Transcript of Interview with Phil Lenahan about 7 Steps to Becoming Financially Free – A Catholic Guide. This interview and others like it can be found at http://www.catholicspotlight.com
Listen Now to the audio version of the show.
7 Steps to Becoming Financially Free – A Catholic Guide is available at The Catholic Company.
http://www.catholiccompany.com/catholic-books/1004462/7-Steps-to-Becoming-Financially-Free-Catholic-Guide/
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Chris Cash: And today in the Spotlight, we have a returned guest, Phil Lenahan, author of Seven Steps to Becoming Financial Free a Catholic Guide. And I’ve asked Phil to come back to talk a little bit about the book again, but more than that to kind of give us some guidelines of how we can maintain our Catholic identity in a time of financial crisis because right now, if you’re listening to this recording a few years from now, hopefully the financial crisis that’s going on right now will be a long gone thing of the past. But right now, there’s just a lot of turmoil in the country. A lot of people are losing their jobs. A lot of people are having their…and there’s just a lot of uncertainty. So Phil, glad to have you back on.
Phil Lenahan:Â Chris, it’s always great to be with you.
Chris Cash:Â To start of with, why don’t you recap for those who haven’t heard our previous show just want is Seven Steps to Becoming Financial Free in your guide.
Phil Lenahan: Well, it’s really a program. I mean it includes a book and a workbook, but really it’s a program designed to be used in the context of a small group study and in fact we…Chelsea and I started another small group at our home last night. I had 10 wonderful folks and getting them under way for a couple of months of just fellowship and learning and growing together as we begin to understand what our Lord would have us do with the resources he’s entrusted to us. So it’s a small group study designed as that that helps people really on two fronts. It gives them, provides them, equips them with the principles that we find within Catholic teachings, so in essence the Bible study, the study of the catechism. We’ve brought these principles or summarized them in a manner that helps really provide a beautiful framework for how we ought to be looking at and managing our money. What attitudes we should have towards it. But then the program goes further than that and it provides people with the practical skill set. The practical tools that they need that they really should have learned in high school or early college but so often in our society were not teaching those things. So basic things like understanding an asset and a liability. What’s a balance sheet? What’s a budget? How do you develop a budget? How do you prioritize your spending? How do you make sure you’re living within your means? Tracking your income and expenses. Setting longï·“term goals for saving and giving. What should we think about debt? Is there productive debt? Is there unproductive debt? If I’ve got unproductive debt, how do I get out of it? So just a good 2-month program that helps people really take control of this area rather than letting their money control them.
Chris Cash: Now, there are a lot of programs out there that give a least a secular view of how we should go about budgeting and getting out of debt and so forth. What is it that’s different about your approach that makes it really Catholic in it’s identity?
Phil Lenahan: Buddy, you just caught it. This is the only one I’m aware of that is Catholic in it’s identity. Even aside from secular programs, there are a couple of programs that have been created that come from a protestant protective. I’m thinking of crown financial ministries I particular as Larry Burkett influenced me a number of years ago and it’s beautiful those Dave Ramsey crown or do wonderful work, but again from a protestant perspective. And I kept thinking, there’s a reason to incorporate Catholic teaching into this. So how have we done that differently? Well, we have the catechism. That’s one gift. So instead of just looking scripture, we also delve into the catechism and look at broader context, church teaching. We focused on the sacraments. Obviously, we’re talking about the need to grow. Well, the catechism calls us stewards of providence and being a steward of providence really is nothing different than the call to holiness. So we are developing that theme in the early part of the small group study that until you understand that, until you begin to grow in your relationship with Christ and that you’re attitude towards money begins to reflect that relationship, the practical skills probably aren’t going to do you a whole lot of good. So we blend the two, but clearly it’s from a thoroughly Catholic perspective.
Chris Cash:Â Right and I’m sure that the whole idea of stewardship is a lot stronger tide in to what you would do in this program than in say a secular Suze Orman-type program.
