Alternative path to wealth

Dollar signLast week I teased that aside from hoping to strike it rich with a miracle investment, there was a better route to go. Here is my brilliant three-step plan:

One: Earn More

Dave Ramsey teaches that your most important wealth building tool is your income. To build wealth, you need to generate income. Saving money (income minus expenses) and investing (return on saved money) are impossible without generating income. Obviously more income increases your chances (but certainly doesn’t guarantee) of having a surplus. If we aren’t currently generating a surplus, we need to either (or both) cut expenses and/or generate more income. Here is some advice on generating more income.

Two: Get rid of Debt

Getting out of debt accomplishes two super important things. First, you take over control of your income. Debt is a lien against your future income. Take control of your future income – it will allow you to save which is step one in accumulate wealth. Second, if you are paying interest on debt, you can have a guaranteed return on an investment by keeping that interest for yourself. See this.

Three: Save cash

This seems counter intuitive, but having a large cash reserve is valuable for several reasons. First, you can negotiate significant discounts on things you are forced to buy. Second, you are prepared when assets that we know and understand become significantly discounted. Like when we get our next recession.  There is a lot more to be said about the advantages of liquidity, but I recommend trying it to see how it feels.

 

Concession from last week. While I’m steadfast that we should let go of the myth of being a great investor, it’s really important to understand that yielding a couple of extra percent yields a massive difference in returns over time. Over 20 years, the difference between earning 6% and 12% on an investment isn’t 2x the return, it’s 3x. This goes up even more over time and/or return.

Interview: David Hyams

david_hyams.jpgI had a chance to interview David Hyams, a Denver Seminary graduate and current practicing attorney. You’re really going to enjoy his wisdom – especially his personal story of navigating student loan debt.

David, you have a unique background – you are a practicing attorney but you also attended and graduated from Denver Seminary. Why did you pursue those seemingly very different directions?

The short answer is, because I was trying to follow God’s call on my life. What this looked like in reality, of course, was a serpentine path to law shrouded by fog, marked by stints of clarity. My undergrad degree is in Sport Medicine, which was never a good fit, but when I chose that major as a freshman, like most 18-year-olds, I didn’t know myself and certainly was not considering career options in terms of God’s calling on my life. Toward the end of college, I fell in love with Jesus and apologetics, which led to seminary. While at D. Sem., I learned my giftings trended more academic, so I pursued the M.A. in Philosophy of Religion. Upon finishing that degree, despite numerous red flags cautioning me otherwise, I was convinced a Ph.D. in Philosophy was what God had for me. Toward that end, I picked up another M.A. in Philosophy from Georgia State University. Eventually, in a most unfamiliar and uncomfortable act of humility, I surrendered to what the Lord had for my career instead of imposing on Him what I thought “made sense.” That led to law school, which wound up being a perfect complement for my background and giftings. In fact, I’ve met quite a few seminarians over the years who’ve entertained the prospect of attending law school, and lawyers who’ve wanted to go to seminary. Few have had the privilege of doing both. Thus, becoming an attorney was not the product of a planned career path, but was the result of my (highly imperfect) attempts to daily follow the Lord’s whispers.

 

You and I have talked briefly about your personal interaction with student loans. I know you have really sacrificed to pay those down – what has your journey looked like?

I’m not proud of my journey. Had I to do it over again, it would look very different. Nonetheless, if through my weaknesses and the ensuing suffering Christ’s power may rest upon me and others may be comforted (see 2 Cor. 12:9; 1:3-4), I gladly share it.

Thankfully, my personal interaction with student loans stemmed solely from my law degree. My parents paid for the B.S. We paid for seminary through a combination of work (my wife and I both worked, though she was the primary breadwinner), scholarships, and church contributions. The second M.A. was paid for through work (again, my wife mainly supported us, though I worked as well), and grants from the university.

