Warren Buffet on Debt

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Okay. I’ve tried to convince you through scripture and plain reason that borrowing money is an awful idea. But you just don’t seem to get it. I’ve quoted scripture and shared my experiences, but now…I’ve reached an all time low. I’m going to quote a someone who didn’t appear in the Bible.

From Wikipedia: “Warren Edward Buffett (born August 30, 1930) is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as “legendary investor, Warren Buffett”, he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is consistently ranked among the world’s wealthiest people. He was ranked as the world’s wealthiest person in 2008 and is the third wealthiest person in the world as of 2011.”

Here are a few of his comments regarding debt, a.k.a. leverage, a.k.a. borrowing:

More smart people have gone broke through leverage than to any other activity. A smart person can’t go broke unless they use leverage. As one of my friends says: If you’re smart, you don’t need it. And if you’re dumb you’ve got no business using it. So, it just doesn’t make sense.

Good business or investment decisions will eventually produce quite satisfactory economic results, with no aid from leverage.

Borrowers then learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, that’s all that is noticed. Even a brief absence of credit can bring a company to its knees. In 2008, in fact, its overnight disappearance in many sectors of the economy came dangerously close to bringing our entire country to its knees.

Unquestionably, some people have become very rich through the use of borrowed money. However, that’s also been a way to get very poor. When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbors get envious. But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade – and some relearned in 2008 – any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.

In his 2011 letter “To the Shareholders of Berkshire Hathaway Inc.,” Buffett went on to say how he learned from his grandfather the importance of having cash on hand in case of emergencies and for investment opportunities. He also talked about not using debt because he did not want to take unnecessary risks with shareholders’ money. Buffett understands stewardship.

As Christians, we are managers of God’s money. We are to use the resources wherein he intrusted us with the utmost prudence.

Take it from me…Take it from Buffett…Take it from God…Borrowing is not the way to true financial freedom.

Jamel Black
Personal Finance Coach

Why I Live Without Loans!

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I feel preachy today.

Turn in your Bibles to Deuteronomy chapter 28. Go down to verse 12. If you’re there, say, “Praise The Lord!” For those of you who haven’t found it, it’s toward the front of your Bible, between Numbers and Joshua. And it reads,

The LORD shall open unto thee his good treasure, the heaven to give the rain unto thy land in his season, and to bless all the work of thine hand: and thou shalt lend unto many nations, and thou shalt not borrow.

And Proverbs 22:7 says,

The rich ruleth over the poor, and the borrower is servant to the lender.

People often ask why I am so staunch in my stance on living without debt. These passages and others like them tell me that it’s the will of God for his people to to be free from debt. And I think that most people professing to be Christian in our culture today would agree with that statement. However, where I differ from the mainstream on this issue is here. When most church goers read these scriptures, they think of a promise of God that they hope will be manifested at some point in the future. And they are correct in that God was speaking to the children of Israel about what He would do in their lives if they followed His ways.

However, as a follower of Jesus Christ, believing that the Bible is His inerrant, revealed will for my life, I like to think of the Bible as a users manual for my life today. It’s sort of like when I buy a new cell phone. Without reading the manual, I can easily charge the battery, add contacts, and make phone calls through my past experiences with like devices. However, in order to dig deeper, and get the full benefit of my pocket computer/video camera/voice recorder/phone, I need to read the manual from the manufacturer to fully understand the hidden functions and benefits of the product.

When I became a Christian, at age 20, I became a new creature according to 2 Corinthians 5:17. However, I had lived for 20 years learning how to operate my life. With cell phones, they pretty much build upon last week’s technology and give us a few new features. However, when a man is born again, Paul writes,

…old things are passed away; behold, all things are become new.

Therefore, it would be both silly and ineffective for me to attempt to simply pull from past experiences and operate my new life. Because this life is not an upgrade, but the end of one life and the beginning of a new.

That being said, as a babe in Christ, I operated my finances the best way I knew, according to what I’d been taught, and according to what my pastor and mentors told me. But as I grew and started understanding the scriptures for myself, passages like Deuteronomy 28:12 and Proverbs 22:7 began to leap out at me. I had student loans, credit card debts, a car loan, and a mortgage. I thought, “Man, I’m in a messed up situation.”

