Wednesday, July 26, 2017

Goal Posts: Winning with Short, Medium, and Long-term Goals

 I'm not much of a sports fan.  There!  I admitted it!  But, I do know enough about sports to understand that there is always a goal.  Hitting a home run.  Sliding into home plate.  Kicking the ball through the goal posts.  Reaching the finish line before all the other runners.  Touching your opponent as they "dodge, thrust, and parry."  Check out one of my favorite Looney Tunes cartoon clips in which the words, "dodge, thrust, parry" are prominently featured.  In today's post we'll talk about "Goal Posts:  Winning the Game with Short, Medium, and Long-term Goals." 

What are short, medium, and long term goals and why are they so important?  I find people all the time who believe that if they have money left over at the end of the month, that they are living on a budget.  I get it.  I once did too!  For many years, I felt that we were "beating the system" just by being smart enough to spend less than we made.  Wasn't that good enough?  Nope.  Not really.  Here's why.  We had one, great, big pile of glorious green cash with no specific job for it to do.  That's a temptation worthy of taking down even a world champion "no spender".   It was the first big mistake I made with money.  I write about it here.   

When you are already living lean, there is a huge temptation to give into a Spirit of fear and say, "I barely afford to live from month to month.  There is NO way that I will ever have enough money to save for any future goals."  But, sticking your head in the sand and hoping that disaster will never strike is a very ineffective strategy.  Your Great Grandma had a "rainy day" fund because she knew that hard days eventually come and it's best to have an "umbrella"handy for inclement financial weather.   In Matthew 5:45 the Bible says that "it rains on the righteous and the unrighteous."  In other words, no matter who you are or how much you love and serve God, eventually ALL of us go through trying times.  

What is the statistical probability that one day in the not-so-distant future you will face an emergency?  Think about it.  Will your water heater leak all over your basement floor?  Will your 20 year old washer bite the dust?  Will your car refuse to start?  Will you open your back door to find your husband's head bleeding profusely?  Will your 18 month old son slash open his forehead while falling off of a chair?   Will your 15 year old run into the garage door while you are teaching him to drive?  (See here for that story!)  ALL of these things have happened to us in our 29 years of marriage.  They were emergencies.  They could not be predicted! 


That's why an emergency fund of $1000 is the first short-term goal of financial planning.   If you don't have an emergency fund, make it your number ONE priority!  Eventually you'll want to expand it to 3 to 6 months of living expenses.  Work extra hours, sell some possessions, or downsize areas of your monthly budget in order to get your emergency fund in place.  If you don't have a monthly budget, go here.  Everydollar is free and I use it every single month.  After you have amassed your $1000 emergency fund, DON'T TOUCH IT!!  It's like those glass cases that say, "Break in case of emergency."  But, be certain that it is truly an emergency before you smash and grab that cash.  Vacation is not an emergency.  A dinner party is not an emergency.  A new couch is not an emergency.  Even your best friend's destination wedding is not an emergency.  You get the idea. 

Even if you are in credit card debt, you should save your $1000 emergency fund BEFORE you begin paying down those cards.  Tackling all outstanding credit card debt should be your next step.  When I say tackling debt, I mean running it over like football players run full force into each other when trying to score a touchdown.  Grab that "debt free ball" and don't let anyone or anything get in your way!  Dodge, Thrust, Parry, Spin!  I recommend following Dave Ramsey's "7 Baby Steps to To Financial Peace".  If you've never taken a Financial Peace University class, I recommend taking this class too.  


Next, consider medium-term goals.  I generally consider this category to include goals with a 2-5 year time frame.  Will your child need braces?  Larry and I should get a serious "multi-child discount" in this arena.  Do you have a child graduating from high school?  We just did this and the cost of celebrations and graduation fees add up fast.  Will you need to replace a car?  We will need to do this again in just a few months.  Are the mountains of Colorado beckoning you to visit them, once again?  Don't give into this siren song unless you've saved up for that vacation.  


Long-term goals generally involve home-improvement projects or retirement and are 5 years or more in the future.  Is there an inverse relationship between the bulging wall of your downstairs shower stall and the amount of duct tape holding it together?  (Don't make me attach a photo!  It's really ugly!!  But, it will stay ugly until we have enough money to replace it.)  Has your spouse begun to measure retirement by the number of months until he can reach this goal?  What about about college tuition?  We don't do it!  That's right.  Our children have known since they were toddlers that we give them $2000 towards college upon completion of high school and they are responsible for all the rest.  Read here for our plan for a debt-free college experience.  

