The Lord's work in the world's ways is ALWAYS a bad idea

How does the envelope system work?

Dear Dave,

How does the envelope system work? Also, how much money do you recommend to save for emergencies?

- Dale via email

Dear Dale,

The envelope system is grandma’s old-fashioned way of budgeting money. Back in the old days when people were paid in cash, they would take the money and divide it up in different envelopes according to the categories in their budget – food, clothing, gas – and whatever else they needed. When a particular envelope started getting close to empty, they stopped buying because the money budgeted for that category was gone. If you wanted a shirt, but the clothing envelope was empty, you didn’t buy the shirt. It’s a very simple cash system that keeps you from overspending.

Today we don’t use it that way for every category, we just use it for a few – food or clothing, for instance. These are two areas where we tend to bust the budget, so use this cash method as the only source of paying for these areas so you don’t overspend the category and blow the budget. Of course, for other areas you would continue to use checks or electronic draft.

A fully-funded emergency fund is three to six months of expenses. Think of it as your rainy day fund. Trust me, if you live very long you’re going to have some rain in your life, financially speaking. The emergency fund is your umbrella, your protection in these cases – a way to prevent you from getting soaked.

- Dave

Should I cancel my disability insurance to pay-off debt?

Dear Dave,

We’re trying to work our way out of debt and have a household income of around $54,000 and three children. We’re trying to cut every corner we can, and I was wondering if we should cut my husband’s long-term disability insurance? It costs about $28 a month and is provided through his employer.

- Kimberly

Dear Kimberly,

Don’t do it! Long-term disability insurance is very inexpensive and a great buy. You’re paying out only about $300 a year, and in return it will pay you 60-70% of his salary should he become disabled. Statistics show that a 32-year old is 12 times more likely to become disabled than to die before the age of 65.

Disability is probably the most under-insured type of financial planning out there today. Everyone needs to have long-term, not short-term, disability insurance. Chances are you won’t ever use it, but in the event that something bad happens it can help save you from financial disaster.

- Dave

My church wants the congregation to sign the building-loan application as guarantors. What's your opinon?

Dear Dave,

My wife and I have been going to a church that’s about four years old, and last year we moved into a new building and we’re renting the space. The owner recently made the property available to the congregation for purchase. About two weeks ago our pastor made the announcement that a bank loan officer would be coming to church, and they’ve asked the congregation to sign the application for the loan as guarantors. What’s your opinion?

- Jeff in Nashville, TN

Dear Jeff,

There is no way under the sun I would sign off on this! You’re talking about going into a partnership with 300 other people, and this is the kind of situation where you could really get your ears nailed to the wall. The business leadership at this church should have more sense than to bring this before the congregation.

Nowhere in the Bible does it say that the congregation should get together and sign a note to buy a church building. This is a really dangerous idea, because it’s going about the Lord’s work in the world’s way. And that’s ALWAYS a bad plan.

- Dave