July, 2010 | Provident Planning

Personal Finance Bible Study: Contentment (Part 4 of 12) – Getting God’s View

Corey — July 29, 2010

In the last part of this series, we began looking at the solution to the problem with The World’s message. We’re continuing that discussion today and over the next parts of the series. We’ll look at God’s View of the world, money, and our lives so we can start to focus on serving Him instead of serving Money.

In Luke 18:18-30, we see the story of the rich ruler. The ruler asks Jesus what he must do to inherit eternal life. Here is Jesus’ response:

¹⁸ A certain ruler asked him, saying, “Good Teacher, what shall I do to inherit eternal life?”

¹⁹ Jesus asked him, “Why do you call me good? No one is good, except one—God. ²⁰ You know the commandments: ‘Don’t commit adultery,’ ‘Don’t murder,’ ‘Don’t steal,’ ‘Don’t give false testimony,’ ‘Honor your father and your mother.’”

²¹ He said, “I have observed all these things from my youth up.”

²² When Jesus heard these things, he said to him, “You still lack one thing. Sell all that you have, and distribute it to the poor. You will have treasure in heaven. Come, follow me.”

²³ But when he heard these things, he became very sad, for he was very rich.

²⁴ Jesus, seeing that he became very sad, said, “How hard it is for those who have riches to enter into the Kingdom of God! ²⁵ For it is easier for a camel to enter in through a needle’s eye, than for a rich man to enter into the Kingdom of God.”

²⁶ Those who heard it said, “Then who can be saved?”

²⁷ But he said, “The things which are impossible with men are possible with God.”

²⁸ Peter said, “Look, we have left everything, and followed you.”

²⁹ He said to them, “Most certainly I tell you, there is no one who has left house, or wife, or brothers, or parents, or children, for the Kingdom of God’s sake, ³⁰ who will not receive many times more in this time, and in the world to come, eternal life.”

Luke 18:18-30 (WEB)

This story is also found in Matthew 19:21-30 and Mark 10:17-27.

When this rich ruler approached Him, Jesus knew that his heart was still focused on his wealth even though he had kept all the commandments since he was young. Earlier in our Personal Finance Bible Study, we learned that focusing on or serving Money keeps us from serving God. When Jesus answered the ruler’s question, he quickly honed in on this fact and challenged the rich ruler to give up his wealth if he truly wanted to serve God and inherit eternal life.

But we see the rich ruler’s response. He was saddened at the thought of giving up all of his wealth. What would we do if Jesus told us to sell everything, give it to the poor, and follow Him? Would we be so attached to our material possessions and wealth that we wouldn’t give it up for Jesus?

What if Jesus asked us to sell our iPods so we could feed the hungry? Or buy a smaller home so we could give clean water to those in third-world countries? Or forgo a new car and get a used one instead so we could give medicine to the weak? These are small things in comparison to selling everything we own, but there’s a good chance we feel resistance at the very thought of those actions.

Naturally, we hold the Things of This World very dear to our hearts because we clearly and plainly see them every day. We easily understand the necessity of some things, and we enjoy the convenience and fun of others. But our focus on This World keeps us from seeing the necessity of God’s viewpoint—of realizing that love and relationships matter much, much more than iPods, big homes, and new cars. We can take nothing with us when we die, yet look at how we strive to accumulate so much Stuff all our lives! This is exactly one of the reasons that Solomon said everything under the Sun is meaningless.

But if it is so natural for us to be attached to the Things of This World, how can we be saved if the salvation Jesus offers requires us to give up that very attachment to our natural world? We can try to remind ourselves that eternal happiness with God in Heaven is worth more than anything The World can offer, but we cannot completely remove the attachment to The World without God’s help. What is impossible for us on our own is possible with God. Through prayer and a close relationship with God, our hearts can be changed so we focus on God’s World and not ours.

The reward of contentment is very great. Our lives are made easier and much more joyful here on Earth because contentment makes the smallest things very great. A hot meal, warm clothes, or a soft bed—all are great wealth to the person who is content. We also get the eternal reward of communion with God and everlasting life in Heaven. How can any benefit of the world’s wealth be greater than the benefit of God’s rewards for us?

So this is the first part of God’s view we must begin to take on for ourselves. Our attachment to This World keeps us from fully receiving God’s gifts and fully serving Him. We must give up this attachment if we want to truly receive eternal life in Jesus. And we cannot do it on our own—we must ask God to change our hearts and teach us His ways. If it seems impossible, remember you are not alone. God can do it through you!