By the time I started law school, however, we were burned out on school and were ready to cast off the shackles of financial restraint we had worn for the years of student life and start living like “grown ups.” Thus, despite having very good jobs for the duration of law school, instead of using our income to actually pay for tuition, we financed the entire degree with student loans. (For brevity’s sake, I’ll skip over the multitude of other financially-ruinous decisions we made over the next several years and focus on the loans.) I thus graduated from law school in 2008 with approximately $125,000 in student loan debt.

Aside from the sloth, prideful sense of entitlement, and utter foolishness that informed the decision to borrow all that money, I never once stopped and put pen to paper to determine the answers to such basic questions as:

How much money am I going to have to make each month in order to pay these loans back in x years?

If I don’t pay at least $x per month, what is the interest going to do to the principal?

What sort of jobs am I either going to need to apply for or walk away from because of my obligation to service this debt, and how does that align with God’s call on my life?

What sort of opportunities am I not going to be able to pursue because of the commitment I’m making to my lender?

Instead, in repeated acts of cowardice, I stuck my head in the sand and, semester after semester, took on more and more debt. Of course, I never abandoned my faith along the way, so, on those rare occasions when I’d actually entertain post-law school financial realities in a general sense, I would sanctify my naivety with such theological quips as, “I don’t know how, but God will provide.” (All the while ignoring that God was actually providing the entire time, I was just choosing to squander his provisions.)

After narrowly avoiding personal bankruptcy following law school, we went through a major life overhaul and (finally) started living on a budget. After eight years of attacking debt, belt-tightening, and the selling of two houses in 2016, we are, praise be to God, debt-free. The student loans had ballooned to ~$165,000, for I had put them in deferment and had entered into a federal “repayment program” while I repaid other debts. And while we’re now starting over in some ways, we’re finally complying with the Lord’s command in Romans 13:8 to owe no one anything except love. It feels amazing.

 

Financially, what word of advice would you give to someone just entering into seminary?

Generally speaking, you need to understand that, while the degree you’re about to earn is extremely valuable and worthwhile from a kingdom perspective, the world does not place the same value on it. And, by and large, the world’s value metrics determine the amount of money you will earn upon exiting seminary, regardless of your place of employment. And while it may feel a little “dirty” to the seminarian who is dutifully following the call of God on his or her life, they need to get comfortable talking about money and the financial realities that come with it. The last thing you want to do is in one breath say, “God, I will go anywhere and do anything you call me to do,” and in the next breath say, “so long as it pays at least $x per month because I’ve got to pay these student loans back!” At its most basic level, taking on student loans is taking on the yoke of another master, and the Lord has warned us about the feasibility of serving two masters (Lk. 16:13)—especially when that other master is Caesar himself (i.e., the federal government)). Moreover, many (most?) of the life crises of the people you’ll be ministering to involve finances in some capacity.

Moreover, you have no idea what will happen in life. Yes, God will provide for your needs. And yes, He owns the cattle on a thousand hills. But this world we live in is fallen and suffering and persecution is a part of the path of righteousness. Why purposefully compound that by fiscal irresponsibility?

Accordingly, I’d advise the seminarian to avoid student loans at all costs. If need be, take your time getting through seminary. (For most of you, being older and wiser upon exiting seminary will only help your future ministry.) Get creative by working multiple jobs (even jobs that might be “beneath” you), take night or weekend classes, check your textbooks out from libraries, live on a budget, beg, pinch, scrape, whatever, just stay indebted only to the Lord.

 

 You have a unique background in Bankruptcy law. I believe one of the biggest issues with large amounts of student loans is that personally you can’t bankrupt out of them. That makes it almost impossible to escape them should you become overly indebted or should life change radically. Obviously bankruptcy has been abused by some people over the years, but can you help us understand why it’s important to our economic process and what risks someone takes by taking on non-bankrupt-able debt?

