There are many articles that note with the economic downturn that household debt has been greatly reduced. And the hope is that we have learned our lesson well and cut the debt cord.
But have we? It looks like that hope is a bit premature...
http://moneyland.time.com/2012/01/12/in-november-we-racked-up-5-6-billion-more-credit-card-debt/
So on Black Friday retailers were thrilled to report consumers spent an unexpected $52 billion (with a "b"). Unfortunately, consumer borrowing surged $20.4 billion (also with a "b") in November - the highest month-over-month increase in a decade! Of the borrowing, $5.6 billion ("b" again) was on credit cards.
Maybe rather than cut the cord, we need to cut the cards!
I listened to an NPR interview discussing why we use debt for purchases. The person being interviewed felt two reasons at least included immediacy (not having to wait) and relativity (adding $100 to a $3,000 balance seems relatively small and therefore causes little concern).
The interview also discussed a new trend in credit card marketing called virtue cards - where instead of cash back or other incentives, a portion of the spending was donated to charity. This made people feel a little less selfish about their consumerism?
The Time article credited some of the credit card spending to a wave of 0% offers promoted by credit card issuers.
I guess the point is (and it sort of covers weeks 3 - 6 in FPU):
1) Wake up
2) Make a plan (budget)
3) Quit using debt (cut up the cards)
4) Be aware of and defend against the impact of marketing on your buying decisions
Showing posts with label debt. Show all posts
Showing posts with label debt. Show all posts
Tuesday, February 28, 2012
Wednesday, January 18, 2012
13 Weeks to Change a Life
For the next 13 weeks we are taking a journey...to change our finances...to change our marriages...to change our perspectives...to change our future...to change our lives.
Financial Peace University is a course about finances, of course. But it can affect every area of your life if you let it. Use it to its fullest. Join in, jump in...it will change your life.
Thirteen weeks is a long time. Thirteen weeks is not a long time. Thirteen weeks is enough time...
...to form a habit...to change your life.
Don't just take the course. Don't just show up. Read the book. Do the homework. Think about the concepts. Apply them to your life.
Practice. Try. Stumble. Get up. Practice. Try. Learn. Press on. Practice. Try. Do it. Do it for 13 weeks.
It's hard. It's not easy. But decide today to engage this process of learning and changing. Decide today which habits are holding you back or need to change. Maybe it's your spending. Maybe it's your communication with your spouse. Maybe it's your patience (think debt). Maybe it's your accountability. Maybe it's your giving. Maybe it's your attention (as in, paying more of it).
Change your habits and change your life. Thirteen weeks is enough time for that.
I don't know what you are facing but I hope in the next 13 weeks you do just that - FACE IT - and begin to take the steps necessary to change...your finances...your marriage...your perspectives...your future...your life.
Thursday, October 30, 2008
On taxes, the wealthy, and spreading it all around
Join me, if you will, on a little anecdotal jaunt... On second thought, let me warn you that you may not want to. This could be painful or even maddening to you. Ok, if you aren't up to reading the tough stuff, just skip to the end.
There has been a lot of talk in the news lately about these implicitly selfish wealthy people and the weak middle class. Now I fit firmly within the middle class category, so nothing I write is from pure self-interest. But I have been thinking...
Most people by now surely have heard that the top 1% of taxpayers pay around 35% of all federal income taxes; the top 5% pay around 55% of the whole; the top 10% pay around 66%; and the top 25% pay around 84%. No matter on what the latest or most precise percentages are because the general idea is clear, and this post is all about general rules. They do, after all, become general rules because they generally are the rule.
There is no reason in the United States today that everyone cannot be a millionaire. Well, there is a reason, but I'll get to that later. The formula is very simple.
Like I said, I have been thinking. What makes rich people rich, middle class people middle class, and the "underprivileged" poor? In general terms, the same reason everyone is not a millionaire. Follow with me...
When wealthy people make lots and lots of money, what do they do with it? Let's see...they buy nice homes (except for Warren Buffet), they buy expensive cars (except for Sam Walton), they buy other stuff, they invest, they save, and they give. I notice their names on university buildings, hospitals, and church wings (for those churches that put names on wings). No, it seems the wealthy spread their wealth voluntarily to accomplish a number of charitable purposes. So why does the government need to get involved? And anyone in nonprofit work knows how most organizations are able to do extraordinary things because of the extraordinary generosity of a few, to whom much was given. Interesting.
