Tuesday, May 13, 2008

Where Dave and I Differ, Part II-Practical Stuff

Following up yesterday, here are a few more specifics of where I fail to follow the Ramsey plan. This will include my reasoning/rationalization for why I don't get with the program. To quote guru Steven Covey, "when we rationalize, we tell rational lies."

Step 1: $1000 in the bank for emergencies. I like more. Seems like we're always on step one, always having to re-fill the emergency fund after some real or imagined emergency. I know that Dave points out that "Christmas isn't an emergency--it comes at the same time every year!" But in our world, there is not a separate line-item in the budget for those annual or unplanned events like appliance replacement, Christmas, or car repairs. We just toss money in savings and are happy we have it when we need it.

Step 2: Debt free except for the house. NEVER make a car payment. Pay off all consumer debt ASAP so you have that money for investment. I agree with all of these things, but it conflicts a bit with my alleged "plan" for step one. What little bit of consumer debt I have is so small that the payments are manageable (and we pay extra), but rather than load up and knock them out right away, it gives my personal "comfort meter" a boost to see the savings balance rise. I know the math of it is the same or even better Dave's way. But I personally experience more peace with more cash and the debt gradually disappearing. As for the car, I did take out a small loan to buy a van that was almost $4000 below Kelly Blue Book value. I could have bought another $1000 beater for cash, but it seemed then (and now) to be a long-term wiser decision to have at least one vehicle in my family that has a range of over 50 miles. I'll pay it off early and drive it till the doors drop off (as I have every car I have owned). In my mind, this is far different than having a never-ending car payment and swapping new cars every 3-5 years.

Step 3: The "full" emergency fund. This is the one that messes me up. I agree 100% that we should have this. However, my school scenario for the kids makes it impossible. Our financial aid package is based partly on our assets. If I were somehow to save $20,000 for "emergencies," it would just get snatched up for tuition, and we'd be back to square one. But, as I wrote earlier, private school is a high (essential) priority for us.

Step 4: Retirement funding at 15% of gross salary. My employer does 10% for me. I intend to gradually raise my own contribution, as well. But I don't have that much "extra" so long as I'm paying private school tuition and trying to stay ahead of debt and savings goals. Fortunately, my projections based on what I'm currently saving and future needs looks pretty good. We may not retire super-early or super-rich, but we'll be just fine.

Step 5: Kid's college fund. Same as the emergency fund. You can't save for future education expenses and still expect somebody else to pony up for your currrent educational expenses. I hope that the good education we are sacrificing for now, plus getting used to paying a significant sum every month for tuition, will set us up to where college isn't as big a shock for us as for some folks. But we'll have to cross that bridge later. I'm at peace with that.

Step 6: Pay off the house early (on a 15-year, fixed rate note, with a payment no more than 25% of your take-home pay). This is not a finance question, it's a geography and math question. If you take my income (which ain't bad) and start backing out the numbers to figure how much house I can afford on that formula, I have to move out of town. Charleston housing is steep, and teacher salaries are not. I took out a 25-year fixed rate loan (that pays off on time before my anticipated retirement) that has a payment in the 25% range. That's for a very reasonable house in a great location, and we've got good equity. Again, I am more comfortable with that quality of life decison than I would be with being financially further ahead but commuting an hour each way to work every day.

Step 7: take all that "saved" money and invest for wealth-building. Sorry. If I found myself with an extra $1000+ a month, I'd bank it and take my family on cool trips (debt-free, of course) every summer. I'm not looking to get rich, just to be comfortable and make good long-term decisions.

So, in summary, it looks like I pretty much screw up every one of Dave's baby steps. But really I'm in line with the big picture--live on less than you make, don't borrow to buy "stuff" you don't need, have savings between your family and the wolf at the door, invest for retirement, don't be house-poor. Got all of those. Quality of life (which for me includes a short commute, good education for the kids, summers off without working summer school or a 2nd job to meet some wealth-building or debt-retiring goal, and the ability to eat out occasionally at a place that doesn't deliver the food in a bag) trumps some of the wealth-building stuff, but I do have what Dave calls "Financial Peace."

10 comments:

Pete said...

So a few questions:
1. why would a $20k emergency fund get snatched for school? do they require that you have less in assets? if that's the case, move the assets into the name of an LLC or an incorporated business. Some would say this sounds like a dishonest approach. But if it's not an asset in your name, but in your businesses name it becomes less liquid. But as I'm no expert here, I would consult a good CPA. Finally off, school tuition is not an emergency... rather a planned expense. But I'm not familiar with "why Porter-Gaude," so i have no idea why this decision is so important... Would you mind doing a post on why you want your kids going to PG? It would be great to know what this school has to offer... besides a great teacher / track coach.

