ple
       Sim
Three Rules
Financial Counselor
        and
  Workshop Leader
 Training Manual
      Second Edition
Copyright          2003

                                      Theo A. Boers

All rights reserved. No part of this book ma...
INDEX

          FIRST BANK of TABS

            Financial Counseling


          Pre-Marriage Mentoring


             Fi...
Introduction

The Financial Counselor and Workshop Leader Training Manual is a self-teaching course on:

(a) How to become...
ple
    Sim
Three Rules
  Section One:

  Financial
  Counseling
Financial Counseling

Introduction………………………………………………………pg. 1

    Why is Financial Counseling Necessary
    Why People Hav...
Why is Financial Counseling Necessary?

Personal bankruptcies hit an all time high of 1.6 million in 2003. On a per capita...
Why People Have Financial Problems

The number one reason people have financial problems is because they spend more than t...
This is especially true in the financial area. That is why many people reach their
       retirement years basically broke...
Andrew Tobias states, “A luxury once sampled becomes a necessity.” Therefore, when
       our budget tells us we have to c...
4.     People whose circumstances have changed and cash flow went from positive to negative.
       Perhaps this was the r...
What People Think Causes Their Financial Problems

If you were to ask first-time clients, “So, what’s the problem?” many o...
rubber hits the road. Unless we have the Discipline we will never accomplish what we want to
accomplish. It’s that simple....
Counseling from a Christian Perspective

For many people, money is considered to be a secular commodity. After all, money ...
You have been treated generously, so live generously. Matthew 10:8b, The
              Message

       •We will not consid...
10
Dos and Don’ts


Recognize Your Limits

If you are not an attorney, do not give any legal advice.

If you are not an accou...
analysis a restaurant is not private enough and doesn’t have the room to lay out the necessary
paperwork.


When to Counse...
Confidentiality

You will want to keep some records, notes and copies of budgets as you work through the
financial situati...
2.     Clearly communicate that you are volunteering your time to help, but you are not a
       “rescuer.” Your role as a...
The Counseling Process

The counseling process will generally consist of a series of meetings. The number of meetings
will...
habits that may be causing their financial problems. If they answered “No” to any of the
     questions 1-8, this may be a...
10.   Ask some specific questions to get an overview of how they manage their money:

      “How often do you get paid?”

...
categories, suggest to them that they refresh their memory by going through their
checkbook and their credit card statemen...
Expenses

Explain why we use three categories of expenses. (See Three Simple Rules for a
refresher if necessary.)
All expe...
• Build up an emergency account until it equals 5% of annual income.
• If some of the money is used it needs to be repleni...
Entertainment

      This is an area where clients frequently do not know how much money they spend. An
      estimate is ...
22
Meeting Number Two

Prior to the second meeting you will want to review your notes from the first meeting and your
client’...
Review the Personal Cash Flow Plan.

     Go through all the numbers making sure that you understand their numbers, that t...
Meeting Number Three

The purpose of the third meeting (assuming you are ready to do this) is to help your clients to
unde...
5.   Offer optional solutions that will help them correct the problem that is preventing them
     from accomplishing thei...
These four steps are deliberately in this order. Do not make the mistake of reversing this
order, which many of your clien...
6.   Assign Homework
     Read Part Four and Five of Three Simple Rules.

7.   Schedule the next session.

8.   Close in p...
Meeting Number Four and subsequent meetings as necessary

We will assume that you now have a balanced budget that your cli...
I like to start by focusing on the Budget Busters. For most families the Budget busters
     are:

     • Food
     • Clot...
The third step is to Know the different types of debt:

       • Credit Card
       • Consumer Debt
       • Real Estate D...
Conclusion

Now that you are familiar with the entire cycle of Financial Counseling it’s time to get your feet
wet. Howeve...
ple
     Sim
Three Rules
  Section Two:

  Pre-Marriage
   Mentoring
Pre-Marriage Financial Mentoring


Researchers have told us for years that family financial problems are the number one ca...
process is gone. I typically offer to meet with them at any time in the future and some take
advantage of that offer.

Pro...
For example, if they agreed that they needed zero credit cards or one credit card I would
       conclude that that is an ...
See the Counseling Section of this manual for more information about how to explain
       these two forms.

4.     Discus...
Dear John and Kelley,

I’m looking forward to meeting with you at 7:30 PM on Monday September 30.

I have enclosed two sur...
ple
     Sim
Three Rules
 Section Three:

  Financial
   Workshop
Three Simple Rules Financial Workshop

The Three Simple Rules Financial Workshop is designed to be offered once per week f...
Session One – The Three Rules

(Note: The symbol (PPt) is a reminder to go to the next Power Point page. If you are using ...
training many counselors he decided to summarize what he had learned in this book. He
     wrote it especially for young p...
6.   Talk about the Personal Financial Habits Assessment. (PPt)

     • Introduce by explaining that many financial proble...
TIPS for spending less than you earn.

(a)    Understand your paycheck. (PPt)

       Q. How many hours does it take to pa...
(g)    Plan your spending. (PPt)

            Use a Personal Cash Flow Plan. (We’ll talk about that next week.)

     In t...
Long-term Savings Account (PPt)

      • Allows you to plan for items you will pay for in the future, such as your childre...
Q. How do you get rid of Debt? (PPt)

      A. You have to have a plan. (We will talk about that more later.)
      A. You...
Session Two – A Financial Physical

Objective – To help the group understand how to give themselves a financial physical.
...
5.   The Importance of Personal Goals

     Encourage the class to identify and share with the group specific goals they h...
Be sure to spend some time on unique income situations i.e. bi-weekly income,
     commissions, etc., or make yourself ava...
Session Three - Diagnosing Your Financial Situation

Objective – To help the group understand how to diagnose their own fi...
The three primary questions we use to diagnose our financial situation are:

     1 – Are we spending less than we earn? (...
Step Three – Repeat Step Two. (PPt)

     Step Four – Repeat Step Three. (PPt)

     Step Five    – Sell assets (motorcycl...
Simple 3 Rules   Financial Counselor & Workshop Leader Training Mannual
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Simple 3 Rules Financial Counselor & Workshop Leader Training Mannual