So I'm curious, would raising taxes on the wealthy beyond the great amount they already pay be an attempt to shift those dollars away from charity to the government? Would the government be better at determining how to use those dollars for social good than the donors who actually earned the money? I am envisioning foreign countries I have visited. They have a "strong" middle class that relies on government to do and build everything. There are no names on hospitals or other "institutional" buildings. The wealthy are those in the government bureaucracy or with close ties and they don't do much charitable giving except with public money. Government is strong. Charity is weak. Okay, so that was admittedly a rant. But it's my blog and you had fair warning.
What about the middle class? What might we do with a raise, a bonus, or a tax refund check? Move toward becoming wealthy? WE PAY OFF DEBT, right? Now that is a great answer. But it begs the question, where did the debt come from? The answer to that question can often be found in another question. Why does the middle class stay the middle class over long stretches of time? Ouch. We stretched on the home purchase, filled it with nice furniture, kept up on the latest gadgetry, and entered the process of either leasing or making perpetual car payments. Middle class neighborhood are filled with all the stuff of wealthy neighborhoods but lack one fundamental similarity - the money to pay for it all. We have no savings, our giving is pathetic, and investing is out of the question.
This one could be touchy. The "underprivileged"? I have seen many people face insurmountable odds, but make wise choices, and press through to thrive. These were most often uneducated and certainly underprivileged folks. For example, most of our immigrant populations. And the Jewish communities that have faced persecution and discrimination that have thrived with little intervention. I recently heard of a local country club that opened up membership to Jews within the last 7 - 10 years. Astounding. Anyway, so what keeps poor people poor over long periods of time? And I could ask along with that, who has seen the greatest success in actually combating poverty in the United States - government or charity (so should we raise taxes or incentivize wealth and charitable giving)? When poor people receive a windfall, they rarely know exactly where it went, but certainly it is gone. It might go to the retail shopping outlet, a car dealership, or any number of places. I would venture to say it never goes to charitable giving, saving, or investing.
Poverty is a curse. The way to fight it is to get people out from under the curse, not to throw money at them. Studies have shown that if the world's wealth were evenly distributed, disparities would return within 6 years I believe. As the old proverb says, "A fool and his money are soon parted."
Thank you for letting me get all that off my chest. I feel better now.
Now for the reason everyone in America today is not a millionaire...
Yes, if you have read many of my posts you might have guessed it - BEHAVIOR - and that starts with you, not the government (not even the president).
So let me give you a little formula for success that I may have previously shared.
Give.
Save.
Then spend.
Or, as financial expert Ron Blue testified before Congress, "Live on less than you make. Then save and invest the difference over a long period of time."
You can do it. It is up to you. When your behavior follows these steps, mathematics takes over and abundance is automatically created. No matter who is president and no matter what the tax rates become, following these principles will naturally lead to wealth and success. And what do you do then (besides pay more taxes)? As Dave Ramsey says, "Once you have lived like no one else, you can live like no one else and you can give like no one else."
Don't wait on government. And don't worry too much about government (but DO get informed, think it through on your own - don't just listen to campaign rhetoric - and VOTE!). I could go on for hours, but I'll stop. Let me leave you with this verse that stretches out over this whole discussion-
"11Your power is great, and your glory is seen everywhere in heaven and on earth. You are king of the entire world, 12and you rule with strength and power. You make people rich and powerful and famous. 13We thank you, our God, and praise you. 14But why should we be happy that we have given you these gifts? They belong to you, and we have only given back what is already yours." 1 Chronicles 29:11 - 14 (Contemporary English Version)
Read it in several versions to let the truth get planted deep within you. And remember what my Dad told me right about this time of year in 1992: "That's why we put our trust in God instead of men." Wise words.
There has been a lot of talk in the news lately about these implicitly selfish wealthy people and the weak middle class. Now I fit firmly within the middle class category, so nothing I write is from pure self-interest. But I have been thinking...
Most people by now surely have heard that the top 1% of taxpayers pay around 35% of all federal income taxes; the top 5% pay around 55% of the whole; the top 10% pay around 66%; and the top 25% pay around 84%. No matter on what the latest or most precise percentages are because the general idea is clear, and this post is all about general rules. They do, after all, become general rules because they generally are the rule.
There is no reason in the United States today that everyone cannot be a millionaire. Well, there is a reason, but I'll get to that later. The formula is very simple.
Like I said, I have been thinking. What makes rich people rich, middle class people middle class, and the "underprivileged" poor? In general terms, the same reason everyone is not a millionaire. Follow with me...
When wealthy people make lots and lots of money, what do they do with it? Let's see...they buy nice homes (except for Warren Buffet), they buy expensive cars (except for Sam Walton), they buy other stuff, they invest, they save, and they give. I notice their names on university buildings, hospitals, and church wings (for those churches that put names on wings). No, it seems the wealthy spread their wealth voluntarily to accomplish a number of charitable purposes. So why does the government need to get involved? And anyone in nonprofit work knows how most organizations are able to do extraordinary things because of the extraordinary generosity of a few, to whom much was given. Interesting.
