A High Score Can Help You: Responsible Credit Decisions Now Can Pay Off Later

By Denise Reinoso Wayman

Do I have credit? Why does credit matter? What is a credit score? Should I apply for as much credit as I can get? You may have asked yourself these questions.

A credit score evaluates a consumer’s creditworthiness. Lenders use credit scores to gauge how likely someone is to repay debts. Someone with a higher score is considered more financially trustworthy.

Lenders generally offer lower interest rates to borrowers with high credit scores. If you have a low credit score, you may not qualify for certain loans or have to pay higher interest rates, which increases your cost of borrowing. If you have no credit score, that usually means you haven’t established credit yet.

Establishing credit usually means borrowing money (using a credit card or getting a loan) and making your payments on time.

Missing payments can lower your credit score, so be realistic about how card or loan payments fit into your overall budget. It takes time to rebuild your credit score after it declines.

Credit_Reporting_AgenciesCredit is not a taboo topic. You may need a loan someday to further your education or buy a car or house. Wouldn’t it be great to be offered the best rate possible? Here are a few tips:

  • Apply for only credit you need – be smart about what you’re doing and why.
  • Be responsible with the credit you have.
  • Make your payments on time.
  • Keep a low credit card balance and pay it in full monthly.

Start by setting up a relationship with your primary financial institution – manage your accounts responsibly, and there’s no better place to start establishing your credit.

You’re entitled to some free information

AnnualCreditReport.com is the official, authorized website to get free credit reports form the three major reporting agencies – Equifax, Experian and TransUnion.

Visit annualcreditreport.com/index.action for more information. It’s important to know what’s on your credit report.

If you have questions about credit or if you’re wondering about planning for your financial future, we would be happy to talk to you!

About the Author

Denise Reinoso Wayman is Regional Operations Manager for Everence Federal Credit Union. She works from their office in Mount Joy, Pennsylvania.

*The logos of Equifax, Experian, and Transunion belong to their respective companies and do not imply their endorsement of the Ecumenical Stewardship Center or its programs

Managing Debt

A new part of the COMPASS resources this year are live chats with thought leaders on the month’s theme featured on the blog. During March, COMPASS has focused on “Managing Debt: Loans and Money in March.”

Sandy Crozier, Stewardship Development Director of The Free Methodist Church in Canada

Sandy Crozier, Stewardship Development Director of The Free Methodist Church in Canada

This past week Sandy Crozier presented on Managing Debt offering tips and ideas for how to repay debt, have emergency savings, and to be financially fit. The recording of the chat is available here to watch the discussion and gain Sandy’s wisdom.

Please note, as this was the first COMPASS Live Chat there were a few technical issues in the first 5-10 minutes of the recording, but after that, it worked well.

Enjoy the presentation, and please share any thoughts, questions, or comments on the topic that you may have here in the questions and we’ll continue the faith and finances conversation about managing debt together.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Faithful Fun with Finances in February

How is that for some alliteration? COMPASS’ focus and mission is on creating conversations related to faith and finances for Millennials and young adults. This month on the COMPASS blog, we will dig deeply into some fresh financial topics such as credit scores, credit cards, taxes, income tax filing, and student debt. In March, we’ll continue a focus on finances with a closer look at debt management.

February is a month with more than just Valentines. We are going to have fun thinking about #faithandfinances.

February is a month with more than just Valentines. We are going to have fun thinking about #faithandfinances.

I am looking forward to sharing posts with you on the blog from persons who have far more expertise on these topics than I do. To start the conversation though, I have a few thoughts about some of our February topics.

Credit Scores

I am no expert when it comes to credit scores, but I have checked my wife’s and mine a few times because of having a credit card and paying student loans. I have learned that paying bills regularly and on time has a positive impact on your credit score. The credit score is one factor that is used when deciding if you will be approved for loans or other credit.