  1. 1. ple Sim Three Rules Financial Counselor and Workshop Leader Training Manual Second Edition
  2. 2. Copyright 2003 Theo A. Boers All rights reserved. No part of this book may be reproduced in any form, except for the inclusion of brief quotations in a review, without permission in writing from the author. Scriptures marked as NIV are taken from the Holy Bible New International Version® Copyright © 1973, 1978, 1984 by the International Bible Society. Scriptures marked as The Message are taken from The Message. Copyright © 1993, 1994, 1995, 1996, 2000, 2001, 2002. Used by permission of NavPress Publishing Group. Scriptures marked as CEV are taken from the Contemporary English Version Copyright © 1995 by American Bible Society. Scriptures marked as The Living Bible are taken from the Life Application Bible for Students: the Living Bible, Copyright © 1992 by Tyndale House Publishers, Inc. Free copies of Three Simple Rules Guaranteed to Improve Your Finances! may be downloaded at www.ThreeRules.org Printed copies of this manual and the Three Simple Rules book are available at cost of printing and shipping. Check our web site for details. Second Edition, printed September 2004
  3. 3. INDEX FIRST BANK of TABS Financial Counseling Pre-Marriage Mentoring Financial Workshop Case Studies SECOND BANK of TABS Case Study Answers Forms Financial Workshop Tools Appendix
  4. 4. Introduction The Financial Counselor and Workshop Leader Training Manual is a self-teaching course on: (a) How to become a Financial Counselor. (b) How to do Pre-Marriage Financial Mentoring. (c) How to conduct small group Financial Workshops. It consists of this manual and the book written by the same author entitled Three Simple Rules Guaranteed to Improve Your Finances. If you haven’t already done so you should read Three Simple Rules before proceeding with this manual. This manual is based on material that the author, who has been involved in financial counseling for over ten years, has used in a classroom environment to teach financial counseling for over seven years. The Financial Counselor section of this manual prepares the reader to offer Financial Budget and Debt Counseling from a Christian Perspective to individuals and/or families. It provides appropriate Bible verses, simple tools for setting up counseling sessions and concrete information on counseling dos and don’ts. The Pre-Marriage Mentoring section of this manual will prepare the reader to offer a pre- marriage mentoring session focused on the couple’s compatibility in the area of finance-related values. The Financial Workshop section of this manual will prepare the reader to conduct a structured four week financial workshop for small groups. The Three Simple Rules book is an integral part of all three aspects of this manual.
  5. 5. ple Sim Three Rules Section One: Financial Counseling
  6. 6. Financial Counseling Introduction………………………………………………………pg. 1 Why is Financial Counseling Necessary Why People Have Financial Problems Three Simple Rules Types of Counseling Situations Counseling Objectives What People Think Causes Financial Problems The Client’s Commitment The Client’s Goals No Magic Wands Recognize Your Limits Counseling from a Christian Perspective Dos and Don’ts……………………………………………pg. 11 Where to Counsel When to Counsel Session Length Cautions Confidentiality Counseling Technique Set Healthy Limits The Counseling Process……….………………………………pg. 15 Meeting Number One Meeting Number Two Meeting Number Three Meeting Number Four and beyond Conclusion………………………………………………...pg. 32
  7. 7. Why is Financial Counseling Necessary? Personal bankruptcies hit an all time high of 1.6 million in 2003. On a per capita basis this rate of bankruptcy is 10 times greater than it was during the Great Depression. Last year over 9 million people, who averaged $16,000 in unsecured debt, sought help from debt counseling agencies. Experts estimate that for every person who seeks council there are 4 who are still in denial. Why are record numbers of Americans filing bankruptcy and seeking debt relief? The primary cause of the rampant rise in personal financial problems in the last 20 years has been the ever increasing easy availability of credit. Financial institutions have been “selling” money in ways we have never before experienced. Houses can now be financed for 125% of value. Cars can be bought and financed at 0% interest. Everything from carpets to carports can be purchased with no down payment, no interest and no payments for 6 – 36 months. Credit cards companies now aggressively pursue non-traditional markets such as college students, senior citizens, the working poor and even the recently bankrupt. Almost anyone can borrow money to buy almost anything. Credit card balances of “revolvers”, people who do not pay off their balance every month, is now over $12,000. We now live in a world where we are no longer reminded that if we buy now we have to pay later. Instead we are repeatedly told to: “Master the possibilities with Master Card.” “Visa. It’s everywhere you want to be.” The message is subtle but it sinks in. Master Card and Visa can help you live a better life, do what you want to do and go where you want to go. The message is totally directed at personal self-gratification. There is no hint of personal responsibility, no reference to interest rates, fees, penalties and payback time except for in the fine print. As a result of all this easy credit an unprecedented number of families are now struggling with serious financial problems and the consequent tension it creates in marriages. This manual is designed to help you help these families. 1
  8. 8. Why People Have Financial Problems The number one reason people have financial problems is because they spend more than they earn! That raises the obvious question of “Why do people spend more than they earn?” Working with many clients over the years has identified three major reasons that cause people to spend more than they earn: lack of discipline, lack of contentment and lack of goals. 1. Lack of Discipline Lack of discipline is a behavioral problem. Behavioral problems have a lot to do with personality. Some personality types have a difficult time being disciplined about anything. Obviously, you can not change the client’s personality. However, being aware that the underlying problem is lack of discipline will influence how you go about helping the client address the problem. Some symptoms that will help you recognize a lack of discipline situation are: • client has no idea where all the money goes. • client unknowingly buys stuff he/she/they can’t afford. • check book is frequently overdrawn. • compulsive spending. • there is no set time to pay bills. • there is no budget. 2. Lack of Contentment Lack of contentment is a spiritual problem. We all have this in one degree or another. Again, being aware that the underlying problem is lack of contentment will influence how you go about helping the client address the problem. Some symptoms that will help you recognize a lack of contentment are: • client makes minimum payments on one or more credit cards • client has more house than he/she/they need or can afford. • client has more expensive cars than he/she/they need or can afford. • client spends more money on clothes, etc. than he/she/they can afford. • buying decisions are driven by wanting what others have. • buying decisions are driven by the need to impress others. • client is of the opinion that they deserve more than they have. 3. Lack of Goals Many people do not have specific goals. Many people who do have a sense of what their goals are have no idea or plan for how they will accomplish their goals. 2
  9. 9. This is especially true in the financial area. That is why many people reach their retirement years basically broke. When you ask people if they would like to be financially free almost all of them will say yes. When you tell them that step one toward that goal is to become totally debt free they look at you with a blank stare because they don’t even believe that to be possible. That is part of the counselor’s challenge. As a counselor you have to reverse what people have been hearing all of their lives and that is that debt is normal. You have to reverse that perception and help your clients to understand that they will never be financially free until they owe no man anything! Sometimes you will need to get your clients’ attention by whacking them over the head with the proverbial two by four. I sometimes do that by projecting where they will be, based on their current spending habits, in five, ten or fifteen years. Generally, the projection is so scary that I get their attention so that we can begin to set some goals and lay out plans for how to accomplish them. Lack of discipline, lack of contentment and lack of goals are not the only reasons that people spend more than they earn. Budgeting is another contributing factor. Budgeting isn’t easy - it’s complicated. The reason budgeting is complicated is because: • Some bills are monthly, some are quarterly, some may be semi-annual or annual and some, like doctor or dentist bills, are just unpredictable. • Some people are paid weekly, some bi-weekly, some monthly and some are on commission. As a result, matching up money coming in and money going out is difficult. This manual and the Three Simple Rules book will provide detailed information on how to teach your clients how to address these complicated variables. Other reasons why budgeting is difficult are: • Many people have simply never been trained to budget their money. • Budgeting takes time. • Balancing a budget means making choices - a lot of people don’t like making choices. • People assume that their lifestyle, whatever it is, is the minimum acceptable lifestyle. We all become accustomed to our standard of living whatever it is. Financial advisor 3
  10. 10. Andrew Tobias states, “A luxury once sampled becomes a necessity.” Therefore, when our budget tells us we have to cut back in certain areas it’s a difficult thing to do. Three Simple Rules As Christian Financial Counselors, our goal is to help people who are experiencing financial difficulties to understand how to apply three of the Bible’s basic money management principles. The three principles are: 1. Spend less than you earn. Don’t fall in love with money. Be satisfied with what you have. The Lord has promised that he will not leave us or desert us. Hebrews 13:5, CEV 2. Save now! Buy later. The wise man saves for the future, but the foolish man spends whatever he gets. Proverbs 21:20, The Living Bible 3. Know the consequences of debt. The poor are always ruled over by the rich, so don’t borrow and put yourself under their power. Proverbs 22:7, The Message As you get involved in financial counseling you will discover that much of the financial hardship and heartache that you will see is a result of people violating these three God-given principles. Types of Counseling Situations In financial counseling it is our objective to help the individual or the family work through a particular financial problem. There are at least six common types of counseling situations. They are: 1. Young couples, perhaps newly married, who need some help setting up a budget. 2. People who need help thinking through a “major” financial decision. For example, perhaps they found a house they would really like to buy, but they are not sure they can afford it. 3. People who tell you that things are always tight and would like some help just thinking things through. Perhaps all they really want to know is if they are doing anything wrong. 4
