Now that credit card companies are beating down your door to offer you credit, just how much credit should you take on? What is the right balance between living (happily) with credit and living (dangerously) on credit? You may have been thrilled no end when you received the first offer of a $25,000 credit line. And then doubly thrilled when the fifty-grand offer came.
But have you ever wondered why someone would offer you that much loan without some ‘ulterior’ motive? The motive is simple: he wants your money, so be very cautious about using your credit card. Just because your limit is there does not necessarily mean you must reach it always. If you do, the guy whose signature appears at the bottom of the card will own you heart, mind and soul, including the very last thread of your pants which you may lose sooner or later.
You have to find your acceptable credit limits, the credit you can afford.
Calculating Your Affordable Credit
Many financial experts advise that total personal debts should never exceed 20 percent of one’s net income. Less is always more preferable. This is because the other 80% will be used for life’s imperatives: food, clothing, shelter, education, the car, the dog and the fishing rod, which must be given its own time in the water.
The best way to determine your affordable credit level is to go back to your incomes and expenses matrix, where you can find your disposable income. Of course, this time the expenses column should be lengthened to include payments due on your credit card/s and other loans to look like this:
Creditor’s Name Loan/Credit Total Amount Maturity Monthly Payments
Maine Motors loan 15,000 2 years 700
Visa Gold credit card 6,000 6 months 1,00
(add lines as needed)
Sum up all the monthly expenses including the monthly payment due to the credit card/s and other loans, and deduct that total from the total monthly income. If there is a remainder, congratulate yourself for having discipline and tight control on your impulse buying tendencies.
If nothing remains –moreso if a negative balance shows—add all your monthly credit card payables. Divide the sum by your income and multiply the result by 100 to get the percentage of credit card debts over the income. If the quotient is less than 20, you are living with credit. If it is over 20, you are living on credit. If it much over 20, you are living dangerously, perhaps flirting with bankruptcy.
Reestablish Control
We suggest you take the afternoon off from regular activities, clean your desk, brew a pot of coffee and sit down to write your resolutions and draft plans on getting out of debt.
Make about five ways of lessening your debt burden, and a number of promises to yourself to avoid expenses, including leaving your credit card at home when you are not going shopping at the supermarket. If you need to sell some low-performing assets, or non-essential ones to, do so. Make balloon payments on your card debt to eliminate your spending the money on other things. The object is to minimize your debts to manageable levels, those easily supported by your regular monthly income, without you having nightmares about how to pay off your dues.
The credit card is a great convenience. It enables us to use money when we don’t have them, yet. But be sure the credit card is your slave, not you its prisoner. Live with credit, not on one. That’s trouble.
No money Down! Guaranteed! And A Life Time of PAIN!
I hope no one ever fall for that. If you are one of those guys that went into real estate just because of no money down, you’re in for big time. Leverage is a good thing, but too much is a killer! It is a double-edged sword. If you are planning to try this “no money down” get rich quick scheme, think again, no one is going to buy your property in this sub-prime mess. I am a investor and a trader myself, to tell you the truth, the sub-prime mess is only the beginning, the worst is yet to come. If you have any liabilities in hand now, try your best to get rid of them, you will think me later. No matter how many interest rates the FED is cutting, the Dow Jones and the economy is coming down hard. My 2 cents worth? Keep Cash, Stay out of Debt!
Ever came across a fellow christian telling you that it is always good to buy from another christian, as the money earned, a tithe will be given to the church. What I can say is that, it is a poor man’s mentality, my God ain’t broke.
How about a christian boss has to hire all christians. Or, please give him a break at work, he is your brother in Christ.
From all the above that I have come across, they lack wisdom. Let’s look at Mathew 25:15 - 30 again.
Mat 25:15 And to one indeed he gave five talents, and to another, two, and to another, one, to each according to his ability. And he went abroad at once.
Mat 25:16 And going, the one who received the five talents worked with them and made another five talents.
Mat 25:17 In the same way, the one with the two also did; he also gained another two.
Mat 25:18 But going away, the one who received the one dug in the earth and hid his lord’s silver.
Mat 25:19 And after much time, the lord of those slaves came and took account with them.
