The Financial Shepherd

AuthorHouse

Contents

Introduction...................................................................1Chapter 1 – Money Mistakes Many People Make..............................9Chapter 2 – The Unlikely American Dream..................................17Chapter 3 – The Foundation of the Financial Shepherd.....................23Chapter 4 – The Importance of Wise Counsel...............................31Chapter 5 – The Warning Signs of Financial Failure.......................42Chapter 6 – Is the Mirror Broken, Or Am I?...............................49Chapter 7 – The Battle for Financial Freedom.............................58Chapter 8 – Plan Your Financial Future...................................68Chapter 9 – Your Financial Plan is Personal..............................79Chapter 10 – Invest in Yourself..........................................98Chapter 11 – Planning for Retirement.....................................112Chapter 12 – Life Has Its Challenges, Be Prepared........................123Chapter 13 – Hope for the Best, Plan for the Worst.......................132Chapter 14 – Blessed to Be a Blessing....................................141

Chapter One

American author and philosopher Henry David Thoreau wrote, "If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away." In today's words, that would translate that we should not endeavor to measure ourselves or our progress in life by the standards of others. Instead, we should follow the path that has been laid before us or better yet, blaze a new trail that best suits our needs. When it comes to managing our finances, we must be able to make tough, responsible decisions—regardless of what others around us are doing—and then accept the consequences of our actions.

One of the most effective systems of checks and balances in money management is accountability. Although most people seemingly desire to do the right things when it comes to finances, societal pressures (peers, greed, selfishness, etc.) allow them to lose focus. However, having someone ask questions and inquire about their motives makes them accountable to someone and something other than their own whims, motivations and selfish desires. Seeking out financial accountability is a crucial step to avoiding several of the money mistakes that most people make.

Confusing Wants vs. Needs

[Glen] When it comes to money and material things, I believe most people intuitively know what they need, and understand what they want – and why they want it. On the other hand, knowledge of such information isn't necessarily enough to compel them to take responsible action and live within their means. At the source of most financial disasters is a blurring of the lines between what is truly a need versus a want. Understanding the difference between wants and needs and being able to patiently wait for the manifestation of either or both means that people must take responsibility and ownership solely for what God has given them. In addition, they must demonstrate faith in His ability to provide for them in His own way, and in His own time. This is often much easier said than done. The line between having what we need and getting what we want is often blurred and frequently confused. More often than not, people who cannot effectively distinguish their wants from their needs end up crossing that line and then suffering financial hardship as a result.

If we go back to the basics, food, shelter, clothing, and education are the absolute essentials for survival in modern-day society. In truth, beyond the basics, everything else is a want or simply a desire for more. But in reality, most of us can't, won't, and don't stop there, because the allure of a life of excess and indulgence is much too appealing.

Even though we affirm that food is a need, we constantly see individuals and families spend excessive amounts of money on food and dining out. Yes we need food, but we do not need gourmet dining or catered meals every night. I find that many individuals, especially single people, spend far too much money on food. Whenever I meet with a new client who is having trouble with his or her cash management, extra food and grocery expenses are usually the culprit. Because we need to eat every day, it's easy for extra food and beverage costs to sneak in throughout the day and week. Although it may be easy to budget for a weekly or monthly grocery bill, it's easy to forget how much early-morning custom coffees and midday lunches can add up. In addition, a lot of people like to eat out and splurge on the weekends, above and beyond the dining budget they have established. So now what was supposed to be a $250 budget has turned into a $600$1,000 extravagance per month depending on the size of the family and the type of restaurants they frequent.

Ironically, I've also observed that many clients who are already on tight budgets tend to eat out even more often because they are stressed out or unhappy and spend money as a form of "therapy" to nurse their emotional wounds. They splurge and treat themselves to extra smaller perks since they cannot realistically afford to take a vacation or indulge an expensive shopping spree. No matter how big or small the expense, it is a common money mistake to think that you can consistently spend money you don't have without paying a bigger price down the road.

