Week 1: Becoming A Wise and Faithful Steward:
The Church I attend has long emphasized being wise financial stewards, avoiding debt, and saving for a time of need. I have seen many members follow this counsel while others tend to do nothing about it. Lately there seems to be a yearning by some members for more investment advice, in addition to basic budgeting, debt avoidance and saving up an emergency fund. My Church responded with four self reliance courses:
- Personal Finance
- Finding a Better Job
- Starting and Growing My Business
- Education for Better Work
How It Works
The ideal group is 8-12 people, often spouses are encouraged to take the course together. There are action partners, commitments, discussions, reading material, educational videos, and opportunities to reflect in silence. The class meets for two hours over the course of 12 weeks. We team up with action partners, apply the lessons and follow up with each other during the week. It is a faith based course and there are scripture references throughout the manual. One person facilitates but is not a teacher, but rather a participant who keeps the lesson on time and keeps things organized. The group shares progress and functions as a council to help everyone progress and learn.
Week 1: Becoming a Wise and Faithful Steward
The lessons are quite good, well thought out and have great questions and discussion points. Here are some of my takeaways from week 1:
- It is important to have faith that there are solutions to our problems.
- Being self reliant means you can provide for yourself and your family, and puts you in a position of strength.
- It is hard to feel peace and be spiritual when the temporal issues preoccupy your mind (when you are worried about money, your next meal, your growing pile of bills, etc).
- All things belong to the Lord, we are simply caretakers of our possessions.
- God cares about our temporal problems just as he does our family and spiritual problems. We can seek His guidance through prayer.
- It is important to track income and expenses to see where improvements can be made.
While I am well versed in how to get to Financial Independence and heading that way in the next decade, I recognize that there is a lot I can learn from others. I was careful not to comment too much but to listen to others. The group is a good mix of those who are successful and knowledgeable, and those who are less savvy. It’s important to recognize that not everyone finds finance so interesting. Many just want to have a bit of knowledge and understanding but won’t take it any further and will live “normal” American lives (as in not FIRE movement style). It was great to gather with fellow members, hear some of their stories and lives and encourage each other throughout the week.
Week 2: Unity In Finance
Becoming Unified in Our Approach to Finances
The start of each lesson has everyone report on their commitments through the week. We had tracked all income and expenses each day, prayed about our finances, read some suggested materials, and checked in with action partners during the week.
The bulk of the lesson was focused on faith in Jesus Christ. We discussed how the Sabbath Day has blessings associated with prosperity as recorded in the book of Isaiah. Tithing was also discussed. In Malachi 3:10-11, God, boldly challenges to His people and see if we can get a blessing from paying our tithing. There aren’t any other commandments challenged so confidently. If we pay our tithing (10% of our income), then the fruit of our labor will not be spoiled, or for nothing.
Work and Responsibility
In Genesis, Adam is told that by the sweat of his brow, he shall eat bread. I’ve often pondered this, and this is often a point of confusion for the Internet Retirement Police. The FIRE movement seems to be placing more emphasis on the Financial Independence part than the Retire Early part. I’m definitely of the same mind and want to reach FI so I can start a more interesting career. I work in IT, and I enjoy it, but I think I would rather do a trade, something blue collar. I believe work is a good thing, and I don’t plan on being lazy when I “retire.”
We also talked about eliminating reliance on others, whether it be family, friends, church welfare programs, or government assistance. We discussed how some people have an entitlement mentality. Entitlement is feeling that you deserve something without taking the action required to get it. It is the opposite of responsibility. The farther removed someone is from the help they receive, the less grateful they are for the assistance.
Finance in Marriage
When we are careless with finances, it can distress a relationship with a spouse. Blame, distrust and anger can occur. When there is transparency, a unified goal and good stewardship, there is greater peace and harmony at home. This can be challenging to achieve as everyone comes form a different culture and background. It’s important to remember that as a couple, you need to be on the same team. When starting a marriage, try to align goals and devise a framework laying out how finances will be handled and how those goals will be met.
Management of family finances should be mutual between husband and wife in an attitude of openness and trust. Control of the money by one spouse as a source of power and authority causes inequality in the marriage and is inappropriate. Conversely, if a marriage partner voluntarily removes himself or herself entirely from family financial management, that is an abdication of necessary responsibility.Marvin J. Ashton
When my wife and I got engaged, we had a discussion about money soon afterwards. We disclosed all of our financial details, and luckily neither of us had made any serious money mistakes and had been fairly wise in our choices. I asked my fiancée what her credit score was, and she had no clue. I had her download the Credit Karma app to find out, and showed her my credit score. We still show each other our scores on a regular basis so we can be sure that we don’t go behind each others back on anything.
