We’ve all heard about the dangers of credit cards. We all know someone (or are someone) who has gotten in debt a little too deep because of them.  Most debt counselor’s advice is to simply quit using them or cut them up and pay off the balance. Then when you’re out of debt, and can use credit responsibly, you can have your cards back. But my question is; when is it responsible to use credit? Most financial advisors, both Christian and non-Christian seem to agree that credit is a tool and when used responsibly it can help to increase your net worth. But that doesn’t seem to be working for most people. In fact, I think it’s clear that credit has financially bankrupted more people than it has helped.

I think that one of the major problems is that unlike other tools that we use, most people are not taught how to use credit wisely. Sure parents tell their children to beware the dangers of credit cards and warn them about instant gratification but they never teach them what situations it is ok to use credit in. There are plenty of thumb rules that attempt to answer this questions such as, “only use credit cards in an emergency”, or “credit is only ok to use if you’re buying something that will increase in value”. Unfortunately, these are only thumb rules, and pretty unstable at that. What constitutes an emergency? Does someone have to be at risk of losing a limb or is it ok to use financing if the sale on the TV that you really wanted is going to end soon. And how do you know if what you’re buying is going to increase in value? Over the last year we saw foreclosures across the country and people walking away from their houses because they owed more than the house was worth. Were their mortgages a good use of credit?

We see credit or debt discussed several times in the bible. But what we as Christians often forget, is that there are two sides to credit. There is a borrower, and a lender. Our lifestyles and roles as consumers have trained us to be borrowers without reminding us what a blessing it is to be a lender. I don’t mean to be a lender for profit, the way the banks and credit card companies do. But to be a lender to someone in need. Remember that God told Israel that he would bless them and make them lenders to many nations and borrowers from none (Deuteronomy 15:6). How can we reach out to those in need if everything we own is already owned by someone else? The purpose of credit is not to allow us to purchase what we want or when we want it. For Christians, the purpose of credit is to serve as a way to help others. We should be the lenders, not the borrowers. God desires us trust him for our needs and to be lenders or even givers to others in need (Matt 5:42; 6:31-32).

So, I would say that “yes”, credit is a tool. But not a tool like a hammer with which you may bruise your finger if you make a mistake. But more like a chainsaw, in the sense that if you use it incorrectly you may never recover. The sad part is, most people are holding it on the wrong end and will end up hurting themselves.

Supporting Verses about Debt

Others were saying, “We are mortgaging our fields, our vineyards and our homes to get grain during the famine.” Still others were saying, “We have had to borrow Money to pay the king’s tax on our fields and vineyards… We have to subject our sons and daughters to slavery. Some of our daughters have already been enslaved, but we are powerless, because our fields and our vineyards belong to others.”

- Nehemiah 5:3-5

A man lacking in judgment strikes hands in pledge and puts up security for his neighbor.

-Proverbs 17:18

Give to the one who asks you, and do not turn away from the one who wants to borrow from you.

-Matthew 5:42

Do not be a man who strikes hands in pledge or puts up security for debts;

If you lack the means to pay, your very bed will be snatched from under you.

-Proverbs 22:26-27

The wicked borrow and do not repay, but the righteous give generously;

-Psalms 37:21

The rich rule over the poor, and the borrower is servant to the lender.

-Proverbs 22:7

Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law.

-Romans 13:8

As stewards, we ultimately answer only to our master. It does not matter what the world or even what other Christians think of our stewardship. Our goal should be to be welcomed into the joy of our master as a good and faithful servant. To hear the words “Well done”. Not “well thought” or “well believed” but “well done”. Every decision that we make should be based on its effect on this one final result.

C.S. Lewis says this brilliantly in his essay “The Worlds Last Night”

We have all encountered judgments or verdicts on ourselves in this life. Every now and then we discover what our fellow creatures really think of us. I don’t of course mean what they tell us to our faces: that we usually have to discount. I am thinking of what we sometimes overhear by accident or of the opinions about us which our neighbors or employees or subordinates unknowingly reveal in their actions: and of the terrible, or lovely, judgments artlessly betrayed by children or even animals. Such discoveries can be the bitterest or sweetest experiences we have. But of course both the bitter and the sweet are limited by our doubt as to the wisdom of those who judge. We always hope that those who so clearly think us cowards or bullies are ignorant and malicious: we always fear that those who trust us or admire us are misled by partiality. I suppose the experience of the Final Judgment (which may break in upon us and any moment) will be like these little experiences, but magnified to the Nth.

