For anyone serious about getting his or here money under control there are a few basics. Frequently when I arrive at a church to present the No Debt, No Sweat! Christian Money Management Seminar I run into people who have given up hope. They’re convinced that their money troubles are so deep and so unique—no one can help them.

While this isn’t true, if you hope to control your money, a good starting point is to know the difference between "need money" and "seed money." The first dollars we all deal with is our "need money." This is the money we "need" to live and function on each month. These are primarily the dollars that make up the regular budget items. This includes the dollars we spend on housing, giving, clothing, food, recreation, transportation, debt service, insurance, etc.

The second category is our "seed money." These are the dollars we save and invest for the future. It is the "seed" we plant anticipating growth and future abundance. This is the money in our Murphy Account (don’t worry, I’ll explain this a little later), retirement accounts, college savings, etc.

I want to give you some ideas on how to plan and prioritize your "seed money." These are only ideas for your consideration—thought sparklers if you will. My hope is to inspire you and help you catch a vision. I’m not suggesting that any given idea is going to be right for everyone. Feel free to read and ponder these concepts. Then accept, modify, or reject them as you see fit.

When it comes to allocating our "seed money," a planned attack is vital. I like to refer to my "seed money" plan as the Wolf Barrier. I get that name from the expression that was so prevalent with the depression era generation about "keeping the wolf from the door." I like to think of building a wall (the barrier) to keep the wolf from the door. The barrier I use is based on a 10-step hierarchy with the ground level block being the starting point. Gradually, by stacking one block on top of another as we build the barrier, we go from those "seed money" expenditures that are vital, to those that are more discretionary. The progression that works for me may work for you, too. As you review the way I prioritize my list, decide if it makes sense to you. Would you do well with the same priorities? What would you change or modify? Would a different progression work better for you?

Reviewing the Ten Stones of the Wolf Barrier

Let’s spend a few minutes discussing each of the ten stones that make up the Wolf Barrier:

Stone #1) Crisis Cash. I hope this first step isn’t necessary in your case. But, there are a lot of folks who literally don’t have two nickels to rub together. They are living so close to the edge that tomorrow’s lunch money isn’t even certain. They don’t have enough cash to get a tetanus shot at the public clinic for one of the kids. This is a horribly stressful way to live. For peace of mind and a sense of personal dignity, every family should have a little "crisis cash" handy. I suggest at least $200 to $300.

Stone #2) The Murphy Fund. We’ve all heard people joke about Murphy’s Law. It’s the famous adage that says, "If something can go wrong—it will go wrong." Over the years I have become convinced that Murphy’s Law must have been written with financial issues in mind. I know of no other sphere where this little proverb is more appropriate. Just about the time you have all the bills paid—BOOM!!! That’s when the washing machine floods the floor. Or, the transmission gives up the ghost. Or, one of the kids breaks an arm. Suddenly you’re hit with an unexpected emergency that is going to cost you money. And, there you are smack in the middle of a budget-busting mess! Now, you have essentially three choices: Leave the problem unfixed, borrow money (usually on high interest credit cards), or dip into your Murphy Fund.

In my mind, the second stone of your Wolf Barrier needs to be a Murphy Fund. I would encourage you to put at least $1,500-$3,000 into this account as quickly as possible. (My personal rule of thumb: Try to build up about an amount equal to about 5% of your "true income.") This will give you the luxury of being able to tackle unexpected problems—without those problems tackling you.

Let me leave you with two suggestions regarding your Murphy Fund. First, never, never, never use your Murphy Fund for anything that isn’t a real emergency. This money isn’t there to pay for a vacation or a new computer. Second, put your Murphy Fund money into a separate account. This will help you avoid accidentally mixing it with your "need money." Also, it’ll make it a little harder to get your hands on it. Some people put their Murphy Fund in a money market account with a mutual fund company, or a savings account at a bank or credit union that pays interest and allows check-writing privileges on the account.

Stone #3) Consider Funding Your Life Insurance. More than most things, insurance is a matter of philosophy. In my judgment it makes sense to fund a term life insurance policy before we go further in the process. Like the commercials say, life insurance isn’t for the living, it’s for those left behind. It is one of the most loving things you can do for your family. Of course, in saying this I am assuming that you have already addressed your health insurance (possibly through group coverage where you work) and auto insurance. Depending on your particular circumstances, you may need other coverages like disability, homeowners, umbrella, renters, etc.

