We must also always be saving towards those goals and dreams. Saving money is a critical part of being wise. God says in Proverbs 21:20

“The wise store up choice food and olive oil, but fools gulp theirs down.”

Not only is saving money always wise to be ready for those times of need (emergency) and for future goals (possessions, education, events, etc), but saving helps us learn discipline, contentment and gratitude, which are critical parts of true financial freedom. Saving also ensures that we will have wealth to share with those that are in need. In fact, God says helping those in need is one of the highest uses of wealth: Proverbs 28:27

“Those who give to the poor will lack nothing, but those who close their eyes to them receive many curses.”

Last, saving money ensures that wealth will be available to pass down to later generations and this is important to God. Look in Proverbs 13:22

“A good man leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous.”

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Money Misconceptions

Money and wealth is not evil. It is neither to be worshiped or reviled. We should not feel guilty if we have wealth or ashamed if we don’t. Nor is money and wealth our everything. It is just a tool to be used to provided for our families, goals and friends in need. All to glorify God who gives us this wealth.

Neither is wealth to be systematically equal for everyone. Each person, according to their talents and effort level, should develop their own wealth. And then use that wealth for the good of your family, friends and people in need. We are all equal in God’s eyes as His children, but that doesn’t mean we automatically should expect to share in God’s wealth equally.

We are called to steward our wealth, because really, we don’t own it, it is all God’s wealth, we are just called to manage it. Psalm 24:1:

“The earth is the Lord’s and everything in it, the world and all who live in it;”

That means we must budget, save, plan and take care of our wealth as an act of faith and obedience. In fact, God says that each of us will give an account to Him regarding our actions, including the management of HIS wealth. Romans 14:12

“So then, each of us will give an account of ourselves to God.”

So we must take care of God’s money and wealth in every way, knowing we will be held responsible for our efforts and actions. Managing money should be considered a holy activity and an act of worship.

Money misconceptions are common and everywhere. But make no mistake about it that God wants us to have wealth, He just doesn’t want us to worship the wealth, or hoard the wealth, but to use it properly in ways that worship Him: Raise our families, help out people in need and to fulfill our goals, values and dreams that God gives us. Keep money and wealth in proper perspective as the tool that it is.