For it will be infallible judgment. If it is favorable we shall  have no fear, if unfavorable, no hope, that it is wrong. We shall not only believe, we shall know, know beyond doubt in every fibre of our appalled or delighted being, that as the Judge has said, so we are: neither more nor less nor other. We shall perhaps even realize that in some dim fashion we could have known it all along. We shall know and all creation will know too: our ancestors, our parents, our wives or husbands, our children. The unanswerable and (by then) self-evident truth about each will be known to all…

We can perhaps, train ourselves to ask more and more often how the thing which we are saying or doing (or failing to do) at each  moment will look whan the irresistible light streams in upon it’ that light which is so different from the light of this world- and yet, even now we know just enough of it to take it into account. Women sometimes have the problem of trying to judge by artificial light how a dress will look by daylight. That is very like the problem of all of us: to dress our souls not for the electric lights of the presents world but for the daylight of the next. The good dress is the one that will face that light. For that light will last longer.

This article is contributed by HealthHarbor.com and previously appeared on ChristianPF.com.

Anyone reading this has probably at some point dealt with a medical bill, or perhaps many medical bills. They come in all shapes and sizes – from the $10 physician visit copay to the $500 dental procedure that fell in the “gap” between your dental and medical policies to the $2,000 ER bill that you incurred while uninsured. When the medical bill just one of many in a stack of obligations you have to creditors, and you’re trying to be the best possible steward of your money, how do you handle it?

On one hand, the case can be made that in the big picture this bill is incredibly important to pay promptly and in full. The money that goes to healthcare providers helps to bring necessary medical services to your community. In the case of hospitals, most of them are not-for-profit entities that provide healthcare to all and provide facilities like an ER to the community.

On the other hand, you probably didn’t choose to get sick, have a toothache, or crash your bike resulting in a prompt visit to the doctor. The prices of medical care, in addition, must be inflated based on the charges for routine services. Plus, that surgeon who you know appears to be doing just fine for himself, so he can wait for the money, right?

No doubt, medical bills are a bit of a different animal from other common bills because of the ethical considerations and short-notice nature of the expenses, but they are still a debt to a provider of a service whom you gave your word to pay back. Now that you have a bill, here are a few things can soften the blow of getting one or more bills from a hospital, doctor, clinic, or other medical providers.

How to negotiate medical bills

Discuss the Charges Up Front – One of the most effective ways to not have sticker shock on a medical bill is to discuss the charges with your provider beforehand. If the service you are going in for is routine, you may find that you can negotiate a discount of 20% or more off the charges, particularly if you are truly willing to shop around (if so, be sure that you’re asking the right questions). The provider may ask that in return for the discount you pay up-front, so be prepared for that.

Check your bill for errors

Review your Explanation of Benefits – The payment adjudication process in healthcare is ripe for errors. Reading the EOB that you receive from your insurance company and comparing it with your medical bill can yield surprising results. There are several points in the medical billing process when a key error can occur creating a higher bill for you than you deserve. The provider may record the wrong insurance for your visit, the visit may be errantly recorded in their system, or the insurer may interpret the claim incorrectly. All can result in an inaccurate medical bill.

Sit down with the EOB and the medical bill, and only when you are satisfied that the correct patient balance made it through to you should you pay off the balance.

Handling past due bills

Discuss Payment Plans – If you just received a medical bill that you can’t pay, don’t worry. Most providers are willing to set up a payment plan that will fit your budget. They don’t want to send you to collections – that is costly for them and the chances of any payment decreases. They would rather put you on a payment schedule that works for them and for you. Pick up the phone and call.