Finally, we talked about having family councils. A regular executive family council between spouses is a great setting to discuss financial matters. We committed to hold one this week, though we have done many informal ones. We have decided to scale back daily financial talks, as I have a tendency to go over plans and goals on a daily basis, and my wife gets sick of it sometimes. Going forward we will implement a end of month family council and discuss progress, goals and challenges.
Overall there is a great feeling in the group and we’ve been able to help each other by sharing resources and different perspectives. It is nice having a forum available to discuss how to go about finances and support one another. We’re excited to become more unified in our approach to finance.
Tithes And Offerings
This week’s meeting after church was one of my favorites. Some people I’ve told about the class were surprised that it wasn’t cancelled for Mother’s Day, but honestly it is so fun and interesting to meet with the group that we would rather go than stay home.
Repentance and Obedience
Without getting too preachy, we discussed two principles of the Gospel: repentance and obedience. Put very simply and literally, repentance means to make a change, correct a behavior, or “turn back.” It has a negative connotation, but really is a positive thing. It’s not hard to see that we make financial “transgressions” and mistakes all the time, and that we can literally repent of these things just as we would repent from telling a lie, or stealing, for example.
Obedience is another powerful principle, and draws parallels with the Gospel. Christ gave specific commandments and asked everyone to follow them. The laws of the gospel are constant, and whenever a blessing is obtained, it is by obedience to a law. The same goes for finance, and if you know the rules and live them, you are blessed with increase.
Tithing, Fasting and Giving
We discussed several topics as a group, including tithing and fasting. Members of our church pay a 10% tithe, but unlike many churches, it doesn’t go to ministers. The funds go to help build more churches, fund missions, humanitarian aid, etc. This law with it’s associated blessings are described in Malachi 3:8-12.
In addition to the law of the tithe, we observe the law of the fast described in Isaiah 58. Each month we give up two consecutive meals and give money equivalent to the cost of those meals, or more, to our Bishop. He then distributes this money to those who are struggling in the congregation. The blessings described in Isaiah 58 are awesome, and I have experienced them in my life.
Stewardship was a big topic this week and we discussed paying the Lord first through tithing, and ourselves second. You can see more in the pictures above and below. Our facilitator mentioned some old Suze Orman CD’s he had. Even she recommended to people struggling to make ends meet that they should give money away and be charitable first. This often spurs people to be more wise with the remaining funds than they otherwise would be. Zig Ziglar often echoed this sentiment saying “You can have everything in life you want, if you will just help other people get what they want.
So far we haven’t really delved into anything directly related to our finances, even after 6 hours of class time. Everyone has been tracking expenses, sharing what we learn with others outside the class, and applying what we have learned (reading scripture, praying about finances, developing greater faith, etc). The next lessons get into budgeting and retirement accounts that would normally be expected in a finance course. Unfortunately the next two weeks are cancelled due to some vacations around Memorial Day, so the next post regarding this will be in a few weeks.
If you are spiritually inclined, I encourage you to check out the scriptures mentioned and even consider praying, or meditating about your finances to see if you come across any inspiration. I often take the approach to pray as though everything depends on the Lord and then act as though everything depends on me. I find this produces great results in many aspects.
I’m curious how your faith has influenced your finances, please comment below.
This week the rubber met the road when it comes to personal finance. Up to this point, the course has focused mostly on expense tracking and spiritual principles like prayer, faith, fasting and tithing.
- Living a balanced life
- Simplifying our lives and eliminating unimportant things from our to do list
- Finish the sentence: “I just didn’t spend enough time__________.”
- Finish the sentence: “I spent too much time__________.”
- Good, Better, Best
- Budgeting to take control of our lives and protect our family
- Fixed vs Variable expenses
- Shopping for better insurance, phone plans, etc.
- Budget categories
- Delayed gratification
We ended up filling in a sample budget and “balancing it.” You mark your income and expenses and as you go down each line the balance decreases until it hits zero. It was quite easy to fill out having diligently tracked expenses the last month. Once that was all complete we took a personal survey and checked whether we thought we spent too little, too much, or are happy with our spending in each category.
