Tuesday, May 5, 2015

6 Steps Up the Financial Ladder: Step 2

So once you have completed Step 1: gathering the basic facts about your situation, you should move immediately to Step 2: the basics.
The basics are:
  1. Earn what you can
  2. Spend less than you earn
  3. Give generously, regularly, and proportionally
Let's break the basics down:
1) Earn what you can. This essentially means that you should work hard, no matter what you are doing, as if you are working for the Lord Himself, because, in fact, you are. It also means that you should not neglect providing for your family's needs because it shows God's love.  If you are unable to provide for your family's needs with your current income, you must reduce your expenses or increase your income. 
2) Spend less than you earn. This means exactly what it says, that you should not spend more per year than you earn. You must consider what expenses you may have or are required to make, like taxes, insurance, or other necessities. For most people the problem is that we purchase too much stuff that:
  • We don’t need – your wants are not needs
  • We can’t afford – credit doesn’t count
  • We didn’t do adequate research – alternatives, really meet needs, used options
  • Is too expensive – research, find alternatives
  • Is low quality – if quality is necessary

3) Give generously, regularly, and proportionally.  I know that God does not want or need your money but what he does want is your heart.  Giving reflects our gratitude for what God has done for us and puts our heart in a healthy place where we don't cling to our money and possessions for security or identity.  Those are places reserved for God.

Wednesday, April 22, 2015

6 Steps up the Financial Ladder: Step 1

Do you ever wonder how you'll ever get ahead financially?  Do you ever wonder why some people seem to be 'blessed' or lucky?  Has it ever bothered you that you just don't seem to 'have what it takes' to get ahead financially?  Are you always trying to find the 'big change' that will transform your finances? 

Stop wondering, I plan to take you through the 6 steps up the financial ladder.

Many people will be able to quickly complete 4, 5, or even all 6, but many people may struggle with Steps 2 and 3. It is important to be diligent and complete the steps in order and not take short cuts. It is also important to remember that you may never reach step 5 or 6 but it is worth trying.

Step 1 is the obtain the vital facts about your finances.

Make a list of all the things you own: Home, Car, Accounts, Investments, Pensions, Collectibles
Make a list of what you owe: mortgage, credit card, loans, line of credit, personal obligations
Make a list of your annual income: paycheques, government benefits, dividends, interest, royalties
Make a list of your annual expenses: home, car, fuel, food, debts, insurance, interest, fees,

You should review monthly or quarterly for cash flow, perhaps quarterly or annually for net worth

Be as accurate as possible within reason. Be accurate enough to enable you to make good choices.

Have you ever asked the question: “Where does all the money go?”  

You should be able to answer that question quickly and accurately.

To track your cash flow you need to itemize and categorize all expenses. I included taxes and payroll deductions but you don’t have to.

I use an automated tracking program available for free through my bank. It categorizes my spending automatically and only needs minor maintenance. I review this monthly. It takes about 30 minutes of my time on a monthly basis.

You can use mint.ca or just use your bank account and credit card statements with MS Excel or similar.

It is difficult to make decisions about spending without these basic facts so I recommend putting a system in place that is easy to use and presents the information in a useable format.

Making note of your assets and liabilities will likely take less than 10 minutes.

Should be updated annually or after any major changes. 

Good luck completing Step 1.  Next is Step 2.

Monday, February 2, 2015

Get Useless: Stewardship in the Economy of Wonder

I read this great blog post on the Acton Institute's PowerBlog and thought I'd pass it along.


“This is useless. This is gratuitous. This is wonder.” –Evan Koons

When we consider the full realm of Christian stewardship, our minds immediately turn to areas like business, finance, ministry, the arts, education, and so on — the places where we “get things done.”

But while each of these is indeed an important area of focus, for the Christian, stewardship also involves creating the space to stop and simply behold our God. Yes, we are called to be active and diligent and fruitful in acts of service and discipleship, but at the core, what is driving the work of our hands? Do we take the time to simply delight in our God, to behold the beauty of his creation, to reflect on his goodness, to fear him deeply and profoundly, to open our hearts and eyes and ears to the whispers of the Holy Spirit?