If Worse Comes to Worse, Ask for Help – If you are able to take care of yourself, then take care of yourself. If you’ve hit a financial tough streak, however, you may find that a healthcare provider will heavily discount or even forgive your balance if you qualify for a Financial Assistance program. This is more common with not-for-profit providers. In order to qualify, you’ll need to demonstrate low assets and income and cooperate with the process. Providers are used to people trying to game the system when it comes to Financial Assistance – be straightforward and honest, and they might be willing and able to help.

One of the frustrating things about medical bills it is difficult to budget for them (especially the emergent care kind) and the dollar amount can hurt. Being proactive and direct with your healthcare providers can help a medical bill fit a bit more neatly into your monthly budget.

In this series we have taken a few small steps towards being stewards of the Lords possessions but they have been just that, small steps. True stewardship is not confined to keeping a budget or maintaining files, these are just tools that will make tracking and managing the assets that the Lord has entrusted to us a little easier and a little more accurate. True stewardship extends beyond the world of finance and into every area of our lives. It requires a change in our world view which will be reflected as a change in our actions. We must learn to see our possessions, our abilities, our time and even the bodies we live in, not as something that we are entitled to but as something we have been entrusted with for a purpose and as something that we will be held accountable for.

Nothing in all creation is hidden from God’s sight. Everything is uncovered and laid bare before the eyes of him to whom we must give an account.

Hebrews 3:13

So we make it our goal to please him, whether we are at home in the body or away from it. For we must all appear before the judgment seat of Christ, that each one may receive what is due him for the things done while in the body, whether good or bad.

2 Corinthians 5:9-10

We must also be careful that we do not forget who we serve and unknowingly end up serving money instead of the Lord. Our first priority is to serving God, whether while rich or poor. Do not let the living standards of the world draw you away from your true goal.

But godliness with contentment is great gain. For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that. People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction. For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.

1 Timothy 6:6-10

Paul relates our training as stewards to an Olympic athlete training for the games. If a marathon runner was to take his time training and just do a little jogging a few times a week between other activities he would never become a world class athlete and wouldn’t stand a chance at winning an Olympic medal. Olympians make training their first priority. They study how their body works and train day and night to find their weaknesses and overcome them. They have a purpose. And they do it all for a medal that will eventually rust or be destroyed. We are told to train the same way as servants of Christ. But the crown that we will receive will not perish but be eternal.

Do you not know that in a race all the runners run, but only one gets the prize? Run in such a way as to get the prize. Everyone who competes in the games goes into strict training. They do it to get a crown that will not last; but we do it to get a crown that will last forever. Therefore I do not run like a man running aimlessly; I do not fight like a man bearing the air. No, I beat my body and make it my slave so that after I have preached to others, I myself will not be disqualified for the prize.

1 Corinthians 9:24-27

Many people use money as a defense against chance. Remember that God knows our needs better than we do and he has promised that he will take care of them even if it is not in the lifestyle that we are accustomed to. Sometimes God calls us to leave our comfort zone and just put our faith in him.

And we know that God causes all things to work together for good for those who love God, to those who are called according to his purpose.

Romans 8:28

So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well.

Matthew 6:31-33

I want to encourage you to continue your path of stewardship and take the time to learn what being a true steward entails. I will continue to post what little bits of insight that the spirit blesses me with but don’t take my word for it. Remember, you will be held accountable for your beliefs and your actions. Take everything you read here and test it against what the bible says. Even look up the verses for yourself and understand the context that they are written in. If you find something I have written that you think may not be correct, please post a comment and let me know.

As iron sharpens iron, so one man sharpens another.

Proverbs 27:17

Whoever loves discipline loves knowledge, but he who hates correction is stupid.

Proverbs 12:1

Why have a budget.

“Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much. So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? And if you have not been trustworthy with someone else’s property, who will give you property of your own?

