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Sunday, October 5, 2008

Budgeting and Stewardship

Speaking in the early 1990s, when the median price of a home was about $108,000, the late Larry Burkett asked, “What do think the price of a house would be if you couldn’t borrow to buy a house? Do you think a $108,000 house would sell for $108,000 if you couldn’t sell it to anybody with a loan?” His answer: “No way. Nor would it sell for $58,000. It would probably sell for around $28,000. Everything above that we’ve built into it through debt.” I wonder how much debt is built into the current median price of a home, which is now around $215,000.

Our attitude and behavior toward debt have made practically every large ticket item in our culture more expensive. As Ken Blackwell of the Family Research Council recently wrote, “We have become a culture addicted to instant gratification and a fixation on the material. Increasingly, concepts such as duty, self-denial, hard work, delayed gratification, and patience have been swept away.” In other words, we are a culture addicted to debt.

Forget home debt for a moment and consider the amount of automobile debt Americans have. Bad automobile debt is contributing to the credit crisis in the U.S. The L.A. Times reported late last year that, with the number of risky car loans approaching the same level as the number of risky home loans, a new credit crunch could be on the horizon for Americans.

This could mean even more trouble for Wall Street as well. We could see more of what happened recently with Bill Heard Chevrolet, the nation’s largest Chevy dealer, which shut down all of its 14 dealerships due in large part to subprime car loans.

Of course, not all debt is bad. However, as I noted in my last column, (seen here), the current economic crisis is due mostly to an “irresponsible” attitude toward debt by the federal government, lending institutions, and individuals.

Also, as I pointed out in my last column, my wife Michelle and I have lived the past approximately 10 years of our lives completely debt free: owning our home, cars, and so on. We have committed to live the rest of our lives completely debt free. The financial position that we are in has special significance given the current economic downturn.

Certainly, owning a home was the largest obstacle to our remaining completely debt free. We own our home because over a three-and-a-half-year period, from early 2000 to late 2003, before we had children and just after we had eliminated our consumer debt, we built it from the ground up, contracting it and financing it completely ourselves. We performed much of the labor ourselves, but we also had a lot of help from family and friends. (This is quite a tale in itself, and I hope someday to tell it in writing.)

Our situation was and is a unique one; I certainly would not recommend that anyone do things exactly as we did them. As I mentioned before, our path was “a calling.” However, I do believe that there are tried and true, simple financial principles that we applied, and are still living by, that would benefit most anyone.
The first thing that we did, very early in our marriage and before we were out of debt, was establish a workable budget that, with adjustments, we maintain to this day. Whether we are talking about the government, a business, a church, or a family, a good budget is essential in maintaining a healthy bottom line.

A budget can help keep you from overspending in any particular pay period or in any particular area, help you plan for non-regular expenses, such as car repairs, and help you plan for your financial future. Establishing a budget can be a lengthy process. It can take as long as a full year to get a budget working well, but the benefits are well worth the hard work involved.

Our budget has played an essential role in helping us weather these difficult financial times. I despise the rise in gas and food prices that we have experienced over the last several months. Being a family of six, these increases have hit us hard. Our budget is in constant flux, but it helps us see the adjustments in spending that we need to make, and therefore maintain sound financial discipline.

I recently moved from teaching at a private school to teaching at a public one. This decision in large part was made for financial reasons. However, it was not a rushed decision. It was one that Michelle and I weighed carefully over many months, and our budget helped guide us in this decision. (See www.crown.org for help with budgeting.)

The second and most significant thing that I came to grips with financially, after budgeting, was the biblical principle of stewardship. In my last column I said that the bottom line for anyone financially is what you own vs. what you owe. However, I was speaking there in practical terms only.

The real bottom line when it comes to money and finances, and this is the most important financial principle taught in Scripture, is that none of us really “owns” anything. The Bible says, “The earth is the Lord’s, and everything in it.” We are merely stewards, or managers, of His property. Until we come to grips with this, we can never truly understand money and wealth.

Copyright 2008, Trevor Grant Thomas
At the Intersection of Politics, Science, Faith, and Reason.
Trevor and his wife Michelle are the authors of: Debt Free Living in a Debt Filled World

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