In the end, I think tracking expenses is good and keeps us aware of where the money goes. It’s important to not get too separated from the pain of spending our money. One of the best budget templates we’ve used is found at MoneyPeach. Lately we have been moving more towards the lazy budget, meaning that we simply automate our finances to save and invest a certain percentage and live off the rest. Our savings rate on any given month is around 50%, but it’s difficult. There isn’t a lot of margin that we can cut, especially if anything unexpected comes up. This is why we are trying to increase our monthly/quarterly income through crowdfunded real estate to give us a bigger buffer.
Take a moment to reflect on what you want your life to look like 25 years from now. Honestly answer the questions posed above. I’ll share my answers:
- I just didn’t spend enough time outside with my kids.
- I spent too much time listening to podcasts and reading articles.
Comment what you will regret spending too much or too little time on. Survey your expenses by category and take note of which are too high or too little, and make adjustments. Make a 1% gain. Decide today to change your financial future.
Sticking To A Budget
This week was a follow up on budgeting from last week where we set up an initial budget. The theme was sticking to it, which is the more difficult part of the process.
We started out with a really simple exercise on problem solving. A hypothetical story about a business was read, and we analyzed the problems and brainstormed several potential solutions. Then we flipped it on ourselves and individually pondered about a problem we were facing. Following the same process, we analyzed root cause and took some quiet moments to reflect on solutions. It made me realize how we often go through life and encounter problems, but don’t often take the time to carefully analyze and think through things. Often we choose sub optimal solutions due to lack of thought.
Truthfully, we haven’t ever been good at budgeting. We’ve tried the envelope method, and gone through many excel files. Luckily my wife and I have frugal tendencies and default to not spending unless it’s necessary. Once a month for a few years now, we plan out the next months spending and get everything filled out. We track probably 95% of our expenses, but it gets a little sloppy at times. We have to guess and borrow from categories. We rarely actually stay within our budget, but have still enjoyed success due to taking so much up front for investing.
That was one of my main takeaway’s; it might take a few years and trying several systems before you find something that actually works for you. The best budget is the one you keep, update and use regularly.
That said I still like the lazy budget, of scooping 40-50% of our money into investment accounts and not sweating the rest. I recognize that tracking spend by category is still a worthwhile activity, as it keeps us aware and engaged with our spending. That is one of the main reasons many struggle. People just swipe a card and hope it works out. There’s no forethought or visibility into daily finance, and it’s gotten to the point where people don’t want to check, because they know it’s bad. People are completely disconnected and disengaged from their financial lives.
My Wife Likes Structure
One of the biggest lessons I learned was that my wife needs more structure. We did an activity where we went through a series of questions to help us gauge what our financial priorities are. One question was regarding an emergency fund. I indicated that we had one, but my wife did not. The fact is that we have a decent stash of money to where we could cover a few months expenses should we need to, but it’s invested in the stock market. It’s not a designated emergency fund though, and my wife generally considers investments off limits. It is my observation that women feel safer knowing there is a cash cushion readily available. We need to set up a designated spot for our emergency fund.
There are many types of budgets available, from mint.com, to YNAB, Mvelopes to Excel. Take action and start tracking your income and expenses somewhere. Find something that works for you and your family. It might take a while, and some practice, but it will come. I have even found that Chase bank provides a pie chart categorizing all my expenses from my checking account. It can be something like that exported from your bank. I do tend to prefer Personal Capital though. They track all my accounts and transactions in one secure location and have a basic budgeting tool. It’s free, and if you want to give them a try, sign up to get $20 to Amazon.
Protection From Hardship
This week was focused on time management and protecting ourselves and families from hardship.
The lesson started out with some pondering on time and it’s meaning in our lives. I immediately thought of the book “Your Money or Your Life.” Time is the true currency of our lives. We discussed a good program for time management that anyone can easily adopt.
- Each morning, list the tasks required of the day. Include the names of people you want to serve. Make this list without numbers, in random order.
- Pray or even meditate about your upcoming day and the names on your list, and the things you have to do. If it suits you, commit to your Higher Power to do your best
- Set priorities for your tasks. The most important task might by the 7th one down. Go through the list and assign each a number.
- Work down the list throughout the day.
- Review the list in the evening, pray or meditate on it, honestly give an account or assessment of how it went.
I’ve been trying to implement this into my life and it’s not going that great. My tasks at work and home shift dramatically based on how wound up the kids are. Getting kids through the bedtime routine can take insanely long and keep me from blogging as much as I’d like to. It’s difficult but I want to do better.
