Scripture to Memorize
She opens her arms to the poor
and extends her hands to the needy.
When it snows, she has no fear for her household;
for all of them are clothed in scarlet.
Proverbs 31:20–21
Passage to Read
No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money.
Matthew 6:24
Guided Prayer
Dear Lord, thank you for speaking the truth concerning money. I’m glad your Word is practical and shows me how to live my daily life. I confess that I’ve tried serving two masters and it didn’t work very well. I became frustrated, exhausted, and irritable. It’s so easy to get caught up in the rat race of earning money (or nagging my husband to earn more!). It’s so easy to become a slave to money or a slave to my job. It’s easy but it brings only discontentment. I don’t want to live that way anymore. God, I believe you can give me the wisdom it takes to be set free from serving money. Instead, I want to discover how to make money work for me. I know I can’t serve both God and money. From this day forward, I choose to serve you, Lord. Amen.
Personal
The Proverbs 31 woman had no fear for her household. If only that were true of more of us today. Many people are afraid of what would happen if the primary breadwinner in the family lost his or her job. And it is frightening, considering that the average out-of-work person will take up to twenty months to find a new job. The fact is that only 20 percent of American families have enough savings to survive for two months.1 So how many would be able to survive for twenty months? Not many. That’s the reason financial experts recommend you have an emergency savings account with enough money to cover three months of living expenses. If you are just beginning to get a handle on your finances, this should be your highest priority. Open a money market account (MMA) with check-writing privileges but then resist the temptation to write checks against it, except in the case of a true emergency. At the time of this writing, it’s possible to earn 5.5 percent interest on an MMA. You can visit www.bankrate.com to hunt for the best current rates.
Dave Ramsey, author of The Total Money Makeover, recommends you begin by putting one thousand dollars in your emergency fund.2 Then focus your energy on paying down your credit card debt. Once you are out of debt, build up your three-month savings reserve. In other words, it doesn’t make much sense to put all your money in a 5 percent MMA while you are paying 17 percent interest on credit cards.
But you have to be serious about your goal of getting completely out of debt within a fixed amount of time and getting that reserve in place. Otherwise, you are just fooling yourself and that three-month reserve will never materialize. Ramsey suggests getting a second job, if that’s what it takes. You might also consider starting a home enterprise and devoting all you earn from it to paying down your debt (see Week 8).
The underlying problem is that most of us are still living paycheck to paycheck. We’re still working for money and the minute that paycheck stops, we are in a whole heap of trouble. Robert Kiyosaki, author of Rich Dad, Poor Dad, has rightly observed: “The poor and middle class work for money. The rich have money work for them.”3
The rich have the right idea. Does that sound unspiritual? Let me ask you this: which is more spiritual—working for money or putting money to work for you?
I would suggest that a person who has money working on her behalf has much greater freedom to pursue the kingdom of God than someone who has to devote all day, every day working for money. Such a person is certainly in a much better position to extend her hand to the poor and needy and is surely better able to have no fear for her household. The Bible reminds us, “No one can serve two masters.” The less time I spend serving my money, the better.
Why is it that some Christians think it’s spiritual to take time to keep track of every penny they spend but unspiritual to take time and energy to generate additional income? Given the choice between earning more and obsessively monitoring and controlling what I’ve already got, I’d much rather focus on earning more. (Of course, our primary focus should always be the kingdom of God, not money, whether we have a little or a lot. Don’t let building your asset column distract you from the more important pursuit: pursuing God.) Yes, I monitor my balance sheet each month, but it’s not my focus. My focus is on building my asset column. Not only is generating income a lot more fun, it sets me on the path to financial freedom rather than continual slavery. That’s why I love the writings of two modern financial gurus: Robert Kiyosaki (Rich Dad) and David Bach, creator of the Automatic Millionaire concept.
The simplest way to understand your money is in terms of assets and liabilities. Anything that brings you money is an asset. Anything that costs you money is a liability. The primary difference between the rich and the rest of us is that the rich acquire assets while the rest of us blow our money on liabilities.4 Again, “an asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.”5
Assets include stocks, bonds, notes, real estate, intellectual property.
Liabilities include mortgage, loans, credit card debt, taxes, insurance, household bills, Disneyland.
Unfortunately, what most people do when they get more money is spend more money. They blow it on liabilities: big screen TVs, new cars, boats, furniture, and so on. Rich people invest that money in assets and use the earnings generated by the assets to buy liabilities like big screen TVs and new cars. In other words, all you need to do is add one step between income and spending. Put the income into an income-generating asset, then you can spend, not once, but as long as the asset keeps generating income.
Let me give you an example. Let’s say Joan inherits fifty thousand dollars from her great-aunt. She goes out and buys a new car. The minute she drives the car off the lot, it depreciates 25 percent and, every day, it’s worth less and less until, finally, she trades it in for another car. That fifty thousand dollars didn’t go too far, did it? What if, instead, Joan took that fifty thousand dollars and put a hefty down payment on a small starter home that she rented out for the next thirty years. All of a sudden, that fifty thousand dollars generates monthly cash flow in the form of rent, year after year after year. Meanwhile, her renters are paying the mortgage while Joan’s property appreciates. In thirty years Joan can sell the place and buy a fleet of new cars. That’s the difference between buying assets versus liabilities. Assets put money in your pocket, month after month, year after year. Buy assets and use the income the assets generate to buy liabilities.
If you have not already organized your finances using a personal finance software program such as Quicken or Microsoft Money, that’s an important step to take. Both are affordable and easy to use. You can purchase them in downloadable format direct from the Internet at www.quicken.com or www.microsoft.com. It took me a weekend of effort to set up all my savings, checking, and investment accounts online so that, once a week, they automatically download all transactions directly into Quicken. Once your accounts are set up online and linked into your financial software, you can get an overview of your assets and liabilities with the click of a button. You can always see, at a glance, exactly where most of your money is going and where you need to cut back. These programs even generate full-color pie charts so, if you can’t read numbers, you can at least get the picture. And yes, both have a budget feature if you want to create one.
If your finances are in disarray, this will be a multiday assignment, but at least you can make a beginning. Your real mission, and what I want to jumpstart you toward, is building your asset column and shrinking your liability column. For the remainder of this week, we’ll look primarily at ways to reduce your liabilities. In Week 8, we’ll discover some exciting opportunities to create more assets.
Affirmation: I don’t work for money; money works for me.
Practical
Create an overview of your current assets and liabilities.
Notebook: Place your completed Assets and Liabilities Worksheet (found on page 337) in the financial section of your Personal Notebook.