Within Your Means Defined

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Some of the world’s richest people fall victim to the wrath of borrowing. People who make $20k want to live like they make $60k. People who have $20mil want to live like they have $60mil. Live within your means. If you don’t have cash, that means it’s not within your means. You know what I mean? You probably disagree, but I’ll be here with open arms to help you clean up the mess when your debt catches up with you. And I won’t even say, “I told you so.” That’s just mean.

Co-signing is “STUPID,” Says The Lord

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“It’s stupid to guarantee someone else’s loan.” Proverbs 17:18, Contemporary English Version (CEV).

I’m not sure how accurate this translation of Scripture is, but it grabbed my attention the first time I heard it. For the more conservative Bible scholar, the KJV says, “A man void of understanding striketh hands, and becometh surety in the presence of his friend.” See, it just doesn’t “POP” the way the other one does.

Whatever translation you fancy, let’s unpack this thing and try to figure out why cosigning is such a terrible thing. For starters, when someone needs a cosigner, someone in the business of selling loans has already reviewed this persons credit history and come to the conclusion that your broke half cousin-in-law, I mean the person in desperate need of financial leverage, can’t be trusted on their own to pay the money back. So the lender needs someone who they can trust, someone with good credit, to agree to repay the loan in the event the original borrower does not.

For me, that would be enough, but I know you’re far more loving, merciful, and generous than am I, so I’ll continue. The same banks that send credit card offers to dogs, dead people, and 4-year-olds do not trust this person to make good on the debt. The same people who spend millions of dollars trying to get 18-year-olds living on student loans to borrow money, will not lend to this person. But you…your tender heart wants to believe, “He just needs a little help to get on his feet. He’s ready to turn his life around and start being responsible. Besides, he needs the car or he won’t be able to get to work.” RUBBISH! PURE RUBBISH!

Please don’t kid yourself. I know you love this person and it’s very hard to say, “No” to a loved one in need, but here are the facts. There is a very high probability that your beloved, with his great intentions, will stick you with the bill. That’s why he needs a cosigner in the first place; because professional lenders don’t believe he’ll pay up.

Don’t get trapped in the guilt trip of not being there when they need you, either. If you truly love that person, find the nicest way possible to say, “No.” Please understand me, I’m not being mean, but I am trying to save your relationship. If you are absolutely sold on the idea that whatever this person needs is a necessity, just give them the money. If you don’t have it to give, you don’t have it to give.

When the original borrower doesn’t pay the bill, you’ll be stuck with the payments. Now picture Thanksgiving dinner. You’re sitting across the table from someone who owes you money. You look at their family dressed all nice in the new clothes they bought with the money they owe you. And they act like it’s all good. And you try to convince yourself, “It’s the principle, not the money.” But the principle is, “THAT GUY OWES ME MONEY!” So you don’t talk to each other for years, and you can cut the tension with a plastic knife whenever you two are in the same room. All of this because you chose to sign a note that you knew they could not pay.

People usually cosign for others out of a genuine desire to help, but more harm than help comes out of these deals far too often. The truth is this. A person usually needs a cosigner because they have a proven track record of misbehaving with money. When someone cosigns, they enable the person to continue in that misbehavior and they also set themselves up to be the a potential victim of the same. And if you don’t know, the closest people to the debtor are the farthest down on the payback list. They know how much you love them, what they owe you doesn’t show on a credit report, and they’re pretty sure you’re not going to sue. You’ll just stop talking, be upset, and hopefully get over it.

Again, I’m not sure about the CEV’s accuracy, but Proverbs 11:15 says, “It’s a dangerous thing to guarantee payment for someone’s debts. Don’t do it!”

But what if I’ve already cosigned for someone? If you’ve already cosigned for someone, take this advise from the CEV’s rendition of Proverbs 6, “My child, suppose you agree to pay the debt of someone, who cannot repay a loan. Then you are trapped by your own words, and you are now in the power of someone else. Here is what you should do: Go and beg for permission to call off the agreement. Do this before you fall asleep or even get sleepy. Save yourself, just as a deer or a bird tries to escape from a hunter.”

Life Without Loans! My loans, your loans, or anybody’s loans!