The final step is to track each of these goals.   Everydollar has a section on your monthly budget to allow you to set a goal.  You tell Everydollar what your savings goal is, how much you already have set aside for that goal, and then every month you allot a certain amount to be added to each goal.  Everydollar does the math for you!  I can tell Larry in about 30 seconds how much money we have available for that new car.  Here's another option.  Being a visual person, at times I have made pie charts showing how much money we are putting toward each of  our goals and added the date by which I thought we would be able to reach each one.  I color coded them.  They were pretty cool!   Big "countdown" thermometers drawn on posterboard are also very effective.  On the first day of every month, your kids can have the job of coloring in the amount you saved toward the goal.  Use whatever visual aid you need for reaching your specific goals.  Keep that goal in front of your face every single month!  

Here are today's "takeaways": 

Life happens!  So, planning for future goals should not be considered as an option.  Planning to fail begins with failing to plan.  Begin with $1000 emergency fund.  Then, pay off all credit card debt.  Finally, list medium and long-term goals in order of importance and devise a way track your progress on these goals.   

Until next time, 

Remember, do all to the glory of God, 


Wednesday, July 19, 2017

Debt-Free Living - Part 5 - Cash is King! - Buying House #2

Today we ascend to the summit of our series.  

We purchase a new house with cash!

In case you missed the first four parts of my Living Debt Free series, you'll find:

Part 1 - The Early Years - here
Part 2 - Mistakes We Made - here.  
Part 3 - Paying Off Our First Home in FIVE Years - here
Part 4 - Gazelle Intensity: Saving for Home #2 - here.

In January of 2009, we began our grand journey to save $30,000 in 24 months in order to pay cash for our next home.  This mammoth task had to be accomplished while raising 4 boys on $40,000 a year.  We would need to live on 52% of our income, while tithing 10% and saving 38%!  Our nest egg grew as we bid adieu to every single superfluous item in our budget.  We trimmed, and then trimmed again.  Every single month I produced a spread sheet showing our rate of savings.

Open Houses:  "Hits" and "Misses":  

We went to open houses every Sunday afternoon.  Some of you might find this a foolhardy idea.  Why torment yourself with homes that you have no way of purchasing right now?  However, we viewed these open houses as a way to keep our "eyes on the prize".  They fueled our fire for continuing to save.  We used them to establish a realistic idea of what we could expect to find in our price range.  We parked and walked around various neighborhoods that we found interesting.  You can find out a lot about a neighborhood just by walking around and talking to the folks you meet.  We used our experiences to create a list of 24 items that we wanted in a new home.  We prayed over our list and thanked God for preparing the perfect house for us at the perfect time.

At the end of 2009, we found that we had exceeded our goal, banking nearly $17,000 in one year!  We had saved over 40% of our yearly income!  We decided that we could buy as early as August of 2010 if the perfect house came across our path. 

We found a realtor in May of 2010.  We told him that we intended to purchase a home with cash.  He listened intently, but he also asked questions about our income and saw us toting around all those boys.  I was fairly certain that he thought we were "pulling his leg" with our proclamations of paying cash.  As a city employee, Larry is restricted to living no more than 25 miles from the city hall. We grabbed a map and used a compass to make a circle around the city.  All towns within the circle met our criteria.    I wanted a 3 bedroom house, in a small town, on a acre lot, no more than ten miles from Peoria.  The realtor showed us exactly what we asked him to show us.  No homes above our price range and only in areas in which we were interested.  It was a little discouraging.  It seems that everyone wants an acre lot less than 10 miles from the city, and owners charge some hefty prices for these amenities.

In July, Larry was praying about our new home and he felt the Lord impress on him that we would buy a home in north Peoria.  When he shared this with me I replied, "But I don't want to live in the city!"  It seems that God had other ideas.  One Sunday, just as we were seriously contemplating putting our house hunting on hold, Larry saw a listing for an open house in north Peoria.  Although the price had been reduced, it was still significantly above our price range.  Reluctantly, I gave into Larry's pleas and agreed to go look at it.  

As we walked through the house, we mentally reviewed our checklist.  It met nearly all of our criteria.   It was a three bedroom, two bath, all brick ranch with hardwood floors, and a walk-out basement.  The neighborhood was lovely and was just a 10 minute walk from a biking/hiking trail which traversed the city for miles and miles.  We decided to make an offer.  However, we told the realtor that it was a "1 bid deal".  We weren't going to entertain any counter offers.  It was "take it or leave it."  Our offer was 30% below the original asking price for the house.  I was pretty certain that the owner wouldn't agree to our terms.