Without question, everyone needs somewhere to stay, but does each child really need his or her own private suite or wing in the home? It's amazing to me to hear people that grew up years ago with four brothers and sisters in a 1,400-square-foot home now tell me they need a 10,000-square-foot mansion because they have two children and one on the way. As opposed to viewing a home as a dwelling place, many families bought into the idea that they would invest in their homes and use them for financial leverage. Unfortunately for millions of people, they didn't do all the necessary research and legwork to make sure they could legitimately afford the house they purchased. There was no emergency reserve fund in place. There was no savings account, and there was no contingency plan in case one or both spouses lost their jobs. Though there are a thousand different variations of that story, the end result is often the same: failure to plan for the worst resulted in planning to fail the home ownership test. Who said that you have to own a McMansion? Who are you trying to impress ... and why?

Wardrobe is another area where people tend to spend excessively. No one is questioning whether or not clean, warm clothing is essential, however designer labels are not necessities. Clothing can be a big budget buster.

I have studied books about frugal millionaires who live like paupers; eventually growing too old or decrepit to enjoy their wealth. I've also read articles and books asserting that Christians are not supposed to have, enjoy, and maintain wealth. I disagree. I believe that Christians are supposed to have all that God has made available for us. We see examples from the Old Testament to the New Testament (from Solomon's regal raiment to Jesus' seamless robe) that indicate quality clothing is important, but it has its proper place. Yes, looking good and having nice quality clothing may not be cheap, but there are things you can do to minimize wasteful spending on clothes: 1. buy sale items. 2 clip coupons 3. save where you can by spending less on general items like socks or pantyhose, or purchasing them in quantity for discount savings. If you are willing to look for a solution, there is always a way to save more money.

When it comes to money and bountiful living, I believe God wants us to cherish each day on earth and reap the benefits of His kingdom. I also understand that it takes money to see and experience many of God's gifts. I remember going on safari in South Africa and visiting the Grand Canyon in the western part of the United States. These are remarkable places, and it is evident that only God could make something so spectacular, so I was humbled by the opportunity to experience His greatness. I also remember that it took money to get to those places. It took hard, cold cash to pay for airline tickets, rental cars, luggage, food, and other trip expenses. Those things aren't free just because I'm a child of God. But when we commit to being good stewards (i.e., honoring God first with our finances, paying off debts, saving and investing for the future, and giving to others), God blesses us even more to enjoy our lives and to be a blessing to others.

I am a huge supporter and advocate for quality education at all levels. In fact, out of all four categories of expenses, education is where I believe one should give the most or make the most sacrifice. Growing up in good schools and nurturing environments certainly gives a great advantage to a child. Also, the difference in earning potential between someone who earns a high school diploma versus someone who earns a college degree is staggering. At the end of the day, investing in education almost always yields the highest return. However, just like everything, there must be limits and guides for moderation. I have seen parents over-do it in this area also. Just to make a social statement and keep up with the "Joneses," I have witnessed parents enroll their child in "the" private school in the city even when they were totally incapable of paying for the tuition costs. In one particular instance, in spite of a great secondary private school education, the child still ended up going to a community college because the parents didn't have enough money to send them to any other college. How backwards is that? There was an excellent, award-winning public school in their neighborhood where the child could have attended for free, yet the parents chose to bankrupt the family just to keep up appearances. They ultimately ended up sacrificing their child's opportunity to obtain a higher-quality, post-secondary education.

Another common money mistake that most people make is operating their household without a budget. Budgets work! Everyone needs a budget, because it is part of the basic foundation in a successful financial plan. Whether you make $10,000 per year or $10,000,000 per year, you must be a good steward over the talents and treasures to which you have been blessed. Successful financial management is not about how much money you make, it's about how much you keep, invest, and grow.

We're often asked about co-signing on loans for friends and family. Again, this is another huge money mistake that a lot of people make. Although everyone starts out with good intentions, nothing tends to complicate a relationship quicker than misunderstandings about money. Co-signing is a big no-no unless you are willing to cover the entire loan and simply give away the money. If you are not willing to do that, then do not put your name on the loan papers. I also do not encourage lending money to family and friends; instead, you should be willing to give it to them and forget about it. I have seen many families and friendships break up over a $100 loan. It's simply not worth the headache; just say NO.

The truth is that we cannot save everybody or fix all their problems. As much as we may want to help and bail them out, some people just will not do the right things, no matter how many times you try to help them. If you haven't already found out the hard way, one of the biggest financial lessons you too will learn is that you cannot help someone until they are ready to be helped.