Want to read the entire Bible study series on Contentment? Download your free copy of Contentment Is Wealth: A Bible Study on Contentment now!

In Contentment, Personal Finance Bible Study

Should Everyone Go to College?

Corey — July 28, 2010

This article has been reprinted with permission from Gary Foreman of The Dollar Stretcher. You can find the original article here: Should Everyone Go to College?

For at least the last few generations it was assumed that a college education was the ticket to success in life. Parents encouraged their children to strive for that college degree. But, like all assumptions, it’s a good idea to examine them periodically.

A provocative article in USA Today by Patrick Welsh, a high school English Teacher does just that. And, what he found could provoke some heated discussions. His main concern is that many of the kids you enter college have no chance at earning a bachelor’s degree. He points to cases where 70% of students entering college drop out. His wonders if colleges are admitting students that they don’t expect to succeed solely to grow their schools and make more money.

That’s the type of thing that’s almost impossible to prove, but sure looks like it could be true. More students means more professors and clerical workers. It means bigger paychecks for the administrator’s, too. It also means more clout in the community and with every one the school does business with.

Unless I miss my guess, none of those administrators will have their pay reduced if too many students drop out. Nor will they bear any responsibility if students end up with debts that are much too big for their income level. In fact, they won’t have to face the problem since student debt doesn’t require payments until the student leaves school.

Studies show that the average graduate has more than $23,000 in debts (NY Times). Which is a lot of debt for someone who might be making $30k per year or less. But, debt is especially nasty for students who don’t complete a degree. Their income potential and ability to repay student loans is even less.

Now I’m not saying that everyone should avoid college. Far from it. Based on what I see many, many jobs will require continuous education. It will become very difficult to find a job where you don’t need to continue learning.

But, I expect college to change in the next decade. The idea of devoting full time to college and attending classes in person will gradually give way to a different approach. One that’s not nearly so expensive. One that doesn’t require as many professors and ivy covered buildings. A continuing education model that will take what we need from colleges and blend that with an internet world. A new paradigm that will be much, much more affordable for students (yes, you can call it more frugal!).

In the meantime, don’t be surprised to see an explosion of college debt defaults. There’s a little more than $600 billion in federal education loans outstanding (FinAid.org) and $45 billion are in default (7.5%). It’s almost impossible to get relief on student loans. Generally even declaring bankruptcy doesn’t make them go away. So the former students will drag these loans around. For some the choice will be between food/shelter or paying their loans. Guess which choice will win out.

So should you plan on going to college? Well, maybe. If you know what you want to do and going to college is the only way to do it. But, for many people, the idea of going to college just so you can say that you went is becoming a very expensive luxury. A luxury that you might pay for the rest of your life.

Keep on Stretching those Dollars!

_________

Gary Foreman is the publisher of The Dollar Stretcher.com, a website dedicated to frugal living. Click here for more information about how to find money for college.

In Debt, Frugality, Work

Where to Keep Your Money While Saving Up a Down Payment for a Home

Corey — July 27, 2010

$30,000. That’s the minimum you should have saved to buy a $150,000 home – and that just covers your 20% down payment! That’s a lot of money. Saving for a down payment on a home can take a long time. The last thing you want to happen is to see your savings drained by a stupid mistake. Putting your savings in the wrong investment option can destroy your dreams of home ownership. Here’s what you need to know so you don’t take on too much risk.

How Long Do You Have?

When it comes to choosing an investment option, you need to consider your time horizon – how long you have until you need the money. This is true of any financial goal. The longer you have, the more risk you can afford to take (and the higher your return might be). Once you know your time horizon, you can start considering your investment options.

Cash – Time Horizon: 0 – 5 Days

Think cash is king? Not when it comes to savings options. Cash may seem like the safest option, but you’ll lose money to inflation. The only reason you should have your down payment in cash is because you need it within a week. Though I wouldn’t walk into a closing with that much cash! A checking account is the equivalent of cash because it usually yields no interest, so just take a check instead.

High-Yield Online Savings Accounts – Time Horizon: 5 Days – 2 Years

I skipped regular savings accounts because the interest they offer is pitiful compared to high-yield online savings accounts (like ING Direct). High-yield savings accounts offer a decent short-term interest rate and are backed by FDIC insurance. This means they’re risk free up to the insurance limits. If you have less than two years until you need the money, this could be your best option.