Income Taxes

In the United States, income taxes must be filed by Friday April 15th this year. Because of this, I am guessing that most of you have not yet started preparing your tax forms. I have to admit, I haven’t either. It’s on my agenda for this month, and I will let you know on the blog how that goes. Here are some things you can start doing now before filling out your paper or e-form:

  1. Find your 2015 receipts that you might use for deductions.
  2. Make sure that you have received all W-2s and other such forms (like 1099-Misc.) which you receive.
  3. Do a little research to determine the best way for you to do your tax preparation (e.g., do you need an accountant, tax preparation software, do you do it by hand??). The approach will vary based on your level of patience, time, interest, and expertise.

Student Loan Debt

At the start of each month my wife Allison and I make sure to set up payments for our student loans. Because we try to pay enough to reduce the principal in addition to the interest, it’s always nice to see that the total amount has gone down, thanks to the previous payment! If possible, adjust your payment schedule and/or amount to pay more than just the interest on student loans.

These are just a few observations from my experience. It’s also helpful to remember that in spite of all of the stress that financial matters can create, God is present with you. One of my favorite passages to remember which helps me put things in perspective and gives me patience is Isaiah 43:1-7.

“Do not fear, for I have redeemed you; I have called you by name, you are mine. When you pass through the waters, I will be with you; and through the rivers, they shall not overwhelm you; when you walk through fire you shall not be burned, and the flame shall not consume you… you are precious in my sight, and honored, and I love you… Do not fear, for I am with you.” ~  from Isaiah 43:1-5, NRSV.

What are some financial questions and topics that you have been wondering about?

About the Author: Timothy blogs regularly and serves as the Communications Associate for the Ecumenical Stewardship Center with a focus on COMPASS. He also serves at Messiah Lutheran as the congregation’s mission developer.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Image Credit: Hearts

Frugal Fall: A Financial Self-Examination

During October, the COMPASS blog is sharing thoughts, tips, and reflections about having a Frugal Fall. Today, we are happy to welcome back regular contributor Nicole Brennan, a Marketing Assistant at Barnabas Foundation. Nicole shares some important ideas and reflections about a “Financial Self-Examination.”

Nicole and her friends having some fun this fall, on their visit to see Pope Francis while he was visiting the United States.

Nicole and her friends having some fun this fall, on their trip to see Pope Francis in Philadelphia while he was visiting the United States.

There is an underlying pressure to make the most of the hot weather during the summer months. My days and evenings were booked trying to squeeze in bike rides, family outings, church fundraisers, date nights, and road trips. Now that autumn is upon us, it almost seems the slight chill in the air makes everyone slow down a bit. Take advantage of fall inactivity and whatever breathing room you have to assess your financial health!

I am very money-minded while travelling on a budget, but my “big-picture” finances tend to get a bit away from me. I have automatic withdrawal for all my bills and automatic deposit with my paycheck. Since everything is pre-programmed, it is very convenient, but the details (and my overall financial health) are sometimes lost. I recently asked myself these four questions to audit myself and see how I am doing.

Am I Following My Budget?

I use my credit card for everything- gas, groceries, clothes, and all the miscellaneous stuff in between. When the email comes saying “Time to Pay!” I look over the expenses to make sure they are accurate, maybe add them up if I have time, and spend my accrued points. If you haven’t made up a budget, a monthly spreadsheet in Excel only takes a few minutes to set up, and you can see your immediate monetary stats all in one place. If you already have one, now is a great time to update it, and make adjustments as needed.

What Do My Retirement Savings Look Like?

My financial advisor (aka- my dad) has always taught me to save, and it’s a value I hold near and dear. If you have a company retirement plan, take advantage of it! If not, then personally set one up ASAP! Your HR representative will be able to help if you are with a company. However, if you are an entrepreneur and/or don’t have company help, consult a financial advisor. (You can try to “go it alone,” but if you are unfamiliar with the financial world, it will be difficult. To get started, do some research about 401(k), 403(b), Roth and IRA options at IRS.gov.)This is a great calculator to help you understand what your projected retirement saving goals look like and where they need to be. It factors in rate of return, current and future salary, current age, age of retirement, and a few other factors. It’s fairly simple to understand, and there’s a handy glossary of common terms below.

Did I Use All My Benefits?