  11. 11. 4. People whose circumstances have changed and cash flow went from positive to negative. Perhaps this was the result of a loss of job, a particularly severe illness, or a divorce. 5. Probably the most frequent situation that you will see will be people who have had a monthly negative cash flow for quite some time and it’s beginning to catch up with them. 6. One more type of counseling situation that you may experience is an individual or a family that is so significantly behind on loan payments that they are being threatened with foreclosure and/or repossession. Situations 1 - 3 are people who are looking for advice. It is frequently possible to give them that advice in one or two meetings. In many situations you may want to ask them to read some or all of Three Simple Rules and then meet to discuss their particular issues. Situations 4 - 6 will take longer. They will require analysis, review of options, making of decisions and then helping the client to develop the discipline necessary to carry out those decisions. Counseling Objectives What do we hope to accomplish as a result of agreeing to provide financial counsel? Obviously, the primary objective of financial counseling is to help clients eliminate current financial problems and to help them prevent future financial problems. However, there are some sub-objectives of which you should be aware: The first one is to simply give them hope – to help them understand that there is a way out of this mess. I’ve had many clients walk into my office convinced that they had no choice but to file bankruptcy only to learn that they did have options. That gave them hope. A second objective is to help the clients define their goals. Many people have never done that before. Helping them define their goals and then focusing on accomplishing those goals will help them stay on the right financial track. A third objective is to teach them some basic money management skills. Many people have never even been taught the basics. Another objective is to teach them that the Bible has a lot of very practical advice when it comes to money. Advice, which if not followed, causes financial problems. I say all this because you may not be successful in accomplishing the primary goal. We’ll talk more about that later. However, that does not mean that the time you invested was wasted. 5
  12. 12. What People Think Causes Their Financial Problems If you were to ask first-time clients, “So, what’s the problem?” many of them will tell you that they just don’t make enough money. In a sense they are right. They don’t make enough money to pay for their excessive spending habits. But inevitably, not making enough money is not the real problem. It isn’t that they don’t make enough money. The real problem is that they spend too much money. I know that’s true because I’ve counseled people who made $30,000 per year and people who made $130,000 per year and they all say the same thing: they don’t make enough money. Most people think that more money will solve all of their financial problems. Perhaps that’s why lottery tickets are so popular. Unfortunately, we know that even with lottery winners more money is not the answer. For this reason, whenever we begin to look for solutions to a financial problem we always first look at where we can reduce expenses. (More about that later.) The Client’s Commitment When I first meet with a counseling client I always ask them what to them seems like a strange question. The question is this, “Will you do whatever it takes to fix this problem?” The answer is generally, “Of course we will.” Unfortunately, I know from experience that many of them will not. Old habits are just too hard to break. I ask them the question anyway, “Will you do whatever it takes to fix this problem?” This allows me to help them understand that I can’t fix their problem. I can only give them advice. They have to fix the problem. I can show them the “how to,” but they are responsible for the “will to” and the “will do.” I then share with them something I learned from Pastor Henry Wildeboer. He frequently incorporates the Four D’s into his messages. The Four D’s He suggests that having the Desire to change something in your life is not unusual and not hard to do. Everyone desires something: to lose weight, to stop smoking, to spend quiet time with God every day, etc. Having desire is normal and not difficult. Then comes Decision: the Decision to do something that will get you where you want to be. Decision is a little bit harder than Desire, but still not terribly difficult. We all make many Decisions every day. But then comes Discipline. Discipline is tough. Discipline means actually doing what it is we made a Decision to do. Not only once, but over and over and over again. Discipline is where the 6
  13. 13. rubber hits the road. Unless we have the Discipline we will never accomplish what we want to accomplish. It’s that simple. But if we do, if we do have the Discipline to do what we have to do to get what we want to go, we will experience DELIGHT! That’s the fourth “D” of Pastor Henry’s little talk and it applies in almost all areas of our life, including attaining financial freedom. The Client’s Goals Another area I cover in the early part of the counseling process is encouraging the client to identify specific goals. Obviously they want the pain of financial problems to go away but I try to get them to be much more specific. As a result they will often identify goals like: • stopping the creditor calls. • having some savings. • buying a better car so they won’t have unreliable transportation. • being able to help send their kids to college. • saving some money for retirement. • etc. The reason I believe it is so important to encourage them to identify their goals up front is so you can remind them of those goals later on in the counseling process. As you work with them over a period of weeks or perhaps months there are going to be times when they want to give up. Changing old spending habits is tough. They may have to make some very difficult choices like: • seriously cutting back on their spending habits in certain categories. • selling a car, boat or motorcycle. • moving to a smaller house. • working more hours. That’s when I remind them of their goals. Would they rather keep the boat or would they rather get that nasty collection agency off their back? That frequently brings them back to reality. No Magic Wands People you counsel also need to understand that you do not have a magic wand. They also need to understand that it is their problem, not your problem and they have to do the heavy lifting to solve the problem. Don’t let them make their problem your problem. You are there to help them analyze their situation, to make recommendations and, to the extent that they will let you, hold them accountable, but you can not fix their problem. 7
  14. 14. Counseling from a Christian Perspective For many people, money is considered to be a secular commodity. After all, money has to do with buying and selling, business and the marketplace. However, what they forget is that Christianity also has to do with the things of everyday life. Jesus talked a lot about money and certainly used everyday life examples in most of his parables. If we were to counsel from a purely secular perspective we would focus on doing whatever is necessary to solve the financial problem. However, when we counsel from a Christian perspective we are going to recognize that violating God’s money management principles may have caused the problem and that applying these principles and asking for his help is a key to solving the problem. From a practical standpoint the following will differentiate Christian financial counseling from secular financial counseling: 1. We will open the counseling session with prayer asking for God’s guidance and wisdom as we work through this problem. 2. We will apply Scriptural principles to financial decisions. For example: • We will encourage the client to be absolutely honest in all their financial dealings. Who may stay in God’s temple or live on the holy mountain of the LORD? Only those who obey God and do as they should. They speak the truth and don’t spread gossip; they treat others fairly and don’t say cruel things. They hate worthless people, but show respect for all who worship the LORD. And they keep their promises, no matter what the cost. They lend their money without charging interest, and they don’t take bribes to hurt the innocent. Those who do these things will always stand firm. Psalm 15:1-5, CEV • We will deal with the concepts of needs vs. wants. God has promised to supply all our needs, not necessarily all of our wants, if we live within his will. You can be sure that God will take care of everything you need, his generosity exceeding even yours in the glory that pours from Jesus. Philippians 4:19, The Message • In the process of dealing with needs vs. wants we will refer to the Scriptural concept of contentment. Do not want anything that belongs to someone else. Don’t want anyone’s house, wife or husband, slaves, oxen, donkeys or anything else. Exodus 20:17, CEV •We will recognize a need to give back to God irrespective of whether we can “afford it.” 8
  15. 15. You have been treated generously, so live generously. Matthew 10:8b, The Message •We will not consider bankruptcy an easy out. An evil person borrows and never pays back; a good person is generous and never stops giving. Psalm 37:21, CEV 3. We will close the counseling session with prayer asking for God’s guidance and wisdom as we work through this problem. In some cases it may be appropriate to encourage the clients to repent of their mistakes and to ask for God’s forgiveness. One Caution - There is obviously much opportunity to refer to God’s Word in the process of financial counseling. The caution is that you need to earn the right to share God’s Word with your clients. This means you need to build rapport and create a trust and respect level. You should never “preach” at your clients. Your clients came to you because of a financial problem. A better understanding of God’s Word will inevitably be a part of the solution, but you have not earned the right to start talking about the solution until they agree that you understand the problem. 9
  16. 16. 10
  17. 17. Dos and Don’ts Recognize Your Limits If you are not an attorney, do not give any legal advice. If you are not an accountant, do not give any accounting or tax advice. If you are not a marriage counselor, do not deal with marriage issues that may be intertwined with the financial issues. Financial problems and marriage problems are frequently interrelated, one causing or contributing to the other. If you are a marriage counselor by profession you can use your own judgment to what extent you want to do marriage counseling. If you are not a marriage counselor but detect some tension in the marriage you should suggest that your clients make an appointment with a marriage counselor or a pastor. If you detect some tension resulting from differences of opinion between husband and wife you may want to ask them to complete the Values Questionnaire (located in the Forms section). This process may help to point out some areas the couple needs to work through with a pastor or marriage counselor. If you are not an investment advisor, do not give investment advice. However, if you are an investment advisor I would urge you to stay far away from any advice that could in any way be perceived as a conflict of interest. If you can somehow gain from any advice that you might give a counseling client, no matter how good that advice might be, you have crossed the line. This will come back to hurt you or the organization (church, etc.) that you represent. The financial counseling business is not a good place to be prospecting for investment clients. Where to Counsel Setting a safe and appropriate environment for your counseling sessions is important. I would strongly advise that you not meet in your home or your client’s home. If you meet in your home the client may be uncomfortable because your home may be much nicer than his or her home. If you meet in the client’s home you may lose control by having to compete with kids, dogs and television sets. I do most of my counseling at my business office. Other places that are appropriate are a quiet, private room at your local library or a quiet, private room at your church. I almost always counsel at my church if I am counseling someone who is not a Christian. This just helps me to underscore that I am counseling from a Christian point of view. There are some times that it is appropriate for you to meet at a restaurant. However, I only use that option for “get acquainted” sessions or situations where we are just going to talk over a relatively simple situation. Obviously, if we are going to get into the nitty gritty of a financial 11