In its simplest form, bankruptcy is about the unmerited forgiveness of voluntarily-incurred debt. As people of the gospel, we should be able to appreciate this, especially given bankruptcy’s biblical roots in the year of jubilee (see Lev. 25). By allowing a debtor—whether an individual or a company—to make a “fresh start,” risk-taking activity is encouraged. Starting a business, pursuing an idea, investing in something you believe in—all of these are risks. If failure would result in a lifetime of inescapable debt, fewer people and companies would be willing to take risks. Thus, fewer jobs, inventions, and fulfilled dreams, i.e., less human flourishing. Bankruptcy allows the risk-taker to minimize her risks by providing a means to discharge or reorganize her debts in the event of financial calamity. Likewise, creditors are encouraged to invest in the risk-takers, for their rights are protected under the Bankruptcy Code as well. Of course, certain types of debts are offered very little protection, but most creditors will work the prospect of bankruptcy into their pricing and they understand the risk of participating in the market.

By taking on debt that cannot be discharged in bankruptcy, such as student loans, the debtor is taking on the risk that, despite Jesus’ promise that we will face trouble in this world, “everything is going to work out.”  Unlike other debts where the debtor and creditor share the risk and therefore want to see the debtor succeed, student loan creditors bear virtually no risk by extending the loans to the particular student. The student bears all the risk, the debt is completely unsecured, i.e., the debt does not attach to any collateral that can be liquidated to satisfy the debt, and it will follow the student all the way to the grave.

 

What have you learned from your unique background working with religious institutions about how occupational ministry and finances collide?

There are of course numerous and beautiful exceptions I’ve seen, but here are a few trends I’ve noticed.

Often, ministry leaders are incredibly gifted at relationships, but they do not have a very keen business sense.  This can have the effect of a poorly run organization that is out of tune with realities its donor base grapples with on a daily basis, even if the leader has good intentions and the doctrinal statement is sound. Of course, there are problems that come with unreflectingly adopting “secular” business principles, but at a minimum, a basic understanding of budgeting, business, and economics (and law) would help ministry leaders.

By embracing a negative mindset toward finances, pastors contribute to the sacred/secular divide, and stymie their flocks’ ability to think Christianly regarding money and work.

Many younger evangelicals who do not feel called into pastoral ministry come to the conclusion that in order to faithfully serve God, they must start or work for a non-profit, because, in their mind, they cannot work for a for-profit company because “profit equals greed,” which is, of course, a sin. But profit and greed are distinct concepts that are not necessarily correlated. This mindset has deprived us of thoughtful Christians in the marketplace and given us too many non-profits, which has had the concomitant results of draining kingdom resources and increasing ministry redundancy. (Not to mention the sympathies toward Marxism this general disdain toward capitalism has engendered—an economic philosophy whose utter failure to actually work in reality has only been surpassed by the torrents of blood that have flowed everywhere it’s been implemented.)

Many believe that by getting too far into the details of finances, they aren’t trusting God or would be idolizing money. A quick survey of Proverbs should put that fear to rest. (See, e.g., Prov. 27:23.)

There is also the risk of the pendulum swinging the other direction toward the “health and wealth” prosperity gospel, which also prevents thoughtful, biblical engagement with finances.

Jesus rightfully warned of the dangers of money. But by failing to help move their flocks beyond “money is bad” (except when the offering plate comes around), the church is left ill-equipped to expose the idols of the age and model a biblical counterexample.

Thank you for your wisdom, vulnerability, and leadership in this area. We are deeply grateful.

 

If you’d like to learn more about David in is own words you can visit a longer bio here: www.sdglawllc.com and if your organization has any legal needs feel free to reach out to him here or 703-771-4671.

 

Conversation with Josh Collier

josh-cI got to know Josh last year when we were stuck at the Pittsburgh airport together. He was kind enough to buy me lunch and I can confirm he pays with cash! He is a graduate of Denver Seminary currently working with Dave Ramsey’s organization teaching financial principles. He is uniquely understanding to the real life financial stress of being a graduate student.

