If anyone does not provide for his relatives, and especially for his immediate family, he has denied the faith and is worse than an unbeliever. (1 Timothy 5:8, NIV)
"His master replied, 'Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master's happiness!' (Matthew 25:23)
October 5-11 has been declared National Financial Planning Week. So, for this week, I'll be focusing my posts on stewardship and financial planning.
Of all people, those of us that claim the name of Christ need to have a solid financial plan in place in order to be excellent managers of the finances God has provided for us. It's really His money anyway, right?
In Financial Peace University, Dave Ramsey lays out one of the best beginning financial planning forms that I have seen to date. Here's a breakdown of the details on this form:
14 Major Components of a Healthy Financial Plan
- Written Cash Flow Plan. This is the dreaded "B" word - budget. You need to have a detailed written, monthly cash flow plan in order to get the most leverage out of the money the Lord has provided for you and your family. This is the beginning of good, Godly, Biblical stewardship. Both spouses need to be in unity on this plan in order for it to work. Be sure to spit-shake and pinky-swear that you will stick with your budget!
- Charitable Giving. In order to be financially healthy, you need to release your grip on money and give some of it away. The starting point for Biblically-based charitable giving is tithing to your church on a regular basis. A tithe is simply 10% of your income. If you are not currently giving at least a tithe to your church, develop a plan to reach 10% as soon as possible. Remember this: Whoever sows sparingly will also reap sparingly, and whoever sows generously will also reap generously. Each man should give what he has decided in his heart to give, not reluctantly or under compulsion, for God loves a cheerful giver. And God is able to make all grace abound to you, so that in all things at all times, having all that you need, you will abound in every good work. (2 Corinthians 9:6-8, NIV)
- Will and/or Estate Plan. You need a will. You don't want the state deciding what will happen with your assets. If you have a young family, you definitely don't want the state deciding who is going to get your children if both you and your spouse pass away, unexpectedly. If you are older, you want to be sure that your money and assets are legally directed to the institutions and people you desire to receive them when you pass away: your church, other charities, and your family. You can purchase legal forms online or consult an attorney. Be sure your will is state specific.
- Debt Reduction Plan. If you're in debt, it's time to formulate a strategy to get out! Debt is bad for a healthy financial plan. A detailed cash flow plan, the envelope system, and the debt snowball method are great tools to enable you to get out of debt as quickly as possible.
- Tax Reduction Plan. If you're young, stay on top of the political landscape and vote for candidates and policies that keep taxes low. If God has blessed you with wealth and/or you are an older adult, you need to consult an attorney for specific legal strategies to avoid costly taxes on your overall estate plan. "Render unto Caesar what is Caesar's," but not anymore than you legally need to pay!
- Emergency Funding. A fully-funded emergency fund is equal to 3-6 months of family expenses. While you are working your debt snowball, keep a baby emergency fund of $1,000 in savings. Once you you're out of debt, save up to 3-6 months worth of expense cash into a money market account. It's important to keep your emergency fund fully liquid.
- Retirement Funding. Once you are debt free and have a fully-funded emergency fund, it's time to start investing 10-15% of your income into your 401(k), 403(b), and/or Roth IRA. Be sure to consult your HR department at work regarding employee matching programs.
- College Funding. Once your retirement funding is underway, you need to start college savings if you have school-age children. 529 college savings plans are a good place to start. You should consult with a competent financial planner before you begin.
- Teach My Children. If you have children at home, you need to start educating them to be wise money managers. Both Dave Ramsey and Crown Financial Ministries have some great resources to get you started!
- Life Insurance. This is critically important for young families in case of the accidental death of the primary income earner. The primary income earner of the family should carry a term life policy equal to at least 8-10 times their annual income for 15-20 years. A stay at home mom should carry a term policy as well in case of her own accidental death. The father will need the money in order to provide childcare resources so that he can keep working and providing for his children.
- Health Insurance. If you don't have health insurance through your workplace, you need to seek out a good plan that you can purchase, independently. Yes, health insurance is expensive, but if you have a major medical emergency in your family, you will end up financially bankrupt! Unpaid medical bills are the leading cause of personal bankruptcy in the United States. Don't become a statistic.
- Disability Insurance. According to the May 2000 Norton Bankruptcy Adviser, 326,441 families that filed for bankruptcy protection in 1999 identified an illness or injury in their family as the major reason for the bankruptcy. That means 1 in 4 debtors in 1999 were attributed to a disability. Still not concerned? According to the US Housing and Home Finance Agency only 3% of home mortgage foreclosures are due to a death of the breadwinner. 48% of all foreclosures are due to a disability. So what do you think is more important during your working years, life or disability insurance?
- Auto Insurance. If you own a vehicle, you must have auto insurance in order to legal operate it. Take this week to review your policy and make sure that you have the proper coverage. Also, if you're not happy with your current rates, go online and make a few phone calls to see if you can get a better deal.
- Homeowner's or Renter's Insurance. Fires, tornadoes, floods, and theft strike without warning. Be sure you have the proper coverage to replace your home and belongings.
This is a handy checklist to make sure you are being a wise money manager and provider for your family. Refer to it regularly and be sure that you have things happening in each of these areas.
What financial planning do you need to take care of during National Financial Planning Week?