Friday, January 23, 2015

Annual Budget - Charitable Giving

Paul wrote to the Corinthian church, "The point is this: whoever sows sparingly will also reap sparingly, and whoever sows bountifully will also reap bountifully. Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver." 2 Corinthians 9:6-7

Many followers of Christ choose to give generously to charitable works, including us.  We feel strongly that we ought to give around 20% of our net income (around 10% of gross income) to worthwhile causes, including our local church and a few other worthwhile causes.  In the past, we have given to special projects, like water well drilling in Africa or microfinance in the developing world, and we like to regularly support summer camps for kids, overseas work in the developing world and various organizations here in Canada, especially our local church. 

We have found that choosing to give our first and best toward charitable work keeps our attitudes around finances humble and focused on our Lord.

Do you give?  Why or why not?

Thursday, January 15, 2015

Annual Budget - Savings

Proverbs 21:20 says: "The wise man saves for the future, but the foolish man spends whatever he gets."

So, we try to save a bit of money each year.  Traditionally, we've been saving between 10-15% of our total income each year toward things like:

1) Retirement or, as I prefer to put it, the day when I no longer collect a paycheque or work for money. 

2) Education for our children. We won't be giving our children a 'free ride' but we have felt it prudent to ensure we give ourselves some options financially when our children attand post secondary school.

3) Medium Term expenses like vehicle purchases and home renovations.

This past year, we spent a good chunk of change on home improvements so we saved a little less but that's fine as over the long term we'll enjoy what we done to improve our living space and it isn't like we are falling behind or cashing in investments to pay for things. 

The main strategy with our savings has largely been to maximize the amount we receive in matching amounts from my employer.  They have 2 programs to invest in at work that match my contributions with dollars from the company (50% match on both programs right now) and I fully take advantage of both of those.  In addition to that we set aside a bit of money each year to deposit into a Registered Education Savings Plan which offers a 20% matching grant from the federal government. 

All told, I have invested, out of my pocket, about 10% of my income and government grants and matching contributions have added up to another 4% this past year.  This seems like an excellent use of our resources.  Havings some money saved will give us options in the future and the resources to pursue different kinds of opportunities.

Certainly, we do not want to be found hoarding our wealth like the rich man of Luke 12 nor do we want to squander it and become dependent on others for our day to day needs.  This is a fine balance and generous and cheerful giving is an important aspect of saving for the future.

Here is another thoughtful treatment of the topic of savings: http://moneyhelpforchristians.com/is-it-biblical-to-save-for-retirement-part-i/

Wednesday, January 7, 2015

Annual Budget - Taxes and Payroll Deductions

So we can see from my pie chart (click to enlarge) that nearly 30% of my total earnings went to federal income tax, provincial income tax, EI premiums, and CPP contributions.  If I didn't contribute to my RRSP, work pension, deduct work expenses or donate to charity the percentage to taxes would be 34%.  Clearly, there are incentives to contribute to retirement plans and donate to charity under Canadian tax law.  I am not bashful about using these incentives to the maximum practical level.  Clearly it is good practice to give generously and save for the future so I would do that anyway without the tax help but the tax laws make it easier to do so.

I don't begrudge paying income tax and Jesus certainly advised the same as recorded in the book of Matthew.  https://www.biblegateway.com/passage/?search=Matthew+22%3A15-22&version=TLB 

The writer Paul also notes in the book of Romans that we should submit to those in authority over us and he explicity notes paying taxes as a form of obedience.  https://www.biblegateway.com/passage/?search=Romans%2013&version=TLB 

There is a very thorough explanation of this theology by John Macarthur here - http://www.gty.org/resources/Study-Guides/40-5127

Your thoughts?

Monday, January 5, 2015

Annual Budget - 2014 in Review

Each year, we review our annual spending, saving, and giving to help us stay accountable to our objectives and to give us feedback on how we've been doing.  Additionally, the review gives us an opportunity to plan for the New Year.  Click on the image to enlarge.

What is your process?