  18. 18. analysis a restaurant is not private enough and doesn’t have the room to lay out the necessary paperwork. When to Counsel You are the counselor. Chances are that you are volunteering your time to help others. Therefore the short answer is that you should counsel based on your availability. Within reason I would encourage you to offer to meet based on when it is convenient for you. I typically meet with counseling clients once per week in the early stages. Sometimes I meet them during the day, sometimes in the evening and sometimes before or after a church service. In all situations I recognize my responsibilities to my family and to my day job before agreeing to meet with a client. Session Length Typically a counseling session will last one to one-and-a-half hours. If they run any longer than that you are probably not being very productive. Cautions 1. Do not counsel family members or friends. Rightly or wrongly, finances in our culture are a very private matter. As a result, friends and relatives may not tell you what you need to know. It is also possible that they will tell you stuff that you really didn’t want to know. 2. Do not counsel the opposite sex alone. This one should be self-explanatory. 3. Do not counsel half of a couple. Finances are a family matter. If there are financial problems significant decisions will need to be made to correct the problem. Both spouses should be part of that decision making process. 4. Do not solve the client’s problem by giving them money. If you are like me you will feel sorry for some of the people you counsel. That in turn may tempt you to give them money. Don’t do it. You are an advisor and you do not want to create a dependency. If there is a critical cash need refer them to the deacons of their church. 12
  19. 19. Confidentiality You will want to keep some records, notes and copies of budgets as you work through the financial situation. You will need them as you develop your recommendations. However, you need to have a place where you can keep this information under lock and key so as to protect the confidentiality of your clients. Counseling Technique 1. Ask questions and listen. This is especially true in the first several meetings. You need to figure out what created the problems before you can begin to address them. 2. DON’T LET THEM MAKE THEIR PROBLEM YOUR PROBLEM. They would like that. They would like to just leave their problem with you for you to fix, but that won’t work. All you can do is show them what they have to do if they want the problem to go away. 3. Keep it simple. Many people who are drawn to becoming financial counselors are the analytical type. Most are quite comfortable with numbers and may know a lot of stuff about money and money management that not everyone needs to know. Therefore, keep it simple. Don’t overwhelm your client with everything you know. Address what they need to know. Healthy Counseling Relationships You are probably reading this manual because you want to become a volunteer financial counselor. As a financial counselor you will deal with people who are experiencing serious financial difficulties. You are offering to help, but you need to be careful that you do not become consumed. Both you and your client need to understand that you may have the “how to” but they have to have the “will to” and they have to commit to the “will do.” You may be able to walk alongside them but you can’t solve their problem for them. That is something that only the client can do. The following is an excerpt from an article written by Mike Taylor in a 1998 edition of “Counselor’s Corner,” a publication of Christian Financial Concepts, Inc. In this article Mr. Taylor outlines six steps that will help you to keep your counseling relationships healthy. 1. Pray for God to grant you a wise and discerning spirit. Call to me and I will answer you and tell you great and unsearchable things you do not know. (Jeremiah 33:3) He will help you to distinguish between the person being crushed by life’s circumstances and the one avoiding personal responsibility in life. Paul writes, “Let your speech always be with grace, season, as it were, with salt, so that you may know how you should respond to each person.” (Colossians 4:6) 13
  20. 20. 2. Clearly communicate that you are volunteering your time to help, but you are not a “rescuer.” Your role as a volunteer counselor is to help people apply biblical principles to everyday problems. You are trained to show “how,” but the the counselee must take responsibility for applying your objective insights. 3. Make homework assignments and hold the person(s) accountable for completing the study work. The goal of Christian counseling is not only seeing financial freedom actualized but long-term life changes under the lordship of Jesus Christ. Such behavior change is unlikely in a person who is unwilling to study. 4. Prepare yourself that many – perhaps the majority – of the counselees will be unwilling to do the hard work that long-term solutions require. Some may show up for a session or two and never come back. That is discouraging. Jesus faced a similar situation: “As a result of this many of his disciples withdrew, and were not walking with Him anymore” (John 6:66). Be careful not to measure the success of your counseling ministry in numbers. 5. Stay focused on your area of expertise – biblical financial counseling. If you’re not a professionally trained marriage counselor, don’t get involved in marital conflicts. If you’re not a trained CFP, don’t pretend to know everything about investing and estate planning. If you’re not trained as a tax specialist, don’t give advice that could get your counselee’s in trouble with the IRS. When you step outside the boundaries of your training, you are flirting with trouble. 6. Watch your time investment. When you begin spending more time on a case than the counselees themselves, you may be heading for trouble. You counsel; allow the counselees to do the legwork. Remember that volunteer financial counseling is a marathon – don’t try to run it at a sprint speed. May God grant you wisdom and insight as you faithfully serve those He sends your way. 14
  21. 21. The Counseling Process The counseling process will generally consist of a series of meetings. The number of meetings will vary depending on the complexity of the situation and the clients’ ability and willingness to do what needs to be done. The following is an outline of what is likely to happen at these meetings. Meeting Number One Prior to the first meeting give or send your client(s) a copy of Three Simple Rules and ask your client(s) to read the Introduction and Part One. Also give or send your client(s) a copy of the Personal Financial Habit Assessment (located in the Forms section) and ask them to complete it and bring it to the first meeting. The purpose of the first meeting is: • for the counselor and the client to get to know each other. • for the client to understand the counseling process. • for the client to understand the two primary forms, the Personal Asset and Debt Inventory and the Personal Cash Flow Plan. • for the client to understand that there will be homework between sessions and that they will be expected to do it. At the first meeting: 1. I like to start with 5 - 10 minutes of small talk just to make the clients comfortable. 2. Open with prayer. (Ask God’s blessing on your time together.) 3. Give them an overview of the counseling process. Explain that this will probably take at least 3-4 meetings and that they will have to do some homework between meetings. 4. Ask them if they did the homework and what they thought of what they read. Some questions to ask: • “What did you think of Steve and Jessica’s story? Can you tell me some of the mistakes they made?” • “Have you made any of the mistakes Steve and Jessica made?” • “What did you learn from reading Part One of Three Simple Rules?” • “How do you plan to apply what you learned?” Ask them for the completed copy of the Personal Financial Habit Assessment. You might scan it but I would suggest not commenting too much on it at this time. Reviewing the Personal Financial Habit Assessment will give you a quick and early read on the 15
  22. 22. habits that may be causing their financial problems. If they answered “No” to any of the questions 1-8, this may be a suspect area. If they answered “Yes” to any of questions 9- 16, this may also be a suspect area. If they did not do the homework, that is a big red light. If they did not do the homework before the first meeting, chances are they are not going to work very hard between subsequent meetings. You may need to point out that unless they do what you ask them to do, you may not be able to help them. 5. Ask them if you can take some notes so that you will be able to help them better. 6. Complete the top part of the Client Profile. (Located in the Forms section.) Follow the Client Profile as you ask questions and gather information about their financial situation. 7. Ask some general questions to determine their assessment of their financial situation: “Why are you here and how can I help?” “When did the problems start?” “What do you think caused the problem?” 8. Ask some questions to assess their expectations and commitment: “What do you hope to achieve as a result of this process?” “If your financial situation was perfect, what would be different?” “What are your three primary financial goals?” “How badly do you want to accomplish these goals? Are you willing to do whatever it takes?” (If you don’t we’re wasting our time!) Explain that for things to get better some behavior and habits will have to change. 9. Explain the 4D’s of changing a condition from what it is to what you want it to be. This applies whether we are trying to stop smoking, lose weight or eliminate a financial problem. • Desire (Having a desire for change is easy.) • Decision (Making a decision to do what is necessary to change is not difficult.) • Discipline (Having the discipline to do what needs to be done is where the rubber hits the road.) • Delight (If we hang in there with the discipline we will have the delight of accomplishing our goal.) 16
  23. 23. 10. Ask some specific questions to get an overview of how they manage their money: “How often do you get paid?” “What happens to the paychecks?” “How many checking accounts and savings accounts do you have?” “Who pays the bills? When? How often?” “How much cash do you go through per week?” “Did you have to pay additional taxes or did you get money back as a result of last year’s tax return?” “How is your credit record?” “Are there bills that are past due?” (Helps determine the urgency of the situation.) “Is there anything that is close to repossession or foreclosure?” “Are you current on your taxes?” 11. Explain the Financial Physical Concept. Explain that before we can make recommendations on how to correct their financial situation we need to totally understand their financial situation. We call that the financial physical. Explain the two forms that we use to help us understand the financial situation. •Personal Asset and Debt Inventory (X-ray) - The Personal Asset and Debt Inventory is like an x-ray. It gives a picture at a point in time. • Personal Cash Flow Plan (Stress Test) - The Personal Cash Flow Plan is like a Stress Test. It tells us what’s happening over time. Complete parts of each form starting with the Personal Asset and Debt Inventory. Complete the parts that they know, primarily for the purpose of getting them comfortable with the forms. (Forms are available in the Forms section.) Part Two of Three Simple Rules has more information on how to complete these two forms. If in the process of explaining and completing the Personal Cash Flow Plan it becomes obvious that the client has no idea how much they are spending in some or all of the 17
  24. 24. categories, suggest to them that they refresh their memory by going through their checkbook and their credit card statements for the last three months. Prior to reading the following section, pull a copy of the Personal Asset and Debt Inventory and the Personal Cash Flow Plan out of the Forms section and refer to them as you review these instructions. PERSONAL ASSET & DEBT INVENTORY Assets Try to establish value for assets but don’t be too concerned about exact value. If the client does want to get a good estimate on the value of their car, you can refer them to www.nadaguides.com. Do not include furniture, clothing, etc. The primary purpose of analyzing assets is to get an idea of approximate value and whether any assets could be turned into cash. Debts Try to get as accurate a picture of the client’s debt as possible. Have the client look up the last statement or call the company if necessary to get an accurate balance. Make sure the list is complete. People have a tendency to “forget” about some loans they may have. Probe for money owed to parents, other relatives, doctors/hospitals, student loans, loans on 401K (Replacement Pension Plan in Canada), loans on life insurance, etc. PERSONAL CASH FLOW PLAN Income Don’t be shy about asking them about their income. Probe for all income sources. Income needs to be defined on a monthly basis. 18
