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Church Leadership

Getting Started in Investing, part two

money_stuff2

Here’s a scenario for you. You are serving at a church and things go sour. I mean, they go really sour. Meetings are arranged behind your back. Students stop coming to events and making excuses to avoid you. Your weekly staff meeting with the pastoral team becomes a finger pointing competition. And all roads are leading back to you. You’ve done nothing wrong but everyone hates you. You leave the meeting and head back to your office. You know your ministry at this church is coming to an end. You have felt it ending for a long time. And you are sweating the reality that a job search is imminent.

All spiritual realities aside. In these moments, and all vocational people in a church will one day be in these moments, there are two positions you can be in.

Position A: You can make a rational decision, knowing that you will be financially OK whether you stay at this ministry or not.

Position B: You can make an irrational decision, knowing that if you get fired you are screwed financially.

[Of course, I’m simplifying this as there are lots of options.] The point is that when things hit the fan at work you need to be able to make a decision that is ultimately best for you and your family. And being knee deep in debt with no savings is not going to help.

Having worked in churches for nearly 10 years I know that there is rarely much margin between income and expense. And this makes saving money hard and acquiring debt easy. Add to that mix that many people in youth ministry brought college debts into ministry… and you have a recipe for disaster!

So, practically speaking, what can you do?

#1 Most Important Thing: You need to figure out how to get a few grand in the bank. You hear every single personal finance person say this and there is a good reason. Having 2-3 months living expenses in the bank allows you the freedom to make decisions that are best for you and not just what will get you through the next couple of months. Living paycheck to paycheck just leads to you acquiring more and more debt. I believe for folks in ministry this is more important than paying down debts… our jobs are just that insecure. And this goes beyond just job issues. I don’t think you can seriously build a budget until you have this little bit of breathing room.

With almost no margin, how do I get that much cash in the bank? Some ideas…

– Sell stuff. Have a garage sale. Have a bake sale. Sell used books on Amazon. Sell your baseball cards on Ebay. Sell your extra car.

– Make more money. We’ll talk more about this in another post. But practically speaking, if there is no margin between what you bring in and what goes out you will need to find another source of income. For Kristen and I this meant that Kristen watched a child from the church four days a week. It wasn’t much… but it helped us widen the margin. If you’re single… you’ll need to look for alternate forms of income. Again, we’ll talk more about this in part five.

– Spend less money. That’s easier said than done, I know. Our friends mocked us, but in Michigan Kristen and I learned that by heating our house less we could find a bit of margin. Also, cutting back on things you don’t really use that much can make a big difference. Remember this is just temporary until you get a few grand in the bank. 6 months without DVR or trips to Starbucks will be worth it.

– Decide a dollar amount to save per paycheck. I take great pleasure in transfering a prescribed dollar amount to savings every payday. But if you lack the discipline to do that, there are more forceful options. If you have direct deposit simply direct a set amount to your savings account so you never actually see it as spendable income! A more manual way to do this is to ask the person who cuts paychecks at the church to write you two seperate checks. One goes in checking and the other goes in savings. If you really lack discipline… go ahead and have the take out your tithe/offering too!

#2 Most important thing: You need to stop using your credit cards. When Kristen and I got married we didn’t have any debts. About a year later we bought a car and went into debt big time to make it happen. But that wasn’t the really dumb thing. The dumb thing is that a few weeks later I said “yes” to an offer for a Discover Card. That thing has been a thorn in my side ever since. At first we paid it off every month and I only used it for gas purchases. Then, we took 3 months to pay for a laptop. Then we bought some furniture. And started using it everywhere we went. Then the monthly balance was so high I couldn’t make myself pay $1000 per month so we let the debt build a little. Before we knew it, it was almost maxed out and we were screwed! The point is… until you take the first step and take using the credit card as part of your buying habits… it’ll own you.

– Stop carrying it with you if its a temptation.

– I like using plastic for every purchase, that’s why I use my debit card.

– Come up with a repayment plan on your own. Currently, we dedicate one of Kristen’s paychecks to savings and one to paying down debt each month.

– As you pay down the balance, call the card company and ask them to lower your limit. While you’re at it ask them to lower your interest rate.

– Try to pay at least double the minimum payment… you need to get the principle down ASAP to incur less interest payments.

– Once you get a few grand in the bank, turn all your efforts to getting rid of credit card debts. If you have more than one debt, pay the one with the highest interest rate off first.