 What years were you at Denver Seminary, what was your focus, and what are you doing now?

My family and I were at Denver Seminary beginning in August of 2007 and graduated in May of 2012. Yes, we were able to cram a two-year degree into five years. As any economist can tell you- this was a booming time in our national economy 🙂 A little backstory, my wife (Christina) and I started with one child and, before moving off-campus in 2013 for a job back in the South, when I graduated we had four children under the age of six. So we went through seminary at a slower pace – at the speed of cash.

I initially was accepted into the counseling program, but at the last minute, I changed to a MA in Leadership and studied leadership with a self-designed emphasis on community development.

Now, I am part of a team of stewardship/church advisors at Ramsey Solutions or better known as Dave Ramsey’s office in Brentwood, TN. Together we serve pastors, church leaders, community developers, and seminarians as they are building and/or remodeling their financial discipleship ministries in their churches/communities.

Draw a connection between personal finances and your ministry training. Why are you doing what you do now?

Personal finances played a large part in “How?” we went through seminary. We went through seminary as we could afford (at the speed of cash) and did not take out any student loans, or any loans for that matter pre/post seminary for living expenses before, during or after seminary… nor did we have to take out any loans for relocation expenses post seminary. Which meant I took classes part-time (a lot of night classes) and worked full-time down in Colorado Springs. We lived on campus in Littleton so that we could literally have a built-in community for my family through our seminary years. During my seminary years I truly embraced a concept that Dr. Larry Lindquist noted at my new student orientation, “Learn from, embrace and take note of the time and experiences spent outside of the class and library as much as the time inside the class and library.” In other words, pay attention and be aware of the experiences and interactions that God orchestrates during your seminary years both inside and outside the structured learning environment.

A big part of “Why?” I am doing what I am doing now is because of our experience of going through seminary debt free without loans and how God surprised and transformed my family and I with His lavish provision which came in many forms- literal hard work, redemptive financial gifts from churches back home, anonymous envelopes of cash on our doorstep, care packages from friends and families, support from our neighbors and peers on and off campus, and lavish support from ministries in the Denver metro area (e.g. Manna ministries, bread drop and food closet at Denver Seminary, odd jobs for my mentors, and support/encouragement from Colorado Community Church, etc.). Through this transformational process known as the “seminary years” we were able to graduate seminary debt free and go when God said, “Go” via a job opening at Ramsey Solutions.

Now at Ramsey Solutions, I have the opportunity and privilege to minster and walk with men and women who are leaders in their community and looking for ways to equip families, marrieds and singles who are struggling or in need of a tune up financially. It still surprises me each day how finances are many times a gateway to how someone is really doing. Billy Graham was spot on when he said, “Give me five minutes with a person’s checkbook (or online bank account these days), and I will tell you where their heart is.”

In your personal story, what did you have to do to graduate without a big debt burden?

Decide that going into debt and taking out loans was not an option from the beginning. Again, it is important to note that my personal story turned into a family and community story. When my family and I graduated from seminary it was a team success. Yes, I had to do literally whatever it took to graduate debt free, which many times required me working and traveling a whopping 70-80+ hours for a five-year period… but God was so lavish in His provision of not only work but wages, health, a steady stream of prayers and encouragement from friends and families across the country.

What do you think are the biggest FINANCIAL challenges facing future ministers?

Pride, pride and… pride. Be open and ask for help. We all need help, so put your pride aside, humble yourself and let others know how they can help you- the sooner the better. The world does not need perfect leaders, but humble leaders who can ask, be filled and receive help from God and through His means. My mentor Pastor Brad Strait said it best, when personally I hit a VERY low point midway through seminary, “Joshua, allow others to minister to you. One day, I know this may not be encouraging right now…,” he laughed and continued, “… you will be on the other side of the equation and serving others. So do not forget the struggles, thoughts and challenges you are experiencing right now and use them to better serve others.”

If you could give one piece of advice to a student just starting seminary now, what would that be?