Protect Yourself and Your Family From Hardship
The discussion moved towards responsibilities towards our families. Even if a person is not married and doesn’t have kids, there are some things that should be done to protect your family. It all starts with coming up with a 1 month emergency fund. While I don’t like to leave cash laying around earning next to nothing, we typically have a month’s worth of spending in our main account. It’s at the point where it’s pretty even and we never get anything more than a months worth saved up. Anything that can be diverted towards investments is taken off the top.
Given the scary headlines showing that most American’s can’t afford a $400 emergency, it is probably in everyone’s best interest to build up an emergency fund ASAP. I think one of the easiest ways to do this is through microsaving or microinvesting. I personally use Worthy Bonds to round up my purchases automatically and invest them in a bond earning 5% interest (no fees).
Life insurance was next on the list and having adequate term coverage is one of the smartest things you can do. Most employers offer cheap with a group discount, but you can sometimes find good deals outside of your employer. I’ve had good experiences with Mass Mutual and Haven Life (which is owned by Mass Mutual). Essentially, you want to have enough coverage to pay your debts and funeral costs if you are single. If you have a spouse or kids, you likely want much more coverage to provide for the family as they go through the grieving and sorting process. I can’t imagine being broke and having to get everything together while dealing with the emotions that come with the loss of a loved one.
If there are children you are responsible for, and one person is the primary breadwinner, they likely have insurance through their employer. It is important to get a policy on the stay at home parent. I know that if my wife passed away, I would have to pay out a lot for daycare and find a way to get things together to stay at my job. Having adequate coverage allows you time to reorganize your life and take the time you need to sort through things. Truthfully, we have enough life insurance on each other that if one of us died, the other would essentially be financially independent. I think that’s worth $500 a year.
Other Types of Insurance
It’s also worth reviewing employer coverage and potentially getting disability insurance beyond what the employer offers. You might want to check to make sure you have adequate property insurance. This is especially important if your home value has increased substantially the last few years. Shopping around yearly for insurance through sites like PolicyGenius is also highly recommended. You can often save hundreds of dollars per year just by making the rounds and getting some quotes. It’s easy money.
Depending on the size of your emergency fund and liquid assets, it is often worth raising your deductible in favor of lower premiums. My car insurance deductible is usually between $1000 and $1500, depending on the year. I know many people leave it around $500. I’ve saved well over $1000 over the years for driving carefully and having higher deductibles.
Take some time to evaluate the needs of your family. When was the last time you shopped for insurance? Did your term life policy expire? Would your current life or home insurance fall short of your family’s needs? I can’t think of a better gift to give your family than having these things figured out. Hopefully you’ll never need to use them, but if you do, make these tough situations as easy as possible.
We didn’t even get into wills, trusts, and healthcare proxy’s, I’ll save that for another post. What other ways are there to protect your family from tough situations?
Good Old Fashioned Integrity
The most recent class started out with a discussion on integrity. Remember that this is a church sponsored class and may seem a bit old fashioned, but I think this stuff is EXTREMELY important. This is a great and compelling account that will get you to reflect on your own integrity.
The Savior (Jesus Christ) once asked His disciples the following question: “What shall a man give in exchange for his soul?”
This is a question that my father taught me to carefully consider years ago. As I was growing up, my parents assigned me chores around the house and paid me an allowance for that work. I often used that money, a little over 50 cents a week, to go to the movies. Back then a movie ticket cost 25 cents for an 11-year-old. This left me with 25 cents to spend on candy bars, which cost 5 cents a piece. A movie with five candy bars! It couldn’t get much better than that.
All was well until I turned 12. Standing in line one afternoon, I realized that the ticket price for a 12-year-old was 35 cents, and that meant two less candy bars. Not quite prepared to make that sacrifice, I reasoned to myself, “You look the same as you did a week ago.” I then stepped up and asked for the 25-cent ticket. The cashier did not blink, and I bought my regular five candy bars instead of three.
What Shall a Man Give in Exchange for His Soul? – Robert C. Gay
Elated by my accomplishment, I later rushed home to tell my dad about my big coup. As I poured out the details, he said nothing. When I finished, he simply looked at me and said, “Son, would you sell your soul for a nickel?” His words pierced my 12-year-old heart. It is a lesson I have never forgotten.
Being As Honest As Possible
I don’t want to sound preachy, and some might not like that hard of a stance, but for true Christians, this is a normal standard that God expects. Job set a great example in Job 27:5 when he said “Till I die I will not remove mine integrity from me.” We talked about some other ways people today might chip away at their integrity:
- Putting a lower purchase price on a bill of sale when purchasing a vehicle in order to pay less in sales tax.