Our Offer Accepted!

Just 24 hours later our realtor called to say that our offer had been accepted.  After picking my jaw up off of the floor I blurted out, "You're kidding!!!"  The realtor assured me that he was not joking.
As we neared the closing date, our realtor called to ask, "The closing for the new house will take place next Friday.  The sale of your old home will not be completed by then.  So, will you be taking out a bridge loan?"  "No," I calmly replied.  "We will just take the entire amount out of savings."  There was dead silence on the other end of the line.  He then hesitantly replied, "Okay, I'll tell them that you'll be ready for the closing next week."

The following Friday was August 26, 2010.  We arrived at the meeting with a cashier's check for the entire amount.  There is no way that I can adequately describe to you the feeling of absolute triumph that I felt in handing over that check!  Our realtor's eyes met mine.  He grinned warmly and quipped, "Cash is king!"

I want to thank you, my reader, for coming along on this journey down memory lane with me.  It has been a real joy to recount for you the amazing blessings that God has bestowed on our family.   I want to leave you with encouragement to reflect upon your own life's journey.  Remember, write, and relate your own stories of God's amazing grace. 

1 Samuel 7:12 says, "Then Samuel took a stone and set it up between Mizpah and Shen and called its name Ebenezer; for he said, “Till now the Lord has helped us.” Samuel set up a series of stones to remember God's goodness and faithfulness.  They remind us of the importance of telling these stories and passing down them down to future generations.  When you do so, you are not only building the faith of your children, but also that of your grandchildren and great-grandchildren.  These tremendous stories of God's provision will become the cornerstones upon which the faith of future generations of your family will be built!

Remember, do all to the glory of God,


Wednesday, July 12, 2017

Debt Free Living - Part 4 - Gazelle Intensity: Saving for Home #2!

Welcome to Part 4 of my series on Debt Free living.  

In case you missed them, you'll find the first three parts of the series here, here , and here.

In this week's edition I'll give you some specific tips on how we saved money for our great big, nearly impossible goal.

When we left our story last week, our money-savvy ways had become a lifestyle.  Our home was paid for.  Our brood of children was growing.  I might add, we were getting very creative at figuring out how to continue stacking them in one bedroom.  We sort of reached maximum capacity when our 4th son would simply not fit into that 11 X 11 foot bedroom.  We broke the bedroom impasse by installing our oldest son into the basement, effectively making our family room into a bedroom. 

The fact that children don't stay little for very long had a lot to do with our next decision.  Larry was starting to frequently repeat the phrase, "Every time I turn around in this house, I bump into somebody."  This was actually pretty literal, given the fact that the main floor of the house was just over 850 square feet.  The basement did add some living space, but we were cramming six people into a very modest sized home.

It was also, unfortunately, a very nice home in a quickly deteriorating neighborhood.  Rental property was becoming common.  Foreclosure was equally ubiquitous.  Drug-infested homes now dotted the neighborhood like a slowly growing blight.  In the past year, four homes within a block of our home were broken into - twice by armed robbery.  The fact that my husband worked in the evidence room at the police department compounded his angst.  He was well aware of how close the violence was getting to us.  The lynch-pin in the situation was when drug sellers ran through our front yard at 3:30 in the afternoon.  My children had just come inside from playing in the yard.  We were done!  Nothing gets a parent's attention like their children being in danger!   Talk about a catalyst for saving and moving!

Dave Ramsey Challenges Us To Pay Cash!

It was right about that time that I stumbled onto the idea of paying cash for our next home, almost by accident.  Honestly, it had not even occurred to me until I read my first Dave Ramsey book.  I had devoured dozens of books on finances, living on a budget, and saving money.  I had heard of Dave Ramsey and thought, "Well, I can't imagine that he'll say anything that I haven't read before."  But, it was one of the few books in the finance section at the library that I hadn't already checked out.  So, I sat down to read The Total Money Makeover.

In the book Dave talks about tackling goals with gazelle intensity.  He derives his concept from Proverbs 6: 4-5, "Deliver yourself like a gazelle from the hands of the hunter."  Apparently gazelles are experts at dodging in order to avoid capture by predators.  Dave asks the reader to adopt this strategy for getting out of debt.  Do whatever you have to do to get away from debt.  When you are tempted to spend money you don't have, channel your inner gazelle and run like crazy in the other direction.  The really creative, visual side of me enjoyed his word picture. 

