An update on Kids & Money

So, the 5yr old earned his first $10! I supplied him with a few DDB envelopes, and we got to it… He put $1 in his “Tithe” envelope. He put $2 in his “Savings” envelope. He put $7 in his “Spending” envelope and off to Target we went!
He was a little sad when he learned that most of the toys (Legos anyway) were more than $7. What he really wanted was the $90 Star Wars Lego set! I told him he could have it, after about 15 more “$10”s.
He settled on a Lego set for $5 & change. He was proud to hand his dollars to the cashier, and was proud to tell everyone that he had earned the dollars that he spent to buy the toy.
One of the hard things for me, was being in Target and watching my child “really want” an $8 or $9 toy when he only had $7. Even though the goal is to teach him financial responsibility, in that moment, I wanted to cover the extra dollar or two for him, so that he could have what he wanted...I like to make my kids smile as much as anyone else! However, I had decided (before we went in the store) that I would not do that. Nathan & I decided that in order to teach him not to spend more money than he has, we can’t allow him (while we still have the control) to spend $9 when he only has $7. We also don’t want to teach him that mom & dad will just pick up any extra cost that he may incur…irresponsible kids become irresponsible adults, after all.
He has since earned another “$10” and has decided he wants a $27 Light Saber. We have been talking about how many more “$10” he needs to earn, in order to buy that toy. We have also introduced him to Craigslist – where he can give away less of his dollars to buy the same toy, used.
It’s also been a good way to tell him how much things cost. When he wants something in the store, we just tell him how many dollars it costs and that he is welcome to spend his money on it…
So far, our efforts to teach him about money are going well!

So, we're teaching the kids about money...

I think that one of our jobs as parents is to teach our kids to become successful adults. Dr. Phil used to say (and probably still does) that you aren’t raising children, you’re raising adults. So, here’s my conflict…

First, I don’t think kids should get an allowance for doing chores. Nobody pays me to pick up after myself, to clean or to cook. I believe that as a member of this family, each person has responsibilities and should contribute to overall value of life for our family. While I can’t expect the 2yr old to clean the toilet, I can expect her to put her dirty clothes in the hamper.

Next I will say that it is the parent’s job to teach their children about money. People don’t do a bad job of managing their money because they are stupid, they do it because no one taught them what to do. My kids will not learn to give and to save if I never teach them. Nor, can they learn the value of a dollar, if they don’t have practice using dollars.

So here’s what we have come up with after talking to different parents about what they do. Our 5yr old has a list of behavior / tasks to do each day. Each behavior / task that he completes earn him a “star” (a sticker) At the end of each day, if he has earned all of his possible stars, he earns $1. When he earns $10, he will give $1 to the local church that we are part of, he will save $2, and he will have $7 to spend. Then, when we go to the store and asks for a toy, we can start the conversation of how many dollars he has vs. how many dollars it costs to buy the toy.

Right now, his behavior / tasks are things like: brush your teeth & comb your hair (the 1st time you are asked), do your homework (takes 5 minutes), good behavior at dinner time (he knows what this means), put shoes, jacket, & backpack away, etc. We have already begun to change his chart around so that it somewhat challenging, but still do-able. We will continue to change it to be consistent with his abilities.

Again, I don’t really believe we should PAY him for doing these things, however, money that can buy toys is incentive, and allows us to teach him how to handle his money.

I would love some feedback / opinions. What do you do? What have you tried? What works at your house?

If you want to have success in your life, you have to put in the work.

I heard (or read) this recently “If you want to have success in your life, you have to put in the work” and it reminded me of a conversation I recently had with a friend.

I was talking to this friend, who is a very successful business man, and he was telling me that someone had recently told him: “when life hands you lemons, you know how to make lemonade.” He corrected their statement like this… No, when life hands me lemons, I cut the lemon open, get the seeds out, plant them, grow lemon trees, sell the lemons I’ve grown to the retailers, all while continuing to cultivate and harvest more lemons.

My friend didn’t become successful overnight. He didn’t win the lottery. He didn’t get where he is by accident. He has worked hard to be where he is today, it wasn’t easy for him. It may look like it’s easy for him now, because others can see him enjoy the fruits of his labor.

The truth is, most of us just want the rewards, but we don’t want to do the work associated with creating or reaping the reward. The reason success doesn’t come easy to you is because success doesn’t come easy to anyone. Success comes by hard work and perseverance. You won’t be successful in your career, health, family, or finances until you decide you are ready to do what it takes.

If you hired me as your personal trainer to teach you how to lose weight, and I told you to stop eating junk food and to get on the treadmill, but then you continued to eat the junk and refused to get your butt on the treadmill, you can’t get mad at me if you never lose any weight!

I have had people hire me as their debt coach and then cancel their membership after a few months because they aren’t seeing results. Can I just tell you, very plainly, that I can’t make you get out of debt. If I show you what to do and you refuse to do it, then I can’t help you. You can pay me to coach you forever, and you still won’t get results if you won’t do the work. I can’t decide for you that you are ready to get out of debt. You have to decide for yourself that you are ready to change your life and accept the coaching. The only people that I can help are the ones that want to change and are willing to put in the work.

Is hiring a Debt Coach good for your marriage?

