7 money rules for life

A summary of Mary Hunt's 7 Money Rules for Life. I picked this book up at the library, and it's one that I would like to have on my bookshelf one day. I was looking for some financial advice, and was happily surprised that Mary Hunt is also a devoted Christian and shares many of our values. As someone who found herself in $100,000 of toxic consumer debt and painfully fought her way out, Hunt's approach is not judgmental and it is realistic. I recommend you reading it, but if you don't have time here's a brief summary and some quotable quotes:

Why does money matter?

• Money is important, with emotional, spiritual and personal impacts.
• Money impacts our lives -- where we live, how we live, where kids go to school, how we pay our bills, how we prepare for the future.
• We are living in a financially uncertain time. 
• You might need a handle a significant amount of money in the future -- an inheritance, promotion, or investment. (I'll be happy if this one happens!) 

The money rules are just that: rules. They are principles to guide you, no matter how much or how little you make. 

The Rules: 

1. Spend less than you earn. You've probably heard this principle before. In order to fulfill this, examine your attitude. Examine how much our culture of entitlement has influenced you. When I read this, I was convicted of my own sense of entitlement. I believe that I deserve vacations, meals out, and things that I like even if I can't afford it. Spending less than you earn sounds impossible to those living paycheque to paycheque, but it's key to the other six rules. To be able to live below your means, you need to honestly examine needs versus wants. 
1. "Contrary to how it might sound to you at first, Rule 1 isn't about restriction. It's about freedom -- freedom from want, freedom from fear of running out of money, freedom from reliance on credit, freedom from being under the economic thumb of others." (40) 
2. 11 ways to widen the gap between your earning and your spending: borrow and share, avoid the mall, limit exposure to ads, live with cash, designate one day of the week as a "spend-free day", save the difference, eat in, pare down/sell used items, unfriend the Joneses, and take opportunities to increase your income. 
2. Save for the future. Start putting away ten percent of what you earn into a separate savings account. This is not your retirement savings. This is not your savings for new furniture or a vacation. This is your emergency fund. Hunt recommends saving 6 months of living expenses. This is important because it frees you from fear. If anything happens (job loss, medical problem) you have a cushion that will allow you to stay level-headed and make the best choices (ex: not just taking the first job you can get because you need to get back to work). Emergencies and life changes will come up; when they do, will you rely on your own savings or on credit? 
3. Give some away.  Find something you believe in and trust and give money to it. Instead of choosing a set amount, a percentage is a better idea because it will adjust with your income. While the percentage you choose is a personal decision, Hunt recommends a 10-10-80 rule: save 10%, give 10% and spend 80%. 
1. "Giving is the way to break the grip of greed so that contentment can thrive. Giving brings balance to your life . . . Giving is the way that you express how grateful you are for all that you have." (85) 
4. Anticipate your irregular expenses. When most people sit down and calculate their monthly expenses compared to their income, they realize that on paper they are spending less than they earn. So where does the rest of the money go? Irregular expenses. Hunt suggests sitting down and making a list of the irregular expenses you had last year and their approximate cost -- a vacation, an appliance, a car repair, Christmas spending, etc. Total that number. Now divide it by 12. That's your new fixed monthly expense to deposit into an irregular expenses account. 
5. Tell your money where to go. This chapter is all about budgets and tracking your spending. I'm going to confess that I kind of skim over this because as students we don't have regular monthly income and we basically try to cheap out on everything. It has been helpful for us to track our expenses every so often just to see if everything is out of whack. A great tool to help budget is an online program called Mvelopes -- we know couples who claim that Mvelopes changed their lives. 
6. Manage your credit. Instead of advising you to cut up all your credit cards, Hunt admits this is not realistic. Credit is a part of our world, probably a part of your financial situation, and your credit rating "plays a very important role in your financial health." 
1. You are entitled to one free credit report every 12 months (not sure if this is different for us Canadians). Make use of that to track your credit report. These reports are often full of errors, so track any inaccuracies and get them changed. 
2. How to improve your credit rating: pay your bills on time, all the time. At a minimum, use one credit card several times a year and immediately pay it back down to a $0 balance. Lower your utilization rate (the amount of money you use compared to how much is available to you). Refrain from closing accounts or opening new accounts. (??) 
7. Borrow only what you know you can repay. Again, Hunt admits that borrowing money -- mortgages, student loans, financing a car -- is an important part of life. It is not the enemy. "Here's the bottom line: debt is not a good thing, and it is to be avoided whenever possible. When it cannot be avoided, debt should be entered into advisedly, with tremendous caution and a strong system of safety nets in place." 
1. Debt falls into three categories: 
1. Reasonable, or good debt: borrowing money to buy something that has a high likelihood of increasing in value. This can be a mortgage, a small amount of student debt, etc. 
2. Toxic debt: includes credit card debt, payday loans, and other high- or variable-rate borrowing. This kind of debt should be avoided entirely. 
3. Neutral debt. 
2. Remember that the lender will often want you to borrow more and pay it back slowly. Don't let the lender determine how much you will borrow and how you will pay it off. 
3. Home mortgages/home equity .... skipped over this ... :) 
4. Student debt: Hunt puts this in the "neutral" category. It can be reasonable or it can be toxic. STUDENT DEBT IS NOT AUTOMATICALLY GOOD DEBT. Especially with the economy and job opportunities available today. Thousands of people are drowning in student debt and are moving back in with Mom and Dad after graduation. 
1. Your total student debt should not exceed the average first year entry level salary in the industry for which you are preparing. This way, your goal can be to pay back your student debt within the first three years after graduation. (If you're not preparing for an industry and just want to learn -- fund it yourself, don't go into debt.) 
5. Some Scripture about debt: "The wicked borrow and do not repay, but the righteous give generously." Debt as bondage: "The rich rule over the poor, and the borrower is servant to the lender." 

Break down each rule and figure out a step that you can start doing today. Write down your goals, and be specific. 

For those with irregular income, she has a whole chapter devoted to you :) I appreciated this because I often feel like financial advice is targeted at people with a regular paycheque. 

If you are drowning in debt, she has a whole chapter for you, too :) 

Quotable quotes: 

"I am so grateful for how God has taken the broken pieces of my life and woven them into a tapestry of beauty that reflects his grace and mercy." (32) 

"Advertisers rely on marketing theory that says people are driven by four things: fear, guilt, greed, and the need for approval. Ads are designed to throw us off balance emotionally to create discontent." (52)

"If you've ever felt as though some kind of invisible force is conspiring against you to make sure you never get ahead, you may be more right than you think. You have two enemies with a single purpose: to destroy your contentment and make it difficult, if not impossible, to spend less than you earn. Their names are Fear and Greed." (63)

"Today, there are three kinds of people: the have's, the have-not's, and the have-not-paid-for-what-they-have's." -- Earl Wilson (165)