Being a Good Steward of Your Financial Resources, by Michael L. Price
by Michael L. Price
What is money?
Contrary to popular belief, money is not the root of all evil. That distinction goes to the lust for money. The reason it is easier for a camel to go through the eye of a needle than for a rich man to go to heaven is his attachment to wealth—his reverence for it and all it means in this world.
Money is not magic, mysterious, or difficult to understand. It is nothing to fear or be nervous about.
So what is money? Simply, it is a symbol. It has no value of its own. We agree to give it value in order to trade it for goods and services that have real, or intrinsic, value. In other words, money is just a tool we use for trade. As a tool, money is neither good nor evil. It is our actions regarding money that become good or evil, so we should learn to use it rightly. Once we know how and why money works, and when to use it, then we can make moral decisions in our money matters. As doctors swear to do, we should all try to “first do no harm” and strive to do God’s will in all our financial dealings.
Everyone—men, women and children (of appropriate age)—should know that every moment of our lives costs someone money. From the moment we get up and perform our morning ablutions, everything from the water and toiletry products we use to the last item we use at night was bought and paid for by someone. The beds we sleep in, what we eat and drink, everything we use during the day, the buildings we enter, especially our homes, cost us or someone else money.
To know this is important. It affects us and those we love in a myriad of ways. The need for money and how we handle it also affects our relationship with God. We can use money to do His will, or we can use it for financial sin. The following are some ways to use
this tool in wise and morally responsible ways.
The Basics: Creating a Budget
How do we handle the nuts and bolts of daily money management in an Orthodox Christian manner? We strive to glorify our Lord in all things, especially when it comes to money. One way to do this is to ensure the economic health of our families and our churches by setting up a realistic budget.
A good way to do this is to divide a sheet of paper into two columns. In the first column write down, honestly and objectively, all your income from every source. Then in the second column (and this may be a difficult and painful thing), honestly, objectively, and completely write down every penny you spend and exactly what you spend it on. There are various ways of doing this. You can estimate. You can keep track of all your receipts for a month. If you use credit and debit cards for a large amount of your spending, you can look at your statements. Break each column down by month and deduct total expenses from total income. This will show how well you are currently handling your money.
Next comes the hard part.
Discovering Money-Wasting Habits
Divide another sheet of paper into two columns, one for Necessities and the other for Non-Necessities. Closely examine each monthly expenditure and mark it down in the appropriate column. Include in the Necessity column a figure for savings (for example, 10% of monthly income after taxes) and a figure for tithing to your church (10% is a traditional tithe, but the amount is up to you), even if you currently do neither.
When complete, the Necessity column is your basic monthly budget. Most people find that the Non-Necessity column represents a lot of impulse buying and wasted money. Some Non-Necessity items are good to have, such as moderate entertainment and occasional splurges like a meal out or a latte. However, a close look will probably show a lot of unnecessary spending of which you are not aware. Using reason and moderation, add the appropriate occasional luxuries to your basic budget.
This process is important for several reasons. First, it can show where discretionary spending can be controlled, thereby eventually providing money for more important things such as buying a home or starting a college fund. This information is also an important tool for discovering bad or lazy habits you may unknowingly practice. Perhaps these habits may affect the way you take care of your loved ones. These habits may even be interfering with your spiritual growth and your relationship to God. Glorifying God in our financial matters means doing the best we ethically can with what we have.
By separating the money we need to spend from the money we like to spend, then winnowing out the excesses, we can determine a realistic budget. A realistic budget takes care of our needs, as well as our reasonable wants. It also allows saving and tithing.
The next step is to combine the Necessity Column with the amended Non-Necessity Column and subtract the total from Total Income. The result should end up balanced, or preferably with some income left over. If not, it is time to take another look and trim enough of the Non-Necessity expenditures to make income and expenses balance out. This belt-tightening can be tough, but will have good results, like gaining more control over your life, gaining financial peace of mind, eliminating some stress, and setting the stage for planning a more stable future for yourself and your loved ones.
This process may also lead you to reconsider whether your income is sufficient. Typically, it is easier to cut back on spending than it is to increase your income. However, we can all fall into the bad habit of assuming that our income and its increases are fixed and beyond our control. This is rarely the case, as pretty much anyone in our society today can begin earning more money if necessary. Prayer, a clear understanding of your need, a lot of creative brainstorming, and persistence can certainly have an impact on your income and thus your budget. Just be careful to keep your expenses in line with your actual income, rather than continuing to spend too much because you’re trying to earn more.
The Nuts and Bolts: Mortgages
One way to stabilize your finances, improve your credit standing, and save by gaining substantial tax deductions and building equity, is to buy a house. If you do not own a house yet, or do but would like to know how to make mortgage payoff easier, the budget you set can give you a tremendous boost. However, understanding the home buying and mortgage processes are absolutely necessary. So, I’m going to go through this in detail.
In my years of work in the real estate and financial management industry, I sadly saw countless people mess up their finances because of bad decisions and a lack of basic knowledge about purchasing and owning real estate. The following information should help you get started thinking about where there may be gaps in your own understanding of this complex issue, and about what kinds of techniques can help you navigate it successfully.
The process of finding the right mortgage for your circumstances can be started before you even begin looking for a home to buy. As a matter of fact, this should be the first step in buying. By finding a reputable mortgage bank or broker and getting prequalified, you will know what homes you can realistically look at buying by their price range. It is important to remember to use your budget when deciding which price range is realistic to search. The mortgage loan officer, or loan rep, will qualify you using parameters set up by regulations and the policies of his or her institution.