Luke 16:10-12

Now that we have systems in place to track our income and spending, we know how to estimate our net worth, and we have our files set up, it is time to tackle the almighty budget. This is the true crucible of personal finance. Not so much the development of the budget itself, but the responsibility and discipline required to face the real numbers and adjust your lifestyle accordingly.  If this is the first time you have created a budget you may be in for a little shock. Most people don’t realize how much money gets spent each month on impulse items, such as fast food and convenient store or vending machine snacks. But this is why having a budget is so important. Unchecked spending can only go on so long before it catches up to you. And when it does, it’s usually sneaks onto your credit card statements at exceptionally high interest rates. A well designed budget combined with the personal discipline required to keep it is the most powerful tool you will ever employ to your finances.

The goal of a budget is simple – to determine how much income you have available over a set time period, and to divide that income up in a way that all of your financial needs are met. Notice I said needs, not wants. HDTV, high speed internet, and a 10,000 minute per month family cell phone plan are not needs. Because each family is different, each budget will be different but there are some important steps that you can follow as a guideline.

1.       Determine what your needs are – Be honest with yourself. Do you really need three cars?  Could you downgrade your internet connection or even cancel it if it really came down to it? Do you need both a home phone and a cell phone? On the other hand, don’t forget about things that help you earn an income. If your job requires you to wear a suit, then dry cleaning may be considered a need. Don’t forget about utilities.

2.       Determine the cost of your needs – Don’t forget to budget for long term items. If a car is one of your needs, budget in the fuel and maintenance costs. Things like clothing and shoes will wear out and need to be replaced as well. These are the things that tend to break a budget if not planned for. Finding your yearly clothing need cost may take a while before you get an accurate number but it still needs to be estimated and budgeted.

3.       Determine your income – I listed this third because often people need to know what their needs are in order to adjust their income. By determining the cost of your needs first you can figure out if you need to work more, less or if you may need to consider changing jobs.

4.       Set your spending – Set an amount for each need that you have. Once that is covered you can start giving some money to your wants. When the money runs out, don’t budget anything else. If you haven’t met your needs then you may need to consider some lifestyle changes.

5.       Get a second opinion – If you’re sitting at your computer at three in the morning trying to put together a family budget on your own…STOP. Most individuals don’t know the true expenses of their family. Ask your wife how much she really needs for school supplies or how much lunch costs for your kids at school. You may not consider life insurance a need but ask your family how they feel first.

It’s simple for the most part but it’s important that you’re honest about the numbers and stop when the money runs out. Part of the reason for having a budget is to keep you from spending more than you have. Your Mint.com account has an excellent tool for setting and tracking your budget but you will still need to follow the above steps to ensure its accuracy.

Be sure not to forget about saving and giving.

“There is never enough left over to save, it has to be budgeted.”

I don’t remember who said that but he’s/she’s right.  The same is true for giving. Don’t forget, this is not our money we are managing, it’s Gods, and he is very clear about our need to give. While the amount of each is up to you these should be listed under your needs, not your wants. (A good rule of thumb for starting a budget is to give 10%, save 10% and live on 80%. Then work on increasing the saving and giving.)

This is just a quick guide to setting up your initial budget. In future posts we will discuss popular strategies and budgeting systems that can help you increase your long term control over your budget. Don’t forget that as your life changes your budget will need to be reviewed and updated

Creating a filing system

In a previous post we designed a simple filing system to help us keep track of which bills had been paid. Now we want to expand that system to more thoroughly manage other important paperwork such as tax documents, warranties, auto maintenance records, ect…

Be sure you know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations.

Proverbs 27:23-24

The first thing to consider when creating a filing system is which documents you need to keep and for how long. While there is room for personal preference when designing your system you don’t want to go too far to either extreme. I admit I went a little overboard when I first started filing. I saved everything for years– utility bills, paycheck stubs, credit card statements, even the return envelops that came in the bills that I paid on-line (you know, just in case). While I’m an advocate of being safe rather than sorry, I have to say that my caution was not rewarded in this case. I ended up with two file cabinet drawers filled with years of worthless documents, a good portion of which were from a house in another state that was sold years ago. So while we are going to be prudent while we design our system, we are going to ensure that the documents we save are really important enough to hold on to.

