It’s time for another Q&A with one of our personal finance favorites, and this week we’re talking about smart money habits and giving back with Peter Anderson from Bible Money Matters. The basic message from his site is Give More, Save More, Live More, and there’s a lot we can appreciate from this philosophy. Let’s dive right in.
You mention that you and your wife were burdened with student loans and a lot of consumer debt. What changed that made you decide to clear off those burdens so you could start to grow your nest egg?
I wouldn’t say we had a lot of debt, but to us, it felt that way. I came into the marriage with in $10,000+ in student loans, and a couple thousand dollars in credit card debt. While it wasn’t a lot by some standards, we could still feel it weighing us down. We knew we wanted to travel, give more to our church and eventually start a family, and the debt that we had could keep us from doing those things to the degree that we wanted. We decided to pay off the debt as soon as we could by setting up a budget, watching what we were spending, and putting our extra funds towards those debts. The credit card debt was paid off in a few months, and the student loan debt was gone within a couple of years. We made a plan to pay all the debt off and we stuck with it so that we could enjoy the freedom that comes with being debt free.
One of the most popular sections on your blog seems to be about making more money – for good reason, as there are tons of good ideas in there! What’s your advice on what to do with the extra cash when you have managed to scrape together some bonus dollars?
What you do with the money that you earn is really up to you personally, and should be based on your own goals. For us, having a bit of extra money added to the bottom line just allows us to do a few more things than we otherwise might have. It allows us to give a little bit more to causes we believe in, to take a few more vacations that we might otherwise have, and to save more for our retirement via our Roth IRA retirement accounts and my company 401(k). With more margin in our budget, more of that surplus ends up showing up in our retirement accounts – saving for our long term goals. Right now we save via Roth IRA accounts with Betterment, Vanguard and WiseBanyan. All of those places are relatively low cost, and can give you a diversified long term portfolio.
One of your core mantras is “give more.” What do you say to someone who is struggling to service debts and pay bills and save for retirement, but really does want to give back to their community?
I like the idea of giving to others, even when you’re struggling yourself. When we were getting out of debt we still were giving regularly to our church, because it was something we felt was a priority and a way to show gratitude to God for all the blessings we’ve been given. Now I wouldn’t recommend that people who are truly in a huge hole necessarily have to give large amounts of money, but even the act of giving small amounts here and there can help to keep you grounded. You don’t have to give of yourself just in cash either. If you’re truly struggling to get by, give of yourself by donating your time or possessions for a good cause. When you’re giving to others, and helping those who are less fortunate than you it tends to keep you focused on the things that are important in life, faith, family and friends. Things that you tend to overspend on often become less important – and for us it made it easier to get out of debt in the long run.
Say you’re at a dinner party, and someone mentions your blog and you’re asked to give the best piece of advice you’ve heard since you launched your blog specifically about investing for the future. What would you say?
Probably the best piece of advice I’ve heard is to just start investing as soon as possible in the whole market – in index funds. They’re low cost, they reduce the risk to your portfolio of any one stock dropping in value by diversifying your holdings across all the parts of the market, and some studies have shown that over 80% of the time that they will beat actively managed funds over the long haul. So don’t try to time the markets, instead invest in index funds, and do it for the long term and you’ll be glad you did.