Phil Lenahan: Well, absolutely. I mean the perspectives will be quite different depending upon that secular author. But secular society often times focuses so much on what’s in it for me. And our Catholic faith, certainly the Lord wants us to be able to provide for the needs that we have and fulfill those responsibilities that he’s given us. But as a Catholic, we have a much broader perspective on why we’re here in the first place and what the Lord calls us to do. He wants us to be looking to Him, recognizing that the greatest gift we have is eternal life with Him and that He calls us to love Him and love our brothers and sisters along the journey and that means looking out for others, not just looking out for ourselves.
Chris Cash:Â So starting off here, let’s talk just a little about some of the housing statistics that’s kind of pushing the market into this negative direction that’s causing so many people all the turmoil financially.
Phil Lenahan: Well, I think it’s important that we take this step back and we’re in the midst of an economic “crisis” and Alan Greenspan has called it a once in a century credit tsunami. So for those of us that are living through this, it is probably the closest thing that we have had to what are parents dealt with in The Great Depression. It’s not The Great Depression and none of us can forecast the future with perfect clarity. Within our forum, for example, we’ll get…at catholic.com the forum there, we’ll get people saying, “Gush, is this the next Great Depression.” We tend to sort of get a little emotional and jump to that conclusion that but I just want to let people know that, “Hey, there’s a lot of hope here too.” There are a lot of backstops that are now in the economy that were not there back in the…
Chris Cash:Â But certainly looking at how the economy has gone from where it was to where it is it’s giving a lot of uncertainty and making people very fearful.
Phil Lenahan: Oh, absolutely. I’m not trying to minimize that. I want to make sure that we’re looking at it from a balanced perspective. I mean what will you…
Chris Cash: Plus when you’ve lost your job and your house, it doesn’t matter if it’s The Great Depression or not. It is the worst thing that’s ever happened in your lifetime.
Phil Lenahan: It’s very personal and we need to remember that that it boils down to the individual. The unemployment rate today though is about 7.2% and at the peak in The Great Depression, it was about 25%. So I think all I’m trying to do is to provide a context. Now economist are expecting the unemployment rate to continue up probably through the early part of 2010 is what I read and probably reach about a 10% level. Now, what triggered all these? Getting back to your question on how housing…
Chris Cash:Â Are these the same economist that said we didn’t have a problem?
Phil Lenahan: No. Many of these economist said we did have a problem and I don’t tend to look at one economist, I tend to look at the consensus that evolves around the number of economist. There are sources out there that will poll economist and have the top 50 or 100 in the nation and then summarize their thinking.
Chris Cash: And most of the economists did see this coming. The lawmakers in Washington just kind of glazed it over.
Phil Lenahan: The politics of it is a totally different thing than the economics of it and that’s a frustrating part of what we’re dealing with. But really over the last decade or two, we ended up with a lot of money in the system and that money was made available pretty easily and the story is pretty old by now. People realized that there was a lot of credit made available that shouldn’t have and so that allowed economic activity to be strong and appears though everything was going along fine and then all of a sudden, the banks and financial institutions realized that some of the stuff wasn’t going to get repaid, lack of trust entered the system and all of a sudden the valves for the money flow were turned off. And so economic activity was above average, above normal because of the extra debt in the system and now we have less debt than is even normal in the system because nobody is willing to lend and so economic activity is contracting. They call that deleveraging.
We’ve talked about my materials before. I’m not a big fan of the type of debt that we’ve got out there. But the bottom line is, we are a society that depends upon a reasonable flow of credit and right now we don’t have that and so we’re going to go through some pain until this deleveraging process goes through and reaches it’s natural equilibrium. Now, on the housing front, some statistics that can tell us…I think we’ve gone a long way towards correcting things. Again, based on what I read and the sense I get, I don’t think we’re at the bottom yet. But again, nobody can tell exactly what clarity where that bottom will be. But on the housing side, we’ve seen price declines according to the Case-Shiller housing index in the metropolitan areas of about 20% with certain areas dropping as much as 40% over the last year. So our area is one of those that’s been off about 40%. We’re in Southern California in one of the counties that has been hard hit by foreclosures. So certainly if you bought a house a year or two ago, and you put some money down into it, you’re feeling a lot of pain right now because that equity is all gone. About one in ten mortgages is at least one month overdue or in foreclosure and so that’s up from about 7% from a year earlier.
