Cassandra Laymon, CFP®, MBA
Last week we reviewed some of the initial steps you should take for a strong financial start in life. If you are not just starting out but find yourself struggling with a difficult debt situation, that’s also a good starting point for you:
- Start incremental giving
- Create a monthly spending plan
- Live within your means
- Save $1,000 in an emergency fund
Today we continue our Stewardship Journey® with Waypoint #1, which encompasses four steps that will put you on solid footing on your way to financial freedom.
Growing up in my family, money was a taboo subject. While I saw mom as a faithful and consistent giver at church, I only understood it from a legalistic standpoint. I completely missed out on the “heart” side of giving. As I got older and realized how much 10% of income equals in dollars – no matter how low or high your salary – it seemed like a lot while I was paying off debt and student loans.
When I married Rick, the idea of tithing was non-negotiable for him. I admit, I was still struggling with this amount of giving. I committed to learning about generous giving, and was heavily influenced by the book The Blessed Life by Robert Morris. When I joined Rick in being a giver, the unexpected happened. I did not suffer because of a shortfall every month. The numbers worked out, and I was blessed by the lightness and joy that comes along with giving. I can’t emphasize this step enough on your way to making peace with money.
Pay Off Credit Cards and High Interest Debts
Getting out of debt is probably high on your list. You may find yourself deep in a hole with no clear path out. There are many, many people who have overcome significant debt, and you can, too. Anytime I find myself faced with a difficult task, I make it my job to find out how someone else achieved their goal.
The most powerful and efficient way to payoff debt is using a tool that has become known as the “debt snowball.” Basically, you make a list of all your debts, and then arrange them from the smallest amount owed to the largest. Instead of paying a little extra each month on each of your payments, you pay the minimum on all debts except the one with the lowest total. All extra money goes to this one payment. When the first debt is paid, you move on to the next until all your debts are paid. I first learned about this concept in my twenties in the book Debt-Proof Living by Mary Hunt. The author paid off over $100,000 in credit card debt and has gone on to become a well-respected guide in helping others to do the same. If you are struggling with debt, I recommend you check this book out at your local library.
Obtain Adequate Insurance Protection
Insurance is something we all know we need. Many people drag their feet on this step. First, it’s a boring topic. Second, insurance forces us to think about worst-case scenarios, and who wants to do that? The need for insurance feels like a far-topic for the future. Until it isn’t. This year a good friend from high school was tragically killed in a motor-cycle accident. Because of poor planning, his teenage daughter is left with nothing to help her navigate the rest of her school years. I knew this man’s heart concerning his daughter. He would be devastated to know how much heartache he left behind because of his poor planning.
Do not delay getting adequate term life, medical, home and auto insurance!
Create a Basic Estate Plan
“Estate Planning” seems like a lofty term. If you are focused on getting out of debt, do you really need an estate plan? The short answer is Yes. At this point, your estate plan will include a basic will, along with a power of attorney should you become unable to make financial decisions for yourself and a healthcare power of attorney if you become incapacitated and unable to make medical decisions for yourself.
This step is not for you, it’s for the benefit of your loved ones. If something unexpected happens, the greatest gift you can give your family is a well thought-out plan.
As you progress through these steps, I pray you are experiencing hope for the future and a sense of accomplishment about all you accomplished so far!