Hi, I'm Jim, and I'm a financial nincompoop.
I make a decent salary. We live in a nice house, have plenty to eat, dress well, and go on vacation every year. We don't live extravagantly. So how come we never get ahead financially? And how come new expenses—such as jacked-up car insurance because our oldest son has started driving—have thrown us into a tailspin?
If you can't relate to any of this, set this magazine aside and light another cigar with a $100 bill. But I suspect our financial life isn't much different from yours. We're average, and though we don't look it, we're basically broke.
My quest to get a handle on our family's finances led me to two money experts: Neil Atkinson, author of The Shrewd Christian: You Can't Have It All, but You Can Have More Than Enough, and Dave Ramsey, syndicated radio talk-show host and author of several best-selling books about mastering money. Both agree that financial pain can be a good thing if it forces you and your spouse to look seriously at your finances for the first time in … how long?
Here are two of their "magic money" secrets revealed. While neither step promises to be pain-free, both will energize your marriage.
Secret 1: Get out of debt
Many couples are financially paralyzed by credit card debt and car loans. They make only minimum payments and have given up the idea that they'll ever crawl out of the hole. They're one missed paycheck or unforeseen expense from disaster.
"They have said to themselves, 'We will forever be a slave to bankers,'" Neil Atkinson says. "Their spirit has been broken. They have a sense of hopelessness and helplessness."
While this seems a no-brainer, if you want more money, you need to wipe out debt—for now, everything except your mortgage. In The Total Money Makeover, Dave Ramsey offers this advice:
- Stop borrowing. Destroy your credit cards and don't get more. Keep a debit card for times when you need a credit card (hotels, car rentals, online purchases). It works like a credit card but you can't spend money you don't have.
- Create a $1,000 rainy-day fund. Sell stuff, put off unnecessary purchases, cash in a cd, do whatever it takes. Set aside the money as untouchable except in case of a real emergency (example: the alternator on your car goes out and costs $300 to replace).
- Find ways to temporarily increase your income—maybe a weekend or evening job. "Wait a minute," you say. "Won't that harm our family life?"
Ramsey can answer that one from experience. About 15 years ago, he and his wife, Sharon, went bankrupt. Today he calls it the worst and best thing that ever happened to them. They learned all they could about money and transformed their lifestyle to get out of debt as quickly as possible. That meant extra work and, for Dave, limited family time for a while.
"I told my wife, 'Okay, Baby. For a year I'm not going to be at a dance recital or a baseball game. It's going to cost me a year of that to clean this up. But I'll never miss one again after that if I don't want to.'" Sharon agreed. Their family was under such stress from the debt load they carried that it was worth that sacrifice. Today they're thankful they did.
- Spend less. Way less. "You can moderate spending, or you can slash it to the bone and pretend your children's lives depend on your getting this mess cleaned up," Ramsey says. Watch the grocery bill. Eat out less often. Reduce your driving. Divert every dollar you can toward attacking debt.
- Sell the car you owe the most money on. Buy something used, reliable, and much cheaper, with no more than an 18-month loan. (And don't even think about leasing!) Rather than make a car payment to a bank, put the same money into a cookie jar for a year, and you'll have enough to pay cash for a decent car until you can afford an even better one.
- Make minimum payments on all but your smallest debt. Send as much money as you can to that one each month and pay it off as quickly as possible. Then take what you were paying toward that loan and aim it at the next-smallest. And so on. The reason for taking on the small debts first is that you'll see progress and stay motivated.
"If I see that it's going to take me 10 years and 7 months to get out of debt, it's hard to stay energized," Ramsey explains. "If it's 24 months, I can grab hold of that. That's a dream I can live."
Ramsey even encourages couples, once they've conquered credit cards and car loans, to tackle the big one: their mortgage. If you have a 30-year loan, either refinance to a 15-year loan or pay extra principle so you treat it like a 15-year loan.
There's one expenditure, however, that should never be sacrificed in order to pay off debts. You may be searching for extra money to throw at credit cards or auto loans for a few months. And then you hear a voice in your head: Suspend tithing for a few months. That's a big chunk of cash. And after all, won't you be able to honor God more with your money once you're debt free?
"Twenty-two times in Proverbs alone it says that the tithe is 'first fruits' or off the top before you do anything," Ramsey points out.
Atkinson adds that part of mastering your money is learning to be generous with it. A couple can accumulate an emergency fund, get rid of their credit cards, pay off their cars. "But if they aren't being generous back to God, they're missing out on the best part—developing their relationship with the Lord," he says. "When a couple tithes, they develop a better relationship with God, and he'll bless them. Maybe not financially. But finances are the least of the Lord's blessings."
Secret 2: Have a plan
Outside of some major medical bills, there are few real financial surprises. "It shouldn't be shocking that we need an umbrella sometimes because it rains," Ramsey says. "Kids grow up, people get sick, and cars break." For Ramsey, that means having a budget. He calls it the "whip and chair" to make your money do what you want it to.
Atkinson, on the other hand, doesn't think budgeting is the answer for couples who've never had the discipline to create one, or for whom budgeting has been a never-ending series of stops and starts.
"Budgets don't work," he says. "They're like diets. Budgets are great for engineers, attorneys, accountants—people who are disciplined. For the normal Christian middle class, budgets will work for a little while. But it will drive them crazy—they'll have too much in one thing, not enough in another, so they'll borrow to make it up, and the cycle begins. Then they just chuck it all and go back to their earlier patterns."
Atkinson believes budgets aren't necessary if couples are tracking: setting aside time together each week to follow carefully how they spend money. They'll quickly spot and slash the frivolous, stupid things for which they received no real value ("We spent how much on a singing fish that hangs on the wall?"). He and his wife, Margie, also never spend more than $25 without the other person's permission.
A financially struggling couple told Atkinson they didn't eat out very much. But when asked to count, they realized they'd eaten out 13 times in the past 15 days. They didn't remember because there was nothing special, no value. It was just part of their busy pattern and it met an immediate need.
Once they discovered this, the couple ended up spending the same or less money to go out on two date nights a week to restaurants with tablecloths and silverware. The evenings are planned, they're fun, and they bring value because they help build a relationship. But for them to make that change, it took stepping back and looking at every dollar spent.
Either way, with a budget or without, couples need to be on the same page. "When you can come into agreement on your spending, you reach a level of unity in your marriage that you reach no other way," Ramsey says. "Now you've agreed on your priorities, your dreams, your goals, your fears."
This financial nincompoop and his wife can back that up. We now spend an hour one evening a week tracking expenses and anticipating "surprises." For the first time in a long time, we have a plan. We've accounted for every incoming and outgoing dollar. We're spending less and getting more value when we do spend. Best of all, we're closer than ever be-cause we're doing all this planning together. That's a pretty good investment.
Jim Killam, an MP regular contributor, is co-author of When God is the Life of the Party (NavPress) and Rescuing the Raggedy Man (Xulon Press).
Copyright © 2004 by the author or Christianity Today/Marriage Partnership magazine. Click here for reprint information on Marriage Partnership.