Work Willingly
Work willingly at whatever you do, as though you were working for the Lord rather than for people.
Colossians 3:23
Financial Discipline …means Financial Freedom! Part 2
Ok so finally…here is the next installment of the financial discipline posts I began two weeks ago. Sorry, I’ve been a bit lazy when it comes to the blog. Anyways, one of the things that is so scary about a recession, is that realization that no matter what you do, how hard you try, you often find that things are beyond your control. What I mean by that is…you can have your needs met, be disciplined financially, and still, have that rainy day that can impact you financially. But I have found, that if you have a disciplined financial plan, that you can prepare for those rainy days, and withstand the results.
Today of course is tax day! Today, we either give the government what we owe, or we get back what the government owes us. My taxes are done, and I am still a bit bitter because I e-filed for the first time…to save time, and I can’t get over the fact that I paid someone else, so that I could pay my taxes! Yes, I owed this year. So this year I am just a little more sympathetic to the rich that we see on the news for tax evasion. You know, the stars you hear about that get in trouble for unpaid back-taxes, and you think they are rich, why didn’t they pay taxes!! OK, so I’m not too sympathetic, but just a little.
I have three keys to financial freedom: 1) Discipline (which I’ll cover today) and in the next posts 2) Planning for the future and 3) Enjoyment of your rewards.
My plan that I abide by financially is actually really simple, and it’s the one I’ve adopted since I had my first job at an Art Museum in Athens, Ohio called The Dairy Barn. (Yes, it was a converted dairy barn into an art museum, and I helped set up the different art exhibits)
When I started making money, at the time minimum wage was $5.15 an hour, and though it wasn’t much, it was mine. And I quickly learned that money goes fast if you don’t tell it what to do. I used my first paycheck on a pair of Air Jordan’s, and just like that it was gone. And I was depressed. I liked my shoes, but I had this feeling of regret knowing all my money was gone, all 40 hours of work had gone into these pair of shoes that were depreciating in value every time I wore them. I bought the shoes because all the kids at school that I wanted to be like wore cool clothes, and like any teenager, my sole purpose in life was fitting in. Now at the time, my number one financial goal was to buy my own car and get insurance. But I found that if I kept “rewarding” my hard work with little stuff, I would never get that car. So I came up with a savings plan.
Well first, I believe, (I know there is much to discuss on this particular financial discipline, and this introduction is poor) but… I believe God is the one who blesses and provides. And thus I believe we are to give the Lord our first 10% or otherwise called a tithe…meaning tenth. So let’s say we just made $10. I would give $1 to my church. I truly believe tithing is pivotal in financial freedom. Not because I believe in health-and-wealth theology. But because tithing breaks the chains of control that money can have over a person. It is the first step in you taking charge of your money instead of it taking charge of you. You tell your money what to do and where to go, not the other way around. Tithing is the first step in financial discipline. By the way, your tithe goes a long way in helping to reduce your taxes, so an added benefit there.
The second step is to take another (at the minimum) 10% and put it into savings. So of the $10 we just made, at least 1 dollar should go to savings. This percentage largely depends on your place in life. Though a general rule of thumb should be as much as possible, at my teenage job stage, since I was supported by my parents, I should have been saving at least 60-70% of my income for my car and college. But now with supporting a family, 10% should be the starting point, with the goal of increasing it.
The third step is to take another 10% and either pay down debt or invest it. If you have debt, concentrate all financial efforts to paying off debt first. Think about it like this. Let’s say you have 25,000 in student loan debt. I do believe there is smart debt and dumb debt, but at the end of the day, it is still debt. If you were to pay that debt using the loan organizations payment plan, at the end of that payment plan you will have paid more than double your original loan amount. That is why paying off debt is priority number one. Don’t get new cars or anything until debt is covered. Because you can use that extra 25 grand to do so much more.
But if investing is where you are at. Put it in something that is low risk, yet yields something of a return. The key to this step is to maintain the discipline of investing. The true value of this step won’t be realized until years down the road. This is what is known as compound interest. Here is a figure to help motivate you. If you invest $3,000 a year from age 35 to 65 you will have $873,000, tax-free!. If you invested $500 a month in a something like a Roth IRA, you would have over 5 million!
Now, I know you are doing the math, and finding out that you are going to have only 70% to live on. And I would challenge you to live on 50% and increase your savings to an emergency fund that can cover you for at least 6 months. Because trust me, a rainy day is coming. It’s just a matter of time.
Limit your out flow as much as possible. Keep your financial blinders on to keep you looking down the road toward your financial goals and not at the depreciating trinkets that you could buy along the way. I will talk about enjoyment and rewards in a few posts from now. But in the meantime, put together a financial plan. A tool to help you, go to quickenonline.com It is free and it can help you see where your money is going, so then you can see whether you have control of your money, or the other way around.
