Who’s Your Daddy? MasterCard or The Master?

“No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money”(Matthew 6:24)

This whole debt freedom thing is about more than just money. Debt freedom is about showing the world who we serve as Christians. It’s about showing them what we believe through our actions. How can we declare that God is Jehovah Jireh, our provider, but yet and still our lives are laced with debt? Whether it’s credit cards, car payments, student loans, etc., those are not blessings, they’re curses that we’ve bestowed upon ourselves. Not only do they keep us from enjoying God’s blessings, but they bind us from doing the work that God has called us to do. We’re too broke to tithe, feed the hungry, sponsor missionaries, build shelters, clothe the naked, care for orphans…Do we care that the work of the Kingdom has fallen short?

The word says that we either hate the one and love the other, we’re either devoted to one and despise the other. Our willingness to rely on a debt system, shows the world that we don’t really believe that God is our provider. We say that we love God, but our actions, according to His word, say that we despise Him. What are we going to do about it? Are we willing to turn the tables and despise debt instead of our God? Or will we continue to look for ways to provide for ourselves, no matter what the cost?

At the end of the day, God wants to be our source. In fact, I believe that He is our source. We just have to allow Him to work in our lives. God knows your heart and can see your needs. Will you be patient enough to allow Him to provide for you? Instead of reaching for the credit card when the next emergency comes, go to God. Tell Him that you don’t want to go into debt, and you need Him to provide. He will do it, if you let Him. God’s system is based on sowing and reaping. If you’re sowing into debt more than you’re sowing into God, you’re probably reaping more bills and payments than you are blessings. The banks may be great at selling their products, but God is greater at delivering His promises…EVERY time. So which will it be: MasterCard or The Master? Only one of them has your best interest at heart. Which will you choose?

Change requires action!

Live free!

Arianne

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The Rich Plan

Luke 14:28 “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?

There is a difference between hoping to get out of debt, and planning to get out of debt. In order to get out and stay out of debt, we have to create a strategic plan for doing so. Unfortunately, those that continue to hope for debt freedom probably won’t get very far. Once you decide to get out of debt, you then need to orchestrate actions that will help you achieve the desired result. How do you do that? By setting a budget and sticking to it!

I know, I know, the dreaded “B” word. I think the word budget has gotten a bad rap. The first word that used to come to my mind when I heard the word budget was restriction! And who wants to feel restricted, especially when it comes to money that you’ve worked for? Well, that’s exactly what debt does. It limits the amount of money that you can control and enjoy. On the other hand, a budget actually gives you more authority. You set the boundaries by determining how much you’re going to spend in each category. A budget doesn’t have to include only your bills. It should include entertainment, shopping, and whatever else you like to do in your free time. If doing those things strain you financially, then simply reallocate. You are free to design the plan however it best fits you. That’s good news!

A budget is not only your plan for getting rich, but it’s your road map to freedom as well. Without one, your money will continue to control you. With a plan in place, you are able to tell your money where to go, instead of having it fall where it may. Remember, your budget can and should include both bills and extracurricular activities. After all, you should be able to reward yourself for all of the hard work that you’re doing (without going into debt of course)! So get to work, your freedom depends on it!

Change requires action!

Live free!

Arianne

The Interest Match

One of the ways that I’ve been able to pay off loans at least 2 years early is by paying more than the minimum amount due. I would start off by paying just $5 or $10 more, and then would continue to increase that amount the closer I became to paying of the balance completely. A dollar here and there may not seem like a lot at the time, but it’s more about challenging yourself to go above and beyond. Once you see that you can “spare” $5 or $10, challenge yourself to add another $5 or $10 a month and more.

To start off, I instituted something that I call an “interest match.” It has worked really well on my car and student loans, and I hope to eventually apply the same method to my mortgage. For instance, if your loan payment is $100 per month, a portion of the $100 will go towards the principle balance, while the other portion goes towards the interest. Let’s just say that $70 goes to the principle, while $30 goes towards interest. Your payment of $100 only reduces the amount that you owe by $70 instead of the full $100. Over the course of 12 months, that’s a loss of $360 that could have gone towards the principal balance owed. Multiply that out over the course of 5 years, and that equates to a total loss of $1800. Can you think of something better to do with $1800 than to give it away to a bank? I know I can. What a nice vacation that would be! The point is, add the interest amount to your minimum payment. In this case, we would pay $130 per month instead of the minimum of $100. That way the principle balance is reduced faster, which in turn will also reduce the amount of interest paid over time as well. Don’t get me wrong, you will still lose money by having to pay interest. However, the sooner you pay the loan off, the less money you will lose over time. You might as well take advantage wherever you can.

I often heard that you should pay more than the minimum balance, but I never knew how much more or if a few extra dollars would even matter. I can tell you firsthand that it does make a difference. This is just one way to get you started. If you have any outstanding loans, take a look at your more recent statement and see just how much of your payment went to the principle, and how much went to interest. If you’re able, I challenge you to make an interest match on your next payment and stick to it for several months. You should notice a bigger decrease in both your principle and interest payments over time. Once you get into the habit of paying more, you’ll be able to apply it to all other loans and debts until you’ve finally paid everything off. Don’t settle for the minimum. Your freedom is worth so much more!