Rent vs. Mortgage

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In the world of personal finance, there’s not much debate about whether someone should rent or borrow to buy a place to lay their head. Most financial gurus agree that it usually is best for people to buy a home if they can afford the monthly mortgage payment. Each financial know-it-all has a formula that they use to gauge whether or not someone can afford to take on a mortgage. One financial ministry says spend no more than 40% of your take-home pay on total housing costs, including your mortgage. A popular radio/television host and author advises his followers to take out a 15-year, fixed rate mortgage with a monthly payment that’s no more than 25% of your take home pay, even though he says he would save and pay cash.

Some of the reasons given to support the position that getting a mortgage is better than renting is that real estate traditionally has risen in value and renting is just throwing away money. I may not do extensive writing on this subject, but I will do a few interviews with people who have both rented and borrowed to buy and see how they feel about their decision in retrospect. Watch the videos. I believe they will be helpful to renters, owners, and those deciding if or not they want to leave the nest.

Peace & Thanks,
Jamel Black
Foresight Christian Financial Coaching

A Penny Saved is More than A Penny Earned

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This age old adage is attributed to Benjamin Franklin, AKA Poor Richard. However, times have changed and so has the way we need to think about money. With time came the income tax. Yes, in this great land of freedom and opportunity there is a cost to making money. Currently, depending on how much you bring in, you could be charged up to $0.35 a buck, but most people will only pay about 25 cents per dollar.

This means I have to earn $1 to take home 75 cents. However, if I find a way to save a dollar that I would normally have to spend, I come out better than if I had gone to work or sold something for a dollar because my savings don’t get taxed. And the savings don’t stop there. If you live in a place like I do, where they charge a 10% sales tax on everything, you also pay less in sales tax when you figure out how to get what you need for low or no cost. And I’m not talking about the 5 finger discount either!

That being said, it’s worth your time to seek out as many ways as possible to save money. I like to use coupons that use the word “FREE.” But don’t get sucked in to the one’s that say, “Free with the purchase of…” because those usually involve paying for a premium priced product that you wouldn’t normally buy. And don’t go for the “Buy 3, Get 1 Free” deal either, unless you’d already planned to buy 4.

One cool way I found to save is through sites like PlasticJungle.com and eBillme.com. At PlasticJungle.com, I like to buy discounted gift cards to stores and restaurants I frequent. For example, I’ll by a $500 Wal-Mart gift card because my budget for the month calls for $300 in groceries and $200 in gas. Since I buy my groceries at Wally Word and I get gas from Sam’s Club, a $500 gift card for $485 just saved me $15. But you say, “$15 ain’t no money!” I say if I do that for Applebees, Chili’s, & The Cheesecake Factory when I go out to eat, and I do it at Home Depot & Lowes when I need something for the house, all of those savings really add up. Think about it. If you had played this game in 2008, you would have made a lot more money than everybody else did in the stock market. This is guaranteed return on investment. You’re basically buying money at a lower price. You’re trading money for more money! The only downside is the restriction to whatever merchant is on the card. But that’s not a big deal if you have some Foresight and plan ahead.

Of course there are many ways to save, but you have to be creative and diligent. It’s work, but it’s worth it. A slack hand causes poverty, but the hand of the diligent makes rich. Proverbs 10:4-5 (ESV)

Peace & Thanks,
Jamel Black

Do I Need A Budget, Part 1

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Most people think of a budget as something poor people use to make sure they don’t buy anything fun, or a way to keep your wife from buying clothes, shoes, and handbags. That’s surely not the case. Don’t think of a budget as a chain that binds or enslaves, but as a navigation system that guides us to our desired destination in the most expeditious fashion.

Without a road map or a navigation system, we may never get where we intend to go. Why don’t you try it. Get in your car and go to 217 Summit Blvd, Space F1, Birmingham, AL 35243. Don’t ask for directions. Don’t go to Google Maps or MapQuest, or anything like that. Don’t use your Garmin, TomTom, or Magellan. Don’t use your car’s built in Navigation system. Don’t even use the antiquated gas station map. Just get in the car and go. The vast majority of people won’t be able to find their way to the desired location. But using any of the aforementioned tools, most of us could find our way directly to the Apple Store at The Summit.

That’s how it is with money. Most people want to have lots of money, or at least enough to pay their bills and live comfortably. For most Americans, this includes buying food, clothing, houses, and cars. It also includes retirement & sending our children to college. However, many of us struggle to get to our desired destinations safely. For lack of navigation, we take many unplanned detours. This causes us to get where we’re going later than we’d planned. Or worse, we never get there.