I met with a client today who I have been working with for just over a month. We are so excited about their progress. When I first spoke with them, they were behind on several things and were additionally incurring NSF fees from their bank and were utilizing the cash advance place. Today they are caught up on everything (except for 1 which will be paid to current next week). They also have a little money saved and have not accrued any more debt. They have paid cash for birthday festivities for one of them and been able to start tithing again. By November, we should have their first debt completely paid off as well as over $500 in their Emergency Fund. And then in December, they will pay cash for Christmas! While all of this is very exciting to me, it isn’t even the best part…

She told me that while having a conversation with her husband about their money, something came up that, in the past, had triggered a “huge fight.” She said that this time, they shrugged a little, decided to do better in the future, and moved on. Because they now had a plan and were taking control of their money, something that used to make them fight, no longer did, they were able to just move on from it!

Now, I am by no means a marital counselor, but knowing that the most frequent reason given for divorce is money, I can’t tell you how excited it makes my heart that this couple now has the skills and support to communicate & be on the same page about something that used to make them fight!

I am so humbled that they have chosen me to help them!

Don’t close your credit accounts!

I recently had someone tell me they were going to pay off a credit card and close the account. I told them not to, and here’s why…

Let’s say you have 5 credit cards and each of them has a credit limit of $2,000. Let’s then say that your balances are $500 on each card. The totals would be as follows: You would owe $2,500 (5 cards @ $500). The total amount you can owe on these cards is $10,000 (5 cards at $2,000 each). You have borrowed $2,500 of your available $10,000 – therefore you owe 25% of your limit.

If you paid off one of your credit cards ($500), then you would owe $2,000 of the $10,000 available and now you only owe 20% of your limit. Lowering your percentage this way helps to increase your credit score. The smaller the percentage you owe, the more “credit responsibility” you demonstrate.

If you took that paid off credit card and closed it, you would then increase the percentage of what you owe… You would still only owe $2,000, but your total available credit would only be $8,000. This would raise you back to owing 25% of your limit. When your percentage goes up, your credit score goes down.

So, as you pay off your debts, you should not close your accounts. (If you pay an annual fee or a non-activity fee, closing the account MAY be an option here – depending what your immediate & future goals are).

Keeping your credit score up is a game. You should know the rules to have a chance at winning! I figured if my friend didn’t understand this, you may not either. So here’s your free advice for the day!

HGTV's Solution to Debt

HGTV has a show called “Income Property” where the host teaches a family how to turn a portion of their home into rental property by renting out a room or a basement or something along those lines. I caught the show last week, and while I don’t know all the details of the family on the show, here’s what I do know…

Two adults own a home. They are planning to get married in the near future. All their primary income currently goes toward debt repayment. The husband (to be) is already working an extra job, just to pay the monthly expenses and other bills that they have.

So then the host shows them a plan to redo / finish their basement so that it would be a rentable apartment. He shows them 2 plans, which are virtually the same except one cost $6,000 and the other costs $12,000. The one that costs more is due to the cost of labor, so the couple can save $6,000 by doing most of the labor themselves.

Now I realize that the host is a designer and not a debt coach, but I was still baffled that anyone would suggest to this couple to go $12,000 (or even $6,000) further into debt to get $700 in rental income.

Then the longer I thought about it, the less baffled I was. Most Americans do the same thing… they will refinance the mortgage on their house to lower their payment. They transfer balances or borrow “free” money to lower payments. …and the reason this doesn’t work – the reason it doesn’t get you out of debt, is because it doesn’t address the problem. The reason you are in debt to the point that it hurts is because you haven’t been accountable to where your money is going. You don’t have a plan. You don’t understand how money works. If a deal sounds too good to be true, it probably is! There is no magic to getting out of debt. Creating more debt to create more income is not the answer.

It did not surprise me that the husband (to be) was very reluctant to choose the cheaper plan that required all the work. Unfortunately, that couple will be spending the “extra” $700 that they have created in no time, and they will be further away from financial freedom than ever before…

"No matter who you are or what you do, you'll always have debt"

I met with a lady recently who was struggling to pay a couple debts and a few bills. Near the end of our appointment she looked at me and said: “No matter who you are or what you do, you’ll always have debt.” I looked her right in the eye and said: “That’s BULL!!” I think I may have even slapped the table!

This line of thinking is not of God. Now, I know we like to pick and choose what parts of the Bible we like best – like love and grace and forgiveness, but we don’t like the parts that say feed the hungry and love your enemies, cause they’re hard. We also don’t like the parts about debt being slavery, because we like our debt, and all the stuff that comes with it!

I don’t buy stories about how you HAD to go into debt. We don’t HAVE to go into debt, we just choose to. Debt may have seemed like a better choice at the time, but the truth is, it is a choice. When we bought our last car 7 years ago, we financed the whole thing. We didn’t HAVE to, we just chose to. We justified it with the warranty and such, but the truth is, we wanted to drive a new car and we didn’t care what anyone else had to say about it, including God.

Look, the lenders want us to believe that we’ll always be in debt… that we will always have car payments, always have a mortgage, always have student loans, and always have credit card payments. This is why mortgage companies want you to refinance, this is why car companies spend so much time on advertisements, this is why I can’t go buy an outfit at Kohl’s without the cashier asking me if I want to save an extra 15% to open a store credit card. The lender’s lure you in. They know what the odds are that you will pay your bill off when it comes due. They know what the odds are that you’ll pay your house or car off early… that’s why they help you justify your debt.

Do I still have debt? Yes!

Am I working my debt freedom plan to get it paid off? Yes!

Am I tempted by the lures of debt everywhere? Yes!

Will I be out of debt one day? ABSO-frikin-LUTELY!!