God's Stimulus Plan and Living Below Your Means

For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.

Here's a piece by Robert Morris (author of the excellent book The Blessed Life: The Simple Secret of Achieving Guaranteed Financial Results) called God's Stimulus Plan. In it he says that for Christians, God is our source of life, not the economy, not the government, and not our money.

You can click through on the link above and read the specifics you like since today I won't be covering most of it. Instead, I wanted to highlight what he says well down the article about what you can and should be doing to get control of your finances. His thoughts:

Live below your means. Most people mistakenly think they understand what it is to live below their means, but I have news for them: Living on 90 percent to 95 percent of your income is not living below your means.

Truly living below your means requires living on about 70 percent of your income. For example, if you tithe 10 percent, put 10 percent in savings, put 10 percent in retirement or other investments, and give something in offerings above your tithes, you’re going to be living on 60 to 70 percent of your income at the highest level.

Yet rather than living below their means, many people live above them.

Because I’m a pastor and love people, my heart is burdened when I meet believers who are experiencing financial difficulties. But when I see the homes they’re living in, the vehicles they’re driving and the clothes they’re wearing, I know many of them are supporting their lifestyles by living entirely on credit. They’re digging a hole of debt for themselves that may take years to dig out of.

Here are my thoughts on this subject:

1. I love the advice. It's the best advice I can give anyone.

2. He's right about the percentages -- you have to be way under 90% to be living below your means. We are roughly 1/3, 1/3, and 1/3 -- living on 1/3, saving 1/3, and giving 1/3. It fluctuates a bit from year-to-year and it's not exact, but these are decent ballpark numbers.

3. He's also right about how many people live. They get all the toys they need -- a nice big house they stretched to get into, a couple new (leased) cars, all the electronics someone could want (big screen TV, iPods, computers, gaming systems, etc.) -- then round these out with things like full cable TV, cell phones, and nice, expensive vacations every year. Some (but not most) kick it into over-drive with something like a boat or a summer vacation home. Then when asked about giving, they say they "can't afford to give." I'm not making this up. I've counseled people and seen their budgets. I've also asked others to donate to charitable causes. And I know the comments I get here. For most people, giving is an after-thought and something done if there's anything left over after they spend like crazy (which there usually isn't.)

A couple verses to end this post. Let's start with my favorite one about spending less than you earn found in Proverbs 21:20:

In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.

And a good one about giving/helping others (to the poor in this case) from Proverbs 19:17:

He who is kind to the poor lends to the LORD, and he will reward him for what he has done.

Comments

[Terry]

What is God's stimulus plan for those living on a poverty-level income? Living below your means is pretty difficult when you are living at or below the poverty level, especially if you do not own your home.

[katy]

I second Terry.

[StL Pastor]

Of course Terry is correct. It is hard to live on a poverty-level income, particularly if you don't own a home and can't grow food. At that point, its good to do whatever you can to increase your income.

This is one of the complications of preaching-I have a congregation that ranges from a man living on SSDI at 500$ a month to executives of major corporations, and the 'proper' financial and religious advice is very different. Obviously, individualized counseling is part of what I as a pastor need to offer, but preaching to such very different contexts is always an interesting experience. The advice 'be wise with your money, spend less than you make, and be generous is pretty generic.

[thebaglady]

There is also taxes that take 15 to 20% of your income so I think people need to live on at most 50% of their income. This is why I think basing debt to income ration on gross income is quite ludicrous.

[Matt110]

My wife and I have been paying down debt for the last three years mostly on one income of 50M per year. All of our vehicles are paid off (3)and we have a zero credit card balance. We have a Next is the big school loan of 25M, then the house (40M). We have been sponsering a boy and his family in Rwanda through www.compassion.com since March.

[mbhunter]

"What is God's stimulus plan for those living on a poverty-level income?"

The answer is the same as for someone who isn't.

Mark 12:41-44 talks about this. It doesn't imply that the poor need to give everything they own, but instead illustrates that God does take (good) notice when people give, even though they don't have much.

[LotharBot]

I've had close friends everywhere on the income scale from $564/month SSDI to seven figure incomes. Some of them at every level use the same excuse that it's "hard" to live beneath their means. Others don't make excuses. The ones who don't make excuses (and who, therefore, listened to good advice) have generally found their position improving over time, even if their base income hasn't changed much if at all.

