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Entries in Dave Ramsey (3)



Last night, in week four of Dave Ramsey's Financial Peace University, one of the things we discussed was "opportunity cost." I've heard of the concept before, but in light of the things that have been on my mind lately, and the changes that are happening in my life, it struck a chord with me on more than just the level of financial education.

Here's a simple definition to start with:

Opportunity cost  n. The loss of potential gain from other alternatives when one alternative is chosen.

In other words, what are you giving up when you make the decision to buy or do something else? 

From a money perspective, this is a handy way to talk yourself out of making a significant, pricey purchase of something that doesn't add value to your life. "If I buy this television, I lose the opportunity take a trip to Disney World." Or maybe "If I buy this car, I lose the opportunity to put a down payment on a house." Or maybe "If I spend $30 on lunch at this restaurant I'll lose the opportunity to take my wife to a movie tonight." 

This idea makes great sense to me. I'm a "consequences" kind of guy. I know that every action has a consequence, and the secret to having a good and happy life is to decide, in advance, the types of consequences you want to cultivate. So thinking in terms of opportunity costs works well for me.

It isn't limited to money, of course. Everything in life is an opportunity, and most of the time accepting one means losing out on another.

If you date this cute girl, you miss out on the opportunity to date her best friend—so which girl do you like or connect with better? 

If you choose to gossip about someone, you miss out on the opportunity to build a strong friendship with them—so do you want to be their friend?

If you choose not to exercise, and instead eat lots of junk food and do nothing but watch TV, you miss out on the opportunity to be fit and attractive and have lots of energy and strength—so do you care more for chicken wings and the latest episode of "Complete Trash: The un-Reality Show" than for your own body? 

If you cheat on your wife, you miss out on an opportunity to have a loving and trusting marriage—so do you love your wife more than the affair?

Looking at life from the perspective of "opportunity cost" can change your perspective on daily decisions, big and small. This is long-tail thinking, far-reaching perspective. This is you looking ahead at the life you want, rather than the life you have.

I'm a believer, so I see this from the perspective of God's will for my life. I think that one of the best ways to weigh opportunity costs for my daily decisions is to pray for wisdom and increased faith and to be filled with the Holy Spirit. With God's Word as my guide, I have something to weigh my choices against. It gives me a compass point, a life to aim for.

Maybe for you, that isn't the case. Maybe you value family values or professional success or personal integrity more. I respect that, because I know how powerful those things can be as motivations. I think, personally, you'd get all of those as part of a strong relationship with God, but I understand if you see it differently.

This is life-changing advice, and it's advice I'm following myself. Look at every decision in your life from the perspective of opportunity cost, and ask yourself if what you're choosing is leading you away from or toward your goals.

Which begs the question: Have you set any goals?

You can't weigh your opportunity costs without knowing where you're trying to go. This tool only works if you have a plan. So sit down, right now, and jot down three things you want to accomplish with your life. They can be anything, from "Lose 20 pounds in six months" to "Win a Pulitzer Prize before I turn 30."  Just make sure they're specific and that they have a timeline for completion. 

Once you have those three goals, use them to determine the opportunity costs of your decisions. Will Choice A get you closer to or further away from your goals? Will Choice B? Go with the choice that gets you closer, and you'll never regret the choice.

Last parting advice—choose the opportunity God has opened up for you. This is a chance to have a life that outlasts your time on Earth. It's a chance to have joy that makes your best memories seem like the least of your good days. It's a chance to experience love that goes deeper, farther, higher, and wider than any you've ever experienced, or ever thought you could. 

If you need help or advice about reaching this opportunity, let me know. I want to help you see it, if you're curious. And maybe I can help you see some other opportunities in your life, too. Sometimes we need someone who loves us to point out what's right in front of us, hiding in plain sight.



Last night was "Week 3" of Dave Ramsey's Financial Peace University. In general, the message for the evening was "Tell your money what to do or you'll wonder where it went." We learned about the importance of sitting down and planning a budget, finding an assignment for every single dollar that comes into your hands, and doing that every month for the rest of your life.

Sounds kind of scary when you put it like that.

And yeah, when the class started I was a bit intimidated by the whole concept. Budgets, for me, have always felt like shackles. They were something used to limit me. Whatever I wanted out of my life, it definitely did not involve allocating every dollar to a task, every month, forever.

But then, what exactly did I want out of my life?

See, there's the problem, right there. I have had no plan for forty years. No real goals. Yeah, I've had a list of wants, things I was keen to accomplish. Wealth has always been on that "list." I've even gone so far as to figure out my own definition for wealth:

Wealth is the freedom and ability to do, have, or be anything I want, including the ability to give to others and to help others achieve a wealthy lifestyle.

That definition changes all the time, actually. I modify it as I learn more. You should have a definition of wealth of your very own. Just keep this rule in mind: Wealth is about more than money. 

Having a defintion is great, but the problem is I had no plan. How, exactly, did I intend to get to wealth? I know the destination, but I don't know the route. I haven't sat with it, written out a plan of action, set milestones and goals that will continuously get me closer.

That's the biggest reason I enrolled in FPU in the first place. I recognized, eventually (FINALLY), that I lack a financial education. Or, at the very least, my financial education has some major gaps in it. I understand business, I understand strategy, I understand marketing and consumers and how industries and markets can move and grow. I don't understand money

And even though wealth and money aren't the same thing, you're going to have a much easier time achieving wealth if you have control of money. Money is a resource, a tool, that helps you achieve your goals faster.

Think of building a skyscraper. 