Mat 25:20 And coming up, the one who received five talents brought another five talents near, saying, Lord, you delivered five talents to me. Behold, I gained another five talents above them.
Mat 25:21 And his lord said to him, Well done, good and faithful slave. You were faithful over a few things; I will set you over many. Enter into the joy of your lord.
Mat 25:22 And the one who received two talents also coming up, he said, Lord, you delivered two talents to me. Behold, I have gained two other talents above them.
Mat 25:23 His lord said to him, Well done, good and faithful slave. You were faithful over a few things, I will set you over many. Enter into the joy of your lord.
Mat 25:24 And the one who received the one talent also coming up, he said, Lord, I knew you, that you are a hard man, reaping where you did not sow, and gathering where you did not scatter;
Mat 25:25 and being afraid, going away, I hid your talent in the earth. Behold, you have yours.
Mat 25:26 And answering, his lord said to him, Evil and slothful slave! You knew that I reap where I did not sow, and I gather where I did not scatter.
Mat 25:27 Then you ought to have put my silver to the bankers, and coming I would have received my own with interest.
Mat 25:28 Therefore, take the talent from him and give it to him who has the ten talents.
Mat 25:29 For to each who has, more will be given, and he will abound. But from him who does not have, even that which he has will be taken from him.
Mat 25:30 And throw the worthless slave out into the outer darkness. There will be weeping and gnashing of the teeth.
What did you learn from this few verses of scriptures? As you can see, the servant that has been given 5 and 2 talents were rewarded. But the servant with 1 talent was punished. Did the Master let him go because he is a Christian, or the master let him go because he have to practice mercy?
Years ago, I own an advertising company which consist of 3 account executives, 2 designers and 1 administrator. I have a partner who is suppose to keep the accounts coming in. During those days, I paid my executives handsomely, in fact they were the highest paid in the whole industry, and most of them are christians from the same church. The first few years of my boutique agency made good money, I own a mercedes benz s-class by the time I reached 30, and I thought I have arrived. I manage to impress both my friends and my clients with my mercedes benz. Soon trouble came, my partner became lazy, sales dropped and my executives slacked. My partner is so lazy that he started to come to the office at 2pm! All he can blame is the bad economy that has caused the downturn. My accounts started to show signs of decline, soon I am in the red. We have to borrow month to month just to pay our staffs. I was to “merciful” towards my partner and staffs even though they were not producing. I thought that this could be just a phase and my team will stick with me to the end, and that was my stupidity talking (blame it on Braveheart). I should have let my staff go by cutting some cost but I just couldn’t bare to do it. Probably, the first thing I should do is to fire my partner, but till then I still trust him because he is a christian. I should have fired him based on Proverbs 24:30-32 Pro 24:30 I went over the field of the lazy man, and by the vineyard of the man lacking heart,
Pro 24:31 and, lo, it was all risen up with thistles; nettles had covered its surface, and its stone wall was broken down. Cut the story short, soon it was time for the company to wind-up, and my partner is the first one to bail out, so much for treating him like a blood brother to me.
The above is a true story and there are more to it than meets the eye, he got my into law suits and many more which I don’t even bothered to elaborate. But God is faithful, His mercy and Grace never fails to meet me there. I encourage those who are going through a business crisis right now, remember, do not allow yourself to be disheartened, God will rescue you no matter what happens…I can vouch for that because He save my ass so many times and He will do it again if needs to be. Why? All because of Jesus, the perfect sacrifice that has clothed me with the robe of righteousness, that I am the righteousness of God in Christ, that is why when God sees me, He sees me in Christ.