So how long should we hold on to paperwork? That depends on what it is. Tax paperwork is usually the most important because the IRS can audit you for up to six years. So for tax forms or paperwork regarding assets that are taxable (such as a car, home, or stocks) we hold onto for at least 7 years. In the case of a taxable asset you want to make sure that you don’t start the counter on that seven years until it’s no longer in your possession. As long as you own it, keep all the paperwork for it. This includes any paperwork for maintenance or home improvements as they can help reduce your tax liability. The tax returns themselves I make sure to hold on to indefinitely. If any future errors are found in things like social security or a retirement account you can use them to track the problem back to when it started. You can save a lot of space by just scanning the returns into your computer as opposed to storing them in a closet. The documents themselves aren’t worth anything, just the information on them.

Non-tax related paperwork has a wide range of recommended hold times. As far as utility bills, credit card statements and paycheck stubs, you probably won’t ever need them more than a month after they have been paid or deposited but I usually hold onto mine until the end of the year and then carry over the last two months into the New Year just to play it safe. Sense you only get 12-24 each year and you already have a folder for them it doesn’t take up any extra space to play it safe. Bank statements are the same way except at the end of the year I throw all of them out except the year end summery. If you don’t want to hold on to these for that long it probably won’t hurt you. You can usually get another copy from your bank if you ask. As far as insurance paperwork, hold onto everything for as long as you have the policy or have claims open plus one full tax year. This doesn’t include those “explanation of benefits” papers you get after each time you go to the doctor. If there is a long term purpose for those please let me know because I put those straight in the trash.

More permanent things such as medical records (not insurance statements or explanation of benefits), pet records, insurance policies, and warranty information you’ll want to hold on to for as long as long as you have the object that it belongs too. In the case of medical records or pet records, that means as long as they’re alive.

In the next post we’re actually going to get our files set up but in the mean time you might want to get acquainted with your scanner. Scanning documents saves space in your house and doesn’t take up much space on your computer. In fact, I have about ten years worth of paperwork saved on a 2 GB flash drive that I keep in a fireproof safe as a backup. If you’re super computer savvy then you may not even need to keep paper files. Programs like Quicken will allow you to scan copies of your bills directly to the program so you can keep digital copies for years to come. There are also digital document organization programs out there for a price. If you know of any good free ones, please let me know. For those of us who prefer to be able to spread out our papers in front of us while we work, then I would recommend keeping the paper files and once a year scanning the old stuff to the computer. Just be sure to make a backup and keep it in a safe place.

Why do we track Net Worth?

Be sure you know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations.

Proverbs 27:23-24

As Christians desiring to be stewards, the reasons for tracking our net worth may be different for us then for the rest of the world. While many people look at their net worth as a financial scorecard, we need to understand it as a summation of what we have been placed in charge of. As stewards, part of our job is to keep track of and manage everything that has been entrusted to our care, and nothing makes you look more closely at everything you have like estimating your net worth. Net worth is also a valuable tool for evaluating the effectiveness of financial decisions and analyzing our financial strategies. But it is important to remember that our net worth is not what determines our success as stewards, nor is it something to get emotionally attached to, it is only a tool to be used to make us better stewards.

Your net worth, in the strictest terms, is the cash value of everything you own, minus everything you owe i.e. if you sold everything including the clothes on your back and paid off every debt, how much cash would you be holding. This number is important because it sums up your financial life. If your individual accounts and assets are battles, your net worth is what lets you know who’s winning the war.

How we track it

The bad news is that your net worth changes every day and to keep an exact figure pretty much requires you to be both an accountant and a prophet. The good news is that it’s possible to get a fairly reasonable figure without that much work. Sense Mint.com is already tracking our major accounts for us, all we have to do is figure out what other assets and liabilities we have and do the math. Fortunately, Mint will do most of the work for us. If you played around with Mint.com for a little while after you set up your account, then you may have noticed that there is a place for you to track the worth of your property. In fact, you can track everything from the value of your home to the value of your dishes if you so desire. If you haven’t found this feature yet, click on the My Accounts link at the top of your Mint.com home page and you’ll find a place to add financial accounts, real estate and other.