  25. 25. Expenses Explain why we use three categories of expenses. (See Three Simple Rules for a refresher if necessary.) All expenses need to be defined on a monthly basis. CATEGORY ONE EXPENSES Giving Explain why giving is listed first. Honor the Lord by giving him the first part of all your income, and he will fill your barns with wheat and barley and overflow your wine vats with the finest wines. Proverbs 3: 9- 10, The Living Bible Do not focus on their giving amount at this time. This is something you can come back to later in the prescription phase. Taxes The easiest way to compute tax liability is to start with information from the clients’ paycheck(s). Assuming that they were not significantly over- or under-withheld in the prior year and assuming that nothing has changed in their status, the current withholdings should be pretty accurate. If this is not the case, there are a number of internet sites that can be used to help calculate tax liability. One of these is www.quiken.com/taxes/tools Certain low-income families are eligible for Earned Income Tax Credits (US only). Check the latest IRS rules on the internet or check with an accountant. Debt Retirement The information necessary to complete this section should be on the debt side of the Personal Asset and Debt Inventory. Savings Most of your counseling clients will not be saving on a regular basis. This section is an opportunity to reinforce the need to save on a regular basis. Emergency Savings Account –– • For emergencies like a broken refrigerator, major car repairs, unexpected dental bill, etc. 19
  26. 26. • Build up an emergency account until it equals 5% of annual income. • If some of the money is used it needs to be replenished. Short-Term Savings Account –– • For big ticket items that will be needed in the next three to five years like cars, furniture, appliances, major home repairs, etc. • Amount needed in this account will be based on short-term goals. Long-Term Savings Account –– • For children’s education, retirement, etc. • Amount needed will be based on long-term goals. • Any regular contributions to a 401K (Replacement Pension Plan in Canada) or IRA (Registered Retirement Savings Plan in Canada) should be listed here. Focus on the savings accounts in the order listed. Fund the emergency account before being concerned about the other two. Use the Savings Comparison Chart (located in the Financial Workshop Tools section) to demonstrate the importance of starting a savings plan early. The number one rule regarding saving and investing is to get started. CATEGORY TWO EXPENSES Housing Taxes and insurance may already be included in the mortgage payment under the debt retirement section of Category One if they are included in the mortgage payment. If that is the case, do not list them again. Food Do not include bought lunches or eating out. These are found in the miscellaneous and entertainment sections below. Typically, this category will include everything purchased at the grocery store including toiletries and cleaning supplies. Car Car loans are listed in the debt retirement section of Category One Expenses. Insurance If medical insurance is provided by an employer, only show the portion of the premium for which the client is responsible. 20
  27. 27. Entertainment This is an area where clients frequently do not know how much money they spend. An estimate is acceptable for now. Tuition/Childcare Christian School tuition is a possible area of conflict between husband and wife. Refer them to a pastor or a marriage counselor if you detect conflict over this issue. Miscellaneous Probe for “other” expense categories that may be unique to this particular client. CATEGORY THREE EXPENSES Any expenses that do not occur on a regular weekly or monthly basis should be accounted for here. For many of these expenses, you will need to estimate the annual cost and then divide by twelve to estimate what the monthly budget should be. 12. Assign Homework Read Part Two and The Addendum of Three Simple Rules. Complete both forms as much as possible. What they should bring to the second counseling session: Recent typical pay stub(s) Personal Asset and Debt Inventory (Completed as much as possible) Personal Cash Flow Plan (Completed as much as possible) 13. Schedule the next counseling session. The second counseling session should be scheduled for one or two weeks later. I like to stay with the same day, time and place so as to minimize confusion. 14. Close with prayer. 21
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  29. 29. Meeting Number Two Prior to the second meeting you will want to review your notes from the first meeting and your client’s Personal Financial Habit Assessment. This review will refresh your memory of your client’s situation and give you some insight into how your client tends to make money decisions. The purpose of the second meeting with your counseling client is to understand their financial situation as accurately as possible. By the end of the second meeting it is your goal to understand: • what they have in the way of assets. • what their liabilities are. • how much income they have and where it is coming from. • how they are spending their money. In the process of finalizing the financial forms, be sure that the numbers remain their numbers, not your numbers. You can question their numbers if you believe they are high or low, but they have to remain their numbers. To accomplish that you will do the following at the second meeting: 1. Some small talk. 2. Open with prayer. 3. Review that they did the homework. Some questions to ask: • “What did you learn from reading Part Two or the addendum pages of Three Simple Rules?” • “How do you plan to apply what you learned?” The counselor should be familiar with the addendum forms in case questions arise. (Many of the forms are available in the Financial Workshop Tools section.) Depending on what you think their problem is, ask them specific questions about addendum exhibits that relate to their problem. 4. Review forms. Start with the Personal Asset and Debt Inventory. Go through all the numbers making sure that you understand their numbers, that they are complete, and that they make sense. 23
  30. 30. Review the Personal Cash Flow Plan. Go through all the numbers making sure that you understand their numbers, that they are complete, and that they make sense. 5. ID missing numbers. If there are missing numbers and they do not know them ask them to look them up at home and call you as soon as they have them. 6. Review their goals again (see Client Profile) to see if you understand them correctly and to remind them of what this is all about. 7. Assign Homework Clients: Read Part Three of Three Simple Rules and prepare your own diagnosis and prescription of your situation. Counselor: Prepare your diagnosis of your client’s situation and your recommended prescription. You will share this with your clients at Meeting Number Three. 8. Schedule the next session. 9. Close in prayer. 24
  31. 31. Meeting Number Three The purpose of the third meeting (assuming you are ready to do this) is to help your clients to understand their financial situation and for you to share recommendations for corrective action. Before the meeting you will want to rewrite or reprint (if you used computer forms) the budget forms based on the numbers they gave you because at this point they will probably be somewhat messy. Before the meeting, you will also prepare your diagnosis and prescription. At the meeting: 1. Open with prayer. 2. Review that they did their homework. • “What according to them is the diagnosis of their financial situation?” • “What should be the prescription?” 3. Give them your diagnosis and prescription of their financial situation. Put it in writing. Be very specific and frank. You can use the Diagnosis and Prescription form (located in the Forms section) as a guide. Some examples of a Diagnosis and Prescription are provided in the Case Study Answers section. Tell them what you think is the cause of the problem in simple, direct, frank, no beating- around-the-bush terms. Help them understand their current financial situation. Start by focusing on the bottom line of the Personal Cash Flow Plan. If it is negative, that is obviously a problem that needs to be corrected. Then focus on line items where they are not accomplishing their goals (Savings, Giving, Debt Retirement, etc.). Next, focus on the Personal Asset and Debt Inventory. Compare their total assets and their total debts. Help them understand the concept of equity. Break their debt down into credit card, auto, mortgage and other. 4. Review their goals again. (Located in the Client Profile.) Talk about what has to happen if they are to accomplish their goals. 25
  32. 32. 5. Offer optional solutions that will help them correct the problem that is preventing them from accomplishing their goals. In most cases the obvious problem is that they spent or are spending more than they earn. Help them develop a balanced budget using the following approach: (a) Test each expense category to see if it can be reduced. (This is the most important and the most difficult part of the process. Most clients will tell you that they can’t possibly reduce expenses. This is where you have to remind them of their goals. Hopefully, accomplishing their goals will become the incentive for them to do what they have to do.) Start at Category Two because it is unlikely that Category One expenses can be reduced. Refer to the Expense Guidelines addendum in the Three Simple Rules book for some recommended category percentages. (b) Evaluate whether there are assets that could be sold so that the proceeds can be used to pay off debt. (c) Can income be increased? • change jobs • more overtime • additional part-time job • offer day-care • children get part-time jobs • rent out a room • etc. Do not explore whether income can be increased until all options in (a) and (b) have been exhausted. Typically, increasing income without tackling expense reduction will result in future expenses catching up to the new income level. If part of the solution is to increase income by working additional hours it should typically be structured as a short-term solution to earn additional money for the primary purpose of reducing or eliminating debt. (d) Many clients will suggest debt restructuring (refinancing their home, home equity loans or a debt consolidation loan) as the solution to their debt problem. In most cases this should be strongly discouraged. This solution may offer a short term fix but it generally does not serve as a long-term solution. The result will typically be temporary because unless the client(s) change their spending habits, chances are that one year from now they will again have the same credit card balances that got them into trouble in the first place. Plus, if they use a home equity loan to restructure or consolidate their debt, their home may be subject to foreclosure. 26
