There are a ton of smart money people out there. A ton. Some whose opinions I find hard to respect – like that lady on tv who had a whole show based on financial advice who then told a girl that a horse was a good investment. Having been in that industry for over half of my life, a $6000 horse will not give you a return. Respect = lost. But some people, like my dad and father-in-law [who actually is a financial planner], I respect a ton. Their basic principles on how they manage their money makes sense. Their lives reflect that their advice is good and 99% of the time, it’s true.
When I was in high school, my dad gave me a credit card. It had a MINUSCULE limit, and I was ONLY to use it for gas. This probably wouldn’t work for some people, but my dad always taught me to treat my credit card like a debit card. Don’t buy something with money you don’t have. So, I ONLY bought gas. In college, he started a checking account for me. And each month he would check to see that I was balancing my checkbook. He would give me the balance on the monthly bank statement and we’d compare out bottom lines. If it was off, it was my job to find out why. This cause a lot of tears some days, but it taught me to really examine where I’m spending my money! Debit cards can be dangerous – a slide here, a slide there – phew – those charges can rack up fast!
Anyway, now I’m married and my finances are handled mostly by Chad, but we’re on our own! We don’t have our parent’s making sure we’re balancing a checkbook or making sure we only use our credit card for gas. But the lessons I’ve picked up on throughout my life are burned in. Mind if I share?
Pay yourself first. My daddy taught me this. I think we get so caught up with paying our bills that we just hope that when it’s all over, there is some left over to buy groceries. My dad always said, “Pay yourself first!” Figure out how much is coming in and treat yourself like a bill – Roth, IRA, retirement, Savings, etc – we should be contributing those things and not just if there is some left over. Now obviously, this takes some budgeting and figuring out how much is going where. A basic budget sheet can be helpful in figuring out all of this. Something like this.
30%/30%/30%/Tithe. I had an internship with a Richmond commercial photographer, Casey Templeton, and he taught me this. Casey’s #1 hobby is investment. He gave me this breakdown: 30/30/30. He meant it for charging – 3 x the price you pay for a product is what you should charge. But I use it for a rough estimate of where my money goes. 30% to taxes. 30% to ME [savings, etc], 30% to expenses. I also added the final 10 – Chad and I commited our lives to the Lord – we believe that ALL of our money comes from God, and He only asks for 10% to sustain the church financially. Sometimes I can’t believe how generous and practical God is. Anyway, so 10% to our church. The 30/30/30 is not a strict rule. The numbers vary each month, but it’s a good place to begin!
Live below your means. Is it human nature to spend money when we get money? No idea. But this little phrase is so hard to live by. It’s easy to look at our bank account, figure out how much we can spend, and spend it. It seems right, but it can actually be limiting. For example, you go to buy a house, the bank will tell you you can afford a HUGE number. Instead of taking that number and shopping in that range, figure in all of the things the bank doesn’t consider. Like your entertainment budget or your tithe and your eating out budget. It might end up cutting the bank’s magic number in half! Anyway, money can be such a stressor and so the advice I’ve always received was to cut that stress down by living below your means!
So there you have it. A few soft principles I’ve picked up along the way that guide me through my financial life. Do you have some? What is the best advice you’ve received?
Here’s a photo. I hate posting a blog post without a picture 🙂 HAPPY SNOW DAY!