Now I have no intention of making you sit down and estimate the value of your clothing, curtains and cookware because even if you remembered how much you paid for them, chances are you aren’t familiar with the laws of depreciation and who knows what you would be able to sell them for anyways. There are things that we can find out about though, your house and car for example. In fact, the house is the easiest, and if you have a mortgage payment, you definitely want to make sure to include this. All you have to do is put your address into Mint and it will estimate the value for you. It won’t be exact but neither will any other number that you get short of actually selling your house and writing down what was paid for it. I do follow real estate in my area fairly closely though ( I still have dreams of flipping houses for a living) and the estimate that Mint came back with was in the ballpark for what I had figured – if anything, it was about $4 – $5000 high.

Next we figure in our cars. The easiest way to do this is to look up its Kelly blue book value. Again, this is not an exact value but it is an estimate based on what other similar cars are selling for. So go out to www.kbb.com and answer the questions. I usually use the Private Party Value because I have no intention of ever selling my Jeep to a car dealership. If you regularly trade in your cars or are planning on doing so in the next few years, you may want to use the Trade-In value. Once you have an estimated value, go ahead and put that in Mint.

Next we put in our property. Like I said, it’s almost pointless to put in everything we own because there is no way of knowing how much we could really sell most of our stuff for (assuming we could sell it at all). But there are things you should be sure to find the value of and include, such as boats, RVs, jewelry, collectables, artwork, antiques or anything that is not likely to depreciate in value. Also, there are certain things that should not be included such as items that you could not sell or things that only have sentimental value. Do not include household fixtures or appliances that would stay with the house if sold, those are understood to be included in the value of the home. Also, do not try to attach a value to non-material things such as work experience or the potential value of your education (do include college loans though).

Now that you have the “Big Picture” items in, feel free to add anything that you want. If you really want to do the research and find out how much your curtains are worth, then go for it. Just remember that it’s only an estimate and if it really came down to it, you may not be able to sell them for as much as you think. That being said, it’s a good idea to update the information included in your net worth at least once a year to keep it relatively recent. So if you don’t want to figure out the resale value of your bath mats each year, don’t add them, or in accountant language, assume their resale value has depreciated to $0.

Important

This was where I originally planned on ending this post but I felt it was important to touch on something again. Many people get very emotionally attached to their financial net worth and use it as a scorecard to determine their successes. As Christians, we need to understand that our worth does not determine our success as stewards. Suppose for a moment that a man’s net worth continued to fall year after year because his amount of giving continued to increase. From a worldly standpoint this would be considered financially unwise but from a Christian standpoint he is simply giving what he cannot keep to gain what he cannot lose.

Do not store up for yourselves treasures on earth where moth and rust destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moth and rust do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also.

Matthew 6:19-21

The world acts from a position of ownership, we must act from a position of stewardship. Our goal is not to become wealthy even thought our duty as stewards may include increasing wealth. So do not use your net worth as anything other than what it is; a tool for determining your financial position and for tracking the direction or your finances. It is not a measure of your stewardship, it is not a scorecard of your wealth, and it is not a figure to devote unhealthy amounts of your time obsessing over.

But godliness with contentment is great gain. For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that. People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction. For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.

1 Timothy 6:6-10

We have been spending the last few days talking about the importance of stewardship and developing a plan to help get our personal finances in order. A lot of this may be extremely basic for some people but because much of what is required to create and maintain a responsible home budget isn’t taught in school, I decided to start from the beginning. If you don’t currently have a system set up in your house then I would suggest reading the previous two posts to help catch up.

The first step that we took was to create a simple filing system and calendar to help keep track of our bills. Today we are going to set up a system for tracking income and expenses. Proverbs 27:23-24 tells us;

Be sure you know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations.

Proverbs 27:23-24

So in light of that, we are going to set up a system to ensure that we can constantly monitor and give careful attention to the condition of our finances.

If the thought of this makes you groan, believe me, I understand. It was many years before I was able to set up a system that accurately let me see where my money was going. But the good news is, it’s only going to take you about 15 minutes.