Then I would go to church and hear conflicting information. When speaking on finances, the preacher would say things like, “If you don’t have the money, you can’t afford it.” But he would often have a caveat like, “…unless it’s for a house because it’s such a big purchase.” At other times he would go on about how it’s smart to borrow to get a house because you can build equity as opposed to renting and “throwing away money.” But he would still be adamant about it being God’s will for us to be debt free. As the crowd said, “Amen,” I felt like I was the only one in the place who felt like something didn’t quite add up. And I would notice other churches with their building projects. They would have the signs of a bank that read, “Financed By…” But they all seemed at some point or another to condemn the use of debt or say that God wanted us all to be debt free.

Then I came across Luke 16:13.

No servant can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon.

When I read that no one can serve two masters, I thought about Proverbs 22:7, “…the borrower is servant to the lender.” Then I reasoned, “As a Christian, I am to live my life completely in service to the one who died for me, according to 2 Corinthians 5:15, “And that he died for all, that they which live should not henceforth live unto themselves, but unto him which died for them, and rose again.” And again in Romans 6:22, “But now being made free from sin, and become servants to God, ye have your fruit unto holiness, and the end everlasting life.” I could not then and still cannot to this day, reconcile within my conscience being a servant to a lender and simultaneously being a servant to God. Jesus said plainly, that “No servant can serve two masters.”

My wife and I vowed to never borrow again and started to pay off all our debts, including our mortgage, as quickly as possible. Sometimes I’m amazed at how fast we were able to do it. We paid off over $200,000! And we were not making an enormous amount of money, either. When we began our debt free journey, I was working part-time at UPS.

I sometimes get questioned by professing believers about my position, and they say my interpretation of scripture is too literal, or that I’m trying to stick to the “letter of the law” and not to the spirit of what Jesus was teaching. First, I’ll say this. When I started, I was doing nothing more than obeying my conscience and doing the best I knew to follow the instructions of my God. That being said, I have yet to find any scriptures that contradict my initial understanding. However, the arguments in support of “holy borrowing” are usually nothing more than the opinions and experiences of men, rather than reasonable interpretations of scripture. I hear things like, “The Lord told me to get a loan,” or “The Lord told me to buy the house.” I never argue with people when they say, “The Lord told me…” That’s between them and God.

These are the best arguments I have heard from scripture:

1. It can’t be impossible for man to serve two masters [God being one of them] because the Bible instructs servants in how to relate to their earthly masters as in Colossians chapter 3.

22 Slaves, obey in everything those who are your earthly masters, not by way of eye-service, as people-pleasers, but with sincerity of heart, fearing the Lord. 23 Whatever you do, work heartily, as for the Lord and not for men, 24 knowing that from the Lord you will receive the inheritance as your reward. You are serving the Lord Christ.

Touche. However, we must remember that Jesus Himself made the statement that “No servant can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other.” I didn’t make this stuff up. Further, when Paul tells slaves how to conduct themselves if they were called while in servitude, he says something interesting. 1 Corinthians 7:20-24 reads,

20 Each one should remain in the condition in which he was called. 21 Were you a slave when called? Do not be concerned about it. (But if you can gain your freedom, avail yourself of the opportunity.) 22 For he who was called in the Lord as a slave is a freedman of the Lord. Likewise he who was free when called is a slave of Christ. 23 You were bought with a price; do not become slaves of men. 24 So, brothers, in whatever condition each was called, there let him remain with God.

Notice that Paul says, “But if you can gain your freedom, avail yourself of the opportunity.” Therefore, if it is possible for you to be free, His desire is for you to be free. This argument cannot used as a cop out to remain under the bondage of debt. Understanding the times, some people were sentenced to physical servitude for life. They, therefore, could not be set free in the natural sense. However, he goes on to write, “…he who was called in the Lord as a slave is a freedman of the Lord.” God totally understands our situations. Just as someone may have been sentenced to a lifetime of slavery in Paul’s day, if you’re 100 years old, with a trillion dollars in debt, you may never be debt free on this earth. Nevertheless, true repentance is a total change of mind. I firmly believe if the rare person for whom it is impossible to pay off their debts, is truly repentant and has a heart and mind to do money God’s way, the Lord will honor the fruit of that repentance.

