Personal Financial Stewardship: The Step-By-Step Guide to Debt-Free Living
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About this ebook
• Would you like to buy holiday gifts for your family without worrying about the bills?
• Would you like to learn a truly rapid debt reduction strategy for your consumer debts?
• Can you imagine not having a car or home payment?
• Would you prefer to enjoy a vacation and have no bills to pay after you get home?
• Would you like to financially support your favorite causes?
• Would you like to retire in comfort?
Other personal finance teaching resources tell you why you should be a good money manager. Although powerful, they do not invest as much time walking you through a step-by-step guide on how to do it. This book does. It will take you through that step-by-step process covering exactly how to rid yourself of burdensome consumer debt. Perhaps the two most beneficial exercises unique to this book are the budget analysis and the rapid debt reduction strategies. You will also be shown how to get on the road to a future with an overall healthier financial picture you create.
Christopher Holmes
Christopher Holmes is lecturer in international political economy at King's College London. He is the author of Polanyi in Times of Populism: Vision and Contradiction in the History of Economic Ideas (2018).
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Personal Financial Stewardship - Christopher Holmes
CHAPTER 1
How Do You View Money?
Nothing can bring you peace but yourself; nothing can bring you peace but the triumph of principles.
– Ralph Waldo Emerson
When you think of money, what comes to mind? Do you see it literally as coins, paper currency, and plastic credit cards to be exchanged for goods and services? Of course it is that and much more. It’s the much more
that may make all the difference in the world. To begin with, money is a tool. It is neither good nor bad. It is not evil or virtuous. Although you may think it is the most important thing in the world if you never had much of it. Money is neutral. How can money make some people completely happy and at peace but, at the same time, make others frustrated and worried? The happy ones are lucky you may be thinking. Plus, the desperate ones have been dealt a bad hand. In most cases, neither of those statements is true.
There is no doubt that many people around our world have been born into hardship, and their circumstances are no laughing matter. With a strong enough will it may still be possible for them to get out from underneath their circumstances. As for the lucky, they have learned that luck tends to happen when preparedness meets opportunity. The wealthy people I know, the lucky
ones, have actually gained stewardship over their money. The frustrated have let money call the shots, often in the forms of greed or a disregard for the rules governing the accumulation of wealth and peace.
You cannot let the tail wag the dog. Taking control over your decisions is the first step toward a healthy relationship with money.
Thoughts on Savings
Anything that we can do to raise personal savings is very much in the interest of this country.
- Alan Greenspan
How is this done? Well, you don’t want to do what I did when I was in my twenties. Like most people, I was excited to have a full-time job making decent money for my age. I was responsible for the night shift crew at a large hospital north of Philadelphia where we decontaminated and sterilized surgical instruments. I believed I worked hard for my money and that I was going to spend it on a nice car and anything else on which I wanted to treat myself. I was living at home—so why not? I would not blame someone for feeling the same way. My guess is they have reached the point where they are open to another approach to managing money.
I received my first aha moment about money after meeting my wife, (then girlfriend) Renee, who worked at a restaurant as a server at the time. After a couple of years of dating, we began to feel more comfortable discussing our finances, since we were contemplating marriage. I found out that Renee had saved three times what I had saved. Even though I earned three times more money, Renee managed to save three times the amount I had saved. I had a hard time making sense of this. All of our circumstances were basically the same. She lived at home too and had a car payment with insurance like I did. I found out she simply put more money in the bank.
What did I do? I spent it on my new car payments, the latest stereo equipment (I’m aging myself here), and on many shopping trips to the mall. Obviously, I was not saving much. I learned my first lesson in money management. It’s not how much you make that matters as much as it matters what you do with what you make.
Perhaps you have been itching to start a savings program, but unexpected events come along causing you to spend even more money. Or, perhaps you have been so buried in bills every month that the thought of having any savings is too far-fetched. The problem is people do not fancy the term savings because it seems synonymous with tedious. When related to something else with which people often struggle, like dieting, it becomes easier to support. If your doctor told you she had to place you on a diet, how would you feel? Apprehensive? What if she gave you a prescription for an eating plan instead? An eating plan sounds much better. Well, that is how to look at savings. What if you were given a template for a spending plan; would that motivate you to learn more?