- Burning CD’s to distribute or taking music off of Youtube.
- Not returning extra change when the cashier gives too much.
- Buying something, like a clothing item, for a certain occasion just to return it once the event is over.
Do what you want, but it does seems most people believe in this vague idea of karma. Increasing your integrity will probably give you more good karma, but it’s not guaranteed.
Understanding And Eliminating Debt
Onto the practical application of the lesson: Eliminating debt. Most people know that debt is usually not ideal, but sometimes can be smart to increase wealth. Our manual was strongly geared towards consumer debt, which is pretty much always bad. Debt for a modest and affordable home, education and basic necessary transportation is sometimes required, but outside of that, it should be avoided. Understanding debt at a basic level goes a long way.
There was a great exercise where we reflected on impulse purchases we had made. We began evaluating our emotions and categorizing these purchases. We took note of who we were with when they happened.
Here are some examples from the group:
- After a stressful day you wind up buying a pair of new shoes that you don’t need. Your friends rave about them and they make you feel better.
- Your children might coax you into buying toys each week. Work is going well and you feel generous.
- Perhaps you feel underappreciated and insecure so you buy something for your boyfriend to try and get more praise.
Maybe you relate to one of the patterns listed above. Environment often trumps willpower so learning to recognize emotional, relational and situational triggers can help you take control of your finances.
Other Financial Issues
Some couples become apathetic about their finances. Both spouses spend carelessly and assume their partner is the one responsible. It’s important to be accountable to one another and share equal responsibility. It’s also easy to covet and compare with all the advertising social media and advertising we see. Comparison is not just a thief of joy, but also of many people’s chance at Financial Independence.
A lot of what was discussed can be summed up in knowing a few things. Unfortunately many people are mostly clueless. Here’s my list of things you should know:
- Your spouse
- Your priorities
- Your emotional, relational and environmental triggers
It may take some time to figure things out but it’s worthwhile. Understanding debt and knowing your triggers is an important step to getting your finances under control. Comment below what your triggers are.
Getting Out of Debt
Take Responsibility and Persevere
We started out discussing why God wants us to take personal responsibility for our lives. I do believe it is a gift from God that we are free to act and to choose so many things in life, especially living in America. Seeing that we are so free, there is accountability associated with our choices. Many people try to shirk responsibility and blame the Man, the system, the company, anything but themselves. Great freedom comes with great accountability. It’s easy to have excuses, but ultimately we have a lot of options in designing our lives.
We talked about how to keep going, even when work is difficult. A lot of it comes to having a positive attitude, increasing our faith and doing what we can to improve our situation. Having a Why makes life much more doable.
I know a lot of people struggle with getting rid of and staying out of debt. It’s becoming increasingly known that our environment greatly shapes our behavior. This goes back to Constraint vs Restraint. Fix your environment and don’t rely on willpower. Get rid of the things that tempt you. Gamify your goals and know your tendencies.
This might require you to get “plastic surgery” and cut up the credit cards. It might require you to take a different way to work to avoid getting breakfast or a drink each morning. It might disrupt your social life. If you don’t find a way to get started and make a change, you’ll probably end up with the same results you’ve always gotten.
This is a fairly simple method that will help you gain momentum towards your goals. Start with the lowest balance debt and attack it with a vengeance. Once it’s gone, roll the money you were using to service that debt to your next largest debt. Repeat until all the loans are paid off. Dave Ramsey loves this plan.
This is a more optimized approach but it can be more risky. This method has you focus on the highest interest rate debt first. Because it might take longer to pay down a larger loan, it can be easy to lose motivation and fall off the wagon. If you can get a good system in place and automate this, it is the fastest way to pay down debt.
We all know that it’s important to get rid of debt. Increase your income through a side hustle and pay extra on your debt. Decide on whether you can tackle the debt avalanche or if the snowball is the better method for you. Take 15 minutes a day and try to make small incremental changes. It might take some time but it’s definitely worth it.
Managing Financial Crises
Inching closer to the end of this course (12 weeks), the topics are becoming more applicable to me. This week the lesson is on managing financial crises.
As usual there is a mini principle before getting into the main lesson. This week is on communication. While pondering how and when our prayers have been answered, we begin a discussion about listening. Generally it can be said that thoughts can come from our hearts or our minds. This is a bit abstract, but I think it’s an important distinction and something to think about. We can start to notice patterns in our prayers and choices and see whether our thoughts come from the heart or the mind. I tend to be more logical while my wife is more emotional. Some topics we switch though.
