Financial intelligence and financial wealth isn’t a function of where you live, your political point of view, the evils of “globalism,” who is president, what the economy is doing, or whether your daddy is the president of the bank where you work. Financial success isn’t so much about your past as it is about what you are doing in the present. It is about knowing a few things and doing them well. The rest is just putting God first and letting time and compound interest do its work.
Before I was able to teach others about sound financial management, I had to learn it myself. I left my parent’s house when I was 15, and came to the United States when I just turned 17, as an international student. Every immigrant that has ever landed in the United States never forgets how much money they had that day, in their pocket. I had $247. I lived for two glorious years with the missionary family that hosted me and graduated from High School with honors.
I attended the cheapest Adventist college that I could find, and despite a 50% scholarship, I still couldn’t pay my school bill. As an international student, my work was restricted to 20 hours of on-campus employment, and within a year or so, I had to leave. Except, I couldn’t leave.
Immediately post-9/11, Pakistan was experiencing some of the worst anti-Christian violence and Sri Lanka (the country of my birth) was in the grips of a bloody civil war with mandatory conscription and no provisions for conscientious objectors. So, I moved out of my room in the dorm, and into the room of a friend down the residence hall, and essentially lived there in that room, in virtual isolation for six months.
I found help and moved to a different state and got back into school. I refilled all my papers that were required for immigration and began my coursework all over again because I was unable to pay for my transcript release at the previous college. After a year of intense study, I reached the same point that I was at the previous college.
I was still working at school, somehow balancing my meager $120 a month after school expenses, and my car insurance that cost $240 a month and eating my fill for the week at church potlucks on the weekend. I was at my job, at the college library, when my International Student Advisor came to talk to me. She said,
Adrian, immigration has denied your application for re-instatement, they are coming to arrest you today, you need to leave and find a lawyer. Also, don’t go back to your house.
I followed her advice and went to a friend’s house. It took me eight months, living in virtual isolation in their basement while trying to figure out my next move. I came to California and found a lawyer. Three years later, I won the privilege to stay in this country in federal court.
A year before that, I got a job, bought a car on payments, it cost me $14,000. I paid $9,000 down on it in through extra payments during that first year. I lost my job when my work permit expired, and the car was repossessed. I only had $5,000 left to pay on it.
I got back into school again. This time I finished my degree. Then I found out that the school was a diploma mill and its degree didn’t count with the California Board of Accounting. So, I started school again at another college.
In 2013, I found out I had advanced stage cancer. Had to quit everything and focus on the biggest battle of my life. My journey took me to four hospitals, four bone crushing rounds of chemotherapy, and three major surgeries, all in one year, to win that battle. Then my share of the medical bills came. I started to work again. Got cheated in business to the tune of thousands—more than what some people earn in a year. At this point, I went back to work again.
I share my story with you because I know what it is like to have a credit report filled with accounts closed for amounts less than a few hundred dollars. I know what it’s like to have a bank account be closed because I didn’t have 34 cents to bring it zero. It went to collections for over $175, in overdraft fees and from there, on to my credit report. I know what it’s like to count out in pennies for food Schrader’s Market in Berrien Springs Michigan, in the middle of winter, with the whole (Adventist) town’s folk are waiting impatiently behind you.
I’ve had the “pleasure” of having to wake up at night and jog in place by my bed to keep warm because the heat had gone out. The “experience” of having to decide whether to pay the utility bill or put gas in your car so you can go to school and work. The “honor” of being lectured, by guys who had done nothing up until that point but study and live with their parents, on why I wasn’t “stable enough” to get married or despite me having crossed the world to live here at 17, already being incredibly successful in ministry, and being deemed “financially unstable” to assume an unpaid ministry leadership position, despite the fact that by that time, I was more than simply debt free.
To this day, paying my own way through high school and college, getting two degrees, out-gunning the prosecution in federal court with my life on the line, being successful in ministry, getting out of debt, going to hell and back as my oncologist said to beat advanced-staged cancer, getting out of debt again, and running a successful business, while saving for my sister’s investor green card visa that runs well into mid-six figures, doesn’t count towards marriage or ministry material, I don’t know what will.
Despite helping people here and there successfully overcome their debt and start on the road to being wealthy, and despite being debt free, because of my friends, I still thought that I was a financial failure because apparently to the world I was a guy who drove an old car, used an older phone, wore less than stellar clothes, and paid my apartment rent. I would later learn that these successful things don’t matter in our Adventist temples of high consumption.