In theory, you could start searching the Internet for everything there is to know about building a skyscraper, from building techniques and materials to local laws and restrictions. You could go and interview people who have built skyscrapers, from contractors who put up the support beams or dug holes or laid tile in the lobby, all the way up to the guy who oversaw the entire project, from blueprint to majestic tower, rising into the sky. You can learn everything there is to know, and then move on to gathering materials. Mining and then smelting iron into beams. Making your own cement from scratch. Building a factory that churns out any and all materials, from floor tiles to window glass to the flag that will wave from the building's roof.

That's a lot of work. So yeah, in theory, you could get it all done, and nary a penny might leave your pocket. You may also be the approximate age of Methuselah by the time you turn that first shovel-full of dirt for starting the foundation. 

But let's say you have a few hundred million dollars at your disposal. Wouldn't that speed things up a bit? Pay an architect to design the building. Pay a builder to oversea operations. Pay contractors to do the labor. Pay for materials. It all happens so much quicker with money. Money is like a time accelerator for getting stuff done.

Common sense, I know.

And yet, this is not how we tend to think about money in our personal lives. We think of it as the end, not the means. My own theory on this, from my own experience, is that we don't have plan for how to use the money we make. If we have a plan, a budget, money stops being the end in and of itself, and starts being the tool we use to get to what we really want.

We tell our money what to do, instead of wondering where it went.

My skyscraper analogy isn't mine. It actually comes from the Bible. Check it out:

28 Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? 29 For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you,30 saying, ‘This person began to build and wasn’t able to finish.’

Luke 14:28-30

Whaaaaaat? The Bible is telling me to plan how to use my money? Set a goal? Manage things? 

And look at what you can accomplish when you do that. You can build a friggin' TOWER. If that's your thing. Or a small business. Or a large business. Or a house. Or a vacation to Europe. Or college for the kids. Or a debt-free life. Or steak dinners every night. Or a million other things that all add up to ONE thing: Wealth.

I haven't done this. I'm doing it. I can't tell you it works for me personally, but I bet I'll be able to soon. I do believe, though, that telling your money what to do is what God wants from you, as a good steward.

Be faithful with a little and you'll be entrusted with a lot. That's from the Bible, too. 




Tonight I start a 9-week course called Financial Peace University. It's a program developed by Dave Ramsey, and it teaches you how to reshape your financial life. Not exactly a topic that has been in my bailiwick over the past four decades, but one I desperately need as part of my education.

So why now?

The more I study and learn about God's will for my life, the more I start to realize I have fallen short in few areas. My health, though not "bad," could be much improved if I'd lose the 70 or so extra pounds I've packed on. My marriage could be more peaceful and joyful if I spent more time focusing on the needs of my wife than focusing on what I want out of our every conversation or situation. My spiritual life could be improved if I'd focus more on studying and continually dwelling in God's Word, rather than giving my mind over to TV and books and films that do little or nothing to glorify God. And my financial life could be vastly improved if I had even a modicum of education in that direction.

It's not an easy thing for me. Money is one of those things that tenses me up every time the subject is broached. Whenever I think about sitting down with Kara to figure out a budget or discuss our finances, I feel sick inside. When I think about doing our taxes I want someone to hog tie me and beat me with a bar of soap in a sock. Money ... I haven't had a very good attitude toward money for most of my life.

And yet, I have always tried very hard to figure out ways to get more money. I need money, you see. We all do. There's some weird sort of notion being taught in schools and in churches and in homes, that money is somehow evil, and that those who have it or want it are just greedy and evil. But the truth is, even if we disdain the green stuff, it's a vital and necessary part of our lives. We need it (or what it stands for ... the value it represents) in order to achieve the things God wants for us in life. Prosperity is part of the promise of God.

But it's not like it's just going to fall out of the sky.

I mean, it might. "Manna from heaven," that's a thing. But look at what had to happen before manna fell to the Earth every morning, to sustain those wandering in the desert. First of all, they were in a DESERT. For FORTY YEARS. They were on the run from a very angry king. They were stranded, far from home, in a land that was harsh and difficult. They roamed, homeless, for forty years, because of disobedience. God sent manna to sustain them because He knew that eventually they'd come around. It was part of his promise to them. (Read Numbers and Exodus in the Old Testament of the Bible to see this whole story play out)

The point is, manna didn't fall from heaven just because the whole lot of them wanted a bite to eat. They probably would have preferred a nice roasted fish, maybe a bit of tartar sauce. Steak would be good. But instead, God sent them what they needed, when they needed it, nothing more. The rest was up to them. Their choice about obedience is what defined their journey. 

So back to the financial education bit. 

If you're going to live a life of prosperity, however you may define it, having a financial education is essential. Required, really. If you're plan is to free yourself from 9-to-5, to improve your lifestyle and achieve the freedom you need in order to accomplish your goals and your dreams, you have to know how money really works. You have to know how to make money work for you, instead of you working for money. 

Wealth ... that's a loaded term. It has all sorts of connotations, good and bad. For me, true wealth is the ability to choose how, when, and where I do the work God has ignited in me. Wealth means I have the means to glorify God with what I do, and to increase the reach of what I produce. It means I'm free to experience the world the way God intended.

Hard times? They'll still come. Stress and worry will always be a part of the equation. Wealth isn't a force field—it doesn't block difficulty from getting in. What it does is give us a tool we can use. And as with all tools—from screwdrivers to laptops to diesel-powered tractors—knowing the right way to use them makes all the difference in their effectiveness.

So I'm on a journey to learn more, and grow, and improve, and build wealth. I want to understand money, and I want to apply what I know about innovation and strategy and marketing and life, and use money as a tool to glorify God and accomplish my dreams and goals. And I want to drag you along with me. 'Cuz I loves ya. So I'll let you know what I learn over the next nine weeks, and how you can apply it to YOUR journey, too.