2. Why isn't christmas and gifts a line item? It should be. If you impulse... that's fine... but plan the impulses. Put a limit to them.

3. All this said... Larry, you're one of my fave... most respected SuperWeek volunteers. I know that you, tommy, becky & mike are all looking to manage your money, time & life wisely as a sacrifice to offer in service to the Father. Not that others aren't doing this... but I just happen to KNOW you guys are.

Larry, your dedication and heart for your work is rare. Hopefully, your employer sees your dedication to their program. It is clear that your work is a calling beyond the paycheck. I can only hope that you inspire others as you pass the baton on to the next generations. (oooh. track analogy!)

Pete said...

found this little nugget: "Plan ahead. It wasn't raining when Noah built the ark."

Coach Sal said...

Thanks for all the kind words, Pete. I'm not sure what the formula is exactly for figuring our aid package, or what percentage of assets are seen as being available for tuition. But philosophically, I'll just say that it is difficult to expect the level of aid we receive (which is quite generous) if you can lay your hands immediately on the equivalent of a year's tuition. I don't feel bad at all about having $2000-5000 as a rainy day fund, but more would seem presumptuous.

As for "why PG," there are several reasons. Our local schools are pretty bad--both in terms of academics and atmosphere. The aid we receive makes PG no more expensive than any other private option in town. I could give you lots of good stats for why PG is better than all of them--everything from average SAT's in the 1300's to 100% college acceptance rates, to the numerous opportunities my kids get in athletics, the arts, etc. by being in a smaller place without thousands of kids competing for those spots on the team, in the play, on student council, or whatever. There's also weekly chapels, Bible studies, required courses in relgion... but it's really simpler than that. This is "my" school--it's where I went to high school, and where I go to work every day. I'm allowed one of my three kids enrolled free. If it requires some sacrifice for the other two to have the same opportunity, I'm fine with that.

As for Christmas, I know it could be a line-item. But assuming our usual budget (not impulse, planned) of about $1000-1200 for Christmas each year, either that's set aside $100 a month (with the effort and record-keeping that entails), or in our budget, just be a little more frugal on some things starting in late October when we begin to shop. It comes out the same, though. Don't worry--I'm not burning up all the savings just to buy brightly-colored plastic toys with no plan.

Philip Murphy said...

Saving is overrated. Whatever happened to "give us this day our daily bread?"

somehow, we've wrapped financial stability up into our Christian core values.

Saving may not be wrong... but I'm not sure it's right either. Of course, wasting all your money on worldly possessions isn't right either.

(and for those that give a rebuttal... please don't quote Solomon, a man who flushed an entire kingdom's wealth away.)

Goode Design said...

Is it ok to quote the Word of G_d?

1. in the house of the wise are stores of choice foods and oils.

2. the wise man sees trouble from afar and prepares, the foolish man rushes in and is destroyed.

3. "For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it, (29) lest, after he has laid the foundation and is not able to finish it, all who see it begin to mock him, saying 'This man began to build and was not able to finish'."

4. and how from infancy you have known the holy Scriptures, which are able to make you wise for salvation through faith in Christ Jesus. All Scripture is G_d-breathed and is useful for teaching, rebuking, correcting and training in righteousness, so that the man of G_d may be thoroughly equipped for every good work.

5. Preach the Word; be prepared in season and out of season; correct, rebuke and encourage—with great patience and careful instruction. (one might argue that being financially ill-prepared makes one less prepared to do the will of the Most High)

6. And let them gather all the food of those good years that are coming, and store up grain under the authority of Pharaoh, and let them keep food in the cities. Then that food shall be as a reserve for the land for the seven years of famine which shall be in the land of Egypt, that the land may not perish during the famine.

7. But if anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever.

8. On entitlement: For even when we were with you, we commanded you this: If anyone will not work, neither shall he eat.

9. But the fruit of the Spirit is love, joy, peace, patience, kindness, goodness, faithfulness.

10. ...When you have finished paying all the tithe of your increase... Deut 26: 12 (you don't get increase without saving... you grow crops by saving seed.)

Financial stability is not so much a christian core value, but a mark of wisdom in regards to one's financial life. Remember, we have one life for christ... that means our finances, our sex lives, our thoughts, our goals, our work and everything else is under the guidance of the Father.

As I seem to remember, Israel was the most prosperous when Solomon was king. It was his sons that flushed the wealth of Israel. I believe Solomon wrote vast amounts on giving & spending as well.