Prequalification also goes a long way toward convincing a seller that you are serious when you make an offer on his house. He may even make concessions to a prequalified buyer he would not otherwise make. This makes it a valuable tool in your negotiating toolbox. While there are plusses and minuses, using the services of a realtor can be valuable. In some regions, a buyer’s agent is another good option. She or he can help to explain the process and negotiate better in your best interest.
Once you have been prequalified by a loan rep, he or she can explain the different mortgages available to you. As a general rule, there are only two types of mortgages for residential properties: government and conventional. Government mortgages such as VA and FHA loans (and all other types of government loans, of which there are many) are guaranteed or insured by the government. All other types of loans, no matter where they originate, are considered conventional loans. It is important to understand the general facts about financing or refinancing a home, so you should research more to learn about how loans work. It is definitely hard work, but increasing your financial literacy will pay off in the long run!
A Home-Buying Strategy
After being prequalified for a mortgage, a homebuyer is ready to set more parameters for the home search. If there is more than one buyer (most frequently a spouse), or another person’s approval is required for final selection of a home, it is important that all decision makers are on the same page. Perhaps the best way to accomplish this is to follow a strategy that takes all needs and wants into consideration according to mutual priorities. This strategy should also allow the buyer to include in the search every house in his or her price range. Of course, the real estate market varies widely from region to region. But in most areas of the country, there are affordable properties to be found if you persevere.
Once again, on a sheet of paper, each decision maker should list every feature she or he would like in a house and neighborhood, regardless of how unlikely it seems. The list should be put in order by priority, with absolute needs listed first. Compare and combine the lists according to priority. Many people are surprised to find that, while most features appear on both lists, the priorities on each one differ greatly.
The mutually agreed-on combined list comprises the house search list. With the purchase price range and list of house features in hand, buyers are almost ready to begin looking at houses. However, one more piece is needed before the search begins. That is a strategy that includes all available information so the buyer can make a sound decision to buy. This will help to avoid a severe case of “buyer’s remorse.” (Buyer’s remorse occurs when buyers have committed, then suddenly put their hands to their faces and exclaim in a panic: “Oh no, what have I done?”)
In order to come up with a streamlined, complete search strategy, knowing what motivates people to buy helps. Most people make decisions to buy using either logic or emotion. Of course, the stronger motivator of the two is emotion. When we decide to buy primarily using emotion, we tend to get into trouble more often. But using only logic when buying can result in
a purchase we later can’t stand. So we should combine both logic and emotion in our search strategy. And, of course, a healthy dose of prayer!
So, to start, create a list of every home in the area that is priced from $0 to about $5000 above your prequali-fication top price. A realtor is a good source for this list, as most belong to multiple listing services that provide detailed information about most homes on the market. They also have access to information on homes sold, or off the market but not sold. This can help determine what a fair price offer should be when a home is chosen.
Using the list of features you would like in a home, the list of houses for sale, and a local street map, it is easy to accomplish several things. First, it will become obvious which homes with luxury features are beyond your means, so you can eliminate them from your list. Secondly, you can eliminate those houses that do not meet your geographic needs, and trim down your list of houses to those you truly want to look at in person. You can further trim your home list by driving by the remaining houses and deleting those you do not like the look of.
Now it is finally time to make arrangements to enter the homes you really want to see.
From the time you drive up to the first prospective home, consciously enter emotional mode and quickly go through the property to get a “feel” for it (the “emotional read”).
Go back outside and consciously change to logic mode. Using your list of desired features, go slowly through the property again, taking everything into account. This way you are including both logic and emotion in your reaction to each house.
Then go to the next house on the list and look at it with both emotion and logic. When you are done, stop and ask yourself two questions: “If these two houses were the only two available for me to buy and I absolutely had to buy right now, which one would I buy?” and “Do I really like that one enough to buy it?”
If the answer to the second question is yes, the search is over, and it is time to make an offer. If the answer is no, eliminate from the list the house you wouldn’t buy (because you will never buy it) and go on to the next house. Repeat the process with each house until the answer to the second question is “yes.” Then make an offer on that house.
By using this strategy, a homebuyer makes a sound decision, balancing logic with emotion and taking all available information into consideration before deciding. The buyer also looks at every property for sale in his or her price range before deciding which to buy, saving time and stress.
After you find the right house, negotiating the deal in your best interest is where the experience and training of a realtor can save you time and money. Especially if legal counsel is absent in the deal, a competent realtor can complete the transaction, ensuring all required clauses, protections, provisions, and disclosures are included. If you do use a realtor, hire one and be sure to sign a buyer’s representative agreement, making it legally binding on the realtor and his or her broker to represent only your best interests in all transactions concluded. Commissions and fees are negotiable, as is who pays them, buyer or seller.
I’ve dealt here mainly with realistic budgeting, finding waste in spending, and savings, because without these foundations, financial health is unlikely, if not impossible. I’ve also included a lot of information about buying a home and choosing a mortgage because housing is a basic need. For most people, a home is the biggest investment they will ever make. Correspondingly, their mortgage is the biggest sustained cost they will ever incur.
By using the above information, as well as educating yourself in other areas (see sidebar), you can create a stable, financially secure future for yourself, your loved ones, and even your church. An important goal is to appropriately balance your work or financial efforts, time with your family and yourself, and your church and spiritual life. Remember, always in all things, use honesty, integrity, and fairness in your transactions, to the glory of God.
At the time Michael Price wrote this article, he and his wife, Paula, had been newly baptized and chrismated into Holy Trinity Antiochian Orthodox Church in Santa Fe, New Mexico. Michael has a background in journalism and business.
This article was originally printed in Vol. 27 No. 3 of AGAIN Magazine, published by Conciliar Press in the Fall of 2005.