StL Pastor is right that the advice is generic, but it's also widely applicable. Someone at poverty level won't be able to apply it exactly the same as the CEO of a major corporation, but they can still look for ways to keep their spending down and create an emergency fund. And it's certainly applicable to those above the poverty level!

[Mike Hunt]

Hi FMF,

You give away 1/3 of your after tax income? That's pretty impressive.

I give away 35% of my gross income to Chairman Maobama like a good American, Another 5% of the gross goes to the wife for her allowance / personal spending money. Another 10% for basic living - food, utilities (place is fully paid). Donate some to charity but that's just under 9% of the gross or so. The remaining 40% goes into savings with some amount into the stock market - short or long...

Living on 90% of your earnings really means you should consider not working and changing your lifestyle to dramatically trim down expenses. Isn't this what college was supposed to teach you? How to live with 3 people and survive on mac 'n cheese and ramen? Keep up those habits while working and you can save a bundle.

-Mike

[StLPastor]

Mike,
I know its tongue in cheek, but surely you reap some rewards from the 35% you contribute to the common good in taxes. I am pretty unhappy with the amount this foolish country spends on the military, but I'm quite fond of roads, public transportation, and law enforcement. I wonder about vilifying the president for current tax rates, which have gone down for basically everyone (95% of the population-see www.fivethirtyeight.com/).

LotharBot, you definitely have a point-and I do try to preach the good generic advice. I just notice that it is easier for me for example to encourage explicit advice like downsizing houses for people living in McMansions.

[Concojones]

Around the time I started working, I read a book with advice to get ahead financially. It said "save 10% from your (net) paycheck as a start; you won't notice the difference." If you're promoted, use 50% to reward yourself and save the other 50%. I liked the principle, and decided to go 50% all the way. From that day on, for every dollar (euro) I spent, I also saved one. It took a bit of creativity given the 40% taxes on my humble graduate salary, but today everything is in place and I'm living well. I plan to continue doing this as my salary increases.

[Mike Hunt]

StL Pastor,

Sorry if I sound a bit harsh but I stand by my earlier comment.

I live overseas so I don't get any of the benefits of roads, public transportation and law enforcement. I am in the US less than 30 days per year for the last 3 years but I must still file and pay the greater of the two- US taxes or overseas taxes. So I do have a right to gripe, it's taxation without representation at it's finest.

Let's dissect your comment a bit... roads are actually paid for mostly by gas (usage) taxes, public transportation is paid by local taxes usually, and law enforcement is paid for by state and local.

My vilifaction of Obama is that he talks about sacrifice and blames this mess on what he inherited without doing one thing to reduce spending, in fact he's put the spending into overdrive. We are 2 trillion in deficit, that's 6 billion a day or 250 million an hour or basically 20 million in the time I'm typing this message. And yet we need to spend more on additional programs like universal healthcare... which increases costs by another 1 trillion over 10 years...? WTF? Shouldn't we stop passing the buck at this point. We are the ones who are going to have to pay for this huge debt burden, not the Chinese, not the Arabs- it will come down on our back and our children's back. Doesn't that get your blood pressure elevated?

My big disappointment with Obama is that I believed his message about change and had high hopes but am very disappointed when he turned out to be another puppet for Goldman Sachs & JP Morgan. I guess I'm upset with myself for getting my hopes up. Now I'm a bit annoyed at the media who still gives him a free pass hence my sarcasm. We need to call it out when we can smell a rat... and something is stinking big time in Washington DC.

-Mike

[Gia]

No matter how low your income is, you still have to live on less than you earn. Even if it's only to save $10 per month.

Why? Because as your income increases your lifestyle (spending) will also increase, and you'll be trapped in the "it's not enough" mentality. However, if you live on less than you earn, your savings (wealth) will increase as your income increases.

There's no excuse.

[Gia]

For those who want to learn to live below their means, consider reading "The Richest Man in Babylon."

[Shane]

Does this apply to people with one or more medical illness? My Dad's medicines as one point was running around $600 a month. My medicine for my seizure disorder & diabetes (type 2) runs around $350. I would like to apply this practice to me, but there seems to be very little "wiggle room" if any at all.

[Annette]

this all made sense to me.