So we’re seeing that whole foreclosure rate go up. Actually, there are about 259,000 filings for foreclosure in November and that’s up from just 200,000 a year earlier. It was only 120,000 two years ago. So you can see where in the doubling rate basically of foreclosures. It a bit continues to climb and it’s probably going to continue for a little while here until we work those through the system. One of the things that I think is interesting is there’s a lot of discussion in congress right now about how to help people stay in their homes and there’s a way to renegotiate mortgages and all that’s been pretty hard to accomplish right now because of how these have been securitize into investment pools and nobody knows who…there’s not this link anymore between your local bank and the borrower. And so working out a renegotiation is harder, but there’s an interesting static from the comptroller of the currency that for those loans that have been renegotiated, about half of those find that they’re delinquent again within about six months. So I think that those housing statistics paint a good picture of us, not that good, but they paint a picture to help us understand the situation. We got into a bubble, the bubble had to burst, and we’re now experiencing the pain of that bursting. Now, I can tell you for folks who have consistently followed the methodology of the seven steps, none of us is immune to this pain. We are all impacted, but I can tell you that those who follow the seven steps consistently have a much softer landing than those who haven’t.
Chris Cash:Â So, I guess the question is, what can we as practical people do to maintain number one, our Catholic identity in this crisis but also to help us just survive the crisis and continue on in a faithful stewardship way of going?
Phil Lenahan: One of the things about our faith that is so important here and is really probably the most practical thing that we can even bring to the table is God is God. God is unchangeable. So even in the midst of our turmoil, we need to remember that end goal. What is life all about? It’s not all about acquiring wealth and living it up, so to speak. It’s about living a life that’s pleasing to Him and using the gifts of time, talent and treasure, the resources He’s given us in ways that are pleasing to Him. So I think that that’s the real key and that’s where a lot of hope to me comes from that that remains our core focus. The other thing and this came out in our small group last night, one of the spouses in the group was from the Philippines and she spoke about how coming from a developing country, she was just amazed at our attitude towards things and our sense of what is middle class versus what is wealth. So she was saying, “You have so much here in America.” And when you think about that, our standard of living continues to be very, very high and again, I think that we sometimes don’t recognize the amount of gifts that we have in relation to others and now it’s up to us to use them well. Now, there’s some very basic practical steps actually would bring people back to the seven steps in terms of what is it makes sense to do in terms of managing through this period of turmoil. There are smart things to do and there are dumb things to do, and we want to be able to convey that to folks.
Chris Cash: So you want to go through just some of the basics of…well, let’s take it for instance here that say I have just lost my job and I may have a small severance package, but what would be the first steps that I should do to kind of secure myself financially for the transition to go whatever and what tools do I need to help me to weather this really severe personal crisis?
Phil Lenahan: If you’ve lost your job now and you haven’t done the planning ahead of time, depending upon the resources you have, you may be in for a tough ride. So there’s really different perspectives to look at here. Given that unemployment is expected to increase over the course probably of the next year or so and let’s take an example where you haven’t lost your job yet. What should you be doing? You want to make sure that you’re getting to at least step three, step four, and step five within the seven steps which is setting up your emergency fund, minimum of $2000. If you’ve got unproductive debts and we’re talking here primarily credit card debt, you want to be working to eliminate that and there’s only one way to eliminate that, you’ve got to carve out the resources. You’ve got to reduce you’re overall spending elsewhere in order to apply money towards those debts and then move to establish in step five of your rainy day fund which is your three to six months’ expenses.
Now, practically speaking, when you’re in a period of unemployment, it’s a period where there’s a lot more uncertainly. I think it makes a lot of sense that you’d want to increase your liquidity. So you’d want to probably increase your initial emergency fund from $2000 to more than that, may be it’s $4000 or $5000 and then work on your debt. And you also may want more than three to six months’ expenses set aside as your reserve fund that you’re keeping available in money market fund or something like that or you know it’s going to be there for you. You can’t tie it up in a long-term investment. So you want to make sure you’re maintaining liquidity. That’s going to be one of the very practical steps that you take. Now, if you’ve just lost your job and you’re getting a severance package, you’re going to have to lay out a plan for what is your spending plan over the next few months and how long will that severance package take you in combination with the emergency fund and rainy day fund that you had set aside before. If you don’t have any of those resources, you’ve got to start thinking very quickly about what you’re options are so that you don’t fall back into credit card debt. I mean the worst thing you can do if you lose your job and are confronted with no savings is to start living off of credits cards under the assumption that you’ll find employment in a week, two weeks, or a month.