Verse 23 is another one that keeps me from taking on debt. It says that I have been purchased with a price and charges me not to become slaves of men. If the Bible is true when it says “the borrower is servant to the lender,” and we have a direct command not to “become slaves of men,” if I willingly become a borrower, I willingly become a slave of men.

Here’s the bottom line. Jesus is right. No man can serve two masters.

2. God told the children of Israel to borrow from the Egyptians.

21 And I will give this people favour in the sight of the Egyptians: and it shall come to pass, that, when ye go, ye shall not go empty: 22 But every woman shall borrow of her neighbour, and of her that sojourneth in her house, jewels of silver, and jewels of gold, and raiment: and ye shall put them upon your sons, and upon your daughters; and ye shall spoil the Egyptians.

Exodus 3:21-22

35 And the children of Israel did according to the word of Moses; and they borrowed of the Egyptians jewels of silver, and jewels of gold, and raiment: 36 And the LORD gave the people favour in the sight of the Egyptians, so that they lent unto them such things as they required. And they spoiled the Egyptians.

Exodus 12:35-36

It seems that they may have a point here. However, if we look closely at these quotes from the King James Version of the Bible, we see that the plan from the beginning was to “spoil the Egyptians.” That was the first red flag that led me to look up the word translated as “borrow” in the authorized version because the word spoil means to plunder, pillage, or take by force. The Bible clearly states, “the wicked borrows but does not pay back.” (Psalms 37:21) God could not have been instructing His people to be wicked by borrowing from the Egyptians without intention to repay. The word translated as borrow in this story is “shaw’al” (Stong’s 7592). It is translated as ask (or some version of ask 94 times), while it is translated as borrow or borrowed only 6 times. Seeing that there was no intention to repay the Egyptians for the spoils, I think it safe to say that the word could not have been correctly translated as “borrow” as shown in the King James Version, but as ask, as shown in Young’s Literal Translation.

35And the sons of Israel have done according to the word of Moses, and they ask from the Egyptians vessels of silver and vessels of gold, and garments; 36and Jehovah hath given the grace of the people in the eyes of the Egyptians, and they cause them to ask, and they spoil the Egyptians.

Ex 12:35-36.

Here’s the bottom line. God did not instruct Israel to borrow from the Egyptians, but to spoil the Egyptians.

3. The prophet told the woman to borrow vessels to sell her God given oil in 2 Kings 4.

1 Now there cried a certain woman of the wives of the sons of the prophets unto Elisha, saying, Thy servant my husband is dead; and thou knowest that thy servant did fear the LORD: and the creditor is come to take unto him my two sons to be bondmen. 2 And Elisha said unto her, What shall I do for thee? tell me, what hast thou in the house? And she said, Thine handmaid hath not any thing in the house, save a pot of oil. 3 Then he said, Go, borrow thee vessels abroad of all thy neighbours, even empty vessels; borrow not a few. 4 And when thou art come in, thou shalt shut the door upon thee and upon thy sons, and shalt pour out into all those vessels, and thou shalt set aside that which is full. 5 So she went from him, and shut the door upon her and upon her sons, who brought the vessels to her; and she poured out. 6 And it came to pass, when the vessels were full, that she said unto her son, Bring me yet a vessel. And he said unto her, There is not a vessel more. And the oil stayed. 7 Then she came and told the man of God. And he said, Go, sell the oil, and pay thy debt, and live thou and thy children of the rest.

Here’s another one of those 6 times the KJV renders “shaw’al” as borrow. 4 of them were used in Exodus. See how Robert Young chose to use the word ask in this passage as well.