“Slow down and go outside.”  A smile comes to my face as I reflect on my seminary years and the wisdom that was poured into me from one man in particular- the late Dr. Vernon Grounds. I can think of at least three different encounters in the Denver Seminary library in which he would stop by my desk and say, “Son, what’s the rush? Go outside… its beautiful out there. Don’t spend all your time cramped up in this library!”

Or said another way, don’t believe the myth that the pace of the seminary years will slow down once you graduate. I would argue that the pace only increases after you leave, and you need to be intentional NOW about building in times “outside” with friends, families and enemies for that matter… before, during and after your seminary years.

 How is it even possible to go to graduate school without going into debt?

First of all, going to graduate school is a want not a need and is a choice. I literally made a deal with God before going to seminary. I told him, “God, if this is your idea, you are going to have to provide and show me how to make this work financially each semester.” Remember, with God all things are possible, and  this may require one to rethink his or her current way of going through seminary and to evaluate their previous, present and future standard of living. We made a ton of small changes and pivots to live more intentionally and frugally. For example, prior to attending seminary and as a family of three, my wife, daughter and I lived in a 240 sq. ft. apartment. We also worked two jobs and saved up an entire full year before moving out West to begin seminary. Once in school, we took full advantage of bread drops for seminarians, became a one car family, very very rarely ate out, had family style meals with neighbors, refrained from getting a TV and our entertainment was enjoying the great outdoors. Chances are, if your story is like ours it will also require more than just the work of one’s two hands and will involve a community of support, gifts, pep talks from mentors, days of repentance and journaling, telling others “Sorry, I was wrong!”, forgiveness, letters of encouragement and prayers to get you through as well.

Remember, I wish someone would have told us this: It costs money to move to that new job after you graduate. So start saving for moving expenses if your next job requires you to move across the country.

 What word of advice do you have for someone that isn’t good at budgets? How do I start doing a regular budget?

Join the club! Like the Apostle Paul, when it comes to doing a budget, “I am the chief of sinners!” Kind of joking, kind of not, but seriously- it takes practice. My wife Christina and I, when we were first married took 3 months to just get started doing a budget (this is what happens when your marriage consists of two oldest children who are recovering perfectionists). We attended financial seminars, read budgeting books, used online forms and sought out advice from those that we wanted to mimic financially as we grew up together; however, it was not until we went through a Financial Peace University class (that was hosted by our Senior Pastor at our home church in South Carolina) that we actually did and lived on a budget on a consistent regular monthly basis. Are we perfect now, “No!” Some months we do not start until the month is almost halfway over, but we now build grace into our budgeting lives, remind ourselves to push pause, start where you are and face the reality of where you are in the month and what remains.

Make doing a budget simple. I have heard it said that budgeting is like a marathon. As a runner, this is ridiculous –  a marathon only lasts 26.2 miles and is one day. Budgeting is more like an Ultra Race that lasts your entire life! All kidding aside, find a basic budgeting spreadsheet or plan that works for you and your family and KEEP IT SIMPLE.  With time you can add more depth, but first you will need to pace yourself for the many miles of budgeting yet to go. If you really want to make a budget stick and see lasting results, ask for help from a budgeting coach. This needs to be someone who has a track record of helping others, the heart of a teacher AND can help keep you accountable, no matter how much you whine or try to make up an air tight, theological excuse of, “Why?” your situation is different especially as a seminary student (pointing a finger at myself here). As Dave Ramsey is fond of saying about a young, novice baker who is frustrated that his vanilla cake keeps turning out chocolate, “If you are not happy with the results you are getting, change the recipe.”

You can touch base with Josh at joshuathecollier@gmail.com. If your church would like to host a Financial Peace University class, he would also be a good contact for you. Thanks for reading! Sorry for any abuses of the king’s English – this is a transcript of a recorded conversation.