So one of the interesting things that I think is an analogy back to The Great Depression, I know it applied to my dad. He grew up in a farming family in Northern California and a number of families lived together during that time in order to make sure that they were able to get by economically. So that’s something that I potentially see as an answer today as well that for families where things have gone array, may be one of the ways that they can get back in shape is to spread those cost among more than just the one family so that they can exit out of this in a more healthy manner than they otherwise would. But you really don’t want to be living off of credit card debt or borrowing against your remaining home equity in order to survive until you get that new job. You want to hopefully than you’re planning upfront or you have severance package that gives you some time until you get that new work. The other aspect is to make sure you’re aggressively going about getting that work and that may or may not be so easy in today’s environment.
Chris Cash: Okay, we’re going to take a short break to hear from our sponsor, but we’ll be back in just a second to hear more from Phil Lenahan about the seven steps to financial freedom. This is the Catholic Spotlight.
Chris Cash: And we’re back on the Catholic Spotlight talking with Phil Lenahan about the seven steps to financial freedom and how we can survive in a time of financial crisis. Now, one of the things you mentioned right before the break was families moving in together to try to reduce expenses and that seems so counter to our current culture in this country. Are there other suggestions that you have for somebody experiencing a real crisis here that they can take that maybe counter cultural but could help them in their long-term survival of this financial crisis.
Phil Lenahan: And trust me, I come out of a large family. We have seven children. I do a lot of counseling, so I don’t suggest the families living together with a blind eye. I understand that that’s not a panacea that there are a lot of side issues.
Chris Cash: But when you’re in a state of complete financial upheaval, sometimes you have to…just about everything you need to do seems like it would be counter cultural to at least the last 30 or 40 years of living that we have in this country.
Phil Lenahan: That’s well said and I think that’s the important point I would want to get across. I mean we have a tool that we call the list of options and I think this is something that can address your question as well. When I’m counseling someone, we’ll get initial snapshot for where there at with their balance sheet and their current budget and understand the dynamics of what’s going on with their debt situation. Most often, you then have to start looking at, “Okay, where are we going to come up with additional resources?” And there’s only so many places you can go for that. You can sell some assets if you have assets to sell in order to eliminate debt or to provide a saving’s buffer.
Chris Cash: However like even selling your house now might not actually increase your savings. You might have to pay to sell your house.
Phil Lenahan: Right. I mean it depends upon each scenario. But there might be some assets, may be you have extra car you can sell, maybe you have a garage sale. It just depends on the particulars of each situation but asset sales are one thing. Debt management is another thing, maybe there’s a refinancing. You want to be real careful with what we’re doing on the debt front in a time like this. Most of the time it boils down to looking at ways to increase income or reduce expenses. That’s where we do need to be willing to say, “What’s our objective?” I mean if I’m not willing to live in or go live with some other family members for example if that appears to be the best option for me but I just don’t want to do it because I don’t want to do it. If I’m counseling someone, I’m going to say, “Well, that’s fine if you choose not to do that.” But what is the ramification of your choice. Where is this money going to come from? Are you happier to go into credit card debt than you are to have to deal with in-laws or whatever that relationship might be?
Now, I would think of moving in with family as sort of like the last resort in most cases, but lots of ways to reduce expenses that we just don’t tend to consider. If you’ve got a car payment, why do you have a car payment? Is there some way you can work your way out of that? Can you sell that car and buy one that’s much less expensive with maybe the cash proceeds that you receive from the car that you sold? Again, it depends upon your particular scenario, but we see a lot of people paying a lot of money for cars and going into debt to do so and that typically is not a very good use of funds. They’re most often buying a lot more car than they can afford. Areas of entertainment. A lot of spending goes on that we just don’t tend to think that much about. A couple of thoughts come to mind. Remember when I started counseling and the first family came with their budget and in the eating out category, they had $400 for the year. And I sort of smiled, “You know I wonder. Let’s talk about this a bit.”
