Finance

Be Generous Today

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Why is it so hard to build a culture of kindness in an affluent society?

Sometimes it’s easy to offer help. Picking up an extra item or two at the store for the food pantry. Buying something you already need to support a fundraiser. But other times, probably the most important times, are when it costs us something. Watching or transporting a child for a friend. Making a meal for someone in need. Volunteering our time for a worthy cause. I know these are things I really want to do.

But sometimes in the day to day slog it’s scary to offer help. Because we’re afraid there just won’t be enough time, energy or money to go around.  We build our lives around scarcity, especially if there was a time when we had to do without. So we do what we can but keep our level of commitment small.  I find this really odd, because some of the most generous people I’ve ever known were not wealthy people. (Well, sometimes there were). But that’s kind of my point. Generosity, both with time, money and resources is not directly attached to income. Which means that it isn’t about having “enough” to share, but having an attitude of abundance. Years ago I heard a financial blogger talk about living with a scarcity mentality vs. an abundance mentality. He is not a spiritual person and yet he gets.

I serve the Almighty Provider, I should be able to give and know that my needs will always be met.

“And my God will supply all your needs according to His riches in glory in Christ Jesus.” Philippians 4:19

If I really believe that, I need to live like it. My brothers and sisters with less in the way of material things are far ahead of me in this area. They have so little, yet they give with both hands. I am lucky enough to live in a country where systems are in place to protect me. Things like unemployment, social security and disability provide a safety net against disaster. (I realize these systems don’t always work as they should, but at least they exist). Yet, I don’t always give as I should. In the land of abundance I sometimes fall prey to living like there is a famine.

True generosity can be frightening, giving in our need rather than our excess. Offering up the things that cost us most. For some it is our money, but other times it is our time, our energy or even our love and friendship. Because we fear interdependency. It feels more secure to be alone and self-sufficient; to need no one and have no one need us. But that is not what we are called it. We need to be willing to give our money without worrying about tomorrow. Give our time without obsessing over our calendars. Give our energy without concern for potential burnout. Give our friendship expecting nothing in return. Give our love without fear of rejection.

 
Be generous today.

 

 

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What to Do With a Windfall? It’s Not Just Free Money

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I haven’t blogged much about finances in quite some time. Mostly because we’ve been in a financial holding pattern, but also because life has been so full of kids, pregnancy and other daily life stuff that sometimes money seems so mundane to write about. But recently I’ve been thinking a lot about how and why we manage our money the way we do. Those are our money values. Those same values apply when unexpected and or unplanned for money comes our way.

Windfalls are pretty much the result of luck, by definition.  While things like rebates, bonuses and tax returns can be counted on to a certain extent, they are not guaranteed.  The questions always becomes, what to do with the money? Many people view this as essentially free money, and therefore can be used for fun activities. I don’t entirely disagree with this.  For most of the last six years, we haven’t had a regular line item in our budget for fun or eating out. This can be a tough way to live and can result in what I call “Frugality Fatigue”. My definition of frugality fatigue is when you have been living very leanly for a long time. (You can read more about that here). Your definition of leanly and long will probably vary. Using small windfalls for those little luxuries can be a good way to prevent long term bitterness or frustration that can lead to larger poor choices. Yes, it is always wisest to save or pay down debt with any extra money. But using a small amount of unexpected money for little treats can help us stay on the long term path to healthy financial living.

Bigger windfalls require more careful consideration. Just because you tax return is $1,000 larger than expected doesn’t mean that it’s free money to be spent however you like. (A tax return in particular is a refund of YOUR hard earned money that the government has been holding onto for the last year. This is not free money, but rather your money being returned to you. Spend it accordingly).

If you don’t have an emergency fund to speak of, that’s a good place to start. I find that a good minimum emergency fund is at least one paycheck, one month’s income is better. A lot of articles recommend six months to a year of income in your emergency fund. But if you have no savings or a lot of debt, that feels like an impossible mountain. The financial guru Dave Ramsey recommend starting with $1,000 emergency fund and then proceed with paying off debt. If that’s all you can manage in the beginning, start with that.