Choosing to Cheat
I wanted to recommend to everyone a book that was recently brought to my attention that I read years ago. It is called Choosing to Cheat by Andy Stanley. It has heavily impacted they way I view certain things and challenged me in many areas of my own life. It is an easy read, but very challenging to apply. It simply poses the question…what are we cheating in our lives? We all cut corners, and cheat something. I don’t mean doing things that are illegal or wrong necessarily. But what I mean is simply we sacrifice A so that we can have B. Or it can be said that we cheat (A) so that we can have more of (B).
For example we cheat time with family in exchange for entertainment, or choose work/money in exchange for relationships or ministry. We give away parts of our lives in exchange for something else. And when we do that we cheat something else in our lives. For example, you may be spend several hours of overtime at work for some extra income, but you do this in exchange for quality time with your family. And admittedly, sometimes we have no options, we are required to make certain choices because of circumstances. Sometimes we have to put the food on the table no matter what, or the boss has given
deadlines that require extra hours. And sometimes we find ourselves in positions without options all the time, and these consistently cause us to cheat that which is most forgiving in our lives. And that usually is our relationship with Christ or our loved ones, and I find that usually that means both. If you find that you are constantly making choices like these because of circumstances, it may be time to make some radical changes.
But sometimes we do have options, for example you may choose to go to an extra movie this weekend, but you do this in exchange for opening your schedule to help in some area of ministry, or doing needed homework. The challenge as leaders is before us…to make sure that when we cheat, that we cheat the wrong thing, not the right thing.
“April Fools!”
Interesting site here if you are a fan of April Fool’s jokes. I personally am a huge fan of “good” pranks. However, I am not a fan of people that come up to me and say something like, “hey you have ketchup on your shirt!” I, of course, look down, and then the person laughs in my face and gives the proverbial “April Fools!” That, to me, is very annoying. I like the good ones, you know the creative ones that when pulled, you can only say…”respect.” But check out this site if you would like to see a top 100 list of April Fool’s jokes from around the world
Monopoly: Financial Discipline…means Financial Freedom Part 1
Today’s economic troubles is something that I am endlessly fascinated about. I know that might sound a little weird. But honestly, I think the recession that our country is in is something that we all should learn from. I have always been a little bit of a financial guru. I love studying business principles, techniques, and marketing. I have to admit I am not much of an investor. I am fairly conservative in my financial approaches. Unless of course I am playing Monopoly, in which I then become the most ingenious and ruthless business tycoon you have ever met. I mean I am ruthless, I have been known to pay players an honest “Monopoly salary” to role the dice for me. Come to think of it, that is probably why my wife no longer agrees to play Monopoly, interesting. However, I have never been able to duplicate that business savvy when it comes to…you know, the real world, with real money, and real risks. 
So I guess I sit a little more left of the “a penny saved is a penny earned” approach. I guess I have my midwestern roots to thank for that. In the midwest, you work to make money. And then you make more money by saving money. Typically, you then limit your financial liability or financial risk to just two things, you own personal health or your own ability, and the stability of your employer…or work if you are self-employed.
Back to our economic situation though. What I marvel at in this economic climate, is the interdependency of all the markets. It’s amazing/depressing to watch the economic domino effect. If you recall, just after the housing boom that ended in the beginning of 2008, large lending institutions began complaining of isolated, yet alarming numbers of mortgage loan defaults. Large investment firms got the first inkling that there were problems ahead. Yet, investors still were making large scale investments on failing loans. Stock market tycoons made lots of money on very complicated systems of loans and investments on top other loans and investments. These being the hedge funds, mortgage loans, and other types of investments upon which you’ve heard in the news from time to time. When Bear Stearns, Lehman Bros., Freddie Mac, and Fannie Mae failed, the banks froze. Everyone took their money and went home. And now you can look at nearly every market and see the impact.
In today’s news the American car industry is losing big. At first the government said it wouldn’t bail out the auto industry, but now that seems to have changed. Probably because we are looking for the economic tipping point that can turn the scales in the right direction. It’s a shame that GM and Chrysler are struggling so much. But in any market you must change. GM hasn’t been able to compete with foreign products that are cheaper and have superior quality. GM got lazy after their market successes since the 50’s. They didn’t change and compete, and now they are losing big time, and it is hurting not just thousands, but millions of people. You see when a plant closes in a small town, the town closes. That closes a school district. The school district impacts county and state revenues. State cut backs hurt all state job departments. That hurts retail and chain markets. That hurts construction prospects. All of these are directly felt in the real estate market. That means your home value plummets, possibly below your original mortgage amount. It’s a vicious cycle, and the government is looking for the e-brake to stop the financial free fall, before, as one character on SNL stated it, “we financially barf on ourselves.”