1 And a certain woman of the wives of the sons of the prophets hath cried unto Elisha, saying, ‘Thy servant, my husband, is dead, and thou hast known that thy servant was fearing Jehovah, and the lender hath come to take my two children to him for servants.’ 2And Elisha saith unto her, ‘What do I do for thee? declare to me, what hast thou in the house?’ and she saith, ‘Thy maid-servant hath nothing in the house except a pot of oil.’ 3And he saith, ‘Go, ask for thee vessels from without, from all thy neighbours—empty vessels—let them not be few; 4and thou hast entered, and shut the door upon thee, and upon thy sons, and hast poured out into all these vessels, and the full ones thou dost remove.’ 5And she goeth from him, and shutteth the door upon her, and upon her sons; they are bringing nigh unto her, and she is pouring out, 6and it cometh to pass, at the filling of the vessels, that she saith unto her son, ‘Bring nigh unto me a vessel more,’ and he saith unto her, ‘There is not a vessel more;’ and the oil stayeth. 7And she cometh and declareth to the man of God, and he saith, ‘Go, sell the oil, and repay thy loan; and thou and thy sons do live of the rest.’

If you’re still not satisfied with the translation explanation, the story itself shows, as the Exodus story, how there was no intention to return the acquired items. She was to “Go, sell the oil.” I don’t think it’s far fetched to believe she sold the oil while still inside the vessels used to carry it. Side note. You also see how the bind created by borrowing literally would have made the widow’s children slaves to the lender had not the prophet stepped in.

Here’s the bottom line. When translated accurately, we see the widow wasn’t instructed by a prophet to borrow.

It’s also interesting to see that the word used for borrow in Deuteronomy, Psalms, and Proverbs is different than the word “shaw’al” used in Exodus and 2 Kings. The word used in Deuteronomy 28:12, Psalms 37:21, and Proverbs 22:7 is “law-vaw” (Strong’s 3867). I like to check the original languages and multiple translations for accuracy. Sometimes it really helps me understand things better.

Those are the only reasonable Biblical arguments I’ve heard on the matter. If you have other reservations, feel free to contact me or comment directly to this blog post.

To sum it all up, I live without loans because I’m fully persuaded that this is the will of God, as shown in His scriptures. To continue to take out loans because of discontentment with our means is not acceptable.

1 I beseech you therefore, brethren, by the mercies of God, that ye present your bodies a living sacrifice, holy, acceptable unto God, which is your reasonable service. 2 And be not conformed to this world: but be ye transformed by the renewing of your mind, that ye may prove what is that good, and acceptable, and perfect, will of God.

Romans 12:1-2

I told you I felt preachy. That was long.

Peace & Thanks,
Jamel Black
Personal Finance Coach

How the Post Office Saved Me an Additional 10%!

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Two days ago, I wrote about how I saved 8% on home improvement by buying discounted gift cards from Plastic Jungle. After a little poking around the web, I found out that I could save another 10% at Lowe’s by going to the Post Office and asking for a “change of address kit.”

I tried it out and it worked just fine. I was in and out of the PO in less than two minutes with a coupon for 10% off my next purchase at Lowe’s. I read that some of the Post Office kits have Home Depot coupons and some have Lowe’s coupons. I haven’t tried it, but some have said that the stores will honor their competitor’s coupons.

Overall, I saved a whopping 18% on the stuff I needed in addition to the floors I picked up from a different store. So, stop by the Post Office and ask for a “change of address kit.” on your way to Lowe’s and save money. Remember, a penny saved is worth more than a penny earned.

Peace & Thanks,
Jamel Black
Personal Finance Coach

Buy & Hold Investing is for Underachievers

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I’ve heard many financial advisors and pundits opine that people should always invest equal amounts of money into mutual funds or individual stocks at regular intervals regardless of market conditions. The idea here is that by consistently investing, you will amass wealth via the magic of compound interest over time, along with dollar cost averaging. Can this work? Yes, it can. Is this the best way to get the highest profits? No. There is a more excellent way.

For example, using the traditional buy, hold, invest regularly, compound until you’re 65 method, imagine you bought 10 shares of stock XYZ at $10 per share. You then purchased additional shares with $10 monthly. No matter the market price, you put $100 per month toward XYZ. In a normal world, XYZ would go up and down over time. If XYZ is a pretty good investment, while going up and down, the price of the stock would also trend higher over time.