What seems to matter is going to school on your parent’s dime or going into debt, driving new cars on payments, buying big houses on payments, buying fancy clothes on payments, getting engaged on payments, getting married on payments, and jetting around the world to conferences to find God’s will for one’s life, you guessed it, on credit card payments. I know this now because I’ve read the financial realities in the credit card bills and traced them across bank statements.
In mid-2010, I preached a sermon on finances at the church where I was a pastor at. I told them, just like I told you here, where I came from, and where I was at that point of time, and how if there was “someone” in the audience who was in debt (I didn’t think there was more than one), I could maybe help them. At the end of the sermon, I made a simple offer—I would sit down with anyone who needed help figuring out their finances and confidentially help them out for free. I was overwhelmed by the response.
All through the next three or four weeks, my phone buzzed with calls from my members and their friends. I was able to help every family, except one, that approached me. To this day, more than eight years later, all of them, except for that one family, are debt free. What’s more, they tell me that they have significant assets in retirement, stocks, and other investments. One family even saved and bought a second house with cash, on a salary that is less than $60,000 per year.
In the last twenty years, I have sat in more financial seminars from GYC to the local churches to mega Adventist churches, than I can count and have listened to so-called Adventist financial experts dispense well-intentioned advice that is either
- unrealistic—they never followed it themselves, and neither do their own children
- was hopelessly outdated,
- conspiratorial, or
- dangerously wrong.
The few seminars that were okay, were often done by seasoned church leaders who covered the narrow biblical aspects of tithes, offerings, and estate giving, as it was part of their job to do so. I once sat across the table from an estate trust official at an unnamed conference who couldn’t articulate to me a financial plan for young adults beyond an estate plan. It was no surprise to me that their own adult children were on the verge of bankruptcy.
Along the way, I’ve helped a few hundred people make a budget, get out of debt or bankruptcy, clean up their credit report, buy a house, save their marriage, and get their plans for retirement on track. I’ve helped resident surgeons, doctors, nurses, truck drivers, meat cutters, plumbers, pastors, administrators, businessmen, dentists, soldiers, and yes even accountants. Most of the time, I’ve sat across from them at their kitchen table, in their garage, or at a public restaurant with their pile of receipts and printed bills, bank, and credit card statements, and helped them make sense of their finances. It isn’t secret, sexy, glamorous, or financially rewarding for me (I don’t charge anything) but it works.
If you follow this series, and read the resources, I will share here and put it into practice, you will get out of debt, and fix your financial condition faster than you thought was possible. Along the way, you will learn more about the human condition, why you act and think currently the way you do, and see the difference when you change. Perhaps you will use the biblical and practical knowledge gained here to help someone get out of debt, and then you will learn for the first time, how awesome it feels to see someone get free from the slavery to debt.
For the rest of this series, as you read these articles, pretend that I’m sitting across the table from you, with my iPhone calculator app open, a clean yellow pad, and a pen. Work out every calculation example on paper, do every step over and over, until you understand it completely, and then apply it step by step to your finances. If you get stuck, YouTube the financial concept, and you will find someone who will work out the calculation for you on a whiteboard. If you are already debt free, or just have a mortgage payment and nothing else, keep reading in the series, we will get to wealth creation and possible early retirement, as well, soon.
Related Link: Give me Neither Poverty Nor Riches
Assessing Your Financial Fitness and Setting Your Goals
To achieve financial independence, you have to find out where you are. You, first, have to get real about your financial condition. And you cannot get to the initial stage without facts that are informed by hard financial data. Usually, when I’m helping a married couple, by the time we are done with this “short” 8-stage process, the wife is in tears. Sometimes the guy is in tears. I’ve had a few big burly guys cry their hearts out as their stoic wives hand them tissues. Perhaps you will cry too. Then you will get mad at yourself. And then you will usually resolve to get even or die trying. That’s all it takes to change. The rest is just details.
Step One: Gather all your Financial Documents
You may need to print out all your bank statements going back at least three months (six months might be better). Print out your last 3 months of credit card(s) billing statement. Your utilities, phone, car payments, child/support/alimony payments, tax returns, pay stubs, car insurance bills etc. Rent/Mortgage etc. The works. If in doubt, just print it out. Print out a monthly calendar for the next six months.
Step Two: Write out all the Minimum Payments for All Your Bills
This total number from all your bills is the absolute minimum you have to pay every month. Prioritize your tithe payment, house payment, utilities, food, medical insurance, phone and then your other credit card payments, in that order. Cancel subscriptions to newspapers, Netflix, HBO, Cable, TV Sports Season packages, gym/spa memberships, multi-level marketing payments, etc.