Granted, I'd like to hear your thoughts on finances and faith.

Coach Sal said...

I think saving, giving, investing, budgeting, etc. Are all sub-sets of being a good steward. Scripture has more to say about money than almost any other topic--partly because of how our use of our treasure betrays where are hearts really are. I want to be a good steward not only of my money, but also of my time, my talents, my family, etc. Having insurance or savings is not an excuse to put our trust in things other than God, but the opposite is also not true--it's bad form, to say the least, to squander one's own resources and then say "God will provide," usually in the form of the fruits of the labor of someone who has been more responsible. And I'm talking about saving, not hoarding.

As for Solomon, despite his numerous personal problems, the Holy Spirit chose to inspire him to write Proverbs. So it's scripture. We get rightfully annoyed whenever someone chooses to ignore Pauline teaching about morality because they say "Paul isn't important like Jesus." But despite the obvious difference in nature, we folks who believe in inspiration are stuck with ALL the words of scripture, even the ones from the authors we don't much like. (That said, I can't stand the tone of 2nd Corinthians.) So quoting Proverbs isn't quoting Solomon so much as it's quoting God.

Philip Murphy said...

Call me crazy... (things I wouldn't say on my own blog, but I'll share with on someone else's) but I'll take Christ's teachings on money over Solomon's any day of the week. In my view, Christ is the primary authority.

That said, Pete I'll discuss your pertinent quotes by the numbers you've provided...

1. not applicable. I'm pretty sure you're not wanting to store oil in your 401k... although an investment in Mobil may not be such a bad idea right about now.

2. seeing trouble from afar doesn't equate to worrying about potential financial disasters. I certainly don't think this passage refers to saving money.

3. Christ isn't definitely NOT referring to saving money in this passage and it's wrong to imply otherwise. (improper prooftext) If anything, he's explaining the importance of following Jesus with all of your heart, something that is very hard to do when you're overly focused on money.

6. If God comes to you in a dream and tells you to save food... I'll have no problem with you storing grain. But when you're saving money to buy a new car... well, it's hard to eat Goodyears. I certainly don't think we need to save so much grain "like the sand in the sea" in order to be Godly. Besides... flip over to Exodus and you'll find that God PUNISHES those who store up too much mannah.

7. "Providing for ones own" is a much different concept than saving for retirement. Also, you're improperly prooftexting this passage again. Paul is referring to the fact that widows shouldn't be lazy gossips. He actualy seems to argue AGAINST having someone sit around and live off savings are other people's generosity. Like you're #8, it's important for people to work. I don't deny that. But I don't think it's important to save for one's 401k retirement plan.

10. I disagree. Increase is not a product of saving, it's a product of working. Working and saving are two separate issues that you seem to lump together. Moreover, "increase" in this passage is used much like our word income. I'm not denying we should have incomes. I just stating maybe we shouldn't hoard income in banks and retirement plans. God will provide.

what if... What if we actually lived like the 1st Century church? Would we really need "emergency savings accounts" and "retirement plans?" Wouldn't we be more concerned about helping each other rather than hoarding our incomes? If someone had a need in your congregation, wouldn't you help? I'm afraid we've allowed too many Christian authors confuse the issues of financial responsibility and financial freedom. It's absolutely important to work, and provide for your family. But, I think we show a severe lack of faith by NOT relying on God and NOT sharing with those in need.

Pete said...

Hi philip,
First, may I point out that you left out the MOST pertinent quote: "All Scripture is G_d-breathed and is useful for teaching, rebuking, correcting and training in righteousness, so that the man of G_d may be thoroughly equipped [or prepared.... arguably financially also?] for every good work." All means all. Todo de las escrituras! Whether it was solomon's hand that wrote it, or peter, paul or if he chose to use the Beatles (blech!)
You're right, Christ is the authority. But where did his authority come from? Answer: From the Most High, Elohim!

1. Most certainly applicable. First off, per Paul's instructions to Timmy... Scripture was applicable to instruct, prove, correct, etc... As for storing oil, it is well known that in the first century (since that's the goal... to be like Century 1) they used their contemporary commodities as currency: sheep, flax, oil, grain, food, cloth, etc. Thus, this scripture is teaching us to have some forms of emergency sustenance on hand. I would also expect that the giving Father would expect that this sustenance is not just for those who save it, but to allow us to be givers to his people who are in need. In other words, I don't just save for myself and greed. We save to give, we save to spend, we save to be wise stewards. (by the way, yes, i do invest in Oil in my retirement and investments. I look at the word and see lots of wise nuggets... this is one that is a GOODE nugget!)

