Five ways to financially set yourself up for generosity.
It’s been said, “It is far better to give than receive.” However, it can be difficult to grab hold of a generous spirit when our own finances appear unmanageable and in disarray. It may be difficult to justify giving to others when we feel we are barely making enough money as it is.
I was once told, “Show me your budget and I’ll show you your values.” I think there is great truth in that statement. Where we spend our money is a reflection of what we value.
If you value generosity, then giving is probably already a part of who you are. If you have trouble with generosity as you face the reality of your circumstances but do desire to become a generous person, then the first step is getting your financial assets in order.
At times, it can truly seem like stewarding your finances well can be so unattainable. Many of us have been taught poor financial stewardship from our culture or our families. Although there are resources to help change the way we use money, it takes some intentionality and discipline to get going in the right direction.
Here are five tips to better set yourself up for financial generosity:
1. Know where you stand.
Part of the problem for a lot of us is that we don’t truly know where we stand. With multiple bank accounts, mortgages, credit cards, student loans, car payments, retirement accounts, and more, it is hard to truly know the stance of our financial situations.
Mint.com is a free, secure way to gather all of that info into one place.
After you connect all your accounts and assets to one place, you can see your actual net worth (or lack thereof) and begin intuitively tracking your spending. You can build budgets and evaluate the trends of where you spend your money, too. This is a great tool for getting started. After all, you can’t cut down on spending $200 a month on coffee if you don’t realize you’re spending that in the first place.
2. The easiest money to make is the money you don’t spend.
My grandfather would always say this to me, and I am so grateful he did. When you go to purchase something, ask yourself if you really need it. Eat out a lot? Get a water instead of a soft drink — that could save you $2.50 five days a week. This comes out to $650 a year. Want a new car? Get a slightly used car and keep a few grand in your pocket. This is an easy concept to apply everywhere!
One of my favorite financial books told me to save first. Most people make the mistake of spending money between paychecks with the intention of saving what is left over. The problem is, money leaks, and we usually spend what we haven’t designated. Instead of saving last, determine what you can put into savings and put that in savings right when you get paid.
Forty-four percent of Americans have less than three months of savings in their bank accounts. First, just start by getting a $1,000 emergency fund in savings. Then start working to save three to six months of whatever you spend in that time, so if you had no job, you would have no worries.
4. Get desperate.
Get desperate in getting rid of debt! Take on a second job or sell your extra belongings, and start taking out chunks of your debt. Pay off the smallest debts first and then apply what you were making as payments on that debt to the next biggest one. Once you free up the money with debt payments, you get to the good stuff …
5. Use money to make money.
Once you have some money for emergencies and you’ve paid off your non-mortgage debt, start taking the extra money from savings and putting that into a retirement account like a Roth IRA or 401(k). Take your money and make it work for you — buy some real estate and rent out a second house, or invest in the market.