So many went out weekly for pizza with a large family and it was way back then, 10 years ago. So they were spending about 20 bucks a pop, 30 bucks a pop at going out. So they’re spending about $1000 and $1500 on their meals out as oppose to the $400 they thought. And until we start logging what we’re spending and that’s in the small group, we have a tool that we start out. In fact, the group last night was given their homework of a spending diary. For 30 days, we track all of the spending that we do. It’s really enlightening. It’s eye opening and you realized, “Gosh, some of these aren’t needs.” Now, there’s nothing wrong with a lot of these stuff if you have the resources to do it. But if you don’t have it, if you just lost your job and you need to cut thing to the bone, then you just need to make some of those decisions and say, “Let’s prioritize our needs. We’ve got housing. We’ve got food and clothing that we absolutely have to have.” And then everything else we start to say, “Can this be cut back, reduced, or just eliminated?” Cable TV or satellite TV, is that a need? Nothing wrong with it if it’s used appropriately. But if you just lost your job and you don’t have any savings and you’re spending $50 to $80 a month maybe on this, may be we shouldn’t be doing that.
Chris Cash:Â And the high-speed internet and the cell phone to the kids.
Phil Lenahan: Absolutely right. I think I forget there was just a story about a young girl hitting some type of a record with text messaging.
Chris Cash: There were over 14,000 text messages in one month. I saw that myself.
Phil Lenahan: So some of these…and it’s amazing…
Chris Cash:Â She had to spend two text messages a minute for every waking hour of everyday during that month.
Phil Lenahan: Isn’t that something? And yet, again, I’ll tell you through my interaction with folks over the years, it’s amazing how blind we’ll be to some of these things. Another story, a couple after our first meeting in our small group. They shared with me and then the follow on meeting, they said, “We enjoy Starbucks once in a while,” and we had a long drive to get home after the first meeting and so my husband asked me, “Would you like to stop at Starbucks and get something?” cause they had an over hour drive to get here and back home. This is after they got assigned a spending diary. So from now on, they were going to have to log everything they bought. And so she was sharing with me, “I don’t really want my first purchase to be a latte at Starbucks.”
So again, a lot of this is just awareness and the tools that are provided through the seven steps program raise that level of awareness of where we’re allocating those resources and then that gives us the opportunities to sit back and say, “Is this really what we ought to be doing? Does this fit with the long-term goals that we have? Or in the midst of a crisis, does this make any sense at all give the state of the crisis that we are personally in?” And I think there’s two ways to look at this crisis. I think everybody ought to be looking out there somewhat cautiously even it hasn’t hit them as hard directly in terms of for example a lost job. Everybody ought to be taking this opportunity to get their ducks in a row and make sure that they have that rainy day fund that they’re building that up probably beyond that three to six months like I talked about. So even if they haven’t been directly impacted, recognize this is the time to be somewhat cautious. For those that have been directly impacted, you’ve got to be aggressive. This is not a time to be passive. It’s not a time to sort of sit back and let the environment happen to you. You need to go out and make sure that you’re taking control of this area and doing the best you can to manage it. And there’s a lot that can be done again even if that gets to the level of looking to family for some short-term help or guidance and potentially even splitting expenses by living together.
Chris Cash: Now, one other thing before…we’re kind of running up on our time here, but I wanted to make sure that we address from the Catholic standpoint. Are there any suggestions that you have in…obviously, if you have no income, then you don’t need the tithe.
Phil Lenahan:Â Yeah, it’s correct.
Chris Cash: But if somebody is in a near crisis where maybe they have their job, but they’re very concerned about the long-term future of that job, may be lay offs have been announced in their industry recently and they are fearful that they might be in there. How can we maintain some of our Catholic identity, things like tithing and the good works that we do even when there’s a large set of fear out there?
