Lost? Intimidated? Don’t Give Up
He came upon some boys playing basketball. “Where are you going?” they asked. “To give a talk on how to get to heaven, but I’m lost and need help finding the convention center. Would you care to join me?” he said. They shot back, “Not really. If you can’t find your way to the convention center, what makes you think you know the way to heaven?” Children have a funny way of getting right to the point, don’t they?
Just as Archbishop Sheen got lost on his way to the convention center, people often get lost in the maze of their personal finances. In earlier articles, I emphasized the importance of keeping the big picture in mind as it relates to your spiritual life. The same holds true when it comes to managing your money.
Most people recognize they need a plan for their finances, but they get overwhelmed with the details of budgets, taxes, repaying their debts, and starting a savings and investment strategy. I’m sure many would rather get a root canal than have to develop a financial plan! They feel intimidated, and as a result, give up before they’ve even started.
It’s not necessary for a financial plan to be complex. True, there may be times when certain details get complicated. That’s when you need to ask for help from a competent professional. But your overall financial plan should be straightforward and understandable.
A Goal-Driven Plan
It’s important that your financial plan be driven by your life plan. It should support your desire for a strong walk with the Lord, a committed marriage and family life, the formation and education of your children, and meeting the needs of your retirement years. Your life’s goals should drive your plan, not the other way around. As you read about the various steps along the path to financial freedom, take a moment to consider where you are. If you find yourself just starting the journey, don’t get discouraged! What’s important is that you map out the steps that will help you reach your goals.
Step One: Be a “Steward of Providence”
While the specifics of a financial plan will vary with each person’s circumstances, most plans will have much in common. After all, our lives follow similar paths: we get out of school and start our careers; purchase our first cars; get married and establish our first homes; have children and go about raising them as best we can — and before we know it, they are leaving home for college and we enter the retirement years.
I call these the “big picture” stages of life, and they relate to important destinations on your journey to financial freedom. While I’ll cover these destinations in greater detail in later chapters, let’s review them briefly here.
As we’ve already discussed, the most important financial decision you will make is committing to being a faithful steward of the gifts God has entrusted to you. It starts with getting your spiritual house in order; recognizing that all you have ultimately belongs to God; learning to be generous with the tithe as your model; applying temperance to your lifestyle; and developing effective communication in your marriage.
Step Two: Assess Where You Are: Do a Budget
I remember reading somewhere that about five percent of Americans live on a budget. It shouldn’t be a surprise that so many are getting into “wrecks” on their financial journeys. Unless you prioritize how your money will be spent, somehow, the money just grows legs and manages to run away on its own. Learning how to put together a budget and committing to living on one is step two. I’ll talk about this in more detail in the next article.
Ending the Plastic Habit
Step Three: $2,000 Emergency Savings (Proverbs 21:20)
In this stage, you set aside $2,000 into an emergency savings fund. You might be thinking, “Hang on just a minute. I’ve got credit card bills that are charging double digit interest rates. Why not pay those down rather than save $2,000?” The reason I want you to set up an initial emergency fund is to help you break the cycle of spending that created your credit card debts in the first place.
Credit card problems typically occur because of two issues. The first is when you habitually spend beyond your means. We’ll fix this problem by showing you how to develop and live by a spending plan using the Money Sense: Practical Application Workbook. The other big reason is when some type of emergency or “surprise” occurs. You know the type of scenario I’m talking about. It may be an urgent car repair or an emergency room bill for one of the kids. Whatever it is, without this initial $2,000 savings buffer, the only option seems to be paying by credit card.
By the way, most of these surprises aren’t really surprises anyway. They are just things that don’t happen on a regular schedule, and we are grateful they don’t! But we can and should plan for them. You should expect your cars to need repairs periodically, and the washing machine wasn’t built to last forever. A good budget will include amounts for these types of expenses.
By setting aside $2,000 into this initial emergency fund, you’ll avoid having to add to your credit card balance the next time one of these irregular expenses occurs.
Step Four: Eliminate Debt: Accelerate It! (Proverbs 22:7)
This is a critical step on your journey. Until you eliminate your credit card debt, you won’t be able to make progress with your plan. Too many resources will be swallowed up paying the high interest charges. I’ll cover the details of how you can eliminate your credit card debt once and for all soon, but suffice it to say that it will be a giant step on your way to financial freedom.
Phil Lenahan is Director Finance at Catholic Answers and author of Catholic Answers’ Guide to Family Finances. If you have a question you would like Phil to address, contact him at plenahan@catholic.com .