I thought, "I'll bet I could adopt this strategy for saving for a  new house."  It was January of 2008.  I finally stopped viewing our savings as "one, big, green pile of cash."  I gave each dollar a job to do.  We found out the worth of our current home and then assumed that we could sell it for at least 90% of that price.  But, even after adding in a percentage of our savings to the total amount available for a new home, I realized that I would need to employ some black belt savings strategies to be able to purchase a home in a better neighborhood by our goal date, which was just 24 months away.

$30,000 In 24 Months!

We were approximately $30,000 short of the amount we needed in order to pay cash for a home in the price range we wanted.  My husband made $40,000 a year and we had four sons.  In order to make this happen we would need to save 35% of his income each year for the next two years!  That was double our rate of savings of the previous year! 

I was a woman on a mission.  I grabbed that great big, audacious goal with my teeth and wouldn't let go - like a dog hanging onto a bone!  I was on fire!  "Nickels and Dimes" became our daily mantra.  Although our monthly savings rate was already fairly high, each category was pretty tight.    There wasn't a lot of "fluff" to cut.  We didn't have cable, satellite TV, a dishwasher, or a cell phone (and still don't!) Our only option was to closely examine every single line item in order to carve out small amounts of additional savings.  For the next two years, if we couldn't eat it or wear it, we didn't buy it!  If we didn't already own it, we didn't need it!

Our Strategy:

Our strategy included a multi-pronged approach.  We started by cutting all unnecessary contracts.  The newspaper and internet were the first casualties.  The library had internet.  Books and movies were borrowed.   We read day old newspapers that Larry brought home from work.  We slashed our gas budget nearly in half.  We made lists of destinations, combined trips, and filled the gas tank of each of our two vehicles just once every thirty days.  Larry rode his bicycle three miles to and from work several days a week. Signs beckoning us to garage sales, went unheeded.  I used cloth diapers and line dried all laundry outside until the temperatures dropped so low that my fingers hurt.   I remember vividly bringing in laundry, dried into shapes resembling stiff boards.   I sliced the food budget to the bone, went to the grocery store just twice a month, planned meals, bulk cooked, and baked all of our bread from scratch.   

I would be remiss if I did not mention one more, really important thing that we did.  We spoke only words that were positive and "life-giving".  When tempted to spend money we smiled at each other and said, "Nickels and dimes!"  We invented a chant for counting down the months until "new house time".  We prayed regularly together as a family and thanked God for meeting our needs.  We prayed for the current owners of the home that God was preparing for us.  We prayed for the new owner-to-be of our current home.  My husband walked around our home and our block praying for a hedge of angelic protection.   Well, you get the idea.  Prayer was, and is, a huge part of our lives.

Next week we'll talk about the grand achievement of our goal. 

Here are today's "takeaways":

Although the goal of paying cash for a house wasn't unreachable, it was very difficult to achieve.  We started with a firm understanding of our financial condition.  We set a reasonable price range for the new home.  Then we constructed a very specific game plan.  We had benchmarks and a timeline in place for tracking our progress.  We were willing to hard work and embrace delayed gratification.  

Until next week,

Remember, do all to the Glory of God,


Wednesday, July 5, 2017

Debt Free Living - Part 3 - Paying Off Our First Home in FIVE Years


Welcome to Week 3 of my debt-free living series!

If you haven't read part 1 or part 2, you'll find:

Part 1 The early years:  here 
Part 2 Mistakes we Made:   here.  

What we needed to know:

Larry and I had been married for 3 years.  It was that magical time when most couples purchase their first home.  Being the facts, figures, and finance guru that I am, I decided that we needed to look at three basic pieces of information and then align them - sort of like a venn diagram.  

1)  Experts tell you that no more than 35 percent of your monthly income should be allocated for household expenses.  In addition to your mortgage payment, household expenses include: property taxes, utilities, home maintenance, and house insurance.  My eyes nearly popped out of my head when I realized how very, very little we really had to be able to make a mortgage payment and still remain fiscally solvent!  

2)  Remember that big, green pile of cash that I kept eyeing longingly?  We had to decide how much of that stash we were able to use as a down payment.  We looked at our hard-earned bounty, which by this point in the game was seeming smaller by the minute.  We still hadn't quite made the leap to giving every single dollar a job, but, we decided  using 75% of our cash was reasonable - leaving us with 3 months of expenses as an emergency fund. 

3)  We found out how much the bank would loan us.  Wow!  Now that was a lot  of money!  Apparently having a steady job and no debt made the bank think that we were made of ... well... money!  No matter what figure the bank gives you, be prepared to cut it.  Seriously!  There is no way you should ever borrow that much money!  

