Recession Proof - Part Two
In Part One we defined what a recession is, looked at some history, and clarified some of the factors that helped create our current situation. If you haven’t had a chance to read it, please click here. It’ll help frame what we’re talking about here.
As we talked about before, recession doesn’t have to be a scary word. Think of it as a counterbalance to inflation. Like a pendulum, we tend to swing in one way or the other. I know it’s far more complicated than that but it doesn’t need to make everyone freak out…as long as you do what you can to live wisely.
I think about Joseph, who told pharaoh that a drought was coming, but as long as they prepared, they would not only survive, there was potential to actually thrive.
It’s the same for us today.
The principles I’m about to share with you are simple. They become second nature faster then you may think. The great thing is, not only do they protect you in a recession, they set you up to take advantage of opportunities as they arise (without going into debt), support you in challenging financial seasons, and enable you to be generous to needs you encounter.
As a family, we have been following Dave Ramsay’s financial principles since I found his book Total Money Makeover in a thrift store in 2004. It completely changed how I looked at money. I happened to be leading a missions trip team at the time and instead of getting a good night’s rest like a leader should do, I stayed up all night reading the book and making changes in my budget. If you haven’t read it yet, I highly recommend it but fair warning…it may turn your world upside down.
He teaches a system called baby steps.
- Put together a $1000 emergency fund.
- Pay off your debts (besides the house) smallest to largest. (Regardless of interest rates)
- Add to your emergency fund so that it’s 3 to 6 months of expenses
- Put 15% away in a retirement account (Roth preferably)
- Save for your kid’s schooling
- Pay off your mortgage
- Enjoy and give your money like you’ve never done before
It’s not sophisticated. It’s simple.
But I dare you to walk through those steps and see if it doesn’t put you in a totally different financial head space. What you’ll feel is peace.
You may not go out to eat as much. Your car may not be as nice.
But you’ll have peace. You’ll be able to be generous.
Here are some other core values we have around finances.
Avoid Debt like the plague
If you cannot pay off your credit cards in full each month, cut them up. Even if you get points, if you are carrying a balance, total up how much you are paying in fees. They’ll quickly outpace the 2% you’re getting back in perks.
If you want to purchase something, save up for it. Don’t finance it. Not only will you end up paying a ton more in fees, it puts you in a vulnerable position. You also tend to make wiser, slower decisions when you are purchasing things with cash.
Create a budget and actually stick to it
It’s easy to create a budget. It’s a little more complicated to actually live by it. If you’re married, create one together so you’re on the same page. Give each of you some blow money each month so you don’t feel too restricted. But use something like mint.com or every dollar so that you can keep track of spending as it happens, not after the fact.
Side note, did you know that the average person feels like they got a 10% raise when they create a budget? Give it a shot!
If married, combine your finances
You may not agree but I believe that you if your finances are separate, your lives are separate. Once you’re married, there’s no longer “my money” and “your money.” It’s important to Natalie and I that we have one main checking account that we put money into and spend out of. Also, we have access to every account. Every account. Nothing happens in the shadows. It makes it hard to get a surprise gift for each other but it’s worth it.
Clarify between wants and needs
This will become clearer when you create a budget. Depending on what stage you are in, different seasons allow for different spending. If you are getting out of debt, cut way back on discretionary spending. Get intense and focused! Make coffee at home, cut cable, dates nights are PBJ’s, etc. If you are intense for a season to get out of debt, you’ll be so glad later. If you’re laissez-faire about it, you’ll never get traction financially and when financial challenges strike, you may not be ready.
Once you’re out of debt and have some savings built up, you can adjust your pace. You can allow for more wants and fun spending. It’s amazing how much freedom you have when you aren’t paying student loans, credit cards and car payments.
Keep God first
I’m not just saying this because I’m a pastor. I’m saying it because it’s a HUGE deal for us. We don’t do many things right but I can say that we’ve kept this one paramount. We’ve decided as a family to give God at least 10% right when we get paid no matter what.
Since the girls were little and they earned $1 for doing a chore, they put a dime in their “for God” jar and a dime in their “save” jar.
Even during really hard times when we were on government support, we still tithed (gave 10%) believing that if we put God first, he would take care of our every need. Not only that, we did it as an act of gratitude because we had so much to be grateful for.
Now, literally decades later, we have zero regrets. Our needs have always been more than met. And we’ve been able to see God do amazing things with the tens of thousands of dollars we’ve given over the years. How cool is that?
All the time, people tell me that I’m lucky because I’m getting some really good deal or something I sell goes for a lot more than I though it would. I don’t call it luck. I think that when you put God first, he takes care of you.
Jesus said “Seek the Kingdom of God above all else, and live righteously, and he will give you everything you need.” Matthew 6:33 NLT
Ok, I’ll take the pastor hat off now but putting God first is more than a bullet point on a list. It’s the foundation of our finances. More than that. It’s the foundation of our everything.
I hope this was helpful for you. It’s much longer than that what I normally write but it’s a topic that I’m pumped about.
Few things have the ability to impact our peace like money.
Few things have the ability to reveal our hearts like money.
Finances are one of those few things that when you get it right, it seems like so many other things fall into place but if they're unhealthy, everything else feels unstable.
It's worth getting right.
How about you? Leave in the comments below some wisdom you’d add to the conversation.
If I can help, reach out!