Money

The Importance of Money

It is often said that religion and money are two topics you never talk about. Yet, these are the two most important philosophies we hold. Whether or not we choose to accept it, what we believe about money creates a huge impact on our lives. No matter what source you tend to use, everyone tends to agree that money fights and money problems is the number one cause of divorce in America. Jesus talked more about money than he did the kingdom of heaven. It’s obvious that what we believe and what we do with money is important. And this is why our philosophy of money is so critical to who we are.

Within the Bible, there are a several overarching ideas regarding money. But one of the most misunderstood ideas behind money is the idea that money is evil. Much of this belief revolves around 1 Timothy 6:10. The common belief of this verse is that it reads, “For money is the root of all evil.” The actual translation is that it reads, “For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.” (NIV) Notice the actual verse.

It’s not money itself that is evil, it’s the love of money that is the root of all evil. The cause of the evil is the action of loving it. And who performs that action? We do. We cause the evil through loving money too much. Money in of itself can not possess evil anymore than a brick can determine what it ends up being used for. After all, a brick can be used to break into a car or home, or it can be used to build an orphanage or hospital. Likewise, money in of itself can be used to purchase food for the needy or to purchase weapons for criminals. The money doesn’t get to choose what it is used for. So how then can something that doesn’t possess the ability to choose good or evil actually be evil? Humans have the ability to choose good or evil, not objects.

The second thing to understand is that NOTHING we “own” or “possess” belongs to us. From our spouses, children, and pets, to our cars, computers, and stereos, to our food, clothing, and our bank accounts; none of them belong to us. They all belong to God (Psalm 24:1, Deuteronomy 10:14). He has simply granted us the right to use and manage them while we are here. And that management is expected to be done well (Matthew 25:14-30). Money is certainly no exception to this.

Thinking Differently

Our approach to handling money isn’t common, and it isn’t necessarily “sophisticated.” In all actuality, it’s probably pretty plain, if not simple. And it revolves around two main ideas: 1) Having an emergency fund to handle the bumps in life, and 2) avoiding debt as much as possible! This belief is based off of the second half of Proverbs 22:7 (“…the borrower is slave to the lender.”) and Matthew 6:24. Some may say we’re simpletons. Others may say we don’t know what we’re talking about, but here’s the honest truth: When we’re not paying the bank, Ford, or American Excess payments every month, we have money to buy whatever we want! Who needs credit when you have cash?

“So what about when the car breaks down? What about when their’s a family emergency? If you don’t have credit or credit cards, how do you handle those situations?” The answer is rather simple, actually: We use our Emergency Fund.

Emergency Fund

You see, we have an amount of money set aside in a separate account strictly for emergency situations. Of course, we try to budget for some of the small problems that will inevitably arise in life – we’ll cash-flow many of those. But you can’t truly plan for everything. For those unplannable situations, we have our Emergency Fund. What this allows us to do is handle the car crisis without turning it into a money crisis as well. It allows us to make that trip across the state to be with the family emergency and not worry about the gas money to get there. All we have to do is jump online at some point and move the money over from the Emergency Fund into the main account. It’s amazing how much peace can come when you can handle the situation and not have to panic about the money side of things. And as life begins to stabilize again, we refill the Emergency Fund back to it’s full state so that it can be there for us the next time we need it.

Now, the Emergency Fund is NOT an Emergency Furniture Fund, or an Emergency Shoe Sale Fund, or an Emergency Vacation Fund. That’s not the purpose of it. Those are not emergencies. Those are WANTS that can wait until you save up the money to spend on them. Those are not the fires of life that need to be put out. Those are selfish WANTS that could cost you your financial safety by removing the money that is there to keep you safe. REAL emergencies are when you hit a piece of wood on the dark road, and it forces you to get two new tires and two new rims, plus the tow truck to get your vehicle to the shop. REAL emergencies are when a family friend’s brother dies, and you need to drive halfway across the State to pick up your sister from college so she can attend the funeral that’s on the other side of the State. REAL emergencies are when you find out your aunt is in ICU and may not make it through the night. Those are emergencies that can’t wait.

The Mythology of FICO

Upon hearing our cash-only plan, everyone seems to always have questions. How will we ever get ahead? What will we do when we need a loan? How will we ever survive in a world without debt? What about a house? Ultimately, all these questions are REALLY asking about our credit score.

Through my not-so-many years of adult life, I have learned a few things about that oh so great and mighty FICO. The first of which was the elements that make up the credit score. You see, the FICO company looks at five basic elements when calculating your credit score. Although the algorithm used to calculate the score itself is not public knowledge, the elements used to calculate the score IS public knowledge. Those elements are:
1) ~10% of the score is calculated by how often you apply for credit (such as when looking to get a new loan)
2) ~10% of the score is calculated by the different types of credit being used (credit cards, mortgage, home equity loan, student loan, etc)
3) ~15% of the score is calculated by how long you’ve been taking out loans
4) ~30% of the score is calculated by how much of your open credit is being used (the more you use your credit cards the better; sitting on open credit cards is considered bad!)
5) ~35% of the score is calculated by whether or not – and how often – you pay your bills on time (non-credit bills, such as utilities will be reported ONLY if they are NOT paid on time!)

Do you see the pattern? The only way to have a credit score is to stay in debt! But WHY stay in debt? So that we can have the option later to go into debt? All the while, we just shovel out hundreds or thousands of dollars to other people in the form of interest. And while we are juggling around payment after payment, we are constantly at risk of one payment not going through properly. Suddenly, that 6% interest credit card gets jacked up to 28.5% interest because of one late payment. Now we’re really messed up. Or… We can pay for things in cash, avoid credit payments, and actually have MONEY to do things in life. After about a year of no credit reportings to the three major credit bureaus, the current algorithm will drop our credit score to 0! And that’s exactly were we desire to be.

Buying a Home

The next big question is regarding the home mortgage. How will we ever buy a house? Without a FICO score, it is possible to buy a house. After all, how did people buy a house before 1987? The credit score hasn’t been around that long. There are two ways in which people buy houses without the use of the credit score. The first way is saving up and paying cash for it. This is extremely difficult, and requires spending renting for the entire savings period, but certainly not impossible. The second way is to have an underwriter give us a mortgage.

An underwriter is someone who gives out loans not by means of a credit score, but by contact our previous landlord companies and make sure we paid our bills on time, make sure we have steady income, and make sure we pay our utilities on time. And THIS will give an accurate prediction of whether or not we pay our bills and are responsible individuals. And this will likely be the case for how we get a mortgage for a house. But even this comes with the stipulation of having a massive down payment of at least 10%, a 15-year fixed rate mortgage, a monthly payment of no more than 25% of my take-home pay, and an understanding that we’ll be at said house for at least 5 years. Our goal would then be to pay off the house in 8-10 years so we can re-obtain the status of being debt free.

The Art of Giving

Sure, our approach is certainly an unorthodox way of handling money, but it’s the way that God has called us to handle money. Striving to be debt free has freed us up to give as much as possible. It places us in a position to be available to drive across the state, pick up a family member, and drive them to another part of the state for a funeral. It places us in a position to support friends in their ministries when they need it. It places us in a position to answer the Calling when God gives it to us by having little to no financial commitments to hold us down. It’s amazing what you can do when all your money isn’t going to the bank in the form of payments!

It’s the Scriptures that lead us, but it’s the ability to give that drives us to manage our money so well for God. This is what it’s all about – being in a position to give like crazy. And giving like crazy is what the Scriptures are all about – giving of yourself, in every way shape and form. Giving not only materially, but emotionally, physically, and financially. And that is why HOW we manage our money is so important.