  33. 33. These four steps are deliberately in this order. Do not make the mistake of reversing this order, which many of your clients will be inclined to do. Unless the bad habits that caused the problem in the first place are corrected, there will not be any long-term solutions. In the process of going through this exercise it is important that you let the clients make the decisions. You can attempt to lead them to the correct decisions but they have to make the decisions because they are the ones who are going to have to execute the plan. They may execute their plan but they won’t execute your plan because they won’t believe it can be done. In many cases the decisions that need to be made will be too complicated for the clients to make at this meeting. If that is the case, focus on helping them understand what the options are and suggest that they think about what they want to do so that they can tell you what they decided at the next meeting. Again, the client will not like most of the options that you give them and they may express that. When that happens keep reminding them that implementing these options is the only way they will accomplish their goals. There is an old saying that applies in this situation: “If you always do what you’ve always done you will always get what you always got. If you want something different you have to do something different.” You may need to remind your clients several times that if their behavior doesn’t change, neither will their circumstances!!! If they do not change their behavior they will in all likelihood never achieve their goals! In fact, for emphasis you may want to calculate what their financial situation will look like in five, ten or fifteen years if they do not take the appropriate action now. Once the tough decisions have been made and you have updated the Personal Cash Flow Plan to show the impact of these decisions, you should have a balanced budget. A balanced budget allows adequate funds for the necessary expenses while still accomplishing your client’s goals in the area of saving, giving and debt retirement. However, just having a balanced budget is only half the battle. All we’ve done so far is make the “Decision” to have a balanced budget. We still have to execute the “Discipline” to actually change the habits that created the financial problems in the first place. We will address that in Meeting Number Four. 27
  34. 34. 6. Assign Homework Read Part Four and Five of Three Simple Rules. 7. Schedule the next session. 8. Close in prayer. 28
  35. 35. Meeting Number Four and subsequent meetings as necessary We will assume that you now have a balanced budget that your clients agree will accomplish their goals. What we mean by a balanced budget is that the Personal Cash Flow Plan no longer has a deficit and that the client’s goals of debt retirement, saving and giving are being met. The purpose of the fourth meeting is to help your client learn how to exercise the “Discipline” that will change the habits that will help them live according to their balanced budget. This is also where the Personal Financial Habit Assessment comes in again. By now you should have highlighted the “bad habits” that need to be corrected. Again, if they answered “No” to any of questions 1-8, this may be a suspect area. “Yes” answers to questions 9-16 may also be suspect areas. 1. Review the Personal Financial Habit Assessment with your client to help them understand the habits that are contributing to the problem and therefore the habits that need to be changed. Explain that the Three Rules were designed to help them change those habits. 2. Review that they did their homework: • “What did you learn about the Paycheck Management System?” • “What did you learn about the Spending Management System?” • “Which one of the Three Rules will it be hardest for you to follow? Why?” • “What did you think about Part Five - Living by God’s Rules?” (Use this question to reinforce the fact that when we violate God’s rules for our lives there will be a consequence.) 3. Help your client think through how to follow Rule One – Spend Less than You Earn. The Paycheck Management System is a critical component to helping your clients spend less than they earn. Unless your clients immediately deposit or direct-deposit paychecks into the appropriate accounts, the chances of accomplishing their goals is greatly diminished. Talk about how to: • set up special accounts. (Savings, Reserve, General) • calculate the appropriate amounts for each account. • distribute every paycheck into the appropriate bank account. (Direct deposit is best.) Once the Paycheck Management System is in place you can focus on helping your clients implement the Spending Management System. When you are focusing on the Spending Management System do not overwhelm your clients. They may have poor spending habits in a lot of different areas. 29
  36. 36. I like to start by focusing on the Budget Busters. For most families the Budget busters are: • Food • Clothing • Eating Out • Entertainment • Vacation • Gifts • Cash See Part Four of Three Simple Rules for ideas on how to help your clients get certain spending areas under control. You will probably be most successful by focusing on a maximum of three spending areas at a time. In some cases you may want to focus on only one spending area until it is under control. Remember, you are trying to change engrained habits and changing habits is hard to do. Once you have worked on and been successful in a few of the spending areas you can move on to others. 4. Help your client think through how to follow Rule Two – Save Now! Buy Later. There are two keys to having a successful savings plan. The first key is DECIDING how much to save. That step should have been accomplished during the process of completing the Personal Spending Plan for this client. The second key is DISCIPLINE. Your client has to have the discipline to execute the plan. The Paycheck Management System we talked about earlier is the best way to help your client accomplish their savings goals. 5. Help your client think through how to follow Rule Three – Know Debt. The reason it is important to Know Debt (understand debt) is so that wise decisions can be made about debt. There are five keys to really understanding debt. The first step is to Know how much debt you have. This step should have been accomplished in the process of completing the Personal Asset and Debt Inventory. The second step is to Know the consequences of debt. The consequences of debt are: (a) Debt reduces your future standard of living. (b) Debt reduces your ability to save. (c) Debt reduces your ability to give. (d) Debt creates personal frustration and stress. (e) Debt results in relational problems between husband and wife. 30
  37. 37. The third step is to Know the different types of debt: • Credit Card • Consumer Debt • Real Estate Debt • Student Debt The fourth step is to Know the borrowing test. If and when you do decide to borrow money there are a few questions that you should ask yourself. Any question to which you answer “yes” is a warning light that should cause you to reconsider your borrowing decision. Am I seeking contentment with this purchase? Am I borrowing money to pay for an impulsive purchase? Am I borrowing money to pay for a purchase driven by pride/ego? Am I justifying my buying decision on the basis that everyone is doing it? Is the item I am about to buy likely to depreciate? Is my loan for this item longer than absolutely necessary? Is there a possibility that I may not be able to make the payments on this loan? Will repayment of this loan threaten my ability to save? Will repayment of this loan threaten my ability to give? Will repayment of this loan threaten my ability to take care of my family? Am I questioning whether taking out this loan is a good decision? Does my spouse have any concern about borrowing money for this purchase? The last key is to Know how to Get out of Debt! That should be everyone’s goal. The steps for getting out of debt are listed on the “How to Get Out of Debt” page of the Financial Workshop Tools section. Once you are satisfied that your client understands the basics of how to implement the Three Rules, subsequent meetings may be scheduled as much as three months later, primarily to see how things are going and for the purpose of accountability. In the interim, you may want to stay in touch with your client by phone to see how it’s going and for encouragement. 31
  38. 38. Conclusion Now that you are familiar with the entire cycle of Financial Counseling it’s time to get your feet wet. However, before meeting with real clients we are going to start by looking at some case studies of typical counseling situations. There are five case studies located in the Case Studies section. Read the story, answer the questions and then compare your answers to those in the Case Study Answers section. Once you have completed the Case Studies you are ready to work with actual counseling clients. To learn more about where to get actual counseling clients see the section entitled “How to Start a Financial Counseling Ministry in Your Church” located in the Appendix section of this manual. For additional support, we’ve also provided you with some Counseling Session Agendas. Go to the “Getting Started” section of the Appendix and you will find brief outlines of each meeting that will help you to prepare and keep yourself on track during the meeting itself. And one final reminder. You are not alone. If at any time you get confused or have a question about how to handle a unique situation you can always contact us through our website at www.ThreeRules.org. 32
  39. 39. ple Sim Three Rules Section Two: Pre-Marriage Mentoring
  40. 40. Pre-Marriage Financial Mentoring Researchers have told us for years that family financial problems are the number one cause of marriage failure. The good news is that there is something we can do about it. The two primary contributing factors to these financial problems can be addressed. As a result, many of these family financial problems can be prevented provided they are addressed prior to or early in the marriage. The two primary contributing factors to family financial problems that need to be addressed are: 1) Different Values The two people who are about to be married may have significantly different values when it comes to money. This may be a result of personality or it may be a result of upbringing or both. One may be a spender, the other may be a saver. One may believe in giving, the other may not. One may have a problem with debt, the other may think it is normal. Frequently young couples are not aware that this is the case prior to the marriage. In their pre-marital bliss they are either in denial or they figure they will deal with it later. 2) Lack of a Financial Plan The lack of a financial plan is the second contributing factor to family financial problems. In the absence of a financial plan we tend to spend based on perceived needs rather than based on what we can afford. The best time to get into the habit of living within our means, building savings and minimizing debt is before we get into financial difficulty. The Pre-Marriage Financial Mentoring process outlined in this manual is designed to address both of these issues. It attempts to ferret out these value differences and give the couple an opportunity to talk about them before they tie the knot. It also walks them through the steps toward creating a Personal Cash Flow Plan that can be used to determine what they can afford and what they need to postpone. This section assumes that you (the mentor) have read the Three Simple Rules book as well as the Financial Counseling section of this manual. In our church it is our policy that our pastors will not marry a couple unless they do a number of things. One of those “things” is to meet with a financial mentor. That is why this Pre-Marriage Financial Mentoring material was developed. The Pre-Marriage Financial Mentoring sessions typically occur three to twelve months before the wedding. They generally consist of three sessions lasting one to one-and-a-half hours each. It would be ideal if the mentoring program extended well into the marriage but from a practical standpoint, once the couple is married, the leverage to motivate them to participate in this 1