Certificates of Deposit (CDs) – Time Horizon: 2 Years – 5 Years

CDs are a good option if you have a longer time horizon because they’ll let you lock in a fixed rate for a specific number of years. There are three problems here though. First, there is often a minimum purchase amount for CDs – usually $1,000. Since you can’t add on to a CD you already own, you’ll have to buy a new one every time you have the money.

Second, CDs can take some managing if you don’t keep them all at the same bank. If you’re chasing the highest rates, you’ll probably have to utilize several different banks. This means having several accounts in different places – and that’s not necessarily a good thing.

And third, putting your money in a CD means it is locked up. You generally can’t get to it early without penalties. This is why I recommend using a high-yield online savings account if you’ve got less than two years. You can pull your money out of there at any time with no penalty.

If CDs don’t sound like something you’d want to try, I’d recommend looking at short-term government bond mutual funds. Vanguard offers VSGBX and VFISX which both have an investment minimum of $3,000. However, you can make additional investments of only $100 (or $50 if you use automatic deposits) after that point. You can avoid the $20 service fee by signing up for electronic delivery of your statements and other documents. These funds are quite stable and low risk while generally offering slightly higher rates than CDs.

Intermediate-Term Bond Funds – Time Horizon: 5 Years – 10 Years

Intermediate-term bond mutual funds offer slightly higher returns than the other options but with slightly more risk. You should only consider them if you have five to ten years until you’ll be buying your home. Again, Vanguard is a good choice here. The same minimums apply, but you’ll want to look at funds with the ticker symbols VIPSX, VBIIX, VFITX, VFICX, or VBMFX. You won’t get stellar returns with these options, but they’ll pay you more than enough to beat the other choices and keep up with inflation.

Conservative Stock/Bond Portfolio – Time Horizon: 10 Years – 20 Years

If you have a good long time until you’ll be buying a house, consider looking at a conservative mix of stocks and bonds for your savings. A good target would be 20-30% in stocks and 70-80% in bonds. A mix like this will give you a reasonable chance of outperforming other options for your savings, but your longer time horizon will decrease the risk of losing money. If you need help figuring out how you should allocate your investments, check out my free portfolio allocation calculator.

Moderate Stock/Bond Portfolio – Time Horizon: 20 Years +

Finally, if you’re not planning to buy a home for at least twenty years or more, you might consider using a moderate mix of stocks and bonds. In this case, somewhere between 40-60% in stocks and 40-60% in bonds would be a reasonable choice. Again, the long time horizon will help ensure you minimize your chances of losing money, but the more aggressive investment choices will give you the chance of higher profits. See the above link to my free calculator if you’d like to see what a sample portfolio would look like.

Your Thoughts

What savings options would you use and why? What advice would you give to those who are saving for a house? Share your thoughts in the comments below!

In Debt, Investing, Saving

How to Get Out of Debt: Step 9 – Top Off Your Emergency Fund

Corey — July 26, 2010

This article is the ninth in a series on how to get out of debt. If you haven’t already, you should check out the previous articles:

Step 9 – Top Off Your Emergency Fund

You’ve reached your final milestone. You’ve paid off your debts. Congratulations!!! Enjoy the moment and celebrate the fact that you’ve come so far. You’ve accomplished your goal and you should be joyful.

But if you want to avoid sinking into debt again, you’re going to have to apply everything you’ve learned along the way and take a couple extra steps to protect yourself. The last two parts of this series will deal with the follow-through.

After paying off your debt, your next goal should be to bolster your savings so that no emergency will force you into debt again. In Step 5, you built a starter emergency fund that equaled one month’s worth of your living expenses. Now it’s time to top off that fund depending on your circumstances.

To figure out how much you should have in your emergency fund, think of it in terms of levels of risk. Some people have a very stable situation and may not need as large of a fund. Others will have much more risk in their situation and should consider saving more. These are not hard and fast rules. They’re simply a guideline to help you think about what works for your situation.

Level 1: Three Months of Living Expenses

Once you’ve got your debt under control, your next emergency fund goal should be three months worth of living expenses. This gives you a large enough cushion to withstand a job loss if you can find another job quickly. It will also help you cover car repairs, some medical bills, and other small to medium sized emergencies. If you’re married and you both have stable jobs, you might feel comfortable stopping here. If you’re single, married with one income, self-employed, or have an unstable job, you’ll want to keep going.