Let’s say you bought your first 10 share lot in January. The stock went down to $9.95 at purchase time in February, $9.20 in March, $9.60 in April, $9 in May, $10.26 in June, $11 in July, $10.55 in August, $10.63 in September, $10.13 in October, $9.80 in November, and $11 in December.

At the end of the year, after contributing $1,200, you would have 119.3378 shares worth $1,312.72, a gain of $112.72 (about 9.39%). Not bad.

Continue for a more excellent way.

Since you’re watching the stock and the underlying company, doing research and keeping up with the news, quarterly conference calls, competition, and general market conditions, you know about what your stock is worth on the market. You can minimally predict certain behaviors of your stock…because you’re not an underachiever. You’re a certified stock stud!

You also got in the game in January at 10 shares for 10 bucks a share. When the stock dropped a nickle in February, you were unsure what caused the drop, but you were confident in your stock, so you held your position and stashed your extra $100. However, you continued to search for the reason the stock previously dropped, so when you saw it drop to $9.20 in March, you realized it was the overall market’s reaction to news that was unrelated to your company that made it fall.

You then took that opportunity to put your $200 to work at $9.20 per share. The news was still gloomy, but for some odd reason the stock jumped 40 cents in April, so instead of buying, you sold the lot you bought at the $9.20 clearance sale, bringing home a whopping $8.69 profit. In May the stock fell to $9. The stock’s story still looked good, so you bought it with the $408.69 you had from February, March, April, & May’s savings and the $8.69 in profits from the March/April flip. When The stock went up to $10.26 in June, you didn’t know if it would fly higher or keep running, so you sold a third of your position and let the rest ride. You believed the rally was for real in July, so you let your position grow and waited for a pullback to get back in. Patience is key (you learned not to get greedy and chase a hot one a long time ago when you used to day trade). You watched it drop in August, but decided to hold. You also held the next month, and passed up the chasing opportunity at $10.63, but you bought half your shares back at $10.13 in October. You didn’t go all in because it wasn’t a fire sale, but it was still low enough to still benefit from the lot you sold in June. And when it dipped to $9.80, for the first time in 6 months, you took the opportunity to put all the cash you had on hand to it before the predictable holiday season where it popped up to $11.

At the end of the year, after contributing $1200, you would have 134.62 shares worth $1,480.82, a gain of $280.82 (about 23.4%).

You may think the $168.10 difference between the two scenarios is not worth the work. And if it were only 170 bucks…one time, I would probably agree. However, when you start dealing with real money over a long period of time, the difference between 23% and 9% is staggering.

Check this out. If  you took the same $100 a month and invested it consistently over 30 years (an average persons working life after their stupid 20′s) and got a 9.3% annual return, you would end up with $196,437.83.

If you invested it aggressively like the stock stud above and got a 23.4% annual return, you would end up with $5,461,861.84!

Did you see that! That’s a 5.2 million dollar difference! That’s the difference between giving a hoot if Social Security is around when you’re 65! That’s the difference between greeting guests at Wal-Mart or greeting guests to their room in your spacious paid for home!

What if I’m half wrong? You’d still end up with 2.6 million bucks! That’s still sounds about 12 times better than the old school advise!

If I said it once, I’ve said it a thousand times, “Don’t be Broke; Be Different.”

This is for the naysayers. Yes, I made up this scenario. No, I don’t expect you to find a stock to behave exactly as I’ve just laid out. However, these examples are representative of how many stocks actually perform, year in and year out.

For a real life example, check this out. I began investing in a certain stock on May 4, 2011. I watched the stock fluctuate and dance around, placing 10 trades between May 4 and July 5, 2011. I added no additional money to the stock. I just bought at what I perceived to be lows, and took profits when I perceived them to be high enough. Had I just let the stock ride untouched, I would have received a 2.24% return. But I worked harder than that and got a 12.21% return in 2 months (after trade commissions)!

That’s a difference of just under 10%. In the fake example, the difference was 11.1%. So, my fiction is pretty close to my reality.

