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.

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/

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?

Managing His Stuff, His Way - The Story of the Talents

In Matthew 25:14–30, Jesus told the story of the Talents. In this story, the master entrusts different amounts of wealth to three servants. To one servant, he places five talents of money in his care, to another, two talents, and to another, one talent.  For context, one talent was 75 pounds of gold or silver and would have been worth around 10-20 years of wages.  So each of these servants was entrusted a large amount of funds.  This is certainly consistent with what I've seen in life as different people are entrusted with different amounts of wealth and responsibliity.

 

 

When the master came back, he found that the servants with five and two talents had each doubled the master's funds. In contrast, the servant with one talent had buried it, making no effort to put his master’s money to work, and coming up with a bad excuse to boot!

It’s interesting to note that the praise God gave the servant who had five talents and earned five more was identical to the praise that he gave to the servant who had two talents and earned two more. That praise was, “Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!” (Matthew 25: 21, 23).

 

As for the servant who was entrusted with one talent, he was lazy, wicked, and unfaithful to God. In short, he was not a good manager.  Perhaps shockingly, he was punished severely for this poor managment and unfaithfulness.

 

Matthew 25:28-29 state, “Take the talent from him and give it to the one who has the ten talents. For everyone who has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him."

 

It’s important to understand what this means. The words “for everyone who has will be given more” means that everyone who has been a faithful manager, God will entrust with more. There is a compounding effect in play.  On the other hand, those have been unfaithful in their management of God's resources will lose even what they have been entrusted with. The servants who were entrusted with five talents and two talents demonstrated faithfulness to God and wise management, and thus God entrusted them with more. However, the third servant was not faithful, and therefore even that one talent was taken away from him.

We can say we are managing well for God when we:
(1) acknowledge in mind and heart that God owns everything - a critical first step
(2) act accordingly - that is, learn and implement God’s principles in managing what God has entrusted us, using our time, talent and treasure in accordance with God’s will, not our own will