Financial Peace Classes

fpuTen years ago exactly this month, Noelle and I opened the credit card statements from Christmas and realized we owed over $7,000 on those two charge cards. We also owned a condo that wasn’t rented, had a car loan on a sweet Mustang GT convertible, and one more student loan for old times sake.

That week I was playing basketball on a Monday night at Smoky Hill Vineyard church and saw a sign there for a class: Financial Peace University. We had missed week one, but the next night – week two of the class on a Tuesday in January, we were there.

It didn’t happen overnight, but we sold the condo, sold the mustang, lived on “beans and rice”, and paid off all of that within the year.

It isn’t a coincidence that these classes start this time of year. January is a time of new year resolutions and new beginnings. If you’re “sick and tired of being sick and tired”, now is a great time to push the reset button.

You can find a class at a local church. CLICK HERE FOR LIST OF LOCAL CLASSES.  

Feel free to reach out to me for more on our experiences and what we’ve done in the 10 years since.

Year End – Goal Setting

smart-goalsDo not forsake wisdom, and she will protect you; lover her, and she will watch over you.

For several years around this time of year, one of the most important activities I’ve done is set my goals for the upcoming year. This morning I awoke with the following idea:

Wisdom is the intersection of the Intellectual and Spiritual.

It isn’t enough for me to know something. It also isn’t enough for me to just believe it. Wisdom is applying what I intellectually know through an act of my will.

What goals should I set? I have goals in four areas of my life. Those four areas are taken from the following verse:

Jesus grew in wisdom and stature, and in favor with God and man.

This verse says there were four areas that Jesus himself developed:

1.) Relationship with God

2.) Relationship with other people

3.) Wisdom on how to live well (financial, intellectual, career, etc.)

4.) Physical health

I figure if I can win in those four areas that life will turn out ok. I recommend keeping it very simple. I carry my goals in writing with me all the time. Pull me over sometime if you’d like to see them!

Vampire Problems

draculaWhat kind of problems require faith?

David Brooks has highlighted a problem he calls a Vampire Problem. Say you are thinking about becoming a vampire, but you’re on the fence. The drinking blood, sleeping in a coffin, no playing golf during the day…it’s a tough decision. Adding to the problem, once you become a vampire there isn’t any going back. Brook’s point is that the most important decisions in life, who to marry, when and how many kids to have, what job to take, these types of problems are ‘vampire problems’ – they have two main characteristics:

1.) There isn’t any way to fully know what life will be like if you make that decision.

2.) Once you make the decision, you can’t go back.

These type of problems can’t be solved with logic, knowledge, analytics, research, or education. As the article points out: “’You shouldn’t fool yourself…You have no idea what you are getting into.’” These type of problems require faith.

Following Jesus is certainly this type of problem. He promises that (1.) You’re spiritually dead right now and you can’t know what it’s like to be alive but (2.) you can be alive with a life that’s better than you can ever imagine and once you are alive you won’t ever be the same.

A lot of financial problems are like this as well. There isn’t any way to fully know the outcome of a decision you need to make. Can I afford to have a child right now? If I take this 2nd job, will I have enough time and energy for my friends and family? If I commit to paying off debt will I still be able to have fun? Will this investment pan out? Which of these two jobs should I take? Is it worth it to move to a new city to go to grad school? Should I fix this old car or buy a new one?

The good news is that faith isn’t blind. It’s an action in the direction of my hope. That’s why all my financial (and life) choices need to start with an act of the will. I need to have hope in my heart that I can be debt free and that it will be worth it before I can start taking actions in that direction.

Faith is the action toward the thing I’m hopeful for. What are your financial hopes for 2017? How about 5 years and 10 years from now? Let’s write those down as we head into a new year. Do you hope to be debt free? To pay off your student loans? To have a fully funded emergency fund? To pay for graduate school? To land a specific job? To start a business?