Most companies are re-upping for their health/dental/vision insurance and their HSA/FSA  (Health/Flex Spending Accounts) about this time of year. If you have these, have you taken full advantage of them? Have you gotten your annual physical and dental check-up, yet? If you have money left in your HSA/FSA, spend it! And speaking of your HSA/FSA, evaluate whether you need to add more or subtract some for next year.

Have I Donated to Charity and My Church?

During your self-audit, it’s very easy to adopt a “broke” mentality. “I’m so broke, I only have this amount in my savings!” “I’m so broke, I can barely stay within my budget!” “I’m so broke, I can only squirrel away a tiny portion towards my retirement!”  It also might be easy to deny tithing or giving to your church and charity, because of this mentality. The truth is we are abundantly blessed by God. We have enough, and the OPPORTUNITY for enough, to pay our bills, visit a doctor, and save what we can. It is an honor to bless those places and people when and where we can. There is a joy that comes from giving. Make room in your budget to experience that joy!

COMPASS resources explore the connection between faith and finances, so looking honestly at your financial health is an important spiritual practice. Deuteronomy 8:18 says, “But remember the Lord your God, for it is he who gives you power to get wealth.” (NRSV). It is essential to be wise with what God has blessed us with here on earth, and that means knowing and improving your financial situation as God gives you the ability to do so.

profileAbout the Author, Nicole Brennan: Hello there! I’m passionate about living a stewardly lifestyle, while being adventurous and frugal. I currently live in community with six other 20-somethings in downtown Chicago and work as a Marketing Assistant at Barnabas Foundation, a partner of ESC and COMPASS. In my off hours, you can find me volunteering at a nearby homeless shelter, enjoying live music with friends, or watching reruns of Parks and Rec. Email me at nicoletbrennan@gmail.com or tweet me at @BarnabasFdn.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Talking about Faith and Finances- One Couple’s Experience

During September, the COMPASS blog is digging deeper into the topic of conversations about money by sharing different perspectives, questions, and approaches. As we continue the series today, I am excited to welcome my friends Pastors Amanda and Jeremy Ullrich to the blog. They have very recently purchased their first home which led me to want to hear their story. In hearing it, I have decided that our conversation will make for a two-part series. Today’s post will shed light on how they as a couple have grown since getting married and attending seminary, especially related to talking about money together. The next post will be specifically about their experience of buying a new home.

Amanda and Jeremy with my wife Allison and I

Amanda and Jeremy with my wife Allison and I, after Amanda and Jeremy graduated from seminary.

Timothy (T): First of all, Amanda and Jeremy, thank you so much for being willing to share your story with me, reflecting on how you talk about faith and finances, and how those conversations have led you into very recently purchasing your first house.

Jeremy (J): We are excited to share our story, and hope it helps other young adults and young families in having these conversations.

T: Amanda and Jeremy, how do you have conversations about faith and finances? What challenges have you faced in having these conversations?

J: Good question Timothy. Having these conversations has been a growing process for sure. We each grew up with different understandings and familiarities when it comes to talking about and managing money.

Amanda (A): We had no clue what we were doing when we started.

J: I felt like I had some clue, but I admit, I didn’t know much. I think we were both raised with the idea that, ‘if you don’t have it, don’t spend it.’’ Because of this, we were naturally inclined to not want to spend, especially as we were paying for college and seminary. We were, and really are, inclined to want to save, and live frugally as much as we could. But that looked differently for both of us.

A: When we were first married, it was really difficult to have money conversations.

J: My dad and uncle invested for a long time, including investing in me. For example, growing up, I showed heifers (cows) at the county fair, and after showing they would be sold. All the money that was raised from those sales became scholarship money for me. This was an early opportunity for me to earn some income, and to do some good work by caring for the cows, walking and feeding them.

A: My sisters and I had an allowance growing up. At some point, once I became a teenager, my parents helped set up a checking and savings account for me.