Create an account with Mint.com

Mint.com is a free, online, personal finance tool that helps you to track multiple accounts with banks, credit card companies and other financial institutions. It also easily allows you to create a budget and see how much you are spending in different categories such as groceries, utilities, dining, gifts, ect.. And the best part is that, after a little setup time, it takes very little maintenance on your part. Each day, it will download your transactions from your financial institution(s) and categorize them according to where the money was spent.

If you have trouble with Mint.com, or you are more familiar with the quicken interface, you can also set up your accounts with QuickenOnline.com. I have used Quicken for years but am personally partial to Mint.com because of its interface and its ability to include the value of my property (such as a house, car, jewelry, ect..) in my net worth. We’re going to set that up in a future post but for now, just be sure to get your major accounts listed. Make sure to include the following accounts:

-Checking Accounts

- Savings Accounts

- Credit Card

- Mortgage

- Loans (including auto and student)

-Investment Accounts

If you can’t get your investment or retirement account in there it should be ok. We’re mainly just trying to get the “high traffic” accounts, that is, the accounts that are used on a regular basis. If Mint.com isn’t set up with one of your major financial institutions, then you may want to try QuickenOnline.com.

Now that we have a method of tracking credit card and bank transactions, that only leaves one area…cash. If you are one of those people who have been using a check card or credit/debit card for so long that you’ve forgotten what cash looks like, then this isn’t for you. But, if you do carry cash for vending machines, parking meters and such then we need to keep an eye on that as well. I’m going to recommend an age old budgeting tradition. Keep a small notepad or even just a piece of paper with you each day for the next two weeks and write down how much cash you spend. It’s amazing how a little change here and there add up.

Don’t forget to keep tracking (and paying) your bills in the mean time. We’re going to come back to those in a few days when we set up our filing system. Next post we are going to discuss finding and tracking your net worth.

          The most common reason that people give for not saving money is, “I just don’t make enough”. From a perspective, this is almost always true. It’s been said that your lifestyle will rise to meet (or exceed) your income. If that’s the fact, then no one really ever makes enough money, and they never will. But those of us who are conscience about our finances understand that it is important to budget savings first and then live within our means. Otherwise, there is never enough left over. I’ve done some simple math to compare the virtues of cutting expenses vs. making more income, so if you’re one of those people who are just waiting until your next pay raise to start saving, you may want to pay attention.

          Let’s assume that Person X is currently making a steady salary. He finally has his life in order and his budget is perfectly set so that he has exactly what he needs to pay his bills. He is only waiting until his next pay raise so that he can start saving. Let’s also assume that person X also has the uncanny ability not to be tempted to increase his lifestyle when the raise comes. That super power alone is enough to show that person X better belongs in a comic book than in the real world, but still, let’s just assume. At the beginning of the year, Person X is given a salary raise of $10,000 per year. Utilizing his super powers, he puts %100 of his pay into savings. But there is one problem, taxes. Person X doesn’t get to keep everything that he makes. Assuming that he gives 20% of his income back to the government he only gets to take home around $8,000 more per year.

          Now, let’s assume that Person Y is in the same situation. The only difference is that instead of waiting for his next pay raise, he changes his lifestyle to allow him to start saving now. He sells his newer car and buys an older model for cash; he cancels his satellite TV and subscription to “Yacht Magazine”, he starts clipping coupons and buying only what he needs and at the end of the year, he is able to budget $10,000 per year to go directly into savings. Sense his budget was based on his take home pay and not his salary; he doesn’t have to figure taxes into the equation. He has effectively given himself a 20% return on his savings over person X, and the only difference is the taxes that he didn’t have to pay on the money he saved.  As much as I would like to start computing the interest that each person earns over the years, I think that it’s clear who is going to come out ahead.

           The numbers that I chose for this example were picked to make the math simple but the point is clear. A penny saved is worth more than a penny earned because you don’t get to keep the entire penny that you earned. In fact, depending on your tax bracket, a penny saved may be worth 1.1, 1.15 or even 1.4 (or more) pennies earned, and when those pennies turn into dollars, the difference is astounding.