Money Matters

When it comes to money, we get into trouble for a host of reasons. In this article from our series Show Me the Way, certified financial planner Chris VanHart helps young professionals (and the rest of us) avoid some of them.

In the first week of my college economics class, each student had to pick a publicly-traded company in which to invest $10,000 of pretend money. At the end of the semester, the top earner would get a prize. It was the mid-90s. I picked Microsoft. I crushed my competitors and won a mug.

Having been raised in a fiscally unproductive home, I took this win as a sign of a new era in my family’s wealth management. I noted, for example, that if I invested just $1,000 annually through my 20s, by retirement I’d outperform anyone who invested the same annual amount—at the same interest rate—starting in their 30s. Only they'd have to invest decades longer to come close to what I could do in one.

Did I do it? Am I on my way to winning another mug? Not exactly. Job changes, marriage, kids, bills—and complacency, too—delayed action.

I’m not alone. Most Americans, if they can afford to invest at all, invest too little, too late. And often too poorly. The reasons vary. Chris VanHart, a Certified Financial Planner and a young professionals (YP) coach here at The High Calling, told me that when it comes to money, we get into trouble for a host of reasons: family upbringing, cultural and peer pressures, fear, misperception. “It all comes into play.”

He described the effects. “I’ve had clients who make $30,000 a year, pay their bills, establish an emergency fund, and even manage to save for college, while others make $300,000 and say, ‘Sorry, kids, we can't help you. We’re living paycheck-to-paycheck around here.’”

The difference blows my mind.

To those living in fear of where money will come from, Chris tells them, “I’m not trying to take away your chocolate.” He knows we like to enjoy a few pleasures in life, after all. But we need the long view. If we dream of exotic vacations (or philanthropy, or hobbies) during retirement, how we save and spend today really matters.

It's Payday!

So let's begin with those early, post-graduation paychecks. What should you do with them?

Chris told me about his first ever. “I was a sales associate at Bon-Ton. That payday, Mom said, ‘Cash your check and bring it to me in an envelope.’” He remembers how adamant she was. “When I got home, she told me to write ‘10%’ on the back, with the dollar amount from my gross next to it. ‘That’s your tithe.’ Beneath that she had me write, ‘15%,’ for savings. Then she concluded, ‘Please don’t spend all the rest.’ I went on to become an accountant and never forgot her advice.”

Paying God first and yourself second is a great place to start. But what about college loans, credit card debt, and the list of pressing expenses you face through your twenties? “There will always be conflicting priorities,” he said, “which means living below your means is critical—from the beginning.”

I pushed. “What about the barista, a popular job among post-college grads? They make, like, $19,000. Is your advice different to him than, say, to the environmental engineer—another popular job—who makes $49,000?”

“No. The same is true for both (complexities of each scenario aside). Live below your means, set manageable goals, and be generous as often as you can.”

“Manageable goals?” I asked.

“Yeah, like creating an emergency fund. Go with a month’s worth of expenses at first. When you reach that savings amount, set a new goal of three months. Six is ideal, but if you’re married and both of you can work, three may hold you over in the event of a job loss.”

“And why generosity?”

Besides being one of the tenets of his company, “inspiring people to live generously” is a way of life for Chris. “Ten-percent was the law in the Old Testament; the minimum. I believe true generosity begins after that.”

Wisdom vs Cable

I thought about how generosity and emergency funds and the like get overshadowed. How easy is it, for example, to let the phone company hijack our budgets. It used to be a simple landline. Now it’s interconnectivity, data plans, and the seduction of Triple Play cornicopia. I’m whining, I know (though, true confession, I recently signed up for cable to get a deep discount and gift cards. It’s still in the box, btw, because we’re mostly content with six stations. Not sure if I’m beating the system or it’s beating me).

I asked Chris what he thought about my cable deal and his wife said, “Don’t even think about joining him.” So I asked why it’s best to be smart with money now instead of later.

“Compounding interest. The longer you’re in, the more your money goes to work.” Despite young professionals’ fear of the stock market, this wisdom stands. He cited an example similar to the one I learned in college and have seen countless times since, then added, “Good habits. Good habits early will help you avoid a lot of trouble later. If you hope to be in a relationship, it’s best to be smart as an individual before someone else enters the picture. Few couples see eye to eye on financial matters, especially when dysfunction is present.”

I thanked Chris for his time, and wished I had followed more advice like this in my twenties. God provides, for sure, but we’re also called to stewardship and using our heads. I still have time to work on this balance, of course.

You, however, my young professional friends, have a lot more.