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.

Loan Forgiveness and PSLF

Tnythis article surfaced in The New York Times a couple weeks ago:

They Thought They Qualified for Student Loan Forgiveness. Years Later, the Government Changes Its Mind.

I’ve written several times including this long post in September of 2015 that I thought the Public Service Loan Forgiveness program was risky and I did not think it was wise to plan on the PSLF program to be your primary loan repayment strategy.

The risk that the government could change the rules at any time was one of the original reasons I wrote that I didn’t like the program. That is exactly what happened to the subjects of that NY Times article and we’ll see how the pending litigation plays out.

There are other alternatives. If you’d like some help working through those then hit me up.

TOOLS

hand-sawI have a friend who works in the construction trade. He confessed that sometimes he puts off or just forgets to make his truck payment for a month or two. He always catches up and pays it back current, it’s just hard to keep track of all of his bills and pay them on time. Now he was worried his low credit score wouldn’t let him expand or buy a house in the future.

I know this friend is really skilled at his job. I also know he is meticulous about cleaning his tools at the end of the day. Why I asked him? Because, he told me, “If you take care of your tools they will take care of you.”

These are the wise words of a skilled craftsman.

The following word picture occurred to me and we talked through it:

One of the many reasons we all work and is to secure our unknown financial future. Good credit is a symptom of someone that takes care of their personal business. I want you to think of your credit as a tool in the toolbox of your financial future. Take care of this tool with the same diligence you bring to your physical tools.

Sometimes it’s hard for us to think and work outside the area of our expertise. If we’re working long hours, in graduate school writing papers into the night, feeding and changing small children, or feeling the weight of ministry demands it can be difficult to remember the importance of the other ‘tools’ in our life.

Our physical body might be our most important tool. We can’t do anything without it. Let’s take care of that tool. Everyday.

Success in life is impossible without healthy relationships – to God and others. Is there some rust building there?

When Noelle and I were really motivated to get out of debt, we spent a few minutes each day thinking and taking a small action. We understood that meeting this financial goal would be a valuable tool that would enable us to be able to do ministry, provide a stable home for our children, and be generous givers.

Take care of your tools and they will take care of you.

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

Two Causes of Poverty

powell-poverty-quoteWhat causes poverty? Thinking about this question can teach us a lot about how to create personal economic mobility. Those are big words for get out of debt, build an emergency fund, save for retirement, and create stability for our children.

In my post-election reading, I came across this long interview (actually made and posted before the election).  The author makes a case that endemic poverty is caused by two main factors:

  • Social Structures That Harm. These are cultural forces that are weighted against the poor and against upward mobility. These aren’t unique to our society, the author of Proverbs 22 points out as a matter of fact that the “The poor are always ruled over by the rich.” In the past I have used the term “Risks” to bring personal awareness to some of these structures. Examples of these cultural forces include redlining neighborhoods, the town factory closing, poor educational systems, payday lenders, having bad parents, and corrupt governments. You might call these “Things that happen to you.”
  • Personal Choices. The interviewee calls this “helping people make better moral choices.” This is the personal responsibility that is required to change your life. Proverbs also address this in a number of says such as “Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time.” Examples of “Things you do to yourself” include substance abuse, not living on a budget, spending on wants vs needs, not deferring gratification, a poor work ethic, and having a negative attitude.

Here are two personal questions to ponder:

Do my thoughts and beliefs lean one way or the other?

One of the points the interview makes is that Liberal leaning folks tend to over-emphasize the social structures and those that bend Conservative tend to over-emphasize the personal responsibility.* This makes me think that you and I probably overemphasize one side or the other in our thinking and beliefs:

Do I think poor people are lazy? Do I believe it’s impossible to get out of debt in today’s society? Do I tell people that there aren’t any good jobs out there? Do I complain about my lack of money while wearing these sick new Jordans? Do I define my employability by the time I was laid off? Do I believe that employer really isn’t looking for someone of my age, sex, or color?

The biases and beliefs I carry will dramatically affect my ability to change my story.

Where is my personal greatest return on investment?

If you are called to change the social structures, I encourage you to go for it. I believe these are evil institutions of oppression and that Jesus was directly addressing these when he said the Kingdom of Heaven is advancing and the “Gates of Hell” won’t prevent good from eventually breaking these down.

However, practically for us today complaining and worrying about these cultural forces isn’t helpful. To personally change, we need to First recognize the cultural forces so I can artfully navigate around those to the best of my ability and Second accept the moral responsibility for that which God has entrusted me, managing my life.

———————————–

*Footnote:  An interesting side note on this I heard this week. The fundamental difference between a liberal and conservative world view is the condition of mankind. A liberal worldview leans humanist, meaning that given the right circumstances humans will move toward goodness. A conservative worldview lends itself toward humans in their nature doing the wrong things.

As I understand it, the Biblical worldview is more centric, that humans are created good and to do good (“In the image of God”) but that because we are infected with the virus of sin we will inevitably do what we don’t want to do (Romans 7:15-20).

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.

Election day and Worry

merleWorry is one of the most destructive emotions to winning with money. Jesus commanded “Don’t worry about your life.” The prayer for “this day’s bread” is a continuous reminder that regret of yesterday’s bread wasted and fear of tomorrow’s lack is worthless.

35 years ago Merle wrote this beautiful poem/song:

I wish a buck was still silver
It was back when the country was strong
Back before Elvis
Before the Vietnam war came along

Before The Beatles and ‘Yesterday’
When a man could still work, still would
The best of the free life behind us now
And are the good times really over for good?

Wish a Ford and a Chevy
Could still last ten years, like they should
Is the best of the free life behind us now?
Are the good times really over for good?

Are we rolling down hill
Like a snowball headed for Hell?
With no kind of chance
For the Flag or the Liberty Bell

People were worried and scared and afraid 3.5 years ago, 35 years ago, and 350 years ago.  Fear destroys Faith and Thanksgiving, both of which are overwhelming indicators of happiness. “Do not be anxious about anything.” Including money. Including elections.