  41. 41. process is gone. I typically offer to meet with them at any time in the future and some take advantage of that offer. Process: Since this program is a normal part of the marriage process at our church, the couple is told to contact the financial counseling ministry for an appointment. When the bride-to-be calls (yes, it’s usually the bride-to-be) the couple is assigned to one of our mentors. The mentor calls the couple and arranges a mutually convenient time to meet. The mentor will then mail a letter to the couple confirming the date and time as well as directions to the agreed-upon meeting place. (See sample letter in this section.) The mentor will also include two copies of the Values Questionnaire (located in the Forms section) along with the letter. The couple is asked to complete the Values Questionnaire independent from each other and to bring the forms to the meeting. Typically there will be three meetings over a period of three weeks. I like to set the meetings for the same day of the week and at the same time and place. Meeting Number One At the first meeting the mentor will: 1. Spend 5 – 10 minutes in informal talk for the purpose of making everyone comfortable with each other. 2. Open with prayer. 3. Use the Values Questionnaire as the agenda for the main part of the first meeting. I typically start by asking the bride-to-be what her answer was to the first question. Then I will ask the groom-to-be the same question. If they do not have the same answer we talk about whether that will become a problem and suggest that they spend some more time with that issue. That could happen on the spot or later. If they agree on the answer I make a judgment as to whether their answer is appropriate. In the case of Question 1 it doesn’t really matter how they answer, just as long as they agree. However, in the case of many of the other questions there is definitely a right and a wrong answer. 2
  42. 42. For example, if they agreed that they needed zero credit cards or one credit card I would conclude that that is an appropriate answer. If they agreed that they should have seven credit cards I would not agree that that is an appropriate answer and I would discuss the danger of credit cards. Once we are finished with the first question I would address the next question to the groom-to-be and then to the bride-to-be. I continue alternating until we are done with all of the questions. This typically takes about one hour. In the process you will likely discover some areas where there is disagreement and or areas where both of them could be agreeing to make decisions that could result in financial disaster. That is where I typically focus my time. If the problems are serious enough I make a note to visit the area again in future sessions or suggest that they seek other counsel for the sake of their marriage. 4. An Early Wedding Gift Once we have gone through the Values Questionnaire I give them an early wedding gift - a copy of Three Simple Rules - Guaranteed to Improve your Finances. I explain the Three Rules and refer them to the Scripture verses in Part Five of the book that support the Three Rules. 5. Assign Homework: Read the Introduction and Parts One and Two of Three Simple Rules. Meeting Number Two At the second meeting the mentor will: 1. Open in prayer. 2. Ask them if they have any questions about the homework assignment. • “What did you learn from reading Parts One and Two of Three Simple Rules.” • “How do you plan to apply what you learned?” 3. Introduce the two primary Family Financial Planning Forms: • Personal Asset and Debt Inventory • Personal Cash Flow Plan The objective of this meeting is to familiarize the couple with these two forms so that they can complete them as a homework assignment. The forms can be partially completed based on the numbers that the couple knows. The rest they may have to research as part of the homework assignment. 3
  43. 43. See the Counseling Section of this manual for more information about how to explain these two forms. 4. Discuss Goals Any additional time can be used to talk about goals the couple may have regarding: • Saving. • Giving. • Debt Management and Debt Retirement. 5. Assign Homework: • Complete the Personal Asset and Debt Inventory. • Complete the Personal Cash Flow Plan. • Read Parts Three, Four, Five and the Addendum of Three Simple Rules. Meeting Number Three The objective of the third meeting is to: • Make sure that the two primary Family Financial Planning Forms are fully completed, • That the numbers on these forms are realistic, and • That the Personal Cash Flow Plan is balanced while accomplishing the couple’s saving goals, giving goals and debt retirement goals. At the third meeting, the mentor will: 1. Open in prayer. 2. Ask them if they have any questions about the homework assignment. • “What did you learn from reading Parts Four and Five of Three Simple Rules.” • “Do you have any questions about completing the two forms?” • “How do you plan to apply what you learned?” 3. Review the Family Planning Forms. • Touch on each number in the two forms, first in the Asset and Debt Inventory and then in the Cash Flow Plan. • Anything that does not look complete or realistic should be addressed. 4. Future Planning. • Teach the couple the importance of reviewing The Financial Plan periodically as changes occur in income or expense. For example, when they decide to start a family, this may increase expenses and reduce income and preparations would need to be made. After asking if they have any questions about anything we covered, I ask if I can pray for their future together and then we end our session in prayer. 4
  44. 44. Dear John and Kelley, I’m looking forward to meeting with you at 7:30 PM on Monday September 30. I have enclosed two surveys, one for each of you. Please complete the enclosed surveys independently prior to that time and bring them with you to our get together. You are certainly welcome to talk about your answers prior to our meeting. We will meet at my office which is located at 3215 Memory Lane. Directions: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ Looking forward to meeting you. Tom Counselor
  45. 45. ple Sim Three Rules Section Three: Financial Workshop
  46. 46. Three Simple Rules Financial Workshop The Three Simple Rules Financial Workshop is designed to be offered once per week for four weeks. The objective of the workshop is to: (a) help participants understand the importance of the Three Simple Rules. (b) give an overview of basic budgeting principles. (c) teach participants how to create a budget unique to their circumstances. (d) introduce several simple systems that will assist participants in living according to their budget. (e) share the Biblical perspective of handling money. The four week workshop could be offered as part of an Adult Sunday School Curriculum or as a stand alone weekday evening education series. The material is sufficiently flexible that class time can range from 45 minutes to 1 1/2 hours and class size can range from as little as six to as many as thirty. The following pages describe how to conduct the four-session financial workshop. The Three Simple Rules book is an integral part of this workshop. The instruction pages assume that the workshop leader has read the book and the Financial Counseling section of this manual. It is also assumed that each workshop participant will receive a copy of Three Simple Rules at the end of the first session. The following announcement was designed to recruit people to attend the financial workshop. Need a little help getting your financial house in order? You are invited to attend the Three Simple Rules Financial Workshop. This four-session workshop is being offered on (day of week) at (starting and ending time) starting on (date) at (location). At this workshop you will learn about the three simple rules that are guaranteed to improve your financial situation. You will also learn how to give yourself a financial physical and how to identify and change the financial habits that are preventing you from accomplishing your financial goals. Call (person) at (phone number) for more information. The following pages outline the Objective and the Talking Points for each session. A PowerPoint Presentation for the Financial Workshops is available free of charge. Just e-mail kristin@threerules.org and ask for the Workshop PowerPoint Presentation. We would also be happy to give you a digital version of this section so that you can customize it to your situation. 1 2nd Edition Revised 10/04/04 www.ThreeRules.org
  47. 47. Session One – The Three Rules (Note: The symbol (PPt) is a reminder to go to the next Power Point page. If you are using an overhead projector you may want to make transparencies of the pages in the Financial Workshop Tools Section and the Forms Section.) Objective – To help the group understand the three simple rules and how to apply them. Preparation – • read or reread the Introduction and Part One of Three Simple Rules. Handout Materials Needed – Bring along a copy of the following for each participant: • Three Simple Rules book • Student Notes Cover Page for Session One (See the back of this section.) • Financial Opinion Survey (Forms Section) • Personal Financial Habit Assessment (Forms Section) Talking Points: 1. Welcome to Week One of the Three Simple Rules Financial Workshop. (PPt) • The workshop is based on the book - Three Simple Rules - Guaranteed to Improve Your Finances. • You will all receive a copy of the book tonight. • We will cover Part One of the book tonight. • The rest of the book will be covered over the next three sessions. • Since each part of the book builds on the previous parts you will benefit the most if you can attend all four sessions. 2. Give each participant a copy of the Financial Opinion Survey. Let them know that this is simply a chance to start thinking through some of the questions that will be discussed in the next few sessions. Ask participants to individually answer the questions. Collect the answers and tell them you will summarize the answers and share the results with them next week. 3. How the Three Simple Rules Book Came into Existence. The author is an entrepreneur and a businessman who set up a Financial Counseling Ministry at his church in the early nineties. After counseling hundreds of families and 2 2nd Edition Revised 10/04/04 www.ThreeRules.org
  48. 48. training many counselors he decided to summarize what he had learned in this book. He wrote it especially for young people and young couples, in the hope that by reading this book they would avoid financial difficulties. 4. Some Questions (PPt) Q. Should a Christian’s Spending Habits be different than a non-Christian? (PPt) A. Giving (firstfruits) A. Contentment (want what you have) A. Christian Education may be part of the budget A. Christians need to question their buying motives Q. What is your favorite Bible verse about money? (PPt) A. See Part Five of the Three Simple Rules book for some Bible verses about money. Q. Would Jesus drive a BMW? (PPt) A. This is an opportunity to talk about testing our decisions from the perspective of WWJD – What Would Jesus Do? 5. Steve and Jessica’s Story (PPt) • Read the Steve and Jessica story from the Introduction of Three Simple Rules to the group. (Read through to the end of the paragraph on the third page that starts with “Early last year…”) • Ask audience to write down Steve and Jessica’s financial mistakes, as you tell the story. • After telling the story ask the audience to ID Steve and Jessica’s financial mistakes. • Review the mistakes list. (PPt) • For some startling information regarding Steve and Jessica’s credit card debt situation, see “Steve and Jessica’s Credit Card Debt” located in the Financial Workshop Tools section. Share this information with the class. Encourage further group discussion regarding Steve and Jessica’s financial mistakes by asking: Q. Do you think these financial mistakes are typical? (PPt) Q. Which mistake do you think is most dangerous? (PPt) Q. What caused Steve and Jessica to make these mistakes? (PPt) 3 2nd Edition Revised 10/04/04 www.ThreeRules.org
  49. 49. 6. Talk about the Personal Financial Habits Assessment. (PPt) • Introduce by explaining that many financial problems are simply a result of bad habits. • In order to fix the problem we have to change the habits (just like a diet). • Hand out blank forms. Have audience take the test. • Tell them how to score the test. (PPt) (Questions 1 – 8 are good habits, therefore the correct answer is Yes; 9 – 16 are bad habits, therefore the correct answer is No.) Group discussion regarding habits: Q. What is the most difficult Good Habit to maintain? A. For many people it is Savings and/or knowing how much cash they spend. Q. What is the most difficult Bad Habit to break? A. Anything dealing with debt. (7 of the 8 bad habits deal with borrowing money.) 7. Introduction to The Three Rules (PPt) 1) Spend Less than You Earn. (PPt) 2) Save Now! Buy Later. (PPt) 3) Know Debt. (PPt) Explain that we will now look at each of the three rules in detail. 8. Rule One –– Spend Less Than You Earn. (PPt) This is the key rule because it makes complying with the other rules possible. Most financial problems are a result of people spending too much money. Q. What happens when you spend more than you earn? A. Debt and probably no savings and minimal giving. 4 2nd Edition Revised 10/04/04 www.ThreeRules.org