Phil Lenahan: Well, I think it’s important number one to come back and remember what is tithing. Tithe literally means a tenth and that’s a guideline for us. The church does not demand the 10% from us and we go through that within the seven steps. We provide that background of Old Testament teaching to New Testament teaching and what does the church teach today. Tithe is still clearly a good guideline for us to consider. The basic way I look at it is if we have an increase in income, whatever our increase is there and I’m talking gross income at this point, then we should be giving a portion of that back to the Lord and for His work here on earth. So if you’ve lost your job as you noted, you’re not going to have the increase happening, so there’s no obligation. No sense that you need to be giving anything at this time. But I think as long as the Lord is blessing us with some resources, it’s incumbent upon us to remember that this call to generosity as a Catholic is a core part of our faith.
You look to the teaching in Matthew 25:35-40 and where the Lord is talking about He was hungry and His disciples gave Him food and He was thirsty, they gave Him drink. He was a stranger and they welcomed Him. Naked and they clothed Him. Sick and they visited Him. And the disciples are saying, “Well, Lord when did we do these things? We don’t remember doing that for you.” And He said, “Well, when you did it to the stranger, you did it to Me.” And we think of Mother Teresa with that reaching out to the poorest of the poor. So there’s a real balance here. Yes, if you don’t have the increase, you don’t have any sense or duty to give. But most of us, again, we’re talking unemployment of 7%. That means 93% are employed. So even if we’re feeling cautious, if we’re feeling this sense of, “Gosh, the world is crashing around us,” make sure that you got your feet on the ground, that you’re making decisions based upon the facts of your circumstances. Yes, recognizing a cautious attitude, but that doesn’t mean that we don’t continue to be a generous people. The methods described in the seven steps are very balanced, along with the giving, you’re saving for the future as well. So those two both go hand in hand and if we try to do either one out of what’s leftover, it will never happen. We won’t give out of what’s leftover, we won’t save out of what’s leftover. We really need to make a commitment on both of these fronts to do it right off the top.
Chris Cash:Â And I think that it’s also important for all of us to remember that in any time of financial crisis, the charities and the churches suffer probably even more so than the rest of us because just that since of uncertainty and I don’t know if I’m going to lose my job in a few weeks or few months, tends to make people cut back prematurely on their donations and their tithes.
Phil Lenahan: I think that’s exactly right. And what happens so you have donations coming down a bit, but you have the demands upon those organizations higher than ever especially if it’s social outreach organization because there are greater needs that they’re being confronted to deal with. So you have this combination that puts a real squeeze on them. So again, I think a good way to sort of wrap it up and summarize this that our faith is our reason for hope and it’s really our long-term goal is to be in union with our Lord and it’s through the gift of our faith that we’re able to do that. We need to remember that God is God. He is just asking us to be faithful. Mother Teresa said that, “I’m called to be faithful, not successful.” And so he wants us to just live consistently and faithfully by his precepts and that’s really all that we can do. But being generous, being a generous people is a key part of that and that should be happening in good times and in bad.
Chris Cash: Well, thank you very much Phil for coming on and sharing some of your wisdom in the financial realm with us. We really appreciate that. And for those of you out there who are looking for guidance, definitely do check out Phil’s book, Seven Steps to Financial Freedom, a Catholic Guide. Also Phi, you have a website, right?
Phil Lenahan: It’s veritasfinancialministries.com. There are free tools available for people to use there. They can do their budgeting online. They can track their income expenses. Lots of good tools they can use with the seminars at parishes, parish bulletin content, and counseling. So number of ways that people can learn better how to be the steward of providence that God wants them to be.
Chris Cash: All right. Well, thank you very much and God bless.
Phil Lenahan:Â Thank you Chris.
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Transcript of Interview with Phil Lenahan about 7 Steps to Becoming Financially Free – A Catholic Guide. This interview and others like it can be found at http://www.catholicspotlight.com
Listen Now to the audio version of the show.
7 Steps to Becoming Financially Free – A Catholic Guide is available at The Catholic Company.
http://www.catholiccompany.com/catholic-books/1004462/7-Steps-to-Becoming-Financially-Free-Catholic-Guide/