Change requires action!

Live free!

Arianne

Swiper, No Swiping!

Now, I have to tell you that switching over to using cash is one challenge that I’ve not yet taken up. I can’t even tell you how many times I’ve seen it, read it, or heard about it, but I just have not gotten myself together to do it. Why? Because I’m a chronic swiper! I’ve just gotten so used to using a debit card that I absolutely despise having to carry cash around. Not to mention it makes your wallet a lot heavier than if you just carried a piece of plastic right!? And, people can’t really tell if you have money or not when you use a debit card since the actual transaction goes on behind the scenes. It’s like magic! Who doesn’t love a magician?! OK seriously, I think I’m actually going to try it this time.

I’m doing a pretty good job at paying down my debt, but it’s definitely time to kick it up a notch. I love a challenge, and this whole cash thing is going to be one. The one comment that I’ve read in several different articles is that you simply have to do what’s best for you. The area in which you’re more likely to overspend is probably a good start. Perhaps you’ll commit to paying for groceries, entertainment, and restaurant food in cash. Of course setting up a budget for this is going to take some trial and error at first, but it can be done. Using cash will help us develop better discipline when it comes to our spending. If you know you only have $20 to spend on entertainment for the week, you’ll probably end up picking dinner or the movie, but not both because it will put you over budget. If you don’t know what you’re spending in these areas now, monitor your receipts for the next 2 weeks or so to get a feel. At least you’ll be in the ballpark once you finally switch over.

One of the things that I’ve learned through this process is that money management is an on-going journey. No matter where you are right now, you can always get better and find new ways to maximize what you have. I’m willing to take on a new challenge that will hopefully propel me further ahead and closer to freedom. Are you?

If anyone is already using this method, please share with the rest of us. We’d love to hear from you! For everyone else that is joining me in the challenge, repeat after me: “Swiper, No Swiping!”

Change requires action!

Live free!

Arianne

Checking in!

Hello Everyone!

I’m just checking in on your progress thus far! We’ve talked about a lot the last two weeks, and hopefully you’re not overwhelmed. The point isn’t to try to do everything at once, but just to realize that there a lot of options to get you started. Once you get going just run with it. Every day won’t be perfect, as we all give into impulses from time to time. It’s OK. Just pick up where you left off and keep going. The more you practice being a great money manager, the quicker you’ll become one and the closer you’ll get to your goals.

Don’t let the numbers scare you. When you first calculated what your net worth should be, you might have thought “wow, I’m way off and I’ll never get there.” Let’s change that to, “wow, I’m way off, how do I get there?” Can you save more or put more towards debt each month? Whatever suits you, put everything in motion by setting a realistic timeline and go after it. I may not be where I should be yet, but at least I have a goal in sight that I’m working towards just like you.

Don’t forget to make the process fun! After all, we’re working towards freedom here and that’s a very positive thing! Keep a daily chart and give yourself rewards points for saving, using coupons, paying off debt, etc. Get a group of friends and make a competition out of it. I’ve seen lots of weight loss challenges, so why not have debt reduction challenges? I surely wouldn’t mind it if all of my friends were rich. That’s why I’m sharing this information with all of you! So let’s continue to encourage and support one another. If you haven’t started yet, pick a strategy and get going. We’re all rooting for you! 🙂

Change requires action!

Live free!

Arianne

The 80/20 Rule of Financial Freedom

The Pareto Principle, also known as the 80/20 rule, states that roughly 80% of effects come from 20% of the causes. You may have heard this term used in the business world to some effect that 20% of the people do 80% of the work, or 20% of sales come from 80% of the customers, etc. The actual numbers may turn out to be a little less or a little more, but you get the picture. Well, I want to show you how to apply that same principle to your finances. We want 20% of our income to do 80% of the work for us as we head towards financial freedom. The formula that I use is as follows:

10% tithe + 5% 401(k) + 5% savings = 20% (the remaining 80% is used for day-to-day operating expenses)

(To calculate your percentage, simply add the total dollars that you’ve contributed to each of those categories over the last month, divide it by your gross monthly income, and multiply that number by 100).

If you remember the S.I.N.G method, the above breakdown actually takes care of 75% of the process, which is pretty close to 80%! My tithe qualifies as Giving, the 401(k) contribution qualifies as Investing, and the direct savings takes care of…you guessed it,  the Savings. The strategy here is to have money accumulating for you as you continue to pay down your debts. That way you’ll already have a head start when you’re able to really focus on increasing your net worth. 

Now, I have heard other sources say that you should stop contributing to your 401(k) or stop giving/tithing until you’re out of debt, but that’s not the route that I’ve chosen (mind you, I’ve had a positive net worth for over a year now in spite of a mortgage and paying down school loans). However, you may find that my method isn’t right for you at this time, and that’s OK. I’m just sharing the practices that have helped me thus far.

No matter which road you decide to take, just pick one and get moving. The point is, you have to start somewhere. The sooner you start, the quicker you’ll reach your goals. Once you reach the first goal, keep the momentum going until you get to the next one, and the next one, and so on. You can do it! Your financial freedom awaits!

Change requires action!

Live free!

Arianne