Level 2: Six Months of Living Expenses

An emergency fund with six months worth of living expenses should be large enough for most people. You’ll have plenty of time to find a new job in most scenarios. However, you might want a larger emergency fund if the economy looks bleak or if you are single or married with one income and you have an unstable job or you are self-employed. In those cases, I’d recommend going for a larger emergency fund.

Level 3: Twelve Months of Living Expenses

If you’re self-employed or have an unstable job and you rely on only one income, you’re going to want to play it safe and save up twelve months of living expenses in your emergency fund. This will help you make it through rough patches in your career when profits are down or you lose your job. This would also be a great idea if you or your children have medical needs that require large payments at unpredictable intervals.

Adjust for Your Situation

If you feel that your situation doesn’t fall into one of these specific categories, then use these as guidelines and save what you feel you’ll need. This guide should help most people get close to the right-sized emergency fund for them. Don’t get discouraged if you feel like it’s a lot. Attack this goal in small steps and you’ll quickly make progress. If you have questions, just leave them in the comments and I’ll try to help!

This series is almost finished! In the last step, I’m going to talk about a couple others things you should consider to help you stay out of debt. This isn’t to say you’ll never use debt again. But the next time you do, it will be a conscious choice based on good and sound reasons. Make sure you’ve signed up for free updates to Provident Planning so you don’t miss out on this important last step! Plus, I’ll be bundling this series with helpful resources and calculators in the future. It’ll be a valuable guide for getting out of debt. If you’ve signed up for free updates, you’ll be sure to see it as soon as it’s available.

Have you topped off your emergency fund yet? How long did it take, and how did you do it? What level did you choose and why? Let me know in the comments below!

P.S. Here are some other articles about emergency funds if you’d like to read more:

In Debt, Saving

Personal Finance Bible Study: Contentment (Part 3 of 12) – The Solution to the Problem

Corey — July 22, 2010

In the last part of this series, we talked about the problem with The World’s message. Loving money and believing The World’s message keep us from serving God. Additionally, The World can offer us no eternal reward and the Stuff it tells us to buy can’t be taken with us when we’re dead.

Today, we’re going to begin talking about the solution to the problem with The World’s message. We’ll only get through part of it now, but we’ll finish up the discussion in the next part of this series.

Where Does the Problem Start?

In Mark 7:21-23, Jesus clearly tells us where the problems of greed and envy start:

²¹ “For from within, out of the hearts of men, proceed evil thoughts, adulteries, sexual sins, murders, thefts, ²² covetings, wickedness, deceit, lustful desires, an evil eye, blasphemy, pride, and foolishness. ²³ All these evil things come from within, and defile the man.”

Mark 7:21-23 (WEB)

Greed and envy come from within—they’re heart problems. These aren’t the kinds of heart problems that can be fixed by taking the right kinds of medicine, getting enough exercise, or eating right. Greed and envy are reflections of our deepest motives, desires, and attitudes. Humans are inherently prone to these kinds of thoughts because Sin infects every area of our lives. The only way we can get these things out of our hearts is to let God come in and take over.

For a while at my Bible study we had a guest speaker named Butch Marvin. One of Butch’s favorite sayings is that God doesn’t want your money, your good works, or anything else you think you can offer Him. God only wants your heart—because once He’s got your heart he’ll get everything else as well.

Renew Your Mind!

For God to fix our hearts and get rid of all the evil things that can come from within us, we have to fully accept Jesus and let Him live in us. That means we have to give up our lives, our hearts, our selfish ambitions—everything! We need to ask God to change our hearts and the way we think. We need to ask Him to keep us focused on His Ways instead of The World’s ways.

² Don’t be conformed to this world, but be transformed by the renewing of your mind, so that you may prove what is the good, well-pleasing, and perfect will of God.

Romans 12:2 (WEB)

God can rid our lives of greed and envy and teach us to be content, if we’ll just ask Him to change the way we think. Only then can we truly understand the great gain that comes from contentment and begin to see God’s perfect will for our lives.

³⁶ Turn my heart toward your statutes,
not toward selfish gain.

Psalm 119:36 (WEB)

We can start the process of renewing our minds and becoming new people by simply praying to God. David’s simple prayer here is a great way to start—simply asking God to keep us focused on Him and not on This World.

In the next part of this series, we’ll talk about the next step in this process: getting God’s view on our lives, money, and the things of This World.

Want to read the entire Bible study series on Contentment? Download your free copy of Contentment Is Wealth: A Bible Study on Contentment now!