A: After getting married, Jeremy and I didn’t have credit card until two years into marriage and seminary. I think the biggest reason why we didn’t get a credit card until then was because we were afraid of having a credit card. We changed our minds in large part because of financial counseling we received which moved us past our fears to the possibilities. We have learned that when intentional and careful with a credit card, and using it as a tool to build credit, and pay it off right away every month, having one can be a good thing. We actually now have two credit cards now- one used for purchases at a single store as well as for gas.

J: While in seminary we received coaching from a financial coach, and that was a very helpful thing which really helped us grow in our ability to talk about money. In fact, one of the things we did early on which was probably most helpful was that Amanda and I both created a financial autobiography. It was so helpful to hear and dig into our financial stories from growing up. That helped us understand each other so much more.

T: In looking at your finances, how often do you have conversations about them?

A: As a couple, we go over our finances, credit cards, checking accounts, etc., at least once a month. In fact, every transaction that we make I enter into a spread sheet, under a certain tabbed area. This helps us, review, make adjustments, and cut back as needed with our budget.

J: Even though we have figured this out, we still have conflict over finances. I am a bit more of a spender than Amanda, and more quick and willing to spend. In seminary, it was really difficult, because when shopping for something, Amanda and I sometimes had differing opinions about whether a purchase was really a need. These moments of conflict sometimes affected our respect and trust for each other. So it was important for us to talk it out and take some time.

A: For example, Jeremy really wants to get a treadmill. He wants to invest in his health. At first I didn’t see the need, but after talking it out with Jeremy, I have come to see the potential benefits.

J: Through our money conversations we have learned to compromise, but also to learn and hear each other’s opinion. Especially in seminary we tried to always avoid impulse buys, and any unplanned big expense. Now, we are slightly more lenient on that, but we definitely have price limits.

Pastors Jeremy and Amanda Ullrich

Pastors Jeremy and Amanda Ullrich

A: Perhaps the best thing that that has come from our conversations is that our communication between each other has definitely increased over the years.

T: What have you two learned in the process of having these money conversations?

J: We have learned that sometimes we aren’t in the right spot to talk about money. Sometimes it might actually be more painful to talk about than helpful. We have had to realize that these conversations also have to deal with conflict management. As finances are both stewardship and ministry, they also reflect one’s core values. What you spend your money on shows where your heart is. To reflect on this takes time and space. Sometimes we may not have the time or mental capacity to have that reflection together, because of stress from work and life. It’s important then to set a time to come back to the conversation with each other.

A: We have also really learned how to address conflict in a healthy way!  By doing so, we don’t let conflict, or any potential conflict, create more distance between us. We have also been reminded over the years of the gifts of our friends, and have collaborated with them to help strategize and have these conversations.

T: Over the years, and with the purchase of your new home recently, what new questions about faith and finances have emerged for you?

A: We want to tithe to our congregations and give beyond that to different groups, causes, and nonprofits. We are still working to figure out the best model for us to have the most impact with our giving.

J: At the same time, we are facing the reality that a huge part of budget in our congregations is for our salaries. As pastors, we have to wrestle with what does it mean to steward the gifts we have as a congregation.

A: Trying to decide how much money to put down on the house was interesting. And I’ve been wondering especially about how to talk about these issues, and stories, in the pulpit more regularly.

J: I think about the story of the rich man, who is told by Jesus that he needs to sell all his possessions. What does it mean to have finances and still follow Jesus? That’s the point at which it becomes a tension. There seems to often be a fear or focus on finances and financial situations in tension with following God. For instance, who are really worshiping when we think about and use our finances?? God? A checkbook? A bank account? It can be a constant tension. I have come to believe that it is important to live into that tension.

T: What hopes and dreams do you two have?

J: I hope to have a growing family someday, and to be able to care for it well.

A: In addition to that, I hope to be able to pay it forward, as we’re both so grateful for all that we have received and do receive.

Pastors Amanda & Jeremy and their dog Lola

Pastors Amanda & Jeremy and their dog Lola

T: We will pick up the conversation in our next post as we turn to Amanda and Jeremy’s decision to buy their first home.