#3 Most important thing. Reward yourself! Look, our jobs are hard. And I think some of the reason so many of us get ensnared in debt and no savings is because we overcompensate and reward ourselves too much. I think there is ample reason to celebrate your successes and take time to celebrate. My beef with Dave Ramsey’s style of personal finance is that he’s too aggressive. He sets you up for a fad diet… and once you reach your goals you have starved yourself so much that you are liable to go buy something stupid just because you can. I go for a more reasonable style of savings/debt repayment. I’m OK with it taking a few months longer if it means I make sustainable changes to my life. That’s why we reward ourselves regularly along the way. We save up a little something outside of our “plan” and then do fun things! Our family has a date night each week… it’s frivolous, but it is a nice reward. I think you deserve to treat yourself for doing a good job! I know in youth ministry there aren’t many other people who will reward you, so reward yourself.

Here’s the good news. Getting a few grand in the bank will probably only take you 6 months if you make it a legit goal. And from there you can turn your DVR and your heat back up! But a little bit of pain is going to go a long, long way for you sustaining in youth ministry into your 30s and beyond.

Categories
family management

The McLane Stimulus Plan

big-money1

Since it’s clear the Obama Administration is going to be giving 100% of the stimulus money to failed companies like GM and AIG and nothing in cash to the middle class, Kristen and I had to make our own bail out plan. (Sorry for the dig on Obama, I was a big fan of Bush’s free money system!)

Our challenge was pretty simple. How do we live on 70% of our income for the next 24 months? If we could do that, this is what we would have at the end of it.

– No debt

– 3 months living expenses in the bank as a rainy day fund

– 1 months living expenses in the bank as general savings

– Still faithfully giving to our church

Our 2008 scenario was like this. Prior to moving to California we lived at about 105% of our income. Basically, we had been swallowed by inflation and struggled to recover. Each month we went a little deeper into debt. When we moved to California we had about 4 months where we lived at 200% of our income. Why? We had two houses, we moved 2500 miles, and stuff like that.

Our plan, live on 70% of what we bring home after taxes. Roughly, the breakdown looks like this. (+/- 2% per month)

10% of our income to paying off debt accumulated in 2007-2008. (Our credit cards jumped from 17% to 29.99% last year, we alone in that?)

10% of our income to savings.

10% of our income to regular charitable giving.

This is where the McLane plan differs from the pop culture financial planners. Most of them would say, “Concentrate on paying off the highest interest thing first, then focus on savings.” I’m not going to lie… I can’t bring myself to not save and spend that much paying down debt while not putting anything into savings.

We’re about 3 months into this plan. It seems to be working for us. For those in love with budgeting, it’s a semi-budget. It leaves about 20% of our money as flexibility… which really works for us.

Categories
family

Buyers market vs. Sellers market

Yesterday was a bit of a shock to the system. It’s not until you leave the Detroit area that you see just how different it is from SoCal. In many ways, the area seems oblivious to the deep recession (I’d call it borderline depression. If not economically, definitely on the psyche of the area.) 

Walking through store is funny. While I’m certain that there are many people on the bottom of the socio-economic ladder, the stores don’t seem to notice. Next time you’re in Target on 26 Mile notice the posture of shoppers. It’ll indicate the confidence level in spending money.

Clearly the housing market is polar opposite. You wouldn’t believe the sales pitch this lady tried to give us on an apartment last night. Not only was the apartment sub-par (worn out, horrible location for a family) when we were done she just said, “We’ll wave the application fee if you give me $100 to hold the place. But we can’t get you in until August 25th.” That’s the hook for spending $2000/month in San Diego? We weren’t impressed.

The general pitch I’ve gotten from renting a house (as opposed to renting an apartment in a complex) is “this house would sell for $500,000 so we don’t think what we’re charing for rent is a lot. Never mind the fact that the person has owned the property for years and probably bought it for under $200,000. For us… this is like Michigan pre-bubble when there is a massive difference between what a place is worth and what the market will sustain. 

We know this is how it is here. We’re not in denial. And I’ll even admit that it’s a little refreshing. It’s fun to not hear every newscast or front page story be about the economy or gas prices. In some respects I understand the “Nation of Whiners” comment. I think most of what we’re feeling is that millions of people have to bite the bullet and start paying down their personal debts. Having less personal debt automatically makes you a more aggressive shopper. 

More housing stuff later today. We’re pretty excited about the next one we’re looking at.