In Contentment, Personal Finance Bible Study

Raising a Cow for Beef: Month 11

Corey — July 21, 2010

       Last month, I posted an update about how my wife and I are raising a cow for beef. This is a summary of our activity and costs for month 11. As always, let’s first check Bambi’s growth. Here he is at ten months old:

Bambi - 10 Months Old

       And here he is at eleven months old:

Bambi - 11 Months Old

       Bambi is well over 700 pounds now. He might be nearing 750 but I haven’t put him on our bathroom scales in a while. To give you some perspective, the ring on the silo where his back reaches is about four feet off the ground. He’s still growing at a steady rate of about 2 pounds per day. This isn’t phenomenal by industry standards, but I’m happy with it.

Costs & Time

I spent a little less time this past month because I’ve become a bit more efficient and because of a change I made a little less than a week ago. (Read on to find out.) His feed cost about the same as last month.

Feed – $40.93

Time – 8 hours

And here are our total costs over the past eleven months:

Cost of Bambi – Free!

Castration & Dehorning – $16.00

Milk Replacer – $45.54

Miscellaneous – $46.87

Feed – $362.77

Hay – $88.00

Straw – $20.00

Medicine – $5.00

Total Spent – $584.18

Time – 102 hours

After almost a year, we’ve spent a total of $584.18 and 102 hours raising a cow for beef. The costs have been pretty steady throughout the spring and summer, and I don’t expect much to change through the fall. It may actually cost us a little less now because I’ll be sending Bambi away. No, we’re not butchering him yet.

As I mentioned in my last post, my main concern has been about what I’ll do with Bambi once he gets too big to handle. It turns out he’s reached that point now. I can still get him where I want him to go – but just barely. His cooperation is important because I have to move him to a new grassy spot every day since we don’t have a fenced-in pasture.

After a little spat we had last Friday, I decided it’s time to either leave him in the barn or send him to live in a pasture until November. We both came out of that little event unharmed, but every time I look at Bambi I only see this:

Bambi - 11 Months Old - Cuts of Beef

If I had to leave him in the barn, we would be spending quite a bit on hay from now until November. Thankfully, the Hersheys (who gave us Bambi) have agreed to let him stay on their farm in a pasture with their pregnant heifers. This means our costs should go down a bit and our time commitment will go to zero. He hasn’t left our place yet, so in the meantime I’m keeping him at the silo and feeding him only hay and grain (no grass).

There are several benefits to this arrangement – my safety not being the least of these. Bambi’s getting big enough that he can almost drag me around, so I don’t want to deal with moving him anymore. But now he’ll have a fresh and continuous water source, which means no more filling up buckets for me. It also won’t take the Hersheys any extra time to feed him because they already have to feed their heifers. Finally, I won’t have to worry about Bambi getting loose any more (which almost happened twice this past month).

This is not to say that I couldn’t continue raising Bambi myself. As I said before, leaving him in the barn is an option. However, I doubt he’d like it much (not that it matters) and this option will cost less in time and money.

With this new arrangement in place, I probably won’t have much to say about Bambi until he goes to the butcher. If you all are interested, I could keep doing updates once a month to track his growth and cover any changes in costs. If not, I’ll just do a final update after we send him off to be butchered. If you have any questions or comments, please leave them below. And make sure you sign up for free updates to Provident Planning if you don’t want to miss out on the last updates about Bambi!

In Miscellaneous

Understanding the New Credit Card Statements

Corey — July 20, 2010

With the passing of the Credit CARD Act came a change in the format of credit card statements. These new statements are designed to help you see the most important aspects of your credit card – your interest rate(s), total fees paid, how long it will take to pay off your card, changes to interest rates, and changes to your account terms. I’ve noticed these changes in my credit card statements, and I like them. The information is easier to find than before, and I hope the payment information section will open peoples’ eyes to the dangers of the minimum payment.

Five Cent Nickel, another personal finance blogger, created a nice graphical explanation of these changes using the Federal Reserve’s sample statement. I thought it might be useful if you’ve been wondering about these changes. The information that FCN provides also includes some of the other changes that came with the Credit CARD Act.

Credit Card Statement Changes from Five Cent Nickel

Do you like these changes and the new format? Do you think it will help people pay off their credit cards faster, or will people who pay the minimum payment keep on ignoring their situation? Share your thoughts in the comments!

In Debt

Categories

Blogroll

Archives For July 2010