So I'm curious, would raising taxes on the wealthy beyond the great amount they already pay be an attempt to shift those dollars away from charity to the government? Would the government be better at determining how to use those dollars for social good than the donors who actually earned the money? I am envisioning foreign countries I have visited. They have a "strong" middle class that relies on government to do and build everything. There are no names on hospitals or other "institutional" buildings. The wealthy are those in the government bureaucracy or with close ties and they don't do much charitable giving except with public money. Government is strong. Charity is weak. Okay, so that was admittedly a rant. But it's my blog and you had fair warning.
What about the middle class? What might we do with a raise, a bonus, or a tax refund check? Move toward becoming wealthy? WE PAY OFF DEBT, right? Now that is a great answer. But it begs the question, where did the debt come from? The answer to that question can often be found in another question. Why does the middle class stay the middle class over long stretches of time? Ouch. We stretched on the home purchase, filled it with nice furniture, kept up on the latest gadgetry, and entered the process of either leasing or making perpetual car payments. Middle class neighborhood are filled with all the stuff of wealthy neighborhoods but lack one fundamental similarity - the money to pay for it all. We have no savings, our giving is pathetic, and investing is out of the question.
This one could be touchy. The "underprivileged"? I have seen many people face insurmountable odds, but make wise choices, and press through to thrive. These were most often uneducated and certainly underprivileged folks. For example, most of our immigrant populations. And the Jewish communities that have faced persecution and discrimination that have thrived with little intervention. I recently heard of a local country club that opened up membership to Jews within the last 7 - 10 years. Astounding. Anyway, so what keeps poor people poor over long periods of time? And I could ask along with that, who has seen the greatest success in actually combating poverty in the United States - government or charity (so should we raise taxes or incentivize wealth and charitable giving)? When poor people receive a windfall, they rarely know exactly where it went, but certainly it is gone. It might go to the retail shopping outlet, a car dealership, or any number of places. I would venture to say it never goes to charitable giving, saving, or investing.
Poverty is a curse. The way to fight it is to get people out from under the curse, not to throw money at them. Studies have shown that if the world's wealth were evenly distributed, disparities would return within 6 years I believe. As the old proverb says, "A fool and his money are soon parted."
Thank you for letting me get all that off my chest. I feel better now.
Now for the reason everyone in America today is not a millionaire...
Yes, if you have read many of my posts you might have guessed it - BEHAVIOR - and that starts with you, not the government (not even the president).
So let me give you a little formula for success that I may have previously shared.
Give.
Save.
Then spend.
Or, as financial expert Ron Blue testified before Congress, "Live on less than you make. Then save and invest the difference over a long period of time."
You can do it. It is up to you. When your behavior follows these steps, mathematics takes over and abundance is automatically created. No matter who is president and no matter what the tax rates become, following these principles will naturally lead to wealth and success. And what do you do then (besides pay more taxes)? As Dave Ramsey says, "Once you have lived like no one else, you can live like no one else and you can give like no one else."
Don't wait on government. And don't worry too much about government (but DO get informed, think it through on your own - don't just listen to campaign rhetoric - and VOTE!). I could go on for hours, but I'll stop. Let me leave you with this verse that stretches out over this whole discussion-
"11Your power is great, and your glory is seen everywhere in heaven and on earth. You are king of the entire world, 12and you rule with strength and power. You make people rich and powerful and famous. 13We thank you, our God, and praise you. 14But why should we be happy that we have given you these gifts? They belong to you, and we have only given back what is already yours." 1 Chronicles 29:11 - 14 (Contemporary English Version)
Read it in several versions to let the truth get planted deep within you. And remember what my Dad told me right about this time of year in 1992: "That's why we put our trust in God instead of men." Wise words.
Saturday, August 16, 2008
Our journey
We are coordinating our second Financial Peace University at Antioch starting August 23. I was thinking back over some of our journey and thought it might encourage someone who finds themselves along the way...
When I completed my formal education, Carrie and I had been married almost two years and had about $60,000 in debt. We should have been terrified (our debt was about twice our income at that moment), but I actually rationalized that it wasn't too bad. I had bought into the "good debt, bad debt" myth and the "car debt is inevitable - at least early on" myth. Since "good debt" (student loans) and "normal" debt (cars) made up most of our debt load, I actually thought our overall debt load to be reasonable at our stage in life. And Carrie trusted me with our money.
Over the next couple of years I got a job, Carrie quit hers to stay home with our new family, we changed cars, bought a house, and lived a bunch of life. During this time our debt load varied slightly, but we were basically in the same place, only we now had a house that needed a complete remodel. Now that's a great place for a young broke family!