To put my 2 month, 12.21% gain into perspective, the S&P 500 has averaged 13.66% over the last 10 years to date. I nearly matched what the market did in 10 years in 2 months!

Many financial guru’s swear up and down, that the average Joe can’t consistently beat the market. I’m here to tell you you can! I’m not talking about get rich quick, though. I’m talking about doing your homework, taking some risk, being diligent, sagacious, and patient. This is how it’s done.

The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.

Proverbs 21:5 (ESV)

Jamel Black
Personal Finance Coach

How I Saved 8% on Home Improvement

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This was an easy one. I’m installing flooring in my living room. I knew I needed lots of additional items in addition to the tile and hardwood. So, I checked Plastic Jungle for discounted gift cards for home improvement stores. I found the deepest discount (8%) on a Lowe’s gift card. Then I went to Lowes.com to look around to make sure they had the things I needed in stock (because this little plan doesn’t work so well if they don’t have what you need).

They had what I needed! WhoooHooo! Then I went back to Plastic Jungle and bought the Lowe’s gift card for 8% less than face value. An easy come up. Gotta love it!

Jamel Black
Personal Finance Coach

If Only I Made More Money…

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One of the first things people tell me, when they find out I’m a Finance Coach, is that they need to get into investing. They want me to show them how to make some money on the stock market or in real estate. Somehow the idea that trading stocks, flipping houses, or purchasing rental properties is a sure fire way to financial freedom.

That couldn’t be further from the truth. Although many people have made fortunes using the aforementioned methods, many more have lost the family farm doing the same things. For this reason, I never begin a personal finance session talking about investments. People think that their problem with money is an inflow issue. They think, “If only I made more money.” Then they want me to show them how they can make more money and begin to live out their financial fantasies.

I could easily take their money and show them a few simple rules of trade that, if implemented, will most likely make them all wealthy. However, without laying the proper financial foundation, the vast majority of people who have the knowledge to build wealth will never come close to obtaining it.

Jesus said,

One who is faithful in a very little is also faithful in much, and one who is dishonest in a very little is also dishonest in much.
Lk 16:10 (ESV)

Through this truth and observation of those around me, I’ve learned that people who have money problems on small incomes, have money problems with large incomes. I know families who struggle on less than 30 grand a year who are thoroughly convinced that if they made 50 grand, all would be well in their financial house. I also know people with incomes north of 100k who would promise you that if they made 150 or 200 that they would be okay.

The truth is, the person who can’t seem to make it on 30 and the person struggling on 100 are the same person when it comes to financial understanding. Both are under the illusion that they have an inflow problem. Both resort to credit when things get tight. Both are overwhelmed when emergencies strike. If given good ideas on how to build wealth, both will most likely take the advise, make a little more money, and end up worse than they were before. Because they didn’t begin with a proper understanding of money and it’s intended purpose.

That’s the reason I start with showing people how to properly function on the little they have before I show them how to obtain more. Once you understand the wisdom of the time tested and proven principles concerning wealth, you will then be successful at both managing and accumulating money. It’s tempting to skip the understanding part, but having money without wisdom is a recipe for disaster.

Jesus said,

for where your treasure is, there will be also your heart. Mt 6:21 (YLT)

Handling money starts with the heart. No matter how much you can manage to come in, if you don’t have a solid understanding of how to use what you have, you will never be financially free. Learn to do right with little, then you will have what it takes to do right with much.

Peace & Thanks,
Jamel Black
Personal Finance Coach

Do I Need A Budget? Part 2

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America’s been independent all these years. Don’t you think it’s time to set yourself free? I mean, how long will you continue to live month to month, paycheck to paycheck? Really! Some of you just sighed with relief because you don’t think you live paycheck to paycheck. However, if a major catastrophe like hurricane Katrina or Alabama’s April tornadoes happened to come your way, rather than to the people on CNN, you’d be wiped out. Most people I know could not continue to pay for their food, utilities, debt payments, and rent for more than two months if they lost their main source of income. And lack of income or the high cost of goods and services is not to blame. The main culprit is lack of planning.