In learning about being a better listener, it’s important to really concentrate on what the other person says and try to validate them. Many times it is powerful to recap what they said in their own words. We might be surprised at how often we think we understand their point but don’t. Some discussions don’t merit this approach for every back and forth, but it’s something to keep ready.
Protecting Family From Hardship
We started out by reviewing our budget and then taking a survey that goes through all the categories. We indicate whether we spend too much, too little, or we feel good about the amount that particular category is. Out of about 10 categories, I felt I spent too much, but I never marked that I spend too little. I’m a pretty content guy.
Now that we have a sense of our feelings about categorical spending, we ponder how we would handle a financial crisis. As a group we talk about the many crises that can arise, and came up with this list:
- Natural disasters
- Identity theft
- Medical problems
- Car accidents
- Death of a family member
Have a Plan
It’s interesting to note that many families have fire drills, or even tornado or earthquake drills. How many people do you know have financial crises drills? Maybe we don’t need to go through a drill, but having a plan would be really good. Putting that into writing and signing it would be even better.
Once you have started coming up with some ideas on how you would handle a financial crises it’s important to take action:
- Make sure you have insurance coverage and it’s up to date and sufficient
- Ensure you have a reasonable emergency fund
- Know that some bills can be put on hardship deferral, while others are more important
- Identify backup resources that could help in a crises, like family, church or community
How Much Should I Have In My Emergency Fund?
This is a deeply personal matter, and experts suggest anywhere from 3-8 months. I will share that in my checking and savings accounts at any given time, there is enough for 2 months of bills. Outside of that, there is some opportunity cost to having too large of an emergency fund. Following this conventional advice can cost you as much as $800k in potential market returns, so I prefer to use what Mr. Money Mustache calls “Springy debt.”
This is also why I use my Roth IRA as an emergency fund. Money in a Roth IRA can be invested, but the principal contribution can be pulled out tax and penalty free at any time. While pulling money out of a Roth would not be ideal, it would still work. It’s a really good idea to make your emergency fund somewhat more difficult to access than your normal checking and savings account. Having some separation from your daily use accounts helps you stay away and not touch it. Of course, I don’t want to lose the tax free growth in my Roth IRA’s, so I’m extra motivated to keep that money in there and growing. I maxed it out two years in a row, which gives me approximately 6 months of emergency fund on top of my 2 months in checking.
It’s really important to take an inventory of your financials every so often. Review them with your spouse, partner, or a mentor. Come up with an emergency plan and put it in writing. You’ll be more likely to stick to it and have some peace of mind once you’ve thought things through. Decide where to put your emergency fund and try to make it tougher to access. It’s not good to tap into it for things that are not emergencies. If you are prepared you don’t have to fear.
Do you have an emergency fund? Where do you keep it?
Invest For The Future
Finally getting into the meat of the course with “Investing For The Future,” which continues in week 11 as well. I know quite a bit about investing already but interested to see how this breaks down the basics.
The lesson started with pondering and discussing learning and how it creates opportunity. The world will often pay you what it thinks you are worth so it’s important to consider that when going to school or considering various careers. More education sometimes isn’t enough, as the cost can be prohibitive even once a degree is obtained.
We completed an activity about creating a life mission and thinking ahead 5 years to try and visualize where we will be. Some things I wrote down were “Landlord,” “more serious blogger,” and half FI. An important component of the life mission was defining a why. My why has a lot to do with service and having more family time. Finally we wrote down what skills, knowledge or experience we need to get there. It definitely helped me prioritize and we then started outlining some goals that align with our Life Mission. I’ll have to post my finished version sometime.
Sometimes to accomplish our goals, we need mentors. We are really interested in real estate but don’t have much experience. We definitely need to start going to Meetups and getting connected with potential mentors.
When it comes to investing for the future, it all starts with saving. There has to be a gap between income and expenses. I do think it’s often important to have a bit of an emergency fund as a prerequisite, which the lesson states as well. We usually keep 2 months expenses in our checking account at all times, but the rest we keep in a Roth IRA and Worthy Bonds. This might be more aggressive than some would like, but it works for us.
Once you have your emergency fund designated and working, keep saving. This will be the money that you can go on to invest for your future.