Step Three: Find $1000 (in cash) as your Emergency Fund
You may need to sell something or cut something back or dip into your savings (if you have any) but you need about $1000 in cash for emergencies. At this point, some couples don’t have the money, and cannot find it. In this case, we find ways to drastically cut their bills (TV/Entertainment/Phone) to find the money in the next month or two. Till then nothing really can happen.
Having an emergency fund is crucial to keep you from falling back into debt the minute something bad happens. According to one study, 55% of American families with income between $50,000 – $100,000 cannot afford a $400 emergency. Sometimes, I start them off with an emergency fund of $500. If you can find $500, and build from there, fine. But don’t let that stop you from moving on to the next step.
Step Four: Go through Your Statements and Circle Every Wasteful Spending
This spending includes everything except for paying for your rent/mortgage, utilities, medical insurance, food, and phone. Most likely you will find a lot of waste here. Hundreds, if not thousands, slipping right past your fingers. It could be a daily stop at a Starbucks for pumpkin spice soy latte. A quick cheeseburger. Soda machine at the gym.
Multiply the total amount of wasteful spending average over the last three months, by 12, to find out how much went by last year. Write that number down. It serves as a benchmark for later. If you have gaps between your statements or use cash, estimate your out of pocket cash usage for payments here and there. By the end of this stage, you will know “where all the money goes.” If you don’t, repeat steps 1-3, till you do.
Step Five: Write a Budget
This process shouldn’t take you any more than an hour or so. It should account for every single dollar you get out of your paychecks after taxes. From now on everything must be “spent on paper” or “spoken for” before it is spent in real life.
First on the list is your income after taxes. This is your “take home check”. Then second on the list is your tithe payment. Third on your list is your house payment, then your utilities, then your food. With your food bill, make sure it is only the amount you use to buy groceries to cook at home. Ideally, your rental/mortgage budget shouldn’t cross 36% of your budget. If it does, and you rent, try to think about getting a cheaper place, that is still safe, if you can.
If you don’t cook at home. Join the legions of millionaires and billionaires who do. Start now. On average, I’ve seen couples shop at a cheap Hispanic Asian food store for $40 a week, in California. If you are spending more than that, see if you can eliminate processed vegetarian meats. Stick to fruits, legumes, rice, vegetables.
A word about “organic” groceries: Your body won’t die if you ate like the rest of humanity for a few months till your spending gets to a stable point. Trust me. I beat advanced-staged cancer eating non-organic veggies while I was on chemotherapy. After you have your essential spending down, it is time to look at your bills a little more closely.
Step Six: Rank Your Bills from Highest Interest Rate to Lowest Rate
This will help you find out which payments to prioritize over others. Financial expert Dave Ramsey suggests going after the lowest outstanding bill first to build psychological momentum. If you need that, do it. If you are smarter and are ready to act like a grownup, then tackle the highest interest rate first. You need to think about interest rates like this: The rate is the amount of money someone is earning in their Investment in lending to you. You are making them rich. If you want to switch it around to where you are earning that rate of return, keep reading in this series.
Find the Principal payment and the Interest rate/payment on all your credit card bills. The Principal payment pays down your bill. The Interest rate part of the payment is the amount you pay for pleasure borrowing the money to impress your equally broke friends. If you can match the principal payment, make double or triple the principal amount listed. It will pay down the payment that much faster.
Step Seven: Circle on Your Calendar When You Get Paid
This allows you to determine your cash flow for the month. Too many people pay far too many bills at the beginning and have nothing left over at the end. This happens when folks load up the difference on their credit cards. You can call your credit card companies and ask them to move the payment date if you haven’t done that already. Make sure it aligns with your paycheck timetable.
Step Eight: Make Minimum Payments on all the Rest of the Cards/Bills
Keep making minimum payments on all the rest of your cards/bills until you have paid off the highest interest card bill. Then move to the next highest interest card bill and so on. You will save the most money possible by doing this. Also, now you have the payment that used to go to the highest interest card to add to your current minimum payment on the lower interest card bill. This is how you build an “avalanche” to pay off your bills in record time. You can schedule payments to go out from your bank account. I usually have people open a second savings account and have them schedule/put the designated money in two days before the bill is scheduled to be paid.
Expert Move #1: Divide and Conquer
If you can somehow put all the bills on one person’s salary, use the other person’s salary to pay your essential bills. This allows you to put more firepower towards paying down your bills. Most married couples don’t think they can live on one salary. The truth is that with diligent sleuthing around in the bank statements and bills, you can find extra “hidden” money. If you can, pick up an extra job. If you are single, you can pick up an extra job, or extra shifts. Do it.
Expert Move #2: Get Credit Reports
Go to annualcreditreport.com and download your free credit report from all the credit agencies. Find out how many accounts are open, closed, in collections.
Expert Move #3: Set Goals
Write down no more than 3 BIG Goals for the next 1-3 years. Write down 5 Long Term Goals (5-10 years). Put dollar signs by them. I will show you how to choose better goals later. But for now, put them on your fridge. Read them out-loud every twice a day. Even these goals can get accomplished.
Sample: Short Term
Goal 1: Pay down all debts ($35,000)
Goal 2: Get a new car ($15,000)
Goal 3: Vacation in France ($5,000)
Sample: Long Term
Goal 1: Fully Fund Kid’s education ($25,000)
Goal 2: Pay Down House ($375,000)
Goal 3: Buy Investment Apartment ($650,000)
Expert Move #4: Pay off/Settle Collections Bills
Once your bills to current creditors are paid off, pay off your collections bills. You can call them up or take advantage of your ‘settlement offers.’ Just make sure that you get their settlement in writing in your hand/emailed/faxed to you before you hand over your payment information.
Usually, they will settle for less, and agree to report the bill as “paid” or “paid as agreed” on the three credit reports. You can ask them to remove the bill from collections from all three credit agencies (Equifax, Transunion, Experian) as well. Sometimes the credit agencies will give a hassle regarding removing the collections record, but most will comply.
Expert Move #5: Get a Financial Tracking Account/App for Free
Use Mint.com or any other good financial tracking account that is free. They usually will offer a free credit score report from one agency as well. I like using Mint.com because it gives me Experian (the most used credit reporting agency). I also use CreditKarma.com which gives me the other two agencies for free. In the beginning, I suggest using paper, because apps are too easy to ignore.
For More Resources: Go to Dave Ramsey’s website. Read up on his 7 Baby Steps plan. This article covered the intermediate steps between Steps 1 and 2. Go to his retirement calculator online and play around with the numbers there.
If you have followed everything up to this point, congratulations. You should see your credit score start to rise as the credit card utilization rate falls and the payments become regular again.
Don’t close your cards as you pay them off. If you don’t have any credit cards, you may want to consider opening up a card once your score goes past 600 on all three reports. You may need to get a secured card in the beginning if you haven’t had cards or your credit is really messed up. But if you wait a bit, your credit will improve to the point where you will get a good card.
Having a small but good card that you use to pay a small bill (less than 25% of the total credit limit) every month can help your score rise. I do depart a bit from Ramsey’s advice regarding no credit cards at all. Simply because I did that, and for a while, it was very hard to rent cars, hotel rooms while I was rebuilding my credit. However, you can choose to go without a credit card for the rest of your life, and that is fine too.
Expert Move #6: Go for a 2 Mile Walk Every Day Morning and/or Evening
Exercise helps to destress your body. Your mind will be stressed by all your new financial decisions. You need every bit of stress relief that you can get. Exercise will also build into your body a resolve that will strengthen your mind. It will also help you sleep better at night. Better sleep means clearer minds for smarter decisions. Cancel your gym membership, get Freeletics app for free on your smartphone, or some other free app like NIKE Run or Strava. Nothing slims you down faster than Freeletics or consistent walking coupled with an excellent diet.
For a cheap lunch, take and eat a salad at work. It will help you lose weight, [another stressor] and help you think more clearly. If you need to, YouTube cheap salad recipes, mix and match ingredients. Steel cut oatmeal is cheap. Eat it with a banana in the morning. Soup in the evening. Snack on nuts in-between meals, or take a smoothie to work. None of this should cost you more than $1-3 per meal, per person, if you are careful. One meal a week, eat whatever you want, within a reasonable cost. In about six to ten weeks, you will look good and feel good.
Step #7: Gratitude and Prayer:
Incorporate daily into your prayers, gratitude to God for His care and guidance in your life up to this point. Ask Him for strength to stay on task with getting out of debt. Keep your written budget on your fridge. Keep next to it, your payment plan. Cross off every payment you make toward financial freedom. It is closer than you think!
RELATED LINK: Stewardship Ministries
You can write me any questions you have from this article. I’ll do my best to reply as I have time. Please keep personal identifiable info like bank accounts, credit card numbers, birthdates, out of your comments.