Stone #4) Accelerate Payments On Short-term Debt. I hate debt. So I like to encourage other people to consider speeding up their short-term debt repayment schedules. This includes school loans, credit cards, department stores, home equity and debt consolidation loans—most everything except mortgages. (I’ll address mortgages in Stone #9.) When you think about it, many of these are relatively high interest loans. I would rather pay off a loan that is costing me 12%, than to put the same money into a mutual fund. Why? Because lots of mutual funds don’t average a 12% return, and I know of none that guarantee it.

Stone #5) "I Don’t Need This Job" Fund. Wouldn’t you like to come to work because you find it challenging, enjoyable, fun? Wouldn’t you like to know that if circumstances changed where you work—you could simply resign and take your time looking for another position? Also, wouldn’t it be great not to be concerned about layoffs, mergers, or downsizing? Well, the good news is it’s possible, and lots of people have done it!

Stone #5 is where I encourage people to build up what I call the "I Don’t Need This Job" Fund. Ideally, this should be an account with 6 (even 12) months of living expenses.

Yeah, I can hear the collective groan now, "That’s pie-in-the-sky! I’ll never save that much." But, au contraire, my dear friends. There are 3 things that will be helpful as you consider this goal: First, with Stone #4 (paying off short-term debt) behind you, there’s now more money available for purposes like this one. Second, remember not to confuse 6 months of living expenses with 6 months of income. Usually your living expenses are significantly less than what your gross income is since they won’t include the money that goes to taxes, Social Security, retirement plans, etc. Third, remember that determination is a great thing. Once you make up your mind that funding an "I Don’t Need This Job" fund is a top priority, you’ll be less tempted to spend the money for other things.

Stone #6) Tax-Advantaged Retirement Funding. The next allocation that makes sense for many people is to fund their qualified retirement plans. By this, I am referring to investment vehicles that have tax advantages associated with them like 401(k) plans, 403(b) plans, SEP’s, IRA’s, etc.

Stone #7) College Savings. It is my personal opinion this is the best time to emphasize saving money for college. Sometimes people ask, "Aren’t I being selfish to begin my retirement planning before I set aside money for my kids to go to college?" I don’t think so, and here are some reasons why: First, remember, I am primarily referring to tax-advantaged retirement programs like the ones mentioned in Stone #6. Many of these offer incentives that, especially in the case of employer matches, can catapult your account growth faster than most any other way. Second, although most parents want to help with their children’s education, there certainly is no disgrace in not doing so. A young person can always apply for scholarships, work his way through, or get college loans (although I don’t encourage this form of borrowing). But as his parent, you are not going to find any retirement loans. So, I come back to the simple question: Which is the more loving thing to do—let your kids arrange for their own education; or you pay for college only to become a ward of your own kids in your retirement years?

Stone #8) Continue Retirement Planning. Now is a good time to reassess your retirement funding needs. Will the tax-advantaged investments we talked about in Stone #6 be adequate? If not, you may want to consider using annuities, regular mutual funds, or other investments to make up the shortfall.

Stone #9) Pay Off Your Mortgage. Let’s try to get rid of the mortgage before we retire. Remember, two things: First, with all of your other debts and expenses under control, this won’t be terribly difficult. Second, the odds are high that this stone won’t occur until a number of years into your Wolf Barrier Plan. By that time, your mortgage should be well along the way to being paid off.

Stone #10) Begin Your Legacy Building Process. With all of your other financial needs addressed, this is when you can begin changing the world. This is that golden opportunity that most people never experience, but always dream of doing. This is when you can establish foundations and charitable plans that will allow your life to count for good long past the time you spend on earth.

Steve Diggs presents the No Debt No Sweat! Christian Money Management Seminar at churches and other venues nationwide. Visit Steve on the Web at www.stevediggs.com or call 615-834-3063. The author of several books, today Steve serves as a minister for the Antioch Church of Christ in Nashville. For 25 years he was President of the Franklin Group, Inc. Steve and Bonnie have four children whom they have home schooled. The family lives in Brentwood, Tennessee.


  Steve Diggs presents the  No Debt No Sweat! Christian Money Management Seminar  at churches and other venues nationwide. Visit Steve on the Web at  www.stevediggs.com or call 615-834-3063. The author of several books, today Steve serves as a minister for the Antioch Church of Christ in Nashville. For 25 years he was President of the Franklin Group, Inc. Steve and Bonnie have four children whom they have home schooled. The family lives in Brentwood, Tennessee.

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