2. In this scripture (though I paraphrase it often) the key isn't the seeing trouble... the key is preparation. With this scripture, the wise person (we would assume the Father actually prefers us to be wise) is prepared and covered... however, the foolish person is unprepared and proceeds into his own error.

3. You're half right... his illustration is to show those who would be prepared for a building project as an analogy of those who would be prepared to do ministry. But in the illustration, Messiah choses to take one thing that is true and wise and show how it applies elsewhere. Thus, he's saying "preparation in building is wise, and it is also wise in ministry and other areas of life... even when choosing who to follow."
I'm sure there are deeper, hermeneutical inferences. However, as we take the message apart, we see many moving parts. This scripture alone would be a GREAT 13 week sunday school study. But we're on a blog (and borrowed type space at that) so I won't do all 13 weeks, rather i'll focus on week 4: The Financially Prepared Follower. Yes! there is more to a life following Messiah than a healthy bank account. I'm no prosperity witch-doctor. But, being unprepared is unwise. Though many folks who are unprepared are simply ignorant of the need for a preparedness in a specific area, it's mere stupidity to build one's house in a flood plain in the US and not have flood insurance. It's financial folly to use credit cards and borrowed money to buy food, cars & toys. Our Father wants to train his children that the borrower is Slave to the lender.

6. Why do folks want the provider to come to them in a Dream? Why not learn from the examples provided in his instructions that we are indeed to be prepared?
6(b). "But when you're saving money to buy a new car..." Ok, philip... how should I go about buying a car (since transportation IS more of a necessity here in the states) Should I go borrow money? Should I finance it? (we have 2 paid-for cars)
6(c). "well, it's hard to eat Goodyears." it is odd that the reference of the Egyptian famine of Yusef brings out the word "Goodyear" in the discussion... Referring to #2, I think being prepared fits here. Plus, (eagle scout to eagle scout) it's a life choice to "Be Prepared."
6(d). "...G_d PUNISHES those who store up too much mannah." you're right! Even Yeshua gives the example of the guy who built bigger barns and bigger silos to store grain. This would be called hoarding. Hoarding is the selfish saving up of things based in Fear of future lack and storing only for one's self. You'll notice that the folks who did the hoarding were saving it for themselves in fear. We're talking about folks who had a slave mentality... just freed from bondage in Egypt.

7. " 'Providing for ones own' is a much different concept than saving for retirement." First off, I think defining "retirement" in our culture is a big deal. Most folks who "retire" simply stop working (stop being productive, effective individuals) and wait for death by trying to live off their savings. I don't think that's goode at all! Rather, how about those folks who "Retire" going and doing things that are more beneficial. Most people look at "retirement" in a very selfish way. One of my "retirement" goals is to build something similar to SuperWeek @ PBC... but an entire camp of SWS type weeks. But at the same time, I'm facing the very real task of facing my parents' retirement years. Thus providing for my own is now not just my kids, but my parents. "But you say that if a man says to his father or mother, 'Whatever help you might otherwise have received from me is a gift devoted to G_d,' he is not to 'honor his father' with it. Thus you nullify the word of G_d for the sake of your tradition." Now, I know he's talking about "a gift devoted to G_d," still we are instructed in the 10 commandments that we are to "Honor your father & mother." Most first century Jews would have understood that this also meant the financial responsibility to care for aging parents. I think it's just common sense that this requires savings. Isn't it cool how the Father (as a Giving Father) is concerned with his children being givers, providers & caretakers of those in need. In fact, his concern provides instruction that his children are to prepare to care for the previous generation(s).
7(b). "He actualy seems to argue AGAINST having someone sit around and live off savings are other people's generosity." I don't think I was implying that one should "sit around and live off savings." Rather, my point is that you should 1. have savings for a rainy day (preparation seen in #2) and 2. prepare to care for others.
7(c). "But I don't think it's important to save for one's 401k retirement plan." Again, preparation. I'm not saying that it should be hoarded. Nor do I believe this savings is intended for greedy purposes. How do you think missionaries get sent to foreign lands like American Samoa? People have to give generously above what they have to "provide for their own." Remember, giving to missionaries (arguably a good thing to do) does not preclude one from providing from one's own family (See Matthew 15).

10. "I disagree. Increase is not a product of saving, it's a product of working. Working and saving are two separate issues that you seem to lump together. Moreover, "increase" in this passage is used much like our word income." Yes, but you don't see increase from those who spend every dime they make. Wisdom would tell us that we are to live on less than we make. Give, Save, Invest & spend (in that order).