  50. 50. TIPS for spending less than you earn. (a) Understand your paycheck. (PPt) Q. How many hours does it take to pay for a $100 item if you earn $10 per hour? A. See Part One of Three Rules. Explain that a large part of your paycheck is pre-spent because of Giving Commitment, Taxes, Savings Commitment and Commitment to repay Debt. (b) Can’t afford it? Don’t buy it. (PPt) Q. How do I know if I can afford it? A. “Do I have the cash to pay for it?” A. “Will I need this money for anything else in the future?” (c) Don’t buy on impulse. (PPt) The bigger the ticket the longer you should wait. (d) Biggie size your fries, not your house and car. (PPt) This is often the biggest mistake made by young couples. (e) Think Used! (PPt) Almost anything can be purchased used and you’ll save a lot of money! (f) Pay Cash. (PPt) Paying Cash limits your spending! Consequences of not paying cash • People who use credit spend 35% more than people who pay cash. • Interest increases costs. • Debt reduces future standard of living. 5 2nd Edition Revised 10/04/04 www.ThreeRules.org
  51. 51. (g) Plan your spending. (PPt) Use a Personal Cash Flow Plan. (We’ll talk about that next week.) In the remaining three sessions, we will talk more about additional ideas that will help you spend less than you earn. 9. Rule Two –– Save Now! Buy Later. (PPt) Stores used to talk about “Buy Now –– Pay Later”. They don’t anymore because it sounds too negative. Sandy Kelley wrote a book called Two Incomes and Still Broke. She mentions in the book that “It’s not how much you make –– It’s how much you keep.” This is good advice! Types of Saving Accounts: Emergency Savings Account (PPt) • Allows you to pay for unplanned expenses such as doctor bills and car repairs. • Add money to this account every payday until it equals five percent of your annual income. • Fund this account first. Short-term Savings Account (PPt) • Allows you to pay cash for the big-ticket items (cars, new roof, etc.) you plan to buy in the next five years. • Compute the amount you need to save in this account based on the big-ticket items you plan to buy in the next five years. 6 2nd Edition Revised 10/04/04 www.ThreeRules.org
  52. 52. Long-term Savings Account (PPt) • Allows you to plan for items you will pay for in the future, such as your children’s Education, Weddings, Full time ministry/retirement, etc. • Compute the amount you need to save in this account based on your unique long-term needs. Recommendation: Save 10% out of every paycheck and divide that as appropriate between your emergency savings, short-term savings and long-term savings. In the remaining three sessions, we will talk more about the discipline of saving. 10. Rule Three –– Know Debt. (PPt) Explain the difference between Know Debt and No Debt. What we mean by “Know Debt” is that you need to understand debt. What we mean by “No Debt” is to be debt free. In this course we will talk about both. Right now we want to focus on Knowing and Understanding debt. Q. What is Debt? (PPt) A. Anytime we owe something to someone else we have a debt. A. That makes us a debtor or a borrower. A. The Bible says, “the borrower is servant to the lender.” A. Therefore we can conclude that as long as you are borrowing money you are enslaved. Q. What are the consequences of Debt? (PPt) A. Debt reduces your standard of living because you have to make payments. A. Debt reduces your ability to save because you have to make payments. A. Debt reduces your ability to give because you have to make payments. A. Debt causes frustration and stress. A. Debt causes relational problems between husband and wife. 7 2nd Edition Revised 10/04/04 www.ThreeRules.org
  53. 53. Q. How do you get rid of Debt? (PPt) A. You have to have a plan. (We will talk about that more later.) A. You have to apply the 4D’s. (PPt) A. You have to have the Desire. A. You have to make a Decision. A. You have to exercise the Discipline. A. Then you will experience the Delight. The 4D’s apply to anything we want (lose 20 pounds, learn a new language, stop smoking, become financially free etc.) We’ll talk more about this whole business of debt as we go through the next three lessons. 11. Summary (PPt) Review the Three Rules with Scripture. 12. Assign Homework: (PPt) Read Part Two and the Addendum of Three Simple Rules. Identify any questions you may have from the reading assignment. 13. Hand out a copy of Three Simple Rules. 8 2nd Edition Revised 10/04/04 www.ThreeRules.org
  54. 54. Session Two – A Financial Physical Objective – To help the group understand how to give themselves a financial physical. Preparation – • take the Financial Opinion Surveys that the class completed in Session One and tabulate how the class responded to each question. • read or reread Part Two of Three Simple Rules. • review the Three Simple Rules Addendum in case questions arise. Handout Materials Needed – Bring along a copy of the following for each participant: • Student Notes Cover Page for Session Two (See the back of this section.) • Blank copy of the Personal Asset and Debt Inventory (Forms Section) • Blank copy of the Personal Cash Flow Plan (Forms Section) Talking Points: 1. Welcome to Week Two of the Three Simple Rules Financial Workshop. (PPt) 2. Share summary results of the Financial Opinion Survey. Go through each statement and share how the majority of the group answered. Talk about the fact that how the group answered the questions and what they actually do may vary (most people know the right answers to the opinion survey but they do not necessarily live that way.) 3. Opening Questions: (PPt) Q. If your financial situation was perfect, what would be different? Q. Is it true that “it should be a Christian’s goal to be out of debt”? (PPt) 4. Homework Review Q. Does anyone have any questions about Part Two of Three Simple Rules? Q. Does anyone have any questions about the Addendum of Three Simple Rules? 9 2nd Edition Revised 10/04/04 www.ThreeRules.org
  55. 55. 5. The Importance of Personal Goals Encourage the class to identify and share with the group specific goals they have in the area of finance. Obviously they want the pain of financial problems to go away but try to get them to be much more specific. Some example goals might be: • having savings. • being able to do a better job in the area of giving. • not living from paycheck to paycheck. • having reliable transportation. • getting out of debt. • being able to go on a family vacation. • stopping the creditor calls. • being able to help send their kids to college. • saving some money for retirement. The reason it is important that participants focus on personal goals is that they might have some tough decisions ahead if they discover that they need to make significant financial adjustments. However, keeping these goals in mind will help them focus on the reward of living on a balanced budget. 6. How to give yourself a Financial Physical Teach the class how to give themselves a financial physical. (See Part Two of Three Simple Rules.) Teach about the concept of a Personal Asset and Debt Inventory using Steve and Jessica’s as an example. (PPt). Teach about the concept of a Personal Cash Flow Plan using Steve and Jessica’s as an example. (PPt). Note – In the power point there are two screens devoted to the Personal Asset and Debt Inventory and four screens devoted to the Personal Cash Flow Plan. This will allow you to take one section of the form at a time. Explain the purpose of each form. Spend time on every line item in both forms so that everyone will understand how to complete these forms for their personal situation. Define each term as necessary. 10 2nd Edition Revised 10/04/04 www.ThreeRules.org
  56. 56. Be sure to spend some time on unique income situations i.e. bi-weekly income, commissions, etc., or make yourself available after class if people have specific questions. 7. Q and A Make sure that everyone understands the purpose of both forms. 8. Assign Homework: (PPt) • Write down at least three personal goals in the area of your personal finances. • Complete the two forms for your personal situation. (Provide blank forms of the Personal Asset and Debt Inventory and the Personal Cash Flow Plan for each participant or couple.) • Read Part Three of Three Simple Rules. 11 2nd Edition Revised 10/04/04 www.ThreeRules.org
  57. 57. Session Three - Diagnosing Your Financial Situation Objective – To help the group understand how to diagnose their own financial situations. Preparation – • read or reread Part Three of Three Simple Rules. Handout Materials Needed – Bring along a copy of the following for each participant: • Student Notes Cover Page for Session Three (See the back of this section.) • Blank copy of the Diagnosis and Prescription Form (Forms Section) Talking Points: 1. Welcome to Week Three of the Three Simple Rules Financial Workshop. (PPt) 2. Have some fun with Money Trivia. (Located in Financial Workshop Tools section.) 3. Homework Review Q. Who would like to share the personal goals that you identified for yourself? Q. Do you have any questions about completing the Personal Asset and Debt Inventory? (PPt) Q. Do you have any questions about completing the Personal Cash Flow Plan? (PPt) Q. Which expense category was the hardest to quantify and why? A. Typical expense categories that are difficult to quantify are: • Taxes • Food • Cash • Clothing • Gifts Q. How did it feel to give yourself a Financial Physical? What did you learn? 4. Diagnosing Your Financial Situation (PPt) Last week we talked about how to give yourself a Financial Physical. Now we are going to talk about how to use that information to diagnose if you have any financial problems. 12 2nd Edition Revised 10/04/04 www.ThreeRules.org
  58. 58. The three primary questions we use to diagnose our financial situation are: 1 – Are we spending less than we earn? (PPt) If we are not, we have a problem! 2 – Are we saving for future needs? (PPt) If we are not, we have a problem! 3 – Is our debt under control? (PPt) If it is not, we have a problem! 5. To help us understand how to do a diagnosis, let’s diagnose Steve and Jessica’s situation. (PPt) Q1 – “Are they spending less than they earn?” Q2 – “Are they saving for future needs?” Q3 – “Is their debt under control?” Q. What is your diagnosis of Steve and Jessica’s situation? A. Steve and Jessica: (PPt) • spend more than they earn. • have no savings. • are not giving. • have too many credit cards. • make minimum credit card payments that consume 4% of income vs. a goal of 0%. • have consumer debt payments that consume 12.5% vs. a goal of less than 10%. • have student debt payments that consume 7% vs. a goal of less than 5%. 6. Now that we’ve done a diagnosis, and have discovered some problems, we need to write a Prescription. Steps to Writing a Prescription (PPt) Step One – If Credit Card Rules are being violated cut them up. (PPt) Step Two – Examine each expense and reduce it as necessary. (PPt) 13 2nd Edition Revised 10/04/04 www.ThreeRules.org
  59. 59. Step Three – Repeat Step Two. (PPt) Step Four – Repeat Step Three. (PPt) Step Five – Sell assets (motorcycles, boats, RV, garage sale, Ebay etc) and use proceeds to reduce debt and payments as necessary. (PPt) Step Six – Downsize (cars, house etc.) to reduce debt (PPt) Step Seven – Increase Income if necessary. (PPt) Q. What would be your prescription for Steve and Jessica? (PPt) A. Cut up the credit cards. A. Reduce expenses. A. Reduce expenses. A. Reduce expenses. A. Sell the boat. A. Sell a car. A. Increase Income. 7. Wrap-up The process starts with a financial physical. Then we do a diagnosis. Then we do a prescription. Next week we will talk about following the prescription. 8. Assign Homework: (PPt) • Do a diagnosis and a prescription on your own situation. (Students should be given a blank copy of the Diagnosis and Prescription form located in the Forms section.) • Read Parts Four and Five of Three Simple Rules. 14 2nd Edition Revised 10/04/04 www.ThreeRules.org

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