About this time we went through Crown Financial Ministries' small group study and started getting serious about our money. We began to make some adjustments, but with all of life that happens while starting a family and the busyness, we still weren't giving it enough focus or intensity. Debt at this time was probably around $50,000 (without the house) and we were trying to get the debt related to our remodel paid off.
Let me break here to ask a question. Why had we not gained more traction? There are lots of answers that I find are common to about everyone who is struggling:
And since our kids were born so close together, once the first hits any stage in life, the others follow, like, immediately. In other words, most of my saving for each stage in life had to take place before our first reached that stage.
Carrie has always been an amazing wife and she got behind me on reaching the goals for our future. She became especially motivated during the Financial Peace University class we coordinated.
So, things had to change. How did we get into debt? Not paying attention. Dave Ramsey says, "You can stumble into debt in our culture but you will never stumble out." How did we get out? Focused intensity. It's the only way.
New rules:
When I completed my formal education, Carrie and I had been married almost two years and had about $60,000 in debt. We should have been terrified (our debt was about twice our income at that moment), but I actually rationalized that it wasn't too bad. I had bought into the "good debt, bad debt" myth and the "car debt is inevitable - at least early on" myth. Since "good debt" (student loans) and "normal" debt (cars) made up most of our debt load, I actually thought our overall debt load to be reasonable at our stage in life. And Carrie trusted me with our money.
Over the next couple of years I got a job, Carrie quit hers to stay home with our new family, we changed cars, bought a house, and lived a bunch of life. During this time our debt load varied slightly, but we were basically in the same place, only we now had a house that needed a complete remodel. Now that's a great place for a young broke family!
About this time we went through Crown Financial Ministries' small group study and started getting serious about our money. We began to make some adjustments, but with all of life that happens while starting a family and the busyness, we still weren't giving it enough focus or intensity. Debt at this time was probably around $50,000 (without the house) and we were trying to get the debt related to our remodel paid off.
Let me break here to ask a question. Why had we not gained more traction? There are lots of answers that I find are common to about everyone who is struggling:
- We had not broken the cycle of debt. We were still using credit cards while trying to pay them off.
- We were not both intimately involved in our family's finances.
- We were not in complete unity on the level of sacrifice we should make to get ahead.
- We were not using a monthly spending plan.
- We were still reacting to circumstances rather than living our financial life on purpose. We weren't being intentional enough.
- We were not exercising the hard work, discipline, and diligence needed to win with money.
And since our kids were born so close together, once the first hits any stage in life, the others follow, like, immediately. In other words, most of my saving for each stage in life had to take place before our first reached that stage.
Carrie has always been an amazing wife and she got behind me on reaching the goals for our future. She became especially motivated during the Financial Peace University class we coordinated.
So, things had to change. How did we get into debt? Not paying attention. Dave Ramsey says, "You can stumble into debt in our culture but you will never stumble out." How did we get out? Focused intensity. It's the only way.
New rules:
- We make a written spending plan (budget) every month, spending every dollar on paper on purpose before the month begins.
- We communicate regularly about our money, making changes to the budget as necessary. Spending all the money on paper requires us to find offsets anytime there is an additional expense we had not accounted for. And Carrie is very involved in this process.
- We use cash everywhere possible to hold ourselves accountable to our spending plan, make wiser spending decisions, and negotiate bargains.
- We don't use credit cards at all.
- We pray about this regularly.
What else?
- We saved $1,000 in the bank as a starter emergency fund.
- We began paying off our debts smallest to largest with a vengeance.
- We picked up extra work to advance the cause.
- We got very diligent about our finances.
- We held off on some wants that sometimes felt like needs.
That was just under one year ago. Today, we have about $11,000 in student loans to go. Everything else is GONE FOREVER. By the end of next year we will be debt-free (except our home), have an emergency fund of 3 - 6 months expenses, and will have cash-flowed a 10-year anniversary resort stay in Cancun.
We are on our way to Financial Peace! Two years of hard work to change our future. Well worth it! And let me assure you of one thing - WE ARE NEVER GOING BACK!
It's a given for me but let me be very clear - To God be all the praise, honor, and glory. We are applying His principles, His truth, and trusting in His provision. We are given strength by His Spirit and are encouraged by His people. He is the Lord of our lives.
I do quite a bit of financial counseling and I have yet to see a situation beyond two years of hard work and sacrifice from being cleaned up. The only question is whether the family is willing to pay the price.
If you are tired of living with the financial stress ... if you work too hard and make too much money to be this broke, please contact me or join a Financial Peace University class near you. This will change your life!
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