Archives For December 2010

Merry Christmas!

December 24, 2010 — Leave a comment

       I wanted to wish everyone a wonderful Christmas, so I thought I better do it today since you’ll probably be busy tomorrow. May God bless you as you worship Him and remember the birth of His Son, Jesus Christ!

       And for something fun, imagine the Christmas story with Web 2.0:

I hope your Christmas is filled with joy and laughter! :)

       After examining the Christian call to work hard, weighing the value of hard work and the dangers of laziness, and looking at our need for rest, I thought it best to look at the values and ethics that should guide us in our work. What are the principles we should follow to best glorify God in our work? In this and the next four parts of this Bible study, we’ll look at God’s business values and ethics.

Be Honest and Fair

       God hates dishonesty or injustice, and if we treat people dishonestly or unjustly we are not reflecting His glory. Though we are no longer under the Law, the Old Testament laws do help us understand some specifics of how we can best serve God.

       13 You shall not have in your bag diverse weights, a great and a small. 14 You shall not have in your house diverse measures, a great and a small. 15 You shall have a perfect and just weight. You shall have a perfect and just measure, that your days may be long in the land which Yahweh your God gives you. 16 For all who do such things, all who do unrighteously, are an abomination to Yahweh your God.

Deuteronomy 25:13-16 (WEB)

       In our business with people – all people, not just other Christians – we are to give them exactly what we say we will and what they’re paying for. While we no longer have weights we carry around to figure out how much we’re selling someone or how much money we’re giving or receiving, the principle still applies. We are not to cheat people in any way. In the same way, we are not to lie to avoid paying what is due or to avoid giving help when someone needs it.

       27 Don’t withhold good from those to whom it is due, when it is in the power of your hand to do it. 28 Don’t say to your neighbor, “Go, and come again; tomorrow I will give it to you,” when you have it by you.

Proverbs 3:27-28 (WEB)

       God doesn’t want us to use dishonesty in any way in our business or our lives. He loves to see us treat each other honestly and fairly, for He is truth and cannot stand lies.

       Lying lips are an abomination to Yahweh, but those who do the truth are his delight.

Proverbs 12:22 (WEB)

       One area we might blur the truth a little is when we’re trying to haggle or negotiate a lower price. God has no problem with us trying to pay a little less, but He doesn’t want us using lies to do it.

       “It’s no good, it’s no good,” says the buyer; but when he is gone his way, then he boasts.

Proverbs 20:14 (WEB)

       We shouldn’t lie about the item we’re buying to get a lower price. I’ll be the first to encourage you to get the lowest price you can, but don’t lie to a seller to do it and treat him unfairly. As we’ll see in a bit, we should treat people exactly the way we’d want them to treat us. So when you’re buying, treat the person the way you’d want people buying from you to treat you. And if you’re the seller, treat the buyer like you’d want sellers to treat you.

       No one likes to be ripped off. Part of being fair and honest is to only charge a fair price and to take no more than is actually due. John the Baptist taught this principle to the tax collectors of his day, who were notorious for taking more than they were actually supposed to:

       12 Tax collectors also came to be baptized, and they said to him, “Teacher, what must we do?” 13 He said to them, “Collect no more than that which is appointed to you.”

Luke 3:12-13 (WEB)

       We shouldn’t charge people more than what’s fair. Part of our Christian witness would be speaking up when this happens as well. If your employer is doing these things, it’s not right for you to do them just because you’re told to or because everyone else is. We are judged not by men, but by God. If we are to work as if we’re working for the Lord, that also means that the actions we take at work should glorify God.

       We must also remember that God wants us to use these business values with all people – not just those we like or agree with.

       For there is no partiality with God.

Romans 2:11 (WEB)

       God has shown no partiality in the gift of His Son. The blood of Jesus is available to all who call upon Him for salvation and redemption from sin. If God has so generously shared Jesus with all people, it is clear that He does not want us to treat anyone with partiality. We should treat all people equally with the same honesty and justice God requires of us.

How to Always Be Fair and Just

       There are many more aspects to being honest, fair, and just than the things that are covered in Scripture. And we might tend to forget them if we try to memorize a bunch of “rules”. But Jesus came preaching a message that fulfilled the Law, and the Holy Spirit teaches us how to glorify God more and more each day. So how can we remember to be fair to everyone and always know that we are being just? Jesus told us how to fulfill the whole law, and in Galatians Paul repeats the part that dictates how we treat other people:

       For the whole law is fulfilled in one word, in this: “You shall love your neighbor as yourself.”

Galatians 5:14 (WEB)

       Jesus even explained how we are to love our neighbors as ourselves. We know this as the “Golden Rule”, and it is the guiding force for all of God’s business values and ethics.

       Therefore whatever you desire for men to do to you, you shall also do to them; for this is the law and the prophets.

Matthew 7:12 (WEB)

This scripture is also found in Luke 6:31.

       By treating people the way we want to be treated, we’re loving them just as we love ourselves. If we follow this principle and let the Spirit guide us, we’ll never be unfair or unjust. We’ll always be honest because we want people to deal with us truthfully. We’ll never rip people off because we’d never want to be ripped off ourselves. And we won’t discriminate in our honesty and fairness because we wouldn’t want to be subject to discrimination either – especially when it comes to truth and justice.

       And the Spirit compels us not only to treat people as we treat ourselves, but to treat them even better than we’d deal with ourselves. Paul explains this to the church at Philippi in this way:

       3 …doing nothing through rivalry or through conceit, but in humility, each counting others better than himself; 4 each of you not just looking to his own things, but each of you also to the things of others.

Philippians 2:3-4 (WEB)

       Our culture tells us we only need to look out for ourselves – the “every man for himself” idea. But Christians are called to look out for others just as we look out for ourselves. We are to go so far as to count others as better than ourselves. I can assure you that if we truly follow Jesus’ teaching and Paul’s explanation here, we will glorify God in all that we do. All of God’s values and ethics are tied up in the two greatest commandments as Jesus explained. We are to love God with all our heart, soul, and mind, and we should love our neighbors as ourselves. Everything hangs on these two commandments. We cannot keep them ourselves by our own power, but the Holy Spirit can do it through us and make us a powerful witness to the whole world.

       So far, I have already discussed the first three concepts behind Advent ConspiracyWorship Fully, Spend Less, and Give More. Today, we’re going to look at the fourth and final concept – Love All. Here’s the Advent Conspiracy video in case you missed it:

Love All

       All of the concepts we’ve been discussing lead up to this final goal – Love All. When you choose to Worship Fully, Spend Less, and Give More, you enable yourself to Love All.

       God loved the world and gave His only Son so that anyone who believes in Him will not die but will have eternal life. Jesus showed love while He was on the earth – he cared for the poor, healed the sick, reached out to the forgotten, and showed mercy on the sinner. And then He willingly gave up His life so that we all would have the chance to choose Him over the world – to choose eternal life with God.

       When we choose to make Christmas about celebrating Christ and the love God has shown to us by sending His only Son, we give ourselves the opportunity to love like He did. Because we have chosen to Spend Less, we can join Jesus in Loving All people by giving resources to those who need help the most. We also reflect God’s love at Christmas by emphasizing relationships and presence instead of stuff and presents when we Give More.

       Your choice to buy just one less gift this year can also be a choice to show more love to someone in need. Take the money you saved from not buying that one gift and give it away to the poor. If we all buy one less gift, we can give one unbelievable present in the name of Jesus Christ.

       Advent Conspiracy is not trying to raise money for any project of their own. No money goes through them. They have partnered with Living Water International