The last two houses I bought, I bought cash. I bought one house when my boys were young and for when we wanted to get away for a few days. We had a house up in the mountains where we went to go snow tubing and sledding. It was just away from the crowd, away from my church, and I bought that house cash. Now, it was a small house. But I’d rather have a small house that I own than a big house with a big mortgage.
When my sons were in their senior year of college, when I was convinced they would actually graduate, I told them they could live off campus. I bought a house for the boys. Had I paid rent every month, I would have paid off a landlord’s loan. Because I bought the two-bedroom apartment, when they graduated from school I sold it and got my money back – which means they lived for free that year. I sold it for a little more than I paid for it, so I made even more money. People say, “You can’t buy a house with cash.” You can, just buy a small house.
When I was living paycheck to paycheck, paying credit cards with credit cards, dressed up on the outside and messed up on the inside, for a minute I blamed my problems on other people. But then I realized -- or as Baptist preachers are known to emphasize, “and he came to himself” -- I had to see myself to fix myself. Now, I have financial freedom. When I stopped working for money, I started making my money work for me.
Becoming debt-free isn’t easy. You have to make sacrifices. You have to adjust your attitude, plan a course of action and change your spending habits. Once you do these things you can more rapidly gain control of your finances by using what I call the power plan. The power plan involves making: power changes, power payments, and power savings.
Making power changes requires paying the price of sacrifice. You must choose the areas where you will cut back in order to pay off your debts faster. You should sell any assets that you can in order to pay off debts faster. Just remember why you’re doing what you’re doing: sacrifice what you don’t need now for what you must have later.
For me, one of my sacrifices was neckties. Everyone who knew me at the time knew about my fondness for neckties – beautiful, handmade, silk ties in a variety of patterns and stripes. I thought I had a problem one day when I got home and realized I had purchased the same new necktie. I knew I had a problem the night I came home with three new neckties and left them in the car until my wife was asleep. In my pajamas, I went out to get those ties and then hid them under older ties. Why? Because if my wife saw me with new ties, she would want to buy new shoes!
Another example I frequently use is getting rid of premium cable, especially since most of us watch about six channels anyway. I mentioned this recently and someone called from the meeting and lowered his cable bill to save $94 per month. That’s a one-year savings of $1,128. Over 20 years, that’s $22,560. We’re still waiting for politicians to raise the minimum wage. You can give yourself a raise by changing the cable bill!
Once you’ve done what it takes to free up some money, you must pay the price of catching up. Use that extra money to make power payments on bills. Prioritize your debts; late payments first. Prioritize by choosing to attack the debts with the smallest balances next or the ones with the highest interest rates and most injurious long-term effects. Then, stop purchasing items using credit; use cash or a debit card.
Because our culture encourages credit dependency, moving from credit to cash only may need to be a gradual process. Push yourself to cut through the many excuses and find a way to afford whatever you buy and pay for it, cash, at the time of purchase. Keep focusing on your needs, not wants. When you do this, you are actually purchasing an unencumbered future of financial freedom.
I know you want to get ahead and part of the price of getting ahead is creating power savings. You need to have an emergency fund of at least $3,000 in cash and use it only for true emergencies. Set aside five percent, or as much as possible even if it is five dollars, of your monthly income in a high-yield savings or investment account. Begin looking ahead at retirement needs. And, save for designated non-monthly expenses on a monthly basis to avoid capsizing your monthly budget.
Don’t just shake your head and say you can’t cut back. I was in Texas speaking to a group of pastors and I asked if they thought, if the cause was big enough – like earthquake or hurricane relief -- if they could get their church members to increase their giving by $57 a month per person. Most didn’t think so and someone asked why. I said because 58 percent of the black people who live in Texas spend $57 per month on lottery tickets. In Texas, there are 2.6 million black people; 1.6 million are regular lottery players. That’s $1.1 billion per year on lottery tickets and the odds of winning are 175 million to 1. The lottery is not a strategy. The lottery is a game. When the lottery becomes a financial strategy, we are not just broke, we are lost.
You can find your way to financial freedom. You can fight your way to a better life. Start your power plan and make your money work for you.