You (and your spouse if you are married) need to decide together what constitutes a windfall (is irregular income a windfall or income? Etc.) and what constitutes a large windfall vs. a smaller one.  In our household I handle the majority of the money, and for the small amounts (less than $50 typically) I usually decide what’s going to happen to it. Examples of this includes credit card rebates, or small survey payments like those I get from Pinecone Research (I typically cash out around $15). I usually funnel these into our date or fun fund, for doing things like getting pizza or ice cream with the kids or saving towards a dinner out for us.

In my opinion the best choices for a large windfall or as follows:

Build an Emergency Fund

This is for actual emergencies. (Job loss, illness, unexpected car or house repairs not covered by insurance). Not for sudden invitations to nights on the town or vacation opportunities. Those are fun things, but should be saved for in another way. An emergency fund is designed to keep you from having to max out your credit card or take out some other kind of loan when faced with unforeseen expenses that you don’t currently have the cash for. Decide how big an emergency fund you need to have to start with and make that your goal.

Pay off debt

Pay off debt, especially high interest debt. Since the current rates on savings accounts are so low, I recommend paying off debt over putting money in savings, once you have formed a small emergency fund (designed to help prevent you from unnecessarily going into debt again).

Start creating a larger savings account beyond your emergency fund.

If your emergency fund is at a level you are comfortable with, than start a larger savings account for small short term dreams and upcoming expenses. Car or large appliance replacement, a weekend away, a family vacation, an upcoming wedding, or big things like home purchase or renovation.

Sometimes this may have to be done at the same time as paying off debt, especially large debt that will take a long time.

Invest for Retirement and the Future

Personally, I’d choose a Roth IRA (post tax) or traditional IRA (pretax) over a 529 plan (college savings) for this reason; you can borrow for your child’s schooling if you must, (or let them take out loans and help them pay them off later) but you can’t borrow for your retirement. This doesn’t mean you shouldn’t do both, but many parents focus so much on trying to save for their children’s education that they don’t think about their own futures until it’s too late.

Some people would argue that Investment should always come first. I am not a financial planner, so it’s possible that I am totally wrong about this. But I am also of the generation who saw the “Great Recession’ and watched a lot of people lose years of their retirement savings, basically starting over from scratch when the dust settled. It also doesn’t make logical sense to me to invest in something that is a gamble when you still have debt. Paying off debt is a guaranteed return!

Obviously these are just some ideas. But when a large sum of money comes your way, it’s best to have a plan for it, even if those plans include wants or dreams rather than practical choices. That way you’ve made intentional choices with your money. This puts you in the driver’s seat of your financial future.

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Preventing Frugality Fatigue While Trying to Get Out of Debt

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For most of the last six years, we haven’t had a regular line item in our budget for things like fun or eating out. This can be a tough way to live and can result in what I call “Frugality Fatigue”. My definition of frugality fatigue is when you have been living very leanly for a long time. Your definition of leanly and long will probably vary. For us it means a basic pre-paid cell phone (no smart phone), no cable. Periods of time without a streaming service like Netflix as well. Rarely eating out, and mostly just not buying things that aren’t necessities (by which I mean food, some clothing, rent/mortgage and utilities).

I remember my husband once told his classmates this when he was in college and they looked at him like he was crazy. How do you survive without buying things you want? Well, it isn’t always easy. Sometimes it makes us feel resentful or bitter. When that happens we are more likely to make a poor choice, like buying things we really shouldn’t. Is the smartest thing always to pay off debt or save any extra money? Yes, absolutely. But sometimes that $25 credit card rewards check doesn’t feel like it makes much of a dent in a very large debt (like student loans bigger than your yearly income), and it can make a small effort to relieve frugality fatigue. (I should note however, that if you are carrying a balance on your credit card, points or rewards should be immediately applied to the balance. If you carry a balance, any interest you are paying more than outweighs any small rewards you are earning to using the card.)

Because I’ve discovered that it’s unrealistic for most people to never get a pizza for five to ten years while they pay off their debt. Yes, it may be the “best thing” to do. But most of us are human. Frugality fatigue will kick in at some point instead of getting a pizza once every month or two, we might decide to splurge on a week long cruise to the Bahamas charged to the credit card and then paid off over the next year at 14% interest. Better to create small kinds of “luxuries” in your life than to get frustrated and make large, poor choices that have long term impact.

I know there are those in the debt free/frugality financial movement who disagree with me. That’s fine. But after 12 years of mostly living in frugality mode, I’ve learned that sometimes it’s better to cut yourself a little bit of slack.

