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One of the benefits of not having a finance background is that I
don’t get as easily caught up in as many theories about money as people
who have been formally educated. When I sit down and work on my own
financial goals, or help a friend or family member work on theirs, it
is often psychology that is most important–because for most of us
money is about our chosen behaviors, and not financial theory. As a
result, I have often witnessed that facing our financial fears, with
the inevitable embarrassment that accompanies it, is the first step to
establishing financial peace in our lives.


Facing Your 800lb Gorilla


You’ve decided that you want to take that first step towards
establishing financial peace in your life. You may have even tried to
take that first step before, but something always prevented you. For
most people it is fear—a fear usually greater in our minds then in
reality. Not long ago, I sat down with family members, in order to help
them start to live by a budget and work out of debt. I will never
forget their reaction when I totaled up all their debt (not including
the mortgage). Based on their shocked looks, I would guess their heart
was well up in their throats. Even though they knew they were in
financial trouble, and had difficulty paying the bills without using
credit cards, they had no clue what their total financial picture
looked like. Without being able to see the complete picture it is
impossible to change your money behavior, eliminate debt and ultimately
establish financial peace.


We didn’t dwell long on the picture I had painted for them. We
quickly began chipping away at a plan. Using an excel spreadsheet, we
went through each debt account and created a budget that was geared not
at easy living, but towards establishing peace in their lives about
money. In roughly four and a half hours we were able to paint their
entire financial picture, cut up all their credit cards, establish a
budget, create cash only envelope accounts and calculate that in 24-30
months they would be debt free if they followed the plan.


I remember seeing the relief on their faces, and hearing it in their
voices when the process was complete. Sure, there was a lot of hard
work and sacrifice ahead of them, and they were still reeling from the
shock of how careless they had been. But they had stood toe to toe with
their financial gorilla and stared him down. Because every single penny
was out in the open, the fear had been wiped out. No longer did they
have to wonder if they had enough money or if they could eliminate
their debt. Now it was all laid out in front of them, and it certainly
did not look so scary, despite having accumulated over $40,000 in debt,
on top of their $120,000 mortgage.




Attack Your Gorilla One Money Punch at a Time


For most people the hardest step toward eliminating debt is sitting
down and painting that financial picture. I know for me, the fear was
paralyzing and at first it was horribly embarrassing. But once I drew
my gorilla out of the “jungle”, I realized he was not as horrible as I
thought.


To help you face your gorilla I want to offer you some basic steps.
This is not meant to be a complete guide to eliminating debt or
establishing financial peace, but it should provide you with an outline
of how to get started.


  1. Find a “money buddy” (friend or relative) who is disciplined with
    money, and believes in paying cash for everything except a mortgage.
    This might not be easy, but start with close friends, relatives or ask
    your parish priest if he knows someone. If you do find someone, make
    sure you trust them 100 percent and tell them they have your permission
    to be honest with you and tough on you. You will need to be honest with
    this person as well. If you hide anything it will most likely guarantee
    a victory for your gorilla.
  1. Sit down at your kitchen table, or some other large table. Lay out
    every bill, statement, collection letter or anything else related to
    money. This is how you will paint your financial picture. Make sure you
    check online or call for the most recent account balances on credit
    cards and other debts. Run your credit score, as you may have
    outstanding balances or collections on accounts you forgot about, and
    you will see how financially healthy you look to a bank. I recommend
    using http://www.myfico.com/. You
    should purchase all three independent reports, which cost about $14.95
    each. This step will be your first look into the face of your gorilla.
    Then let your “money buddy” take charge and guide because he/she will
    not be emotionally involved, as this often a very emotional step for
    most people. (This is also the step wjere you cut up ALL your credit cards.)
  1. Create your budget. The most important thing in this step is not to
    complicate it. Unlike the United States tax code, keep your budget
    simple and clear. Starting with your revenue, determine the minimum
    amount of money you can live on. You have to pay yourself first, so
    take care of all your utilities, rent/mortgage, food, gas etc. Once you
    have accounted for all the things you absolutely have to pay, attack
    your debt from smallest to largest–meaning that after you have met
    minimum payments on all credit cards/loans, start to pay whatever is
    left over on the card/loan with the smallest balance. The only
    exception to this rule is any credit card or loan with an exceptionally
    high interest rate like 20 or 30 percent. If done properly, you should
    be able to calculate about how long it will take to be debt free. This
    is important, because you need to see the goal, and knowing that your
    goal is six months, twelve months or thirty-six months away provides
    you with focus and hope. As you begin to put your plan into practice,
    it is important to remember your budget is not the Ten Commandments. It
    is not written in stone. You will have to make adjustments once you
    start to actually live by it.
  1. Establish your cash accounts. In order to re-train your behavior
    with money, you need to pay cash so your brain actually sees the money
    being spent. Handing over a credit card, or even a debit card, does not
    allow our brain to register what we are doing. Establishing cash
    account envelopes (Dave Ramsey has a good system, but there is a fee.)
    will allow your budget to become real to you on a daily basis, and not
    just when you sit down in front of your spreadsheet. Every time you
    reach into an envelope to spend cash it will reinforce what you are
    doing. In fact by using cash, and seeing it dwindle in your envelope
    after every purchase your mind will begin to look at those purchases
    differently by asking the question, “Do I really need this?”

Each month or pay period you will pay the cash envelope account
based on what you calculated in your budget. If you choose to use a
food or household envelope then put in the amount of cash that is
represented by the lines in your budget which make up the pertinent
accounts. There are different ways to create your envelopes and it
depends on the individual person, but you should have either an
envelope for each expenditure item, or by grouping similar items
together such as household. Some people like to keep food separate from
cleaning supplies and toiletries, and other people like to lump them
together under household items.


  1. Make sure you talk with your money buddy on a regular basis, and
    sit down with them once or twice a month. This is particularly
    important in the first 3-6 months as you begin to get comfortable with
    your new self-imposed financial lifestyle. Issues will arise, such as
    not budgeting enough money for an unexpected expense arises. Your
    financial buddy is the person you should turn too. Remember for most of
    us who have been in financial trouble, our behavior is similar to an
    addiction which means when we try to change we will be tempted to
    revert back to our old behavior. Having a good money buddy is key to
    helping you through those tempting times.


This is not a comprehensive guide to becoming debt free. My goal is
to simply try and shine some light on the fear that prevents many of us
from taking that first step towards financial peace. Facing your
gorilla is not unlike going to confession. It is scary only because of
our own fear and pride–but once we face that fear and temper our
pride, we come away feeling refreshed and ready to work harder towards
our goal. Money is not as important as our salvation, but it is one of
many temporal issues that can greatly affect the choices we make, and
it is those choices that ultimately determine if we spend eternity with
God. Don’t live one more day in fear of your debt gorilla. You are the
only person standing in your way.


Remeber prayer is important in everything we do so begin the process by praying to the Infant Jesus of Prague patron of good finances and freedom.


Resources


Total Money Makeover– by Dave Ramsey – This is the book that will change your outlook about money forever.


Suze Orman’s Financial Guidebook: Put the 9 Steps to Work (Paperback) – Suze is one of the most entertaining people when it comes to money. She is great at helping remove the fear.


(**Note of caution: Dave Ramsey and Suze Orman do speak about Christian and spiritual principles which may not be compatible with the Catholic Faith so please discern accordingly.)




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