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Ask Dave

Moving On To The Next Step

Kim will have her house completely paid off by the end of January. However, she and her husband have had this goal for so long that now it's a little scary to have so much money freed up.

QUESTION: Kim in Tri-Cities will have her house completely paid off by the end of January. However, she and her husband have had this goal for so long that now it’s a little scary to have so much money freed up.

ANSWER: We work with a lot of wealthy people—music artists, athletes and so forth. What I recommend to them is exactly what I recommend to you, and that is that you set your household on a reasonable budget—not beans and rice. Here’s an example of how it might work. Let’s say you decided you were going to live on $70,000 a year. That’s a considerable raise over what you’ve been doing at $48,000 given that you don’t have a house payment anymore. Whatever you set this base budget on includes some basic enjoying life but nothing super luxurious—just good. It’s a lot better than what you’ve been doing because you’ve been living on beans and rice to hit this goal. Once you’ve done that, then everything you make above that budget, I want you to apply a formula to it. A percentage goes to giving, a percentage goes to investing, and a percentage goes to extra lifestyle fun stuff. You decide what that is. Set the percentages in advance, and every time money comes in above your budget, which is going to be every month in your case, you’re going to apply that formula to it, meaning we’re going to enjoy some of it, give a certain percentage of it, and invest a certain percentage of it.

I’ll give you an example with one of the athletes I was talking to the other day. He’s making about $2 million a year. NFL players work 3.7 years on average, and then they’re out of the league. He’s just got a couple of years. He decided, after we talked it through, to live on $10,000 a month—$120,000 out of $2 million, which is nothing. Then we applied a formula to the rest of it. The formula sounded like this. He needed about 50% for taxes. He’s a Christian, so he gave a 10% tithe. In his case, he did another 10% in giving in addition to that. Then he invested 25% and raised his lifestyle by 5%. So if he got any bonuses for having a good year or anything above that… Basically, he had $120,000 plus 5% of $1.9 million. So he has a really good life for lifestyle, but he’s always giving about 20% above that. He’s including his tithe. He’s always investing, and he’s always making sure his taxes are taken care of. What that’ll do in his case is when he’s out of work in three years, which will be the average, he’ll actually have some money.

In your case, what it’ll sound like is you’re going to get to enjoy a little bit of the money. As you get a raise, you get to celebrate the raise. It’s not all going to starving children in Uganda. But you’re going to give some to starving children somewhere or to whomever. You need to give, save and spend. Make sure your taxes are done. Give, save and spend a percentage of everything over a reasonably flush budget. That’ll help you stay on track. Because you know you’re investing and giving, you can enjoy the money that you spend because you’re calling me a little bit freaked out that you’re going to jack that up and go right back to where you used to be. All we’re doing is applying a little bit of a simple formula, and it just gives you a track to run on. Then you guys can change the formula.

Number one, take your time. Number two, when you give, you are investing for the Kingdom. If you’re going to invest the money, you’d be very careful where you invested it, so you’re going to give it very wisely. I don’t give to charities that don’t handle money well. They live in a constant state of emergency. I’m not going to fund their lack of planning and their emergencies. We have a family foundation, and we just do our giving, and it’s set every year. We pretty much stick with that unless God just interrupts us big time. A lot of people want God to interrupt us, but He doesn’t very often because most of the time, He’s got a plan. It’s going to be somebody who’s doing a good job with the money, doing a good job of bang for the buck. If I give money to feed starving kids, I want starving kids fed. I don’t want some guy’s jet fueled. I’m going to check into that when I give to it. Treat it like you’re investing it because you are.

Take your time, treat it like an investment, and we have found that one of us in our family somewhere usually has a connection point to the people we give to—the ministries that we give to. It’s not like somebody comes in who none of us have ever met and they do some wow presentation and we all just fall in the floor and go, “That was God.” It usually doesn’t work that way. Ninety-nine percent of the time, there’s some point of connection. It’s something that’s on one of my daughters’ hearts or my son’s heart or something that’s on my wife’s heart or even mine.

I’d be walking around looking for God opportunities. Random acts of kindness are some of the most fun things you’ll have. Know that if someone needs their house payment paid, there’s probably a reason. You’d better get in there and make sure we solve the problem and not just treat the symptom. We always attach Financial Peace University to those kinds of things.