The vast majority of American families bring in more than enough to both supply their needs and have a reasonable emergency fund that will float them for six to twelve months in case of calamity. However, most people fail to plan for emergencies. The unexpected will happen…unless you learn to expect it. I like to think of emergencies as life that I didn’t plan for. This way, I train myself to think of things that frequently catch people’s finances off guard. For example, car repairs happen often, but how many people plan on getting a flat tire on the way to work or waking up to a bad alternator? Because I know these things happen all the time, though not necessarily to me, I choose to make sure I always have enough cash on hand to get my car fixed and get around while it’s in the shop.

But, “How do I budget for that, Mr. Black?” I’m glad you asked. Let’s use the past to give us foresight for tomorrow. If you’ve kept your auto repair receipts, this one is easy. The more records you find, the better. Follow these instructions to build an auto maintenance budget.

1. Locate all of your car repair & maintenance receipts.

2. If you have more than a year’s worth, divide the total money spent maintaining and fixing your car by the number of years covered by the receipts. For example, if you have $5,000 of repairs over a five year period, divide the $5000 by 5. This means you spend an average of $1000 per year on auto repairs & maintenance.

3. Divide that $1000 by 12 (for the 12 months in a year). This comes out to about $83.34 per month.

4. Set aside $83.34 each month to start auto emergency proofing your life.

This number will vary from person to person depending on the age of your car, how many cars you have, and how expensive your car is.

It may seem silly at first, just having money lying around doing nothing, waiting on an emergency. However, when trouble comes, you’ll be more than glad you were prepared. Best case scenario, you end up with piles of cash because your car never breaks down. Worst case scenario, you have the money needed if and when your transportation is a little less than reliable.

Remember, a budget is used to free, not to bind. Tomorrow looks good when you plan for it. Enjoy your independence!

Peace & Thanks,
Jamel Black
Personal Finance Coach

28 For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it? 29 Lest haply, after he hath laid the foundation, and is not able to finish it, all that behold it begin to mock him, 30 Saying, This man began to build, and was not able to finish. 31 Or what king, going to make war against another king, sitteth not down first, and consulteth whether he be able with ten thousand to meet him that cometh against him with twenty thousand? 32 Or else, while the other is yet a great way off, he sendeth an ambassage, and desireth conditions of peace.” Luke 14:28-32.

30 Years of Servitude

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It’s interesting how we Americans justify our desires, and trick ourselves into believing they are actual necessities. I thought about how I used to live in a one room cell (I mean dorm room) with another full grown man and shared a bathroom with a couple dozen other guys for an extended stay at Alabama State University. Many of you have had similar living situations. You ate cafeteria food that was less than “gourmet,” even though that word was in the name of the company that served your school. You shared a land line telephone with your roommate and the two guys next door. You also walked or biked wherever you needed to go. It was the simple life, to say the least, but you managed, and even had fun in the process.

Fast forward four years (let’s get serious, five and a half). You graduated from college, struggled to find that entry level position in your field of expertise, lived in a one or two bedroom apartment, and drove a used Honda Accord. A little later you married the girl of your dreams. Now this is where the brain damage kicks in for lots of guys. Somehow getting married translates into “You need to buy a house.” All of a sudden, the same guy who used to lived in one room with one other person in college “needs” to buy a house because he now lives with one other person. Never mind the fact that your apartment, while not worthy of MTV Cribs, has a living room, a bedroom, a kitchen, and a bathroom. None of which you have to share with your neighbors. All of which makes this place at least seven times better than your previous living arrangement, wherein you dwelled for several years. So, the pretty face, slim waist, and other unmentionable delights convince you that you need to buy a house because that’s what grown ups do. You can barely afford the monthly rent for your apartment and you have no savings, so the only option to buy the house that you so desperately need is to borrow money in the form of a 30 year mortgage. A 5, 7, 10, or 15 year mortgage are all out of the question because you could never make the payments. So you take on 30 years of servitude (Proverbs 22:7) because you tricked yourself into believing you needed something that you merely desired.