On the way to shelter, we get lost in foreclosure. On the way to transportation, we get stuck in repossession. On the way to higher education, we end up in forbearance. Just trying to get to food and clothing, many of us get wrecked by bankruptcy.

A proper road map will ensure you get where you intend to go. If you follow the map. Don’t be the guy who, when his navigation system says, “Make a U-turn,” keeps going straight because he knows better than the plan. Use some foresight and chart your course wisely. Then see your way to your final destination.

Think about what you want to do next month. You want to eat, pay the rent or mortgage, pay the utility bills, put gas in the car, and buy a birthday present for your little cousin, Nay-Nay. So you look at the money you have in your hand, and say, “How can I do these things with what I have?” Let’s say you have $2,000 in hand from last months income.

1. The rent or mortgage payment is probably already decided for you, so you allocate $800 of the $2000 for shelter.

2. You think about what you want to eat, and mark $350 of the remaining $1200 for food.

3. You know it’s winter, and you’re not chopping wood for the fireplace, so you set aside $350 of the remaining $850 on utilities.

4. You then set aside $200 for the gas guzzling SUV and that leaves you with $300 to spoil little Nay-Nay, and/or save for the future.

That wasn’t that hard. Was it? Did it feel like bondage? Did it make you feel poor? No, it probably didn’t. What did it do? It gave you control over that $2000. It made sure those five things you planned to do got done. You gave each dollar a job, and put them to work.

I know you have more bills than that, but this is just an example of how it’s done. The point is to make your money work for you, rather than getting worked over by the lack of money you have at the end of the month and there are still things left undone. This is how we stay on course at the Black’s house. We don’t fear the weather, the traffic, or the state troopers. We know that if we handle our business, and stay the charted course, we will most definitely reach our destinations.

So the answer to “Do I need a budget?” is a resounding YES. If you have money, you need a budget.

The Spirit of CHRISTmas

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Glory to God in the highest, and on earth peace, good will toward men. (Luke 2:14) Have a very blessed day, celebrating the wonderful coming of our Great Lord and King, Jesus the Christ.

When you’re debt free, you can give like you’ve never imagined. This is me in October 2010, visiting some orphans in Ethiopia. We spent over 60 hours just traveling, but the reward is eternal.

Jesus said, 31 ?“When the Son of Man comes in his glory, and all the angels with him, ?then he will sit on his glorious throne. 32 Before him ?will be gathered ?all the nations, and ?he will separate people one from another as a shepherd separates ?the sheep from the goats. 33 And he will place the sheep on his right, but the goats on the left. 34 Then ?the King will say to ?those on his right, ‘Come, you ?who are blessed by my Father, ?inherit ?the kingdom ?prepared for you ?from the foundation of the world. 35 For ?I was hungry and you gave me food, I was thirsty and you ?gave me drink, ?I was a stranger and you welcomed me, 36 ?I was naked and you clothed me, ?I was sick and you ?visited me, ?I was in prison and you came to me.’ 37 Then the righteous will answer him, saying, ‘Lord, when did we see you hungry and feed you, or thirsty and give you drink? 38 And when did we see you a stranger and welcome you, or naked and clothe you? 39 And when did we see you sick or in prison and visit you?’ 40 And ?the King will answer them, ?‘Truly, I say to you, as you did it to one of the least of these ?my brothers, you did it to me.’ 41 “Then he will say to those on his left, ?‘Depart from me, you ?cursed, into ?the eternal fire prepared for ?the devil and his angels. 42 For ?I was hungry and you gave me no food, I was thirsty and you gave me no drink, 43 I was a stranger and you did not welcome me, naked and you did not clothe me, sick and in prison and you did not visit me.’ 44 Then they also will answer, saying, ‘Lord, when did we see you hungry or thirsty or a stranger or naked or sick or in prison, and did not minister to you?’ 45 Then he will answer them, saying, ‘Truly, I say to you, as you did not do it to one of the least of these, ?you did not do it to me.’ 46 And these will go away ?into eternal punishment, but the righteous ?into ?eternal life.” The Holy Bible : English Standard Version. Mt 25:31-46.

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