A common financial dilemma we often encounter is concerning what types of expenses are OK to pay with credit. For example, is it a good idea to pay tithes and offerings or support ministry working using a credit card? The answer is less about supporting ministry work and more about being able to pay off the entire debt each month. I think it is fine to pay everything with a credit card because it helps in tracking and monitoring expenses - as long as you are responsible and pay it off completely every month. If you cannot afford to do that, then you should not be using the card. God does not want us to be debtors, so you should not go into debt giving to the church or any other ministry. If you find yourself doing this, then most likely, your priorities are wrong and you should take other corrective measures to get your financial house in order.

We know there is a lot of information in this book that may require you to mentally and financially stretch beyond what you've done in the past. That is the point. And if you're starting out under a massive load of debt, the situation may seem impossible to reverse. But it is not. It takes time to get out of debt; especially following our plan, because we believe in saving while you are paying off your debt. Even though it takes time, we all know and understand that it is worth it in the end. Following the system and process of Financial Shepherding leads you back to being in the will of God and gaining access to His promises and financial blessings based on His Word.

Living Above Your Means

[Sy] We all have in some way been impacted by the syndrome of 'keeping up with the "Joneses"' whether it is outright competing with them over new purchases or just finding out what the latest fashion trend is and getting it before "they" do. Regardless, the "Joneses" have taken full advantage of all media outlets in order to maximize the power of influence. In fact, my experience as a therapist, coach, father, and former teenager has allowed me to draw this conclusion: the propaganda of the media is responsible for the greatest psychological warfare known to man. This is just another way of saying that we are being brainwashed to spend money on things that some person (just like you or me) has determined to be "the in thing." Think about your wardrobe, your hairstyle, your vehicle, your home, and so on. Why did you choose that particular brand? Think about the generic packaging at Walmart versus that famous brand item. What is the one major difference? It's the appeal of the advertisement. When was the last time a generic brand of cereal had a television commercial? As people, we are so complex yet we can be deeply influenced by the simplest things. More often than not those simple things are wants, but not necessarily needs.

Next, money and communication typically top the list of problems confronting couples that come in for counseling. In the context of money mistakes most people make, poor decisions are usually the result of some other problem that is brewing beneath the surface. For example, my client Jimmy* bought a brand new model dream car to celebrate his "freedom" after a tumultuous breakup with his girlfriend of three years. He said he purchased the car because when they were living together, he used her car and he had no need to purchase one for himself. Now, to many the problem appears that the actual breakup of the relationship caused him to go out and get the car of his dreams as a means of revenge to assert his independence from her. But the problem is actually much greater than that. I met with Jimmy and his fiancée for three months prior to their breakup. The truth is that Jimmy's emotional spending was a result of an ongoing internal conflict to which he had already yielded. Jimmy did not have a car or a place of his own because of his insecurities in addition to his fiancée's admittedly controlling behaviors fueled by her own insecurities. So Jimmy retaliated in the best way he knew how; by going to get the dream car that he so desperately "needed." Overspending was his way of self-medicating and nurturing his internal wounds and insecurities. The result however was the accrual of debt he couldn't manage, which of course, created even more problems to compound the ones he already had. This is just one example of a situation that many people face.

It seems logical that everyone should be able to live within their financial means because the solution is simple: Do not spend more than you earn. But when it comes to money, logic seemingly goes out the window, and emotions, egos, desire, and pride kick in. As part of the emotional battle to control our spending and achieve financial independence, it is important for us to recognize the consequences of pursuing wants instead of needs. This is where most people hit a roadblock and fall short, attempting to thrive at the level of their wants instead of living solely on the more affordable needs. Financial success lies in our ability to correctly identify our true needs, and then make credible decisions based on our personal financial plan and the advice of wise counsel.

Simply put, our needs are the things that we require for survival and without them it is impossible to live. I need food to survive, but I want filet mignon and lobster. I need shoes to protect my feet, but I want the designer brand Allen Edmonds. Realize too that our needs can also be our wants, but our wants are not always what we need. The point here is not to say that there is anything wrong with having wants, but rather it is important to be conscious of the differences between wants and needs if we have to choose which is more important.

(Continues...)

Excerpted from The Financial Shepherdby Glen Wright, II Sy Pugh Copyright © 2011 by Glen Wright, II and Sy Pugh. Excerpted by permission of AuthorHouse. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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