About the Interviewees: Amanda and Jeremy Ullrich are a clergy couple in West Texas, both serving their first congregational calls as ordained pastors. Their family currently includes their wonderful dog, Lola. Together they are tackling the world’s largest puzzle, which includes approximately 33,600 puzzle pieces, because “everything is bigger in Texas,” and “why not go big or go home.” While attending Luther Seminary, they lived next door to Allison and Timothy Siburg, and that was the start of a beautiful friendship.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Talking About Faith and Finances: Pursue Contentment

During September, the COMPASS blog is digging deeper into the topic of conversations about money by sharing different perspectives, questions, and approaches. Today we welcome Dori Zerbe Cornelsen, from the Mennonite Foundation of Canada, back to the blog. Join Dori in thinking about contentment. As Dori mentions, First Things First and many other resources on the COMPASS website help pursue living with a deeper sense of contentment. See what you think and please join the conversation on Facebook or here on the blog by leaving a comment.

10 Million

“Which would you rather have – 10 kids or $10 Million?”

“Which would you rather have – 10 kids or $10 Million?” 

During a presentation I once asked the group, “Who comes to mind when you think of the word contentment?” Someone said his grandfather used to ask this question. Without much hesitation, I said, “I’d choose the $10M.”

“Wrong answer,” the person said.  “Because if you have $10M you are never completely sure you have enough but if you have 10 kids… you know you have enough!”

Contentment probably does have something to do with having enough.  In studies that test the link between money and happiness, one consistent observation is that the association of happiness-to-money plateaus when people have enough money to meet basic needs, have good health care and safety, etc. – any increase in money above this level does not predict the same increase in happiness.

We live in a culture that promotes being discontent.  Spending on advertising in North America is projected to be more than $200B in 2015 all to remind us that we should be dissatisfied.

So, can we be content?  Way before people did studies on money and happiness, Paul wrote a letter to Timothy in our Bible that includes pretty much the same observation:

“For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that.” (1 Timothy 6:7-8).

Paul goes on to warn Timothy that unchecked dissatisfaction can lead to pretty grim consequences.

I mentioned the study guide, First Things First in my last blog.  “Contentment is a choice,” writes Edwin Friesen:

“True contentment frees us to enjoy our gifts in the present.  To be content does not mean that we don’t work for better tomorrows or plan for the future.  It does mean that we do not let our dreams and concerns about tomorrow rob us of fully enjoying the gifts we have today.” (p. 35)

How are you choosing contentment?

dori-zerbe-cornelson-220x220About the Author: Dori Zerbe Cornelsen works with Mennonite Foundation of Canada encouraging and inviting generous living.  She and her husband Rick live in Winnipeg, Manitoba.

 

 

Image Credit: Money

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Leveling Up in Financial Conversations

During the month of February, COMPASS is giving space for thought, questions and conversation related to couples, their money, and their money decisions. As part of this series, we are featuring guest posts from different writers. Today, we welcome Margaret Ellsworth and her husband Drew Baker to the blog to share a story about how they engage financial conversations.

margaretanddrew2

Margaret Ellsworth and Drew Baker

This Valentine’s Day is marked by a lot of conversations in our house about finances. Our partnership has to “level up” (can you tell we’re gamers?) in response to new blessings and new challenges. For the past five years, our income has come from a variety of piecemeal sources: adjunct teaching contracts, freelance projects, scholarships, and an assortment of part-time jobs. We’ve been lucky: we’ve had enough to pay our expenses and put some money away for the future. But because our income sources were so sporadic, we didn’t have much of a saving strategy beyond making it to the end of the semester or the end of the contract. We worked hard to live frugally, putting off large purchases and hoarding away as much money as we could to prepare for a future in flux.

That all changed in 2014. We finished our respective graduate programs, and for the first time since we got together, both Drew and I are in long-term, so-called “career track” jobs. Which means we have to figure out what to do now that the paychecks are the same every month. Our new situation is presenting us with some new questions…

With all of the degrees that this couple share, you might expect that they have quite the library now.

With all of the degrees that this couple share, you might expect that they have quite the library now.

