As a long-time pastor, I’ve counseled church members on all kinds of life issues. And now, as a speaker and expert on biblical finance with Dave Ramsey’s organization, I’ve grown especially comfortable counseling those with money problems.
If you’re a pastor who is counseling financially hurting church members, know this: They probably feel scared, worried, angry, or lost. They’re looking for hope, support, and a plan. Most importantly, they want biblical guidance. They want to honor God going forward, because it’s clear that doing things their own way hasn’t worked.
Fellow pastors, I want to encourage you that you can give those people the affirmation they crave and offer a plan that actually transforms their lives and shows them how to take control of their money. The key is keeping that plan simple. They need step-by-step guidance that’s easy to put into practice.
I call this plan the Baby Steps, because it focuses on one financial goal at a time rather than addressing everything at once. It’s slow and intentional, as each step must be completed in order. With every finished step, people feel empowered to press on. Now don’t get me wrong: Changing lifelong money habits, digging out of debt, and saving for emergencies are hard! There’s no way around that.
But the Baby Steps make the impossible feel possible. That glimmer of hope is often the one thing people need the most to change their behavior around money. After all, as Dave Ramsey says, finance is 80 percent behavior and just 20 percent head knowledge. If you can counsel your people toward behavior change, you’ve given them the key to life transformation. Ready? Here’s your plan for them.
Laying the groundwork
Before anyone dives into the Baby Steps, they need to shift their mind-set or they’ll fall back into old habits fast. (And for those who are married, the spouse should be on board too.)
First, they must commit to stop borrowing money immediately. I would be okay making an exception down the road (way down the road) for them to buy a house on a fifteen-year mortgage, with at least 10 percent down and a monthly payment of no more than 25 percent of their take-home pay. But when they’re just beginning this journey, they have to say no to all forms of debt.
Then, each month they need to make a written budget where they assign every dollar they earn to be spent, saved, or given. The amount they earn, minus the amount they assign to all categories, should equal zero. EveryDollar is a great, free budgeting tool that makes that process easy. Spouses can even access their shared budget from their own cell phones. First-time budgeters shouldn’t expect to master budgeting the first time they try it, though. It usually takes about three months to get it down.
Next, I encourage people beginning the Baby Steps to temporarily stop all retirement contributions—even the employer match—until they pay off all debt and have a full emergency fund. Don’t worry! They’ll be able to make up for this pause by reallocating the money they were paying toward debt into retirement once they have a fully funded emergency fund.
Finally, they need to get current on all bills if they’re behind. This means their four walls are taken care of: food, basic clothing, shelter and utilities, and transportation. To quickly earn some extra money, I suggest finding stuff to sell, taking a part-time side job, or trimming their lifestyle. They’ll have to take a hard look at how much of their money goes toward wants instead of needs. Luxuries like cable TV, eating out, or expensive cell phone plans can usually be eliminated or downgraded to more affordable options. Remind them that eventually, when they’re in a better place financially, they can choose to resume those expenses.
Okay, now that we’ve laid the groundwork, let’s dig into the Baby Steps that can be presented to the people you counsel.
Baby Step 1: Save a $1,000 starter emergency fund.
The Bible encourages you to save for a rainy day. In fact, Proverbs 21:20 says, “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has” (NIV 1984). That’s why the first Baby Step is to save $1,000 cash in a savings account that should be used only for true emergencies. That protects you from going deeper into debt. (If you earn less than $20,000 a year, it’s okay to save up just $500.)
Baby Step 2: Pay off all consumer debt.
The Bible has nothing good to say about debt, so it’s time to pay off every cent of consumer debt. In fact, Proverbs 22:7 tells us, “The rich rule over the poor, and the borrower is slave to the lender.” This step is the hardest of all the Baby Steps. It requires paying off everything from credit cards and car loans to student loans and all other debt, except the mortgage. Start with the smallest debt and pay it off as fast as you can while continuing to make minimum payments on all the rest. Once that first debt is gone, roll its payment into your next smallest debt payment, while continuing to make minimum payments on all the rest. Continue that process until they’re all gone!
Baby Step 3: Fully fund your emergency fund to cover three to six months of expenses.
Once you’re debt-free, it’s time to revisit that emergency fund. This time, focus on saving a full emergency fund of three to six months of living expenses. I’m talking basic expenses here—what you’d need to survive in an emergency. If you budget $200 each month for entertainment, for example, you would not include that in your emergency savings. When it comes to emergencies, it’s not a question of if they’ll happen, but when. Be ready!
Baby Step 4: Invest 15 percent of your income for retirement.
After fully funding an emergency fund, it’s time to start (or restart) that retirement savings. I recommend investing 15 percent of your income into mutual funds, and the younger you are, the better. Compound growth is your best friend! But even if you’re nearing retirement, it’s not too late. Here’s what to do: If your employer offers a retirement savings option like a 401(k), invest there, up to the match. Then open a Roth IRA—one for you and, if you’re married, one for your spouse—separate from your employer, and invest up to the maximum limit. If you still need to invest more to reach the 15 percent mark, head back to your employer’s fund and increase your contributions there. If you counsel someone who needs professional help walking through that process, I recommend a SmartVestor Pro, a financial professional with the heart of a teacher. They’re located around the country and help their clients make wise investing choices.
It’s also a good idea to encourage people to have a clear picture of what they want their retirement to look like, because that will affect how much they realistically need to save. Most people don’t do this, though. But just like you’d never build a house without a blueprint, you should never retire without a plan.
That plan will look a lot different for people who want to spend their golden years sitting on the front porch of the paid-for home they’ve lived in for fifty years than it will for someone who wants to travel the world. A great tool to share with people who need help figuring out how much to save for the retirement of their dreams is Chris Hogan’s R:IQ.
Baby Step 5: Invest for your kids’ education.
After your own retirement is taken care of (and only after), it’s time to save for your kids’ college education. It’s no secret that higher education is ridiculously expensive, and student loan debt is one of the biggest obstacles keeping young adults from living the lives they feel God calling them to. What a gift to send your kids to college debt-free! The sooner you can start saving for this, the better. I recommend investing in 529 college savings funds or ESAs (Education Savings Accounts). An investing professional can help you determine how much to tuck away each month.
Baby Step 6: Pay off your house early.
If you have a mortgage, now’s the time to pay it off early! Paying off a mortgage ahead of schedule saves a ton on interest, reducing the overall amount you end up paying for your home. Plus, having no house payment and no debt allows you to begin the most fun Baby Step of all.
Baby Step 7: Give generously!
Giving is one of the most important parts of any financial plan, and it’s the most fun you can have with money. Once you’ve reached Baby Step 7, you’re able to bless others generously while living a blessed life yourself. Not only are those in Baby Step 7 tithing (as the Bible calls us to tithe no matter where we are financially), but they also have so much surplus that they can give offerings above and beyond the tithe, not to mention other giving opportunities as they arise. Have fun with it and be creative!
No matter where people are on their financial journeys—even if they’ve reached Baby Step 7—they’re never free of their finances. Even millionaires should make and stick to a monthly budget; their numbers are just a lot bigger. But staying on top of your money is God’s desire. Every dollar earned is really God’s. He calls us to be managers of His money and to maximize and leverage everything He’s blessed us with. It’s a big responsibility! But it’s also an amazing opportunity, one I pray you will lead your church members to embrace as you counsel them to take control of their finances and to create a lasting legacy of good financial stewardship that long outlives them. As Proverbs 13:22 says, “A good man leaves an inheritance to his children’s children” (NKJV).