Don’t get me wrong, I’m not suggesting you never buy a house. But I am suggesting you consider the true reason you’re making such a huge move. If you and the girl of your dreams can’t manage to live in close quarters for a few years while you build a firm financial foundation, you’re probably going to have bigger problems once the financial grizzly bear of a mortgage hugs the honeymoon out of you. Think about it. You lived with some random stranger for four or five years in a dormitory. How much easier should it be to live in a small apartment with the most precious gift God has given you since the crucifixion? And again, I’m not suggesting you do it forever (although I’m not against it). What I suggest is using your young adult years to set yourself up for an unbelievable financial journey through middle age to a money-is-no-object retirement.

I can’t tell you how many times I hear people in their 40s, 50s, and 60s, telling me they wished they were in my current financial position (in my low 30s). The majority of these middle-lifers regrettably spent their 20s and 30s overspending on the desires that they duped themselves into believing were needs. Every year they dug deeper holes of debt by buying bigger houses than they needed, nicer cars than what would get them there, fancier clothing than was necessary, and spoiling their children in the same manner. In hindsight, they see the foolishness in their decisions. Young people, learn from your elders, even when they mess up.

If you work hard, have some foresight, and spend on the basics on the front end, home stretch will prove to be a much easier ride for you than it will be for normal people. Don’t be broke. Be different.

Peace & Thanks,

Jamel Black

Personal Finance Coach

Righteous Above Riches

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?Better is the little that the righteous has than the abundance of many wicked. For ?the arms of the wicked shall be broken, but the Lord ?upholds the righteous. The Lord ?knows the days of the blameless, and their ?heritage will remain forever; they are not put to shame in evil times; in ?the days of famine they have abundance. But the wicked will perish; the enemies of the Lord are like ?the glory of the pastures; they vanish—like ?smoke they vanish away. Psalm 37:16-20.

What the Wealthy Say About Debt

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I normally quote Biblical scriptures that deal with money issues, but for those who are not convinced by scripture, here are some quotes from America’s richest people.

Bill Gates said, “Leverage is a very dangerous thing.”

Warren Buffet said, “…keep enough cash around so I feel very comfortable and don’t worry about sleeping at night…You always want enough so that no one else can determine your future.”

Now, Jesus on rich people and salvation. This is not directly related to the quotes above, but it’s for you to understand that my ultimate goal in teaching financial literacy is not for people to get rich, but for people to learn to handle money God’s way and be free to do what pleases Him. Being wealthy can be very dangerous if we don’t have God’s power which enables us to put money in its proper place.

And when he was gone forth into the way, there came one running, and kneeled to him, and asked him, Good Master, what shall I do that I may inherit eternal life? 18 And Jesus said unto him, Why callest thou me good? there is none good but one, that is, God. 19 Thou knowest the commandments, Do not commit adultery, Do not kill, Do not steal, Do not bear false witness, Defraud not, Honour thy father and mother. 20 And he answered and said unto him, Master, all these have I observed from my youth. 21 Then Jesus beholding him loved him, and said unto him, One thing thou lackest: go thy way, sell whatsoever thou hast, and give to the poor, and thou shalt have treasure in heaven: and come, take up the cross, and follow me. 22 And he was sad at that saying, and went away grieved: for he had great possessions. 23 And Jesus looked round about, and saith unto his disciples, How hardly shall they that have riches enter into the kingdom of God! 24 And the disciples were astonished at his words. But Jesus answereth again, and saith unto them, Children, how hard is it for them that trust in riches to enter into the kingdom of God! 25 It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God. 26 And they were astonished out of measure, saying among themselves, Who then can be saved? 27 And Jesus looking upon them saith, With men it is impossible, but not with God: for with God all things are possible. 28 Then Peter began to say unto him, Lo, we have left all, and have followed thee. 29 And Jesus answered and said, Verily I say unto you, There is no man that hath left house, or brethren, or sisters, or father, or mother, or wife, or children, or lands, for my sake, and the gospel’s, 30 But he shall receive an hundredfold now in this time, houses, and brethren, and sisters, and mothers, and children, and lands, with persecutions; and in the world to come eternal life. 31 But many that are first shall be last; and the last first. Mark 10:17-31 (KJV)

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