What are our new savings goals? We’re realizing that this is a time to think about more long-term goals, whether or not we are ready to achieve them. For us, our most recent decision is that we want to own a home someday. The housing market in Southern California being what it is, we may not be able to afford that for a while. But we’ve started researching the home-buying process now, as well as starting conversations about our priorities in terms of location, price, and type of home. This gives us a concrete goal to look forward to.

How does our spending align with our values? This applies to both big and small purchases. When we recently upgraded our car, we chose a hybrid car so that my commute didn’t put as much pressure on the environment. We’re moving toward using a smaller local bank instead of the big national chains, and as much as possible we’re moving toward making our smaller purchases locally as well. Taking a look at our budget, we realized we can afford paying a few extra dollars for locally grown produce, or buying Christmas gifts at hometown shops rather than Amazon and Best Buy. We want to honor this privilege

How can we give to others in need? Giving to charity or faith communities is something we put off for a long time when we were living paycheck to paycheck, but we always knew we wanted to make it part of our life. As an interfaith couple (Drew is Buddhist and I’m Christian) our charitable giving has to look a little different than the simple monthly check to the church that I remember from my childhood. We can’t just write a check to the church and call it a day! Not that we’d want to anyway. At the moment our giving is a piecemeal combination of pledges to my church, contributions to charities and interfaith organizations. It’s a work in progress, and we are committed to making it a habit.

These are exciting and frightening questions—thank goodness we are tackling them together. Most weeks we take a Sunday afternoon walk down to our favorite frozen yogurt shop, and we often use those walks to check in with each other about where we’re at financially. Maybe I’ll tell Drew about some of the charities I think could use our help, or Drew will describe a potential house and ask me what I think. We’re trying to find a financial picture that works for us right now, while realizing our situation can and almost certainly will change again.

margaretanddrew1About the Authors: Margaret Ellsworth is a writer, communicator, and recent seminary graduate. She currently works at the Chapman University Library in events and marketing. Her husband, Drew Baker, is an acquisitions librarian and Buddhist Studies professor. They live in a book-filled apartment in Claremont, California.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Couples, Money and Valentines: February COMPASS blog preview

How do you and your partner (or Valentine) talk and think about money together?

How do you and your partner (or Valentine) talk and think about money together?

During the month of February, COMPASS is giving space for thought, questions and conversation related to couples, their money, and their money decisions. Over the course of the month, a series of guest posts will explore this topic and how different people engage in money conversations with their partner. The series of posts will offer reflection about how couples approach money, money decisions, and finances together.

Do you have some thoughts you would like to share? Might you like to think about this and share reflections in the form of a guest post yourself? If so, please let me know.

In the meantime, consider these questions yourself (and if you have a partner, with your partner):

  • What is your earliest memory of money? (What is your partner’s earliest memory of money?)
  • Do you believe that you have enough, or do you always feel like you are running short of enough money?
  • How much money (by percentage of income) do you put away in savings, and how often?
  • How often, and how much money (by percentage of income) do you give financially to faith communities, non-profits and other social needs?
  • If money were no object, what would you (and your spouse) do for fun or your favorite hobby?
  • What is one bigger expense that you have put off that you are hoping to make this year?
  • What is one bigger expense that you know you need to pay this year?
  • How would you describe your ability to talk about money with others?
  • How would you describe your ability for those closest to you (like your partner) to talk about money with you?

As we travel through this series, we will also share possible resources to help explore these and other finance questions for couples.

Until the next post, and even though it is a bit early, Happy Valentine’s Day! I hope that your money questions and conversations are positive and helpful, and that you are able to celebrate Valentine’s Day in a meaningful way with those you care about with or without the use of money.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

New Year’s Resolutions- Savings, Debt, New Home and More

In January, the COMPASS blog is focusing on changes and resolutions related to personal finances. As part of this series I invited Grace Duddy Pomroy to share her thoughts. You might remember that we have heard from Grace before last fall in this first and second part of a two-part conversation. Enjoy Grace’s thoughts! -Timothy

Grace headshot

Grace Duddy Pomroy

Hello COMPASS readers! Timothy asked me to join in the conversation about New Year’s Resolutions on the blog. My husband and I have been married for about four months and we recently bought our first house. As I think about our resolutions for 2015, a big one for me is organizing our financial life. I recently wrote a blog post on how to organize your financial life on my blog Classy Frugalist, which really opened my eyes.