When the stock market crashed in 1929, I always wondered why people would jump to their deaths after learning they had lost all their money. I always thought, so you’re bankrupt, so what?! There are worse things that can happen. In the 1929 crash, the crash was caused by big dog stock market players scamming the little investors at increasing levels. They would falsely ballon prospector interest in a product to drive its stock value up, and then boom, sell and saddle the actual product value with the little man. And if it tanked, which most of the time it did, the little investor lost everything. This was known as the bull market. When the market completely crashed, CEOs and owners lost everything, they couldn’t take it, and they jumped. I mean sure, they were hated because they scammed thousands of people and lost their shirt financially. But still it could be worse.
By the way, the 1929 crash all happened after a housing market boom that collapsed after the “the Roaring Twenties.” The 1920’s industry boom happened largely because of the American automobile industry. America was leading the world in product superiority and ingenuity. By the way, the best thing in my view, that came out of the Great Depression (besides the government overhaul of the trading market rules) was the creation of the greatest board game ever…Monoply. That’s right, created during the depression as people dreamt about what their lives could have been like.
Money can have such an inebriating effect on people can’t it? It can be so enticing, so coveted, so seemingly valuable, that we can be blinded by it. Today, lenders made billions on making risky bets on the funds of others. They enticed investors to commit investments on funds and promised insuring their investment to the tune of billions upon billions of dollars. Then when everything tanked, the insurance securities couldn’t be paid to the investors. Boom! Just like that, you land on the proverbial “Boardwalk” and you don’t own it.
More to come!! I want to look at having financial discipline, and how to avoid financial “drunkenness” and how that can mean financial freedom and stability.
Quotes
And we rejoice in the hope of the glory of God. Not only so, but we also rejoice in our sufferings, because we know that suffering produces perseverance; perseverance, character; and character, hope. .: Romans 5:2-4
March Madness Update
I don’t know how your bracket is doing, but Arizona and Purdue surprised me. The rest of my bracket is intact, until this weekend anyway. 
Pittsburgh hasn’t played well, but as long as their confidence stays consistent, I think they have what it takes. I am kind of disappointed that there hasn’t been a huge cinderella upset this year. But I really think Syracuse might make a surprising run. Unfortunately, I didn’t reflect that in my bracket. O me of little faith.
The Pareto Principle
Sorry it’s been a while since I last blogged, but it’s just been one thing after another recently. You know how it goes sometimes, when it rains…it pours. But today I wanted to begin a discussion on something I have been thinking on for a while. So anyone that reads this can contribute.
In the late 1800’s, sociologist Vilfredo Pareto made his observation about Italian land ownership that has since been famously known as the Pareto Principle. Pareto observed that 80% of the land in Italy was only owned by 20% of the population. This 80/20 ratio has been a governing law in business and economics ever since. That meaning, 20% of the world’s population owns 80% of the world wealth. Actually 82.7% to be exact. Tim Ferris and his New York Times bestseller The 4 Hour Work Week is built on the principle. He points out that businesses make 80% of their revenue on just 20% of their clientele. He also points out generally your average employee will work hard 20% of the time, to accomplish 80% of what’s expected of their performance. Then they work/waste 80% of their remaining 40 hours to accomplish the reaming 20% of their work. He compares it to cramming for a test, or having a last second problem occur that you handle efficiently and accurately in just a short amount of time…all because you had no other choice.
I, of course am a student pastor, so why you may ask am I interested in this? Well, I am interested in just about anything. But that’s besides the point. If you also are in ministry, you’ve probably heard that figure (based on the Pareto law) that 20% of the church does 80% of the ministry work. I tend to think that is fairly accurate. I’ve heard that church plants have a 20% retention rate, that is, 1 in 5 attenders stick. (I’m not sure if that is accurate, but I have heard the ratio before)
Microsoft applied this principle, and they focused on fixing the top 20% of error messages that our computers reported to them, and they found that they fixed 80% of the crashes that were being experienced.
What are some Pareto laws that you’ve seen at work? I don’t mean just in your place of employment (though it could be), I mean anywhere? Do you think there is a way to focus on that 20% that is most effective? Or are we doomed to spend 80% of our time, resources, you name it, on achieving that last 20% of the pie? In the business world, many,many books have focused on this idea. But from what I can tell, understanding the 80/20 rule can help you know what you strengths are and probably what you are most effective in doing. It’s unfortunate, but most of the time, we spend 20% or less, of our time doing what we are most gifted and passionate about doing. But then spend the remaining 80% of our time doing what we have to do.
I do think there is good knowing the 80/20 principle. I believe it begins to open the door to focus and discipline. I think it also helps us understand and attribute value categories and paradigms to our time, money, abilities, and even our relationships.
March Madness!
Well it’s that time again! Spring time, the days are longer, the weather is warmer, and the only time I pay attention to college basketball. I have made my tournament bracket picks! I think the pressure is on for Pittsburgh. And I think they make it happen. Actually I have no idea what I am talking about here. But I still have fun filling out the brackets and watching the tournament.