For some people this means a weekly or monthly pizza. For others it means keeping the pricey smart phone or a daily latte. I think it’s OK to have a couple of things like this in our lives, as long as we count the cost. If you can, do the math. Use an excel spread sheet or an online debt calculator. Figure out how much giving up those daily lunches with co-workers or that unlimited cell phone data plan will actually save you. Then decide, is it worth it?

The problem is when we think we “need” all of these things. Instead of just one or two luxuries, we classify them all as needs rather than wants. It’s OK to enjoy something and want to make it part of your life. But if you can’t pay your bills every month or can’t get the debt paid off no matter how you try, it’s time to more closely examine those quality of life items and decide which ones will stay and which will go.

Choosing to take responsibility for your finances isn’t always easy. We’ve built a culture based on the concept that we should be able to have whatever we want, whenever we want it, regardless of if we can afford it. But the reality is, it comes down to math. Everything has a cost and we will pay it one way or the other. This doesn’t mean that we can’t have fun things in our lives; but it does mean we have to be conscious of how we spend our money, especially if we are still paying off debt or trying to build a savings account to protect us from future emergencies.

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What I Learned about Career and Technical Education Working for SkillsUSA

I was a naturally academic kid. I loved to read and write; and I was great at school. Even the subjects I didn’t love I still did well in because I was determined to get the A, even if it took a ton of hard work and didn’t come easy. I went to a private four year college and studied what I loved, Creative Writing, with most of my electives in dance and psychology. After graduation, I had a hard time finding a job. I was limited in several ways. I was married and location limited due to my husband’s ongoing education, so we couldn’t just pick up and move across the country. But I don’t think I would have anyway because I liked being near my family. So I took one job after the next, staying a year or less at each one until I could find a better one. Very few of them were in my field, but many of them used my skills and talents, if not my education. Most of them needed my skills, they just didn’t know it when they hired me.

The last full time job I worked before my children were born was as an administrative assistant for an educational non-profit. But my job pretty much entailed doing whatever needed to be done. Everything from photocopying to writing and designing marketing materials. It was during this time that I discovered a whole new area of education that I knew nothing about: career & technical education.

I should correct that, I knew a little bit about career & technical education (in previous generations it was referred to as vocational education or vo-tech). I had a classmate at my private Christian high school who used to leave early 3 days a week to take videography classes at the local vo-tech. Everyone wanted to be his partner when it was class project time, no matter the subject because he had access to top of the line video editing equipment at the vo-tech campus. But it never occurred to me to find out anything more about it.

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Working for SkillsUSA Council, an educational non-profit focused on leadership and employment skills, I got an education of my own. I worked with five different career & technical schools, all within 30 to 40 minutes from my office. They offered the expected career and tech programs like cosmetology and automotive technology. But they also offered culinary classes, pre-engineering courses, web design and entrepreneurship programs. I was even more impressed by the students I met. I should note that involvement with SkillsUSA is optional and in some areas of the country the career and technical schools don’t promote or encourage the students to take advantage of all that SkillsUSA has to offer. So the students I met were there because they wanted to be. Many of them had plans and goals, but some of them were just excited that somebody thought they had something to offer even if they didn’t get straight A’s in English, math and history. Some of these students had been slated as B-track kids, meaning not those who were going on to college. Others were the exact opposite. I met straight A, honor students with aspirations to be engineers and computer programmers who decided not to spend their time on AP classes when they could be getting actual job training in their future fields. I met one exceptional young woman who wanted to become an engineer. By the time she was a senior in high school she had taken all of the math and science courses she could, plus all the pre-engineering classes at career & tech. So she qualified for an internship. She spent her senior year working for several different local businesses to get a taste of the kind of work she could do after college, while taking courses at a local community college.

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The fact is that in our quest to make sure that every student goes to college, we’ve forgotten that not every student should go to college. A traditional four year college (let alone a master’s or doctoral program) is not more important, nor more impressive than being a plumber or an electrician, though we often treat it as though it is. I met high school graduates apprenticing as auto mechanics and welders making more money than I was, and I had a four year degree and had been in the workforce for four years!