When my husband and I got married, we combined our money. I created a budget for us that included savings, giving and debt repayment. We are confident and secure about where our money is going day to day, but we have yet to really make a plan for our longer-term goals. Here are a few things that I would like to get organized for next year:

Debt Repayment Plan

The biggest thing that I would like to do is make a plan to repay our debt. Both my husband and I brought educational loans into our marriage. Currently, we are doing just fine paying off the minimums on our loans plus a little extra when we can. I want to spend some time putting all of our different debts on the table looking at the total balance and interest rate on each one. I also want to look at the different available repayment plans and make sure that we are using the most beneficial system. My goal has always been that I would repay my student loans back in 5 years instead of 10. That may be a bit ambitious, but I would like to put together a repayment plan that gets out of debt as quickly and efficiently as we can.

Short and Long-Term Emergency Fund

I recently read about the difference between a short-term and long-term emergency savings. Ever since graduate school, I have had an emergency savings fund that I have grown and used as I have had occasion to. I never realized the value of having two separate funds. Your short-term emergency savings fund should be close at hand and generally a small amount. This money can be used for things like the deductible for your auto and homeowner’s insurance, cost of an appliance breaking, money for a medical expense, etc. (Generally somewhere between $500-$3000 depending on your life circumstance.) This should be kept close at hand, likely in a savings fund, to be used when needed.

Long-term emergency funds should include enough money to pay for 3-6 months of expenses just in case you or your partner or both lose your job. This money could be kept in an investment account: just make sure that it is fairly easy to access if needed for a larger emergency expense. I think that it is brilliant to have two separate funds rather than just one. When you are growing an emergency fund initially, the short-term fund seems like a much more reasonable goal. Once you achieve that, you can begin building the long-term fund over a longer time period. I want to create a solid estimate for both funds in our family budget and continue building them.

Continue Saving

Savings have been a huge learning area for me since graduate school. My husband and I are now a part of a credit union that allows us to have separate savings funds for different goals. Currently, we have four: an emergency fund, a puppy fund, a travel fund and one to save money to pay taxes annually for the contracted stewardship work that I do. I would like to grow my savings fund to be able to add a fund for Christmas/birthdays and a fund where we save for a few things that are more fun. I also want to make more of a plan for our travel and fun fund so we have some specific goals in mind.

When purchasing a new home and entering into a marriage, there are lots of new or adjusted expenses to think about.

When purchasing a new home and entering into a marriage, there are lots of new or adjusted expenses to think about.

Adjust to New Expenses

Since we are entering into a new housing situation, we will need to adjust for new expenses. Our monthly housing payment is a little higher than our current rent cost. We will also have higher expenses for utilities and incidentals. We will need to take a few months to adjust our budget to these new expenses.

Putting It All Together

In getting organized, I am most excited to put everything together. I want to take a look at our values and where our money is going over the long-term. Which things should be a priority for right now? Should we invest more in debt repayment or building up long-term emergency savings? What types of things will we save up for in our travel and fun funds? How will we handle additional money that we receive (tax refund, bonuses, side work, etc.) – how will that money be divided amongst our priorities?

Happy New Year Compass Readers and best wishes on your resolutions for 2015!

About the Writer: Grace Duddy Pomroy is Executive Director of Operations at Kairos and Associates, and previously served as Assistant Director for the Center for Stewardship Leaders and Luther Seminary. She is author of “Stewards of God’s Love,” recently published by the Evangelical Lutheran Church in America. She blogs regularly and you can follow her on Twitter.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Image Credit: New Home

Renting vs. Buying

Today we are pleased to welcome Carolyn Lesmeister as a guest blogger as part of COMPASS’ series of reflections about renting, buying and mortgages. If you missed the previous posts in the series by Matthew DeBall and Timothy Siburg, check those out also and join the conversation. 