Consider Home Ownership
While I don’t think a home is necessarily an investment, it is sometimes less expensive and better than renting. Many people aspire to own homes, and I tend to think of it as a forced savings account with about a 3% interest rate. Before deciding to buy, consider the pros and cons. If you are going to be moving soon, it is likely better to continue renting. There are many costs with home ownership and it’s not usually something people plan for. When you rent, the landlord fixes all the problems (hopefully), but that’s not the case when you have your own place.
When deciding to buy a home there are some boxes you want to check:
- Are you free from consumer debt?
- Do you have a 3-6 month emergency fund?
- Am I living on a budget and do I know how much I can comfortably afford?
- Have I saved enough for a down payment?
- Is my employment stable?
- Do I plan to own for at least 5-7 years?
- Can I afford other associated costs like insurance, taxes, and maintenance?
To avoid being house poor, try to keep your monthly payment less than 25% of your monthly income. Banks will often qualify you for enough of a mortgage that it might be around 50% of your gross pay, but this is something to be avoided. You will be house poor and unable to save or invest much outside of your normal monthly mortgage payment.
It’s a good rule of thumb to plan for 1% of the home’s value to be spent in maintenance each year.
Depending on your tolerance for risk, you might want to consider a 15 year mortgage, which will cost much less in interest, and pay off the home in half the time. 30 year mortgages are the norm and what I get, but it’s not hard to pay them down in 15 years or less. It gives you more flexibility should you fall on hard times by having a smaller monthly payment. Most people with 30 year mortgages will not pay it like a 15 year despite best intentions. Know yourself and try to make the best decision for your family. When done right, home ownership can be a way to invest for your future.
Invest For The Future With Education
Education is how we invest in ourselves. Often additional training or education comes at a cost, but that is not always the case with MOOCs available. Some companies even provide subscriptions like Pluralsight or Lynda, or access to other training on or off site. See what your employer offers and consider taking advantage of that. I even came across Smartly recently and they offer a free MBA to qualified candidates.
Working in IT, things can move quick and it’s important to keep up with the latest technology and trends. More and more jobs are at risk of getting disrupted with AI and other technological advancements. Amazon is even spending X amount to retrain a third of their workforce. This might not be the case if the labor market wasn’t so tight. It is troubling to see a record high amount of open jobs out there but not enough qualified candidates. Some companies like Google are even forgoing degrees for those with experience or skill.
However you invest in yourself, consider your options and try to avoid debt to the extent you are able. I will be looking into some certifications that I think my employer may be able to help with.
Investing is really the main thing that will ensure you have enough assets to retire. Many people think they can’t afford to invest, but in reality, you can’t afford not to. There might be sacrifices that need to be made to continue to pay off debt, increase income, or lower expenses, but you don’t want to get to age 60 with nothing to show for it. I will have more posts upcoming about my investing philosophy and strategy. It doesn’t have to be complicated. How do you invest for the future?
Investing For The Future Part 2
This is the penultimate class in the self reliance course.
Become One, Serve Together
The lesson started out with some pondering and discussion about serving others, and how that can help us. I think volunteering and serving those less fortunate than ourselves helps put our lives into perspective. Everyone has problems, and if you stop to look around you’ll probably see a lot of people are not doing as well as you. It is true that when you lose yourself in the service of others, you start to really find yourself.
Some feel that they deserve what others already have, which can cause resentment. Others feel entitled to things they have not earned. These two traps blind people from seeing and essential truth: all things belong to God. Resentment and entitlement can be overcome by focusing on the needs of others.Personal Finances for self reliance manual
We discussed as a group people who could use our help. People in our congregation came up, and we talked about the talents, resources and contacts we have to offer. Sometimes we can’t serve people very well, but we can connect them to someone who can.
Planning For Retirement
For many, it’s easy to put off retirement planning because it seems so far off. Not taking it serious early on will cause major problems. Time is what makes compound interest so powerful, so the sooner you save for retirement, the better and easier. To get started planning you’ll want to try and get an idea of how much you need to save.
There are tons of retirement calculators on the internet. If you have a 401k, or investment account, you likely can find a calculator on the website for your account. CalcXML has tons of great calculators, as does FinancialFreedomBook.com. I personally like Personal Capital’s retirement planner.
Otherwise, two simple formula’s are as follows:
- Number of years in retirement X annual amount needed for retirement
- Your annual spend X 25 (or 35)
The second formula is reverse engineering the 4% rule of thumb which came from the Trinity Study. It’s designed for a 30 year retirement, so it might be wise to do 30x or 35x your annual spend to be sure.
