The Bottom Line

For the past year I have been mentoring a woman in managing her personal finances.

I first met her during a talk that I gave to young adults.  She is a middle-aged woman but was invited to the talk by a younger friend of hers.  After I spoke, she asked if we could meet individually so that I could review her current situation and see if there was anything she could do differently.  I have to admit that I was kind of intimidated.  During my talk she interjected on several occasions to discuss tips that she was already implementing to save money.  From what she shared, it seemed like she was doing plenty to cut back in spending.  What did I possibly have to offer her?

We ended up meeting about three months later, about a month into the new year.  She told me what her monthly expenses were, showed me what debt she owed, etc.  Then she told me that she had just received her income tax return. 

"That's great," I said after seeing that she had received a little over $3,000.  "What do you have left?"
"Nothing," she replied.  "I put it all towards the bills."
"What did you pay?"  I asked.
"I paid off my rent for the next four months and paid off some of my debts."

My heart sank.  I was thankful that she had a mind to pay bills, but how unfortunate that she had made paying her rent in advance a priority.  Let me explain...

Rent does not have interest.  When someone rents, that bill comes around every month.  It doesn't go away unless the person moves.  Debt (i.e. loans) do have interest and do go away once they are paid off.  The interest on a debt can make paying it off cost more than the original debt itself.  Therefore, when there is an opportunity to put a large chunk of money towards a debt, DO IT!

My friend equated security with having the roof over her head taken care of for a couple months.  Also, it was her largest monthly bill.  So in her mind she probably felt some peace in knowing that this big payment was taken care of for a while.  She was thinking in the present rather than in the future.

Last month when she and I met, we discussed the upcoming income tax payment that she is expecting to receive.  We did an exercise where each of her debts were listed on a piece of paper and she said which ones that she would pay with hypothetical amounts of money given as a refund.  Before declaring what money would got towards debt and spending, we first made sure to calculate what the tithe would be.

It always amazes me the difference between what a person is saying about what they do with their money versus what they are actually doing with their money.  I am not judging because I can be a culprit of this paradox as well.  The bottom line is we all have lessons that we can learn about how to be better stewards of the money with which God entrusts us.