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However, career and technical education isn’t for everyone either. Students will put up with people thinking that they are choosing a trade because they aren’t smart enough to go to college, even though many career and technical students often do go on to two or four year colleges, as well as post-secondary technical education. Career and technical education works best for those gifted in working with their hands or at least a mind able to handle a certain amount of technical jargon. My husband, a computer programmer, would have excelled in a high school level career and technical program because it would have let him take advanced programming and computer design classes not offered at his local high school. But his family would likely have discouraged him because of the stigma they would have associated with career and technical education. As a straight A student and class valedictorian, they would have seen that as a waste for him. But they would have been wrong.

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Culturally, at least in the United States, someone decided that it was more acceptable to be a $50,000 in debt with a business degree and no job, than to be a working electrician making that much per year. Plumbers, electricians, automotive technicians:  these professionals are necessary to our society and often get paid very well for what they do. But many of us have been taught that this kind of work is second best to work that requires a four year college education. The world may need doctors, engineers and lawyers, but it needs just as many welders, and police officers. (Did I forget to mention and our local career and technical schools offer criminal justice and forensic science classes as well?) In fact, the world could probably use a fewer PhD college professors (as much as I like and respect that profession and those who choose it) and a few more of the professionals who keep the world together. Because who do you think the president of Harvard calls when his office roof is leaking?

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My experience working with career and technical students through SkillsUSA truly changed my perspective. I came from an academic family where my parents were from the first generation in their families to attend college. My grandfathers both worked in what is dubbed “trades.” But it was never presented as much of a possibility to me. Part of that is probably a gender bias, though even that is changing. During my time with SkillsUSA, I met young women who were the top students in their classes in welding, carpentry, automotive refinishing, welding, masonry, plumbing, building maintenance technology and criminal justice. There can be great honor is these professions when the work is pursued with integrity and a strong work ethic. I hope the next generation of young people in this country will see it as honorable (along with the politicians who defund it in favor of making sure “every student goes to college.”)

So have you had any experience with career and technical education? How was it presented to you, as a legitimate career possibility or only for kids not smart enough for college?

Just as a side note, all of the pictures in this post are of real students competing in their areas of training at a district level competition. Many of these students went on to compete at state a national competitions to win tools of the trade, scholarships and other opportunities that will help them in the future.

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Make a Debt Free Plan: Working Through One Bite At A Time

I’ve been avoiding writing this blog post. Mostly because I didn’t know how. We’ve been struggling with school loan debt for years and despite living very simply and forgoing most luxuries (a few small exceptions) we were making hardly any progress. So finally we sat down with our mentor couple who did our premarital counseling and talked about options. Things could not stay as they were. Income Based Repayment on our loans was allowing us to afford the payments, but not actually pay off the loans. Only a few dollars of principle was being paid each month, everything else was just interest. We were driving two old cars and we really didn’t want a car payment, but eventually something was going to have to change. We reviewed all our options including me going back to work, my husband getting a second job and looking for other ways to increase our income.

Without going into personal details I’ll just say that we were able to increase our income in some unexpected ways and we will now be making full loan repayments. At this rate it will still take us 10 years to get rid of the loans. But we are also committed to continue to live simply and resist lifestyle inflation wherever possible. However, we also know that we have future expenses coming that will need to be addressed, such as a new vehicle, so we can’t just put everything on our student loans, but we still think that if we continue to live simply and look for extra opportunities to put additional money towards our debt repayment, we can shorten that time frame.

Our current goal: repay the student loans in the next 5 years. That still feels huge and very difficult. But it has enough attainability to give us a challenge that we can work towards. I also feel that it is important to note that this came after years of prayer on this topic. There were so many times that I felt discouraged, as if nothing was ever going to change. But God has blessed us, and I can take no credit for it whatsoever. It wasn’t because we were the most faithful, there were times I doubted. It wasn’t because we followed a magic formula, we just honestly expressed our needs, desires and frustrations to God.

So I would encourage you to stay strong toward you goals of living debt free. Even if you are in a time where it seems like you aren’t making any progress, look for ways to increase your income, not just lower your expenses. Sometimes you’re already as low as you can realistically go. Pray continually about your situation and ask God to open your eyes to options you may not have previously seen. If nothing else, try to actively avoid taking on any additional debt. When you already have a lot of debt, sometimes it seems like the easiest way to survive is to keep taking on debt. Try not to. Try to discipline yourself to live within your means, preferably below them if that allow you to pay off you debts sooner. Make a plan. Some kind of plan. Even if the goals you set are tiny, because at least it is some kind of progress.

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