It can be hard to anticipate how much you will spend in retirement as health begins to decline and the cost of care increases. Hopefully your mortgage can be paid off before retirement, providing some buffer. There may also be some social programs but it is not wise to rely much on those. Take a moment to consider how long your grandparents, great aunts and uncles, or parents have lived, and what health conditions they faced.
True security comes from flexibility. Set a goal and figure out how much you need to save monthly.
This is a fairly simple concept, where the interest from your investments earns interest, in a continuous cycle. Most people don’t see the value of this as it has an exponential effect on money, and our brains tend to think in a linear fashion. Compound interest allows you to get a million dollars for just $160,000, which is 84% off.
Risk vs Return
Most people immediately think of stocks when it comes to investing, but there are many ways to invest. The graph below shows different investment vehicles but it is not comprehensive. Diversifying your investments into many of these is often a relatively smart thing to do. If someone is a real estate expert or stock picker, then diversifying may be a waste of time. Diversification across different investment vehicles helps compensate for ignorance, so experts don’t have to do this as much.
It’s important to invest according to your risk tolerance, but keeping money in the bank is a losing proposition. The middle of this graph offers some great investment vehicles in index funds, large and small cap stocks. I personally am a fan of VTI, VOO and VB – all excellent Vanguard funds. Stocks are probably the first place to start if your employer offers a 401k/403b/457 match of any sort.
My household is all in the middle and upper side of the scale, getting started in real estate and considering business ownership.
Finally, you should try and optimize your investments for taxes. The less you pay, the better. There are tons of strategies on this and I would direct you to GoCurryCracker and MadFIentist for more on this subject. In general, the younger you are the more a Roth/Roth 401k should appeal to you. The older you are, the more a traditional account should appeal, but it all depends. Having a bit of both is not bad. You’ll have to pay now or later, and with taxes the way they are, paying now is a good option.
Investing is a big subject and there are so many exciting and new ways to get your money working than you have time to explore. Start with your employer benefits, but if that’s not an option, opening an Individual Retirement account is not difficult at all. Take 20 minutes and do what it takes to get started, if you haven’t already. If you have started, consider your asset allocation, diversification, and the tax treatment of your investments. Look for small ways to optimize for your goals and educate yourself further on these matters. You don’t have to spend hours researching to make incremental improvements to your investments. The most important thing is to do as much possible as early as you can.
Giving And Blessing Others
Everyone in the group was at least a decade or two older than my wife and I, and not part of the FIRE movement. It was great to associate with them and I learned much more than I expected, and got to share some great FIRE hacks.
Share Principles of Self-Reliance
We shouldn’t keep our knowledge to ourselves. It’s never been easier to share our thoughts and ideas with the world with the advent of social media. In the past month I’ve had the opportunity to talk with several of my coworkers about finance. Several are in the 25-30 age range, and don’t have a lot of investing experience. The company I work for doesn’t allow 401k contributions until 3 months of employment, so I just ask if they have started it around that time for some of the newer hires. By opening up the conversation, I’ve been able to explain the power of the Health Saving Account (HSA) and which funds I’ve found the best in our 401k and HSA plans.
There is an interdependence between those who have and those who have not. The process of giving exalts the poor and humbles the rich. In this process, both are sanctified. The poor, released from bondage and limitations of poverty, are enabled as free men to rise to their full potential, both temporally and spiritually. [those who have more], by imparting of their surplus, participate in the eternal principle of giving. Once a person has been made whole, or self-reliant, he reaches our to aid others, and the cycle repeats itself.The Celestial Nature of Self-Reliance
As a group attending the same congregation, we brainstormed friends and associates we might be able to share these principles with, and perhaps they will take the class next time.
We took several minutes to asses a wide variety of topics, including:
- Family unity
- Commitment to self reliance
- Faith in Jesus Christ
- Tithing and Fast Offerings
- Being independent from family, church or governments support
- Emergency fund
- Planning for retirement
We listed out some of our next steps. Some of the steps I’ll be taking soon are holding family councils, improving in my day job, funding my Donor Advised Fund, automating our budget, funding a brokerage account through M1 Finance, improving our emergency fund and investment allocation, blogging more, and considering side hustles.
It was a shorter meeting, but ended with a conversation about flat squirrels. The road is covered with squirrels (and armadillos) who couldn’t make a decision. It really comes down to applying everything we have learned and taking action. Once again there has never been a time with easier access to good information and creative ways to make money or start businesses. If you are already on the path to FIRE, I encourage you to freely give of your knowledge to those around you.