Back to the subject on wisdom, as you have read about a brief account of my past history, there you can see I lack wisdom. The answer is right in the bible, in proverbs and many more and yet I was foolish enough to trust man. Look at Psalm 118:8-9 Psa 118:8 It is better to trust in Jehovah than to trust in man;
Psa 118:9 it is better to trust in Jehovah than to trust in nobles.
and Micha 7:5 Mic 7:5 Put no faith in a companion; put no trust in a friend; keep the door of your mouth from her who lies in your bosom;
I was stupid enough to trust my partner and believe in my staffs that they will strive together with me. I was not strong enough to say “no” to my partner. I was lazy to look deep into the matter, when I do, it was too late. To all christian business people who are reading this right now, please do not follow my foot steps, I have save you alot of trouble by telling you all this. If you are in a midst of something similar to my situation, ask God for wisdom and guide you through. As Psalm 23:4 says Psa 23:4 Yea, though I walk through the valley of the shadow of death I will fear no evil; for You are with me; Your rod and Your staff, they comfort me. It says “though I walk through the valley of the shadow of death”, I WALK, not Jesus wants me to walk or God forces me to walk. A lot fo preachers will use this verse and says God will test you and make you walk through the valley of the shadow of death, NO, it is you yourself who chose to walk. And why on earth will you want to walk through the valley of the shadow of death? Because you lack wisdom, just like I did. That is why I spent 2 years walking through the valley of the shadow of death, but thank God for delivering me!
Please don’t get me wrong, I did not imply that don’t trust your friends! What I meant is, when you are making a business decision, please put friends and your “christian mentality” aside. Just imagine if a christian brother in your company who is also a finance manager, and you found out he has been dishonest and cooking the books. Now, what do you do? Do you forgive him and let him off? Do you “practice mercy and grace” and let him off? Or you think that he is a christian and it is okay to let him off? By all means NO, if you ever do that, you are foolish and it can make you an accomplice! In this situation, you have to put yourself in a corporate position, not christian position; you still need to answer to your board of directors and I am pretty sure they are not interested in your christian explanation. Remember the parable of the 5 talents? Did the master forgave the servant with 1 talent? No, he dealt with him wisely. If your christian friend did dishonest thing to you, then you can forgive him and let go. But in business, please deal wisely.
Well, after the first part of the article base on wisdom I talked about, I hope I have built a foundation for all of you. Without further a do, let’s cut to the chase.
I believe most of us here has been broke in some point of our lives. But thank God, it is broke, not poor, where broke is temporal while poor is rather permanent. During this period of time, the stress level in most of us “red-lined”, we have bills to pay, children to feed and to some, lifestyles to up-keep. We will spend most of our time worrying, paralysed by the myriad of letters that demanded you for payment. When you have a chance to pray, you will without a doubt ask God to stretch out His mighty hand from the sky and hand you a million dollars. And you think that will solve all your financial problems. And soon this method of prayer doesn’t work and you start “trying” other methods to get close to God; and if you did, you will ask Him for that million dollars.
And again, I will ask the million dollar question again. Do you know by now, why God did not zap you with a million dollars? The answer to that question relates to “what will you do if you have a million dollars?”
Let’s look at 1 Kings 4:29
1Ki 4:29 And God gave Solomon exceeding great wisdom and understanding, and largeness of heart, even as the sand that is on the lip of the sea.
In this verse you will find that God gave Solomon wisdom first , then understanding and largeness of heart. There is your answer! God has actually given all of us wisdom, just that, most of us are lazy to use it!
“What are you talking about? Are uyou trying to say that I am an idiot?!” You may exclaimed. By all means, NO, what I meant is you are lazy to use wisdom! When God gave Solomon wisdom, He also gave him understanding. What I am trying to say is this, God gave Solomon the wisdom to ACQUIRE KNOWLEDGE! This is the part where all of us fail and we try to blame God for not hepling us!
God have given us wisdom when we ask for it, but sadly only a few of us use it. How? by acquiring “knowledge”, that is how “understanding comes in. And that is how his “breath of mind” expanded like the sand of the seashore.
When the lack of finance comes into our lives, all we do is sit around and look paralysed. Have you forgot Deuteronomy 8:18, it says Deu 8:18 But you shall remember Jehovah your God, for it is He who gives to you power to get wealth; that He may establish His covenant which He swore to your fathers, as it is this day.
He gives to US the POWER to Get Wealth! How to get wealth? Buy a gun and point it at anyone by means of robbing? NO! We get wealth by the wisdom God has given us! Let me show you a few more verses….. Read the rest of this entry »
April 11, 2008 
Posted in Money Management 
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