What’s the catch you may ask? Well, the spending plan does require some responsibility which is almost as icky as the word diet at first. The most important aspect of the spending plan is to write it out. Keeping a budget in their heads is how people tend to get woefully off track. Other than what you do with your money, another important stewardship concept to learn is the importance of writing out your spending plan. The very first time you sit down and take a close look at your spending habits, it may not be pleasant, but it will be insightful. Sometimes the right thing to do is not the easy thing to do.
I wish I could say that savings is the first step in achieving heathy finances. Having the correct perspective on money is the first step. Balancing your current budget is the second step.
Ready to Do What It Takes?
A dream doesn’t become reality through magic; it takes sweat, determination and hard work.
- Colin Powell
One of the toughest principles to adopt is delayed gratification. Who would not want everything now? Not only is it impractical to expect this, it can also prevent you from experiencing the things you would really prefer. Are you a ship without a rudder? Picture that. If you lived your life as if you were a boat without a rudder, where would you go? That’s right, wherever the wind and current takes you. If that is what you really want, then hats’ off to you. Enjoy the adventure. If you prefer to have more control and influence over where your life goes, then delayed gratification and persistence can play an important role by helping to be the rudder in your life.
Once you set a goal or a destination in your heart, you can use that rudder to guide you no matter how the currents are flowing or how hard the winds are blowing. You may have to focus more and give up some sightseeing in the meantime to stay on course, but it will be worth it in the long run. That is why savings is referred to as spending in the future. If you spend all of your money now, you will be less likely to have the money to spend it on something more important to you in the future.
The first time Renee and I sat down and took a serious look at our finances it was a bit uncomfortable. It was a little like airing out some old laundry and realizing it needed to be replaced. What we were doing was okay, just not what was going to get us to where we really wanted to be in life. We had to learn some new habits and some new ways of looking at money. Facing the numbers was another aha moment. It was clear that we had work to do and where we needed to make some changes. We saw where we were spending a bit more in one category at the peril of another. It was as if we were robbing Peter to pay Paul. Sometimes we cannot see the errors of our ways until we sit down and write them all out.
Spending Plan Exercise 1
The budget is not just a collection of numbers, but an expression of our values and aspirations.
- Jack Lew
The whole exercise is broken into six sections to help explain the steps better and to give you a chance to reflect on the work in more manageable portions. If you do forge ahead on the steps, be sure to go back and read the materials you skipped. I still recommend following the flow as described so you can give yourself time to absorb all the other supportive information within this book.
Here comes some of the work. It is essential you make time to get out a pen and paper and do the following exercise. You may find it immensely helpful to use the companion workbook at this time too. Either way, on the page write your monthly income. Here is a guide you may find helpful if you are not used to organizing your finances like this.
Gross Monthly Income: ____________
Taxes: _______
Charitable giving _______
Other deductions: _______
Net Monthly Income: ____________
A. Housing Category Total: _________
a. Mortgage/rent:_________
b. Electricity:__________
c. Etc._________
B. Automobile Category Total: _________
d. Payment: ______
e. Gasoline: ______
f. Insurance: _____
g. And so on…
If you get paid irregularly try your best to estimate what your average monthly income is. Recall that gross income is the amount you get before anything is taken out like taxes. Net pay is what you have left after deductions. You can think of it as the spendable amount after taxes and other deductions. Below the net amount, write the monthly deductions such as taxes, automatic withdrawals or any charitable giving you do for your church, synagogue, etc.
Keep in mind going forward that every number must be a monthly figure or equivalent to have it makes sense overall. For example, if you pay your car insurance every three months you would enter a third of it on your worksheet. If you are married or share most expenses with someone else, be sure to include both incomes so the combined monthly obligations offset properly at the end of the exercise. Your page can be organized anyway you like. You can also refer to Form A
in the workbook, the companion to this book (for a full size, sample form).
Continue to list all of your expenses over the rest of the page. Your budget will look different from others and may look different from year to year. That’s okay. This is your program and one you are going to care about more than anyone else. Go ahead and list your mortgage or rent. Next, list any expenses associated with your dwelling such as your monthly electricity, trash, gas, water, sewer, etc., making sure to convert those to monthly figures as needed. This is a good place to add your monthly