When my husband and I finished graduate school and moved from the San Francisco Bay area to small-town Indiana, we experienced housing “sticker shock.” For 2/3 of what we’d paid to rent a one-bedroom apartment in Berkeley, we were able to rent a house eight times its size. Our former apartment – in its entirety – could have fit into the formal living room, with room to spare.

It’s possible that the dramatic price drop went to our heads. The two of us rented a four-bedroom house. Our cat basically ended up with his own room. (Yes, our cat.) We didn’t need that much space, but we could easily afford it, so we went a little crazy.

Renting certainly had its perks. It let us stay flexible when we were unsure how stable our jobs were and how long we’d be in one place. It allowed us to learn that it’s hard for two people who work full-time to keep a large house clean. (The cat never did learn how to pick up his toys!) Renting kept us from being tied to a property in a place where the housing market was stagnant.

When you and your landlord don't share maintenance priorities, you sometimes end up learning interesting skills, like how to sweet-talk bats into pillowcases.

When you and your landlord don’t share maintenance priorities, you sometimes end up learning interesting skills, like how to sweet-talk bats into pillowcases.

Most importantly, renting meant that when something went wrong – like when the furnace started making explosion noises and shaking the entire house – all we had to do was call our landlord and let her deal with it. We didn’t have to find a repairman, and we didn’t have to pay the bill.

The downside was that our landlord didn’t always share our perspective on what repairs were necessary. She didn’t seem concerned when we told her that small panes of glass had fallen out of one of the attic windows. As a result, I became an expert at safely and humanely removing bats from our living quarters. We had to learn to live with whatever issues our landlord didn’t fix.

About a year ago, our personal and professional circumstances required us to relocate to downtown Indianapolis. Initially we looked for places to rent but soon discovered that the monthly mortgage payments on a nice house would be less than the going rent (often for not-so-nice places) in the area. As a neighbor quipped, “It’s an up-and-coming neighborhood, but the landlords around here seem to think it up-and-came.”

So, we ventured into the fascinating and sometimes terrifying world of buying a house. We considered multiple options when we applied for our mortgage, including a community-based nonprofit that focused on loans for low-income first-time homeowners, a large national bank with some good incentives, and even the mortgage affiliate of our real estate agency. Each had its own perks and its own drawbacks … and its own qualification requirements.

The process had some bumps, but it worked out, and we bought a lovely, two-bedroom, 112-year-old craftsman style house within two miles of the city center. We downsized to a much more manageable house that suits our needs.

One of the "perks" of homeownership is making your house your own. Days off become occassions for spackling, painting, and doing maintenance work.

One of the “perks” of homeownership is making your house your own. Days off become occassions for spackling, painting, and doing maintenance work.

The nice thing about home ownership is that we have complete control over our space. We can paint, update, and landscape to our heart’s content. The downside is that when things go wrong now – like when the kitchen sink detached itself from the counter and tried to fall off – we have to deal with it ourselves. We made half a dozen phone calls before finding someone willing to try and fix that one.

We find ourselves more committed to our community, too. Buying a home – for us – means making a long-term investment in our neighborhood and our city. We care about our local businesses, schools, and community organizations, and we are investing in them even more than we did when we rented in other places.

Since we moved, the words God spoke to Jeremiah keep echoing in my mind, “Work for the peace and prosperity of the city to which I have sent you, and pray to the Lord on its behalf, for its welfare will determine your welfare.” (Jer. 29:7)

Renting was a great option for my husband and me when we first started out – and if we’d stayed in California it might have been our only option – but we are enjoying the blessings and challenges of homeownership in this new phase of life.

lesmeister headshotAbout the Author: Carolyn Lesmeister serves alongside her husband as the pastoral team for a unique rural-urban ecumenical ministry cooperative in central Indiana. She’s passionate about loving God and God’s people and is crazy enough to think that faith ought to affect every aspect of a person’s life. She strives to live that way on a daily basis and constantly seeks forgiveness for the ways in which she falls short.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.