"I just stating maybe we shouldn't hoard income in banks and retirement plans." who said to hoard? I said GIVE, save, invest & spend

"G_d will provide." You're right. Part of his provision is instruction. Part of that instruction says to save. Since the law of the Lord is perfect... it makes wise the ignorant... it brings light to our path... i think it sounds like the late-nite preachers who tell their "flocks" to give it all away and trust G_d, when clearly scripture teaches that we should save.

NEW: 11. A good man leaves an inheritance for his children's children, but a sinner's wealth is stored up for the righteous. (ok, solomon wrote it... but need i repeat... ALL SCRIPTURE?) I don't think a "good" man referenced here was hoarding, nor do I believe he was a spend-thrift. But since the Judge of our character is looking to the internal motives, I think we can deduce that the "good man" saves, invests & grow something to leave to the generations beyond him... Especially, since he's contrasted with the "sinner" & "his wealth" which we could possibly say he was greedy, hoarding & fearful of lack.

"what if... What if we actually lived like the 1st Century church? Would we really need 'emergency savings accounts' and 'retirement plans?' " Again, I cannot stress enough, Emergency funds are for emergencies which do come. (Prov 22: 3 ~ written by solomon, inspired by Elohim) I also hate the term "retirement plans," as I really don't think our modern view of "retirement" to be a good, G_dly nor healthy approach to the waning years of life. Though we are told to enjoy our salvation, I think there are productive, effective and influential ways to do this.

"Wouldn't we be more concerned about helping each other rather than hoarding our incomes?" Again, I reference that I believe the savings is not a greedy hoarding, rather a preparedness to care for one's family, parents and the needs of others. People pay for missionaries from savings and excess. If they do so to the detriment of their own house and family, they are NOT following Yeshua's teachings (Matthew 15: 4 - 7)

Q: "If someone had a need in your congregation, wouldn't you help?"
A: Absolutely! I won't go into details, but in our current situation, that is exactly what we do. We seek out people in need to help.

"...we've allowed too many Christian authors [to] confuse the issues of financial responsibility and financial freedom." ABSO-FRIGGEN-LUTELY. Notice I don't quote Dave in this post... nor TD Jakes (BLECH!!) nor Creflo Dollar (i just puked) or Andy Andrews (he has some goode books) First off, financial freedom is a myth. Financial responsibility is a reality. Most folks are ignorant of the practices of financial responsibility. In truth, they've never had their parents train them in the way they should go here. But I know that the word of the Most High instructs me to "Train a child in the way they should go..." so that "When [s]he is old, [s]he will not stray from it..." So, I will teach her the first lesson after those comments as I try to do all the others as well, "The rich govern the poor & the borrower is slave to the lender."

"But, I think we show a severe lack of faith by NOT relying on G_d and NOT sharing with those in need." I agree. That's why the Goode who (who are savers) actively share with those in need. Those who save and do not give, are merely hoarders and are the 2nd part of the equation in Proverbs 13: 22.

Philip Murphy said...

pete, we'll have to pick this up at camp. I'm too lazy to discuss every point. Plus, I don't think we're that far apart.

also, I'm just poking fun at Solomon. I'm not stating proverbs isn't "scripture." I just find it odd that so many people who argue Christian finances use proverbs likely written by one of the world's first tax happy Democrats.

Also, in defense of our family's ministry, we don't have financial support from the States. You seem to imply as much from your statements in 7c.

Goode Design said...

I wouldn't call Solomon the Tax Happy king. That would be more like his 2 sons ("My little finger is bigger than my father's waist & I'll scourge you with scorpions") especially since the moneys & work divvied upon the Israelites was to build the Temple. Once it was completed and israel was made into the wealthiest nation on earth at it's height, the 2 sons squandered that wealth by taxing them, dividing the nation & effectively destroying all their father & grandfather had built. Those 2 were tax happy... seeing how much their father had amassed during his tenure as king bread great greed in their minds. You'd think the wisest person in the world would have succeeded in doing what he wrote: "Train a child in the way that he should go and when he is old he will not depart from it." Yet that's where we see Solomon's great personal flaw. He had the wisdom, but in many ways, did not perpetuate it throughout his legacy.

As for the mission work you do: My mistake. I generally assume that most mission workers are funded by giving churches (US based or otherwise). If you're looking for some REALLY good and giving churches, begin looking to China. It's the fastest growing Christian nation in the world.

As for picking this up at camp, i'll only be there for a few hours to 1 day. Tim has some plans for me... luckily, i'm not so Svelte as to be used for moving large boulders or displacing the lake.