I was asked the other day during a presentation, “How long will it take someone to be able to build their Foundation Phase?” Of course the short answer is, “It depends.” The longer – and more accurate – answer is, “It depends on how many power dollars you have.”
But what are power dollars? I define power dollars as the dollars coming in from your income stream that have no other purpose than to go to your financial plan and work for you. First, you have to understand that your largest, controllable financial asset is your income stream. What you do with this will determine your financial success in life.
Here’s the best part: it does not matter how much you make. I have worked with clients that did not make much money but were savers and were able to accumulate a lot of money over the years and be an ongoing blessing to those around them. I have also worked with people making over $500,000 per year and had nothing to show for it.
It does not matter how much you make, it matters what you do with your money.
Honor the LORD with your wealth, with the firstfruits of all your crops; then your barns will be filled to overflowing, and your vats will brim over with new wine. – Proverbs 3:9-10 NIV
“Will a mere mortal rob God? Yet you rob me. “But you ask, ‘How are we robbing you?’ “In tithes and offerings. You are under a curse—your whole nation—because you are robbing me. Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the Lord Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it. – Malachi 3:8-10 NIV
The Bible talks about the importance of tithing (1/10th or 10%). I believe this refers to gross income as the Bible says firstfruits (before anything is taken out). In my opinion, everyone should be tithing back to their local church. This should be the first place that you take money out of your income.
How Power Dollars Work
Foundation Phase = 5-10% Accumulating Wealth Phase = 10-20%
If you are in the Foundation Phase, after your tithe, you should still have approximately 5-10% of your overall income that you are able to use specifically to move through the five steps. If you make $60,000 per year, this means you would tithe $6,000 and have between $3,000 and $6,000 power dollars.
The rest is what you live off of. If you are just beginning, these power dollars are what you will use to build up your $1,000 cash-on-hand emergency fund. If you are on the low side and can only come up with 5% or $3,000, this equates to $250 per month. This means that step number one of budgeting and having $1,000 cash on hand will take you four months. If you are able to come up with 10% or $500 per month, it would only take you two months.
How many power dollars you have is up to you. The more you cut out of your discretionary expenses, the more power dollars you will have to work through these steps. Most people should easily be able to find at least 5% of their budget to use as power dollars. If not, you will need to take the pulse of your budget and see what is causing the pain. Over time, this number should naturally grow. As you pay down one debt, those saved dollars can now become more power dollars and help you go through the steps even faster.
Once you have completed the Foundation Phase, you should now have 10%-20% that you can use to build your different accounts (retirement, college savings, taxable savings). Obviously there is a trade-off. The more you save for tomorrow is less you have for today. You need to keep this in balance, especially if you are married. Don’t become a hoarder of money where you are storing your values and beliefs in money.
If you find that you are saving much more than 20%, remember it is better to give than it is to receive (see Acts 20:35). We believe you should be tithing in the Foundation Phase. We also believe that once you are in the Accumulating Wealth Phase that you should begin to do some Impact Giving.
You have built a solid foundation for today and are now saving for tomorrow. Not everyone in this world has their today protected yet. Find a cause that you believe in where you can be a blessing to them through a one-time gift or maybe ongoing gifts. The reality is, if you have a solid foundation and have completed the five steps, God has blessed you. Bless others.
Start your impact giving at 1%. If you want, you can set up a seperate account or put an envelope in your safe at home. In the example earlier of someone making $60,000 per year, 1% would equate to $600 or $50 per month. How can you make an impact with that money? How can you teach your kids about giving at the same time?
As you can see, how much you make does not matter. It’s how much you save and how much you give that matters. How long takes you to get through the Foundation Phase depends on how many power dollars you have created in your budget.
Work hard on making your money work hard for you. Don’t forget that God has blessed you and you have a responsibility to be a blessing to others through your tithes and impact giving.
How many power dollars do you have every month? How are you putting them to work for you? Leave a comment!