Pulling it all together:

Now came the tricky part, pulling all three pieces into perfect alignment.  We weighed our options carefully.  Paying 20% down would allow us to skip the mandatory PMI (Private Mortgage Insurance) that was inherent in loans involving more than 80% of the value of the home.  So, that magical 20% down payment became our goal.  In order to "right size" our mortgage to match our down payment, we needed to cut the total amount the bank was willing to loan us by 35%.  By looking at homes only in this price range, we could opt for a 15 year, instead of a 30 year mortgage.  Sighing, I wrote down a solitary figure on a scrap of paper. It represented our perfect purchase price.  I cried.  Seriously, I did cry!  We did the only thing we knew to do:  We began to pray.  This seemed like oddly familiar ground.  Remember, we "prayed in" the little white house just a few months into our marriage. 

While our decidedly tight financial circumstances could have been drastically depressing, we took an optimistic outlook and  began looking at homes.  One dismal home after another met our weary eyes.  Our price range meant either tiny, cramped, poorly built spaces or older homes in bad neighborhoods in need of a serious overhaul.  Reviewing our list of "wants", we mentally crossed off items.  Three bedrooms became two.  Two bathrooms became one.  Central air became window fans.  We were being forced to separate our "wants" from our "needs".  Meanwhile, we continued praying for God to prepare a home for us, at the right price, in a nice neighborhood.  

Let the bidding war begin!

 In September of 1992, we found ourselves in a 3-way bidding war for a home.  All three couples had put in a bid for the same house, for the same amount, and on the exact same day.  We won the war.  That 20% down payment made the difference.  They gave us the house because our financing looked more secure.  The other bidders had offered 10% and 5% down respectively.  Never in my life did I think that magic 20% number would have proven to be so critical to us getting the home that we wanted.  

It was a 2 bedroom, 1 bath bungalow with a walk-up attic, built in 1930. Over 60 years earlier a local contractor had built it for his daughter and son-in-law.  We were the second owners.  The house had "good bones", beautiful woodwork, hardwood floors under the aging carpet,  and lathe and plaster walls.  The price was just $1000 more than my "perfect purchase price"!  

The first year we lived there, we put on a new roof and updated the electrical systems.  Then for the next four consecutive years, we saved every extra penny we could, making the equivalent of double payments.  Every few months we wrote a second payment check and labelled it "Apply to principle only".  I double-checked each time, to be certain that the bank had, indeed, applied it to the principle and not the interest.  I quit my job at the end of November in 1996, as we welcomed our first child into our family.  Our income was cut by 40 percent!  Larry made the final house payment in February of 1998, just over five years after we took possession. 

Next week we'll talk more about "living lean".  Over the next thirteen years we welcomed three more sons into our family, while setting aside the equivalent of our mortgage payment every single month.  Our brand new, great big, nearly impossible goal became to purchase our next home with cash!  

Life Lessons:

Our season of house-hunting was difficult for us on many different levels.  We were not only praying for a home, we were also praying for a child.  We went through years of infertility.  I desperately wanted to be a mother and I wanted to stay at home with that baby.  Looking back, I realize that God's timing was perfect.  Had we bought a more expensive home, I would have been forced to choose between being at home with our children and going back to work to help finish paying for the house.  I never had to make that choice.   A year after our son's birth, we paid off the house. 

Looking for your first home is a LOT of fun!  You get to go to open houses on Sunday afternoons, look at how others have utilized their space, explore different decorating techniques, and try to envision your family in each home.  Unfortunately, when you are house hunting while living beneath the median US household income, your dreams come into conflict with your reality in very short order!  It's vitally important to place distance in your mind between what you want and what you can afford when searching through the current MLS listings.  In your price range, finding the right house may be a time-consuming process.  So, be prepared to take your time! 

I remember going to family potlucks as a child and eating until I felt that I would explode. Those last few bites of chocolate cake sat on my plate uneaten.  I was so full that I just could not bring myself to touch it.  Food tastes SO good at a summer picnic.  However, too much of a good thing quickly becomes a really bad, uncomfortable, painful situation when you take on more than you can chew.  I vividly remember overhearing the adults declare to one another, "Her eyes were too big for her stomach." 

That is the word picture I want you to remember when considering your next house.  When you are living lean, each and every calculation you use on your journey becomes all that more critical.  
 Right-size your home and your mortgage payment and you will not be living under duress.  But, when you overspend, the result is often uncomfortable and painful.  You just don't want to spend years of your life worrying about whether there will be enough money to make your payments.