How to Reset your Life

redditThis reddit thread came to my attention yesterday and it is fascinating. If you scan through the original post there are some good comments. In my judgement from reading, research, and exemplified by one person’s experiences on this thread, here is my formula for resetting your financial life:

  • Cut expenses to nothing

Dave Ramsey has said he can tell by the tone of callers voices if they are ready to change. It’s the “sick and tired of being sick and tired”. He calls it “Selling so much stuff the dog thinks its next”. Like the reddit poster, I need to be willing to cut cable, internet, eating out, Netflix, move residences, and anything else that is preventing me from paying off debt and building an emergency fund.

  • Create a plan for more income

There seems to be some direct connection between getting dramatically serious about cutting expenses and creating an income plan. Perhaps not having any entertainment options creates space in my life for more work and time to think about my work. How am I going to create more income? When I take the time to focus my will, my brain starts finding solutions to the problem. Praying is also deeply powerful. Prayer aligns my will with Gods. The Bible says we were “created in Christ Jesus to do good works, which God prepared in advance for us to do.” The Psalmist says God’s direct favor can be seen by “establishing the work of our hands”.  Pray that God would reveal opportunities for us to “work as unto the Lord”. In my experience the most common way these opportunities are revealed is by working on what is available to me right now. “All hard work brings a profit, but mere talk leads only to poverty.”

That’s the formula. It may be simple but it isn’t easy. I have a note in my office from Tony Robbins. If you want to change your life:

  • Decide what you want
  • Take MASSIVE action
  • Review results & make course corrections
  • Repeat steps 2 & 3

How to get Paid

$2 bill logoSome students I counsel are skeptical when I advise them that they can and should be earning more money.

If you want to earn more money, it is helpful to understand how and why employers pay employees. Understanding this will dramatically improve your earning power. Here are three main ways employees are compensated:

1.) Hourly. This is the most common and first (and usually only) way most of my students think about being paid. When I tell them they can easily earn $25+ an hour they say “Nobody is paying that.” Correction: (Almost) Nobody pays that per hour. Hourly work is the lowest common denominator – we all have an hour. It’s not based on skill or productivity. There’s nothing wrong with being paid hourly, just understand that both your hours and the dollar per hour the employer can justify are limited.

2.) Piece Work. Many jobs pay by the job, not by the hour. For example, you may be paid $100 to clean a house that should take 5 hours. That’s $20 an hour work. If you can do it in 4 hours, you just received a 25% pay raise. If you’re looking for part time work, finding work that pays by the job instead of the hour is a great way to dramatically boost your income.

3.) Value Added. The highest paying jobs pay by the amount of value you can add. A simple version of this is someone who works on commission. If I sell 3 cars instead of 1 car on a Tuesday, my hourly income is 3x higher. The employer is happy to pay me because they are earning more money. I have ‘added more value’ then I cost my employer. More jobs than you think use this model. It’s “knowing where to hit”. This is why Zig taught “You will get all you want in life, if you help enough other people get what they want.

There are lots of other ways to make money (buying and selling stuff, investing, etc.), but those are three models employers use in determining what compensation structure to offer.

Here are some random thoughts on these compensation plans:

  • Pastors should insist on positioning themselves as ‘Piece Work’ and ‘Value Add’, never on hourly. Your Sunday sermon is ‘Piece Work’. It needs to be ready to go by Sunday at 8am. If you can train and discipline yourself to prepare it in 10 hours instead of 20, you should then go home to raise your kids, play golf, or spend time in spiritual renewal. The reality is that being able to prepare it in 10 hours instead of 20 is a unique value you bring, and you need to capture that value for yourself. If you raise a healthier family, the church will benefit from that so the value is mutually beneficial. This isn’t just true of sermon prep, it’s also true of staff meetings, budget committees, dealing with people who complain, etc.
  • When it comes to adding value, there is a huge mark up. Pastors that are educated, good leaders, and have excellent communication skills are going to command a significant premium. Rick Warren has sold over 25 million books, and while he has been blessed with lots of skills, gifts, and opportunities from his maker, he isn’t lucky. The same is true for a local electrician like my friend Tim. Tim is compensated far more than many others in his field because being honest and dependable has a huge premium in his field.
  • The great news is that the ways you can add value are truly limitless. Find the areas that have the highest return on your time. It might be recruiting new kids to the youth group. It might be solving problems without requiring direction. Studies show that food servers that use their name and smile can earn $2.00 more per tip.
  • Part time income is really well suited for piece work and value add. If you worked in retail you might make $10 an hour. 10 hours a week would be $100. But you could make several times that if you were a piano teacher or math tutor charging $40 an hour. It would require you to put together flyers and facebook posts to spread the word. The actual time you spend teaching piano is somewhat valuable, but the time you spend finding new clients is extremely valuable. Finding new clients will pay you $100-$200 an hour. No matter what job you have, figure out what part of that job is the most valuable and do it more.
  • To truly understand value, we need to understand the stories people tell themselves. Teaching little Suzy the piano probably isn’t the highest value you bring. As a parent I want to believe that I am opening up the world of music to my kids. Broadening their horizons and teaching them the arts. The REAL value you bring isn’t teaching the piano its confirming my story to myself that I’m a good parent.
  • You don’t need to be self-employed for this to work. If I cleaned houses, I might go to my boss and ask “What’s the value of a new customer?” If they hired our company once a month for an average of three years and the company made a profit of $100 each visit a new customer would be worth $3,600 to the company. Would the company pay me $500 to find them a new customer? Of course. Then I would put up flyers on the bulletin board at church, let friends know I was looking for new customers. I may have started as a house keeper, but now I have a side hustle.
  • Most people that don’t believe they can make a lot more money don’t understand where they can add true value. A piano teacher is somewhat valuable. But if the teacher asks for referrals every week at the end of the lesson, that 1-2 minutes is worth hundreds of dollars per hour.
  • If you have the capacity for 10 students and you have 15 willing to take lessons, you can raise your rate from $40 to $50 (or $20-$35 or $55-$65). You will lose a couple students, but still have 10 willing to pay the extra. You didn’t earn a 25% raise for being a great teacher (though you may and should be), you earned that by finding more clients. No matter what job or field, figure out where the value is added to the organization.
  • I’m not convinced driving for Uber or Lyft is a good job. It wears out my car (my factory), my income is limited by the hours I can work, and there are very few ways I can add additional value.
  • I watched “The Big Short” last night and was reminded that nobody understands “Value Add” like financial professionals. Hedge fund managers build it right into their agreements (2 and 20) so there isn’t any ambiguity when it comes time to get paid.
  • Perhaps the most important skill you can build is learning how to explain to the client what exactly is the value you add and why that is important and worth it to them.
  • The heart of all jobs is solving a problem. The highest paid people are able to communicate “I understand your problem” and “I can help you”. It’s really empathy. That will get you the job, following through and delivering on and above your promise will keep the job or keep the customer coming back.

Payment Calculator Link

payment-calcThe two most common financial questions students have are “How much will my income be once I graduate?” AND “What will the payments be on my student loans?“.

We’ve looked at different income questions before (here, here, here, here), and we’ve looked at some of the payment questions (like is Public Service Loan Forgiveness (PSLF) a good option?), but as a regular reminder you can go to this link and run your future payments for yourself:

STUDENT LOAN PAYMENT CALCULATOR

Emotional reaction to financial risk

Recently while driving I glanced back in the rear-view mirror to see the familiar sight of a police car merging behind me in traffic. Police rearviewEven though I was pretty sure I was breaking the speed limit by the socially acceptable amount, my heart still raced.

Why does that happen? Why does our “fight or flight” kick in at the prospect of a very affordable traffic ticket?

The bigger question: Why doesn’t our heart race the same way when faced with a financial risk over 100x greater – taking out a car loan or $40k in student loan debt?

The short answer is that we are very poorly designed to properly calculate risk.