I’ve seen people mash cans, crunch bottles or shred newspapers and magazines to further the cause of modern ecology. I used to work at a collection agency and now at a bank. I believe in preserving the nation’s natural and human resources too-particularly from a personal finance perspective.
I’ve come across eight financial principles that counsel and help “recycle” many people who have been all but mashed, crunched or shredded by the miseries of indebtedness and poor money management.
To put it plainly, I’ve seen firsthand the full spectrum of financial woes that can hopelessly trap people in a society victimized by the credit-card, “buy-now-pay-later” syndrome. Daily, I see people in deep financial trouble. Thousands in this country have got themselves into financial messes that can lead to more serious consequences.
Financial counseling became a matter of revealing these principles and allowing financially troubled persons to choose whether to obey them or not. These principles are real and will help you in conducting your financial affairs.
Live On Margin
The third principle is that of living on a margin. Everyone ought to live on a margin-a physical margin, a spiritual margin, a time margin and a financial margin. Living on a margin simply means allowing room for things to happen.
There are really only three ways a person can arrive anyplace. He can arrive early, on time or late. I used to aim at arriving right on time, and I consistently arrived five minutes late. That’s because I allowed no margin.
Those precious minutes add up. Think of the cumulative effort, on health alone, of continually spending 15 minutes hurrying to be five minutes late. Fifteen minutes of hurrying three times each day for 15 years adds up to nearly six months of 24-hour days when I’m under unnecessary tension, just hurrying to be late. And tension is a leading cause of heart attacks. How ridiculous! But we should operate on a time margin-planning to arrive early rather than hurrying to be late.
For a simple example, if a couple with an income of $12,000 a year would save $1000 of it each of those years and let this money earn 6 percent interest, compounded annually, they would have $24,672.56 at the end of a 15-year period.
If at the end of 15 years of saving faithfully, a son or daughter is ready for college or the family needs to move into a bigger house or wants to serve the Lord on a full-time basis, the couple can start to withdraw their savings. They can withdraw $2000 a year for 10 years and still have $15,322.17, or slightly more than they set aside. Isn’t this making your money work for you?
Keep Out of Debt
Suppose this same young couple with the $12,000 annual income had decided that instead of saving $1000 a year, they would go into debt for $1000 to buy some furniture. And suppose they continue to increase their indebtedness by $1000 during each of the 15 years, without paying back one cent. With 10 percent interest, compounded annually, on the increase in debt, the couple’s debt would have been an astronomical $34,949.74. The debt on $1000 alone for that same period, without any repayment, would have been $4177.21.
Too many people think you can buy now and pay later. That isn’t true. I’ve found that easy credit now makes people uneasy later. Usually a person pays more for the use of borrowed money than he gets in interest for saving it.
Secret of Contentment
One area where people often first become discontent involves the old automobile. Too many people trade or sell their cars before they are used up. There’s a big difference between fixing up the old junk heap to drive three more years and buying a new car. Many salesmen make the slick remark, “You just make that easy monthly payment.” There is seldom anything easy about that monthly payment. It seems to get harder to make all the time.
My friends in the automobile business tell me that most cars are good for more miles than most people put on them. Just because a car has over 100,000 miles doesn’t mean a person has to get rid of it. Look at some of the buses, trucks and cars still going strong, especially in countries outside North America. They are cars of the same age and mileage that other people junked years ago.
A worthwhile saying to remember on contentment is this: “Use it up, wear it out, make it do, do without.”
Keep Records, Budget
If someone were to tell me that he’s going to run his business without keeping any records, I would say this is downright stupid. A man I know to whom I have given financial counsel thought he was doing great because he had to borrow only $300 in the last eight months. When I asked him how he managed to get along so well, he admitted he had sold his week of vacation for $500 and had some overtime pay.
I figured that the fellow was actually spending $175 per month more than he was making during the eight-month period, despite the one-time windfall of getting rid of his vacation and working overtime. A year from now, at his present rate of overspending, he would owe $2100 more, with interest adding to his debt totaling more than $30 each month.
By keeping good records, having a plan and being honest with oneself, a person won’t get into financial trouble. I seldom see financially successful people who don’t keep good records.
The advice infers that the world’s poorest credit risk is the man who agrees to pay a stranger’s debt. When a person cosigns a note, he is the one who is really borrowing the money. The reason a person needs a cosigner is because the lender is unwilling to lend that money to the person requesting the loan.
It is important to work. Many times I find that people in financial trouble aren’t really working hard. I have often discovered in counseling young men in real financial trouble that they are “tooling” around too much of the time and putting 2000 miles a month on the car. I advise them to take a second job. This increases their income and decreases their expenses and it keeps them from misusing or frittering away their time.
Before buying a house, purchasing a car or just borrowing money, pray about it and seek the counsel of financially smart people. They can keep you from making a lot of mistakes. The reason so many people don’t seek counsel is that they don’t want to be told by someone an intended action is unsound-they just like to do what they want anyway.
Above all, don’t sign anything until you check the deal thoroughly first. Don’t be hurried into any deal. The worst deal in the world is often the one in which a person is rushed into signing-capitulating to a relentless salesman’s chance-of-a-lifetime-offer pressure tactics. The best offer in the world can wait.
These are the 8 financial principles: Live on a margin; save money; keep out of debt; be content with what you have; keep records; don’t cosign; work hard and seek counsel.
As one learns to follow these principles in his personal finances, he will know the joy that comes from their financial freedom.