Money and Wealth (Part 32) – Pastor Wagner’s Practical Tips on Money Management (Part B)

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Money and Wealth (Part 32) – Pastor Wagner’s Practical Tips on Money Management (Part B)

Pastor Wagner’s Practical Tips on Money Management

1. Retirement fund
   • I recommend investing 15% of your gross income in a retirement account (401k, IRA, Roth IRA, etc).
   • See prior section on Investing for the details.
2. House fund
   • If you are renting, rent the cheapest decent apartment you can find and save money for a house, if you want one.
     1. Save at least 20% of the value of the house that you want.
     2. If you put less than 20% down on a house, that means you can’t afford the house.
   • “The fastest way to become a homeowner is through a Total Money Makeover while renting the cheapest thing you can suffer through.” (Dave Ramsey, The Total Money Makeover, p. 60)
   • Renting a small, cheap apartment while saving for a house is not “throwing away money” as the commonly repeated myth says.
     1. Renting a small, cheap apartment is actually saving you money.
     2. When you factor in property taxes, insurance, utilities, and maintenance, a small, cheap apartment will cost less per month than a bought-and-paid-for average house does.
     3. Here is a comparison to make the point.
     4. 2-bedroom apartment
        1. Rent = $833/month
        2. Renter insurance = $11
        3. Utilities = $50/month (average)
        4. Total = $894/month
     5. 3-bedroom, 2-bathroom, $250,000 house
        1. Property tax = $200/month ($2,300/year)
        2. Home insurance = $233/month ($2,800/year in MO)
        3. Utilities (electric, gas, propane, water, sewer, garbage, etc.) = $300/month (average)
        4. Maintenance = $200/month (this is very conservative – experts recommend budgeting 1-4% of the house’s value per year for maintenance, which would be $208 – $833/month)
        5. Total = $933/month
     6. Renting an apartment is $39/month cheaper than owning (not mortgaging) a house ($933 – $894 = $39).
        1. And if you put the $250,000 that you would have used to buy the house in a high-yield 4% savings account, you would make $833/month in interest (about $625/month after taxes).
        2. That means that renting an apartment is actually $664/month cheaper than owning (not mortgaging) a house ($933 – ($894-$625) = $664)).
     7. If you don’t actually own the home, when you factor in a $1,300+ monthly mortgage payment (30-year loan at 7.15% interest with 20% down, not including taxes and insurance), renting an apartment is FAR cheaper than buying a house ($1,339/month cheaper). ($1,300 + $933 – $894 = $1,339)
     8. Don’t ever let anyone tell you that you are wasting money renting a small, cheap apartment.
     9. Never care what broke people think of you.
   • Your house fund should include savings for repairs, appliances, etc. as well.
   • After you buy a house, put your old rent payment in your house fund to cover your housing costs (taxes, insurance, utilities, maintenance, etc.)

• Car fund
  • Make your “car payment” to your car fund, and you will never have an actual car payment again because you will be able to pay cash for a car.
  • You can also use this fund to cover repairs on your car as they come up so that you are not scrambling to find money for them, or putting it on a credit card.
  • If you are currently financing a car, pay it off as quickly as possible, and when it is paid off then make that same “payment” to your car fund.
  • If you have an expensive car that isn’t paid off, consider selling it and buying a less expensive car that you can pay off more quickly so that you can begin saving to pay cash for the rest of the cars you buy in your lifetime.
  • Drive your car for five years after it is paid off, while making the “payment” to your car fund.
    1. You can afford to do this because you were already making the payment to the bank.
    2. After 5 years, you can pay cash for your next car.
    3. Then keep making that “payment” to your car fund, and in 5 years you can buy your next car with cash.
    4. Repeat this process for the rest of your life and you will never have a car payment again.
    5. You only have to “sacrifice” for a few years, and you will never have to make another car payment again.
  • You will also spend far less on cars because you will be making interest instead of paying it, and you will likely not buy that $50,000+ vehicle when doing so means writing out a $50,000+ check for it.
  • If you are not putting a sufficient amount of money in your car fund every month now, you will be going into debt for a car in the future.
    1. Hope is not a financial plan.
    2. Start saving for your next car now, or you will soon be a debt slave again.
  • If you want to make your pastor happy, inform me someday that you just bought a car with cash.
    1. After teaching this for about a decade, I have yet to see a church member do it.
    2. That is very sad.

1. Car insurance fund
   • By automatically putting a little in this account every paycheck, you will never be surprised and scrambling for money when your biannual car insurance bill comes due.
   • You will also save money by paying your car insurance every six months instead of monthly.
2. Medical fund
   • This fund can be used for things like doctor’s appointments, medicine, urgent care, dental work, eye appointments, and your personal responsibility amount if you have Christian Healthcare Ministries instead of health insurance like me.
   • You will save money and be in control of your own healthcare instead of dealing with horrible insurance companies which have been causing prices to rise exponentially and are contributing to the destruction of our healthcare system.
   • If you have health insurance, this fund can be used for deductibles, co-pays, out-of-pocket costs, uncovered medical care (of which there is plenty), dental work, eye appointments, etc.
   • You should have at least enough in this fund to cover your yearly out-of-pocket max.
3. Clothing fund (could be done in cash)
   • Put a little money from each paycheck in this fund to be used to buy clothes for your family.
   • If there is no money in the fund, wear your old clothes.
   • If one or more members of your household likes to shop for clothes, create a separate fund for her so she doesn’t blow the rest of the family’s budget.
   • If you will be patient and shop in thrift stores, you will save a TON of money on clothes.

• Electronics fund
  • Put a set amount of money in this account every month to buy computers, smartphones, and other consumer electronics you think you need.
  • Figure on buying a new computer every 8-10 years and new phone every 4-6 years, do the math on what that will cost over a ten-year period, then divide it by 120 and you will know how much to put in the fund every month.
• Vacation fund
  • By automatically putting a little in this account every paycheck, you will have money to go on a vacation.
  • If this fund is empty, don’t go on vacation.
  • Financing a vacation on a credit card is a mark of insanity.

1. Fun money fund
   • It’s best to keep this fund in cash.
   • Put a set amount of cash in an envelope at the beginning of each month to be used exclusively for having fun.
   • This can be for eating out, entertainment, etc.
   • When the money is gone, no more going out to eat or having fun for the month!
   • This will force undisciplined people to limit the amount of money they spend on having fun, and it will force ultra-frugal people to have some fun.
2. Husband fun money fund
   • Put a little in this fund every month for the husband to spend on whatever he wants.
   • This should be separate from the general Fun Money fund.
3. Wife fun money fund
   • Put a little in this fund every month for the wife to spend on whatever she wants.
   • This should be separate from the general Fun Money fund.

• Children’s fund
  • Do not give your children an “allowance.”
  • By doing so, you will teach them to be lazy little entitled socialists.
  • Make them do jobs around the house for money from the time they are little until they are teenagers and can get a job.
  • Pay them out of this fund.
    1. When they want anything outside of food, clothing, and other basic needs, make them save for it and buy it.
    2. Every time they get money from working, or from gifts, have them divide it in to three different envelops: 10% for God, 50% for savings, 40% for spending.
    3. Tell them from an early age that you will not buy them a car, nor will you pay for their car insurance or gas, and that they need to be saving for these things.
    4. If you want to offer a 50% match up to a certain amount towards a car for them, that might be something to consider.
  • Once they become teenagers, help them to open their own bank account with a debit card (never a credit card).
    1. Deposit the money that you have budgeted for their clothing, sports fees, and other expenses that you pay for into their bank account and have them manage the money and pay for these things themselves.
    2. Let them know that you will not bail them out.
    3. If they mismanage the money and have nothing left to buy clothes or pay for their sports things, they will wear their old clothes and not play sports until they have the money for it.
  • College fund
    • Set a little money away each month for each of your children in a separate bank account for college (boys), trade school (boys), or just money to get them started in life (boys and girls), but don’t tell them about it.
    • Since this is long term savings, consider putting it into gold or silver so that its purchasing power is not destroyed by inflation.
    • There are tax-favorable accounts similar to IRAs which you can use to save for your son’s college, if you choose to.
    • I personally don’t recommend sending your daughters to college for any reason, and only sending your sons to college if they want to pursue a career in science, technology, engineering, medicine, or a similar field for which, 1) a degree is absolutely necessary, and 2) there is a high likelihood that the degree will secure them a high-paying job.
    • I recommend strongly discouraging your children from taking out student loans which will be a heavy chain on their necks keeping them (mostly likely) in debt slavery for life.
    • If you can’t help your son with college costs, tell him several years in advance, and tell him that he will need to pay for it himself, and that he should do so without debt.
  • Groceries fund (should be done in cash)
    • Budget a certain amount of money each month for groceries.
    • I recommend using cash for this fund because it will make it easier for your wife to keep within the budget when shopping.
    • I give my wife a certain amount of cash at the beginning of every month for groceries, and she knows when the money’s gone that we must make due with what we have.
    • If there is money left over at the end of the month, I put it in a “grocery surplus” fund that can be used if we need a little extra in a future month.