It was over a decade ago. The kids were young. Ashley was still in diapers. We attended a wealthy church where most of our friends had loads of spending money in their pockets.
We didn’t.
We had just $30 allocated as “spending” per paycheck. The rest was bills. I was a youth worker… we don’t usually have piles of cash laying around.
Every Sunday it happened. Church would dismiss and our friends would start making plans. “We’re all going to lunch after church. Wanna come?” Everyone piled in their cars, “See you at Outback!”
Lori and I would inventory our pockets and sadly look at each other. “Twelve dollars and thirty six cents. Hmmmm. Maybe we can put it on the credit card just this once.”
A month later the air conditioner went out in the car. $500
Alyssa got a sinus and ear infection. $30 co-payment and $55 in prescriptions.
Alec needs $235 for church camp.
These things weren’t in the budget!
Within a few years we had over $10,000 in credit card debt. The astronomically inflated interest rate alone was several hundred per month. There was no end in sight.
My parents made us a deal. They’d bail us out, paying off our debt with a no-interest loan to us. We just had to agree to cut up the credit cards.
We gladly accepted the gracious offer, cut up the cards and spent the next five years paying my parents back with a consistent monthly payment.
We have a credit card now, but we’ve never gone even one month without paying it off. We had learned that lesson the hard way. The school of hard knocks taught us three budgeting lessons that we still practice today:
1. Write It All Down
Almost every time I’ve counseled a couple struggling with their finances, they didn’t have a budget, or didn’t stick to it. The reality of the situation was… they had no idea how much they actually spent each month.
Try this: take a month and write down every dime you spend. Coffee on the way to work? Write it down. Amazon book and a quick iTunes download? Write em’ both down. $80 for the kids soccer fees? Write it down.
What many people discover is… this stuff wasn’t in their budget!
Lori and I actually had a budget before our financial downward spiral—it just wasn’t realistic. It had the house payment, utilities, gas, groceries… all the typical stuff. What it didn’t have was that stuff that creeps up every month that you don’t expect. Brakes for the Honda. Glasses for our 4th grader. Grandma McKee’s birthday.
After our financial mess-up, we made some realistic changes to the budget. We created some new categories:
Car maintenance- we added up all the car bills from the last year and divided by twelve. Maintenance on our two old cars, oil changes, brakes, etc. added up to about $120 a month. (Yeah… this wasn’t in our budget before. You can see how this would quickly add up on a credit card!)
Birthdays and Christmas- we added up what we spent on birthdays and Christmas for the year and then divided it by twelve. It was about $600. So we added this category at $50 a month.
Crap that happens- yes, we actually still have a category by this name in our budget. (Some more refined people might call this “miscellaneous” or “emergency.” I prefer my title.) These are the items you forget to plan for like vet bills, replacing a broken toaster, or the $100 fine you received from the county for burning on a “no-burn day” (I’m speaking hypothetically of course, because I would never do such a thing… stupid rule!!!)
We’d put this money in our savings account so that we had a cushion to draw from when these expenses came up. When the car broke down, we dipped into our savings. Thanks to our discipline of putting $120 per month for “car maintenance” aside, we had the cash there when we needed it.
The idea is to make yourself a realistic budget of what your bills truly are. If you don’t have enough, then you need to cut expenses. It’s really that simple. Yes, that might mean no iPhone or no Satellite TV. I realize this might make it difficult to hang out with your other gadget-stacked-Gen Y friends… but bills need to match income (and that Gen Y guy is still living in his parents’ basement—that’s why he can afford an iPhone).
Realistic budgeting lets you know how much you actually have to spend each month. At this time in our lives, we only had $30 each per paycheck. Lori would hand me my $30 and tuck her $30 in her purse on the 1st and the 15th of every month. If I took her out for a fancy dinner… at Costco food court… I used my spending cash. When the cash was gone? No more spending. Which brings me to my next point…
2. No Debt… with Two Exceptions
Debt is just stupid. Take it from a guy who has been there. When Lori and I dug ourselves in over $10,000 credit card debt, we owed “The Man” (an appropriate label for credit card companies) several hundred dollars a month in interest just for borrowing “his” money.
Think about the shortsightedness of this. Here’s how it works:
- We think we are too poor, so we spend on a credit card to cover the shortfall.
- “The Man” charges us interest on what we borrow.
- Now we are several hundred dollars per month POORER because we owe “The Man” hundreds in interest each month.
So don’t buy the lie that some people guise as “the American Dream.” You don’t need the white picket fence if it requires you to pay “The Man” every month just because you couldn’t wait, and save up for the fence.
Avoid credit card debt like the plague.
It would be nice to avoid all debt, but in today’s world, I see two realistic exceptions: the home loan, and the 0-interest loan.
Once you’re in your vocation, the only loan I recommend taking is a home loan, because it’s a solid investment (with some exceptions in the past few years), and it’s just unrealistic that anyone can save up the cash for a house before they buy it. But here’s an important principle to remember: when you get a home loan, don’t refinance every time you think you need new stuff, yanking all the equity out of your house. Get a good rate on your home loan, and pay the bill each month until it’s paid off completely by age 67 (the current average expected retirement age). Keep your home loan as your only debt.
Am I saying that a car loan is foolish? Let me just say this. Keep the car you have, and start paying your car payment to yourself rather than to “The Man.” After a few years of saving that $300 a month, you’ll have $10,000 for a car (and you can get something pretty reliable for $10,000). It’s always better to earn interest than pay interest. When you’re saving $300 a month, you are actually earning a little bit on your money. When you borrow, you’re paying “The Man.”
Yes, I’ve seen exceptions, where someone didn’t have a car, and couldn’t wait to save for a new one. In that case, maybe a payment is unavoidable. But just realize that now you are paying “The Man” as well as your car payment. That means you are more poor. “More poor” is never good!
Some ask me, “What about a 0-interest loan?” If you’re disciplined, then this is not a bad way to “save.” Here’s the logic. If you save $300 per month towards a car, then you could either save it in your bank for 3 years… or maybe a car company is willing to give you the car for $300 a month with a 0-interest loan; you aren’t earning interest, but at least you’re not paying “The Man.” (As long as you always pay your $300 each month. Don’t miss a payment, because usually penalties are enforced that sometimes can add tons of interest to the entire loan.)
In short, always avoid paying “The Man.” There are better places for your money… like ministry! And that brings me to my last point…
3. First Fruits First
I saved the most important point for last. It doesn’t matter how poor you think you are, or how in debt you have dug yourself. Always give God your first fruits… first!
God asks us to give him our first fruits (Exodus 23, Leviticus 23:8-10, Deuteronomy 18:4, Proverbs 3:9, Ezekiel 44:30) and to store up treasures in heaven, not on earth (Matthew 6:19-21), regardless of income or situation. Whenever you are tempted to try to justify anything other than this truth, just remember the story of the widow’s mite (Luke 21). Jesus made it clear that she had barely anything and yet gave it all.
When Lori and I were struggling to pay bills and climb out of debt, I struggled with this truth and began to rationalize the possibility of not giving to God for a few months until we “caught up.” I sat down to ask my dad for wisdom on the matter and something interesting happened. When I tried to find the words to explain my logic, I became tongue-tied. Don’t get me wrong; I don’t think it was anything supernatural—I just couldn’t find the words or provide any compelling argument for not giving to God. About halfway through my explanation, I realized how ignorant I sounded and simply said, “Oh forget it. I know what I need to do!”
My dad, who hadn’t even said a word, smiled and said, “Glad you figured it out.”
For the next 5 years we wrote a check to God first (we chose to write 10%), then to all our other budgeted bills and savings, and finally, $30 cash to each of us.
That was over 10 years ago, and we are consistently shocked how much God provides during times of “drought.”
Sometimes we Americans get all caught up in that “American Dream.” When I pursued that dream, my finances became a nightmare.
I’m glad God woke me up.
IF YOU ENJOYED THIS ARTICLE, YOU MIGHT ALSO ENJOY…
When the Ministry Budget isn’t Big Enough
When My Wife Had Enough—Balancing Family and Ministry
Can I Smash My Daughter’s Cell Phone?
If you liked this article from Jonathan, you’ll love his books, Ministry By Teenagers, Connect: Real Relationships in a World of Isolation, and his brand new 4 Session DVD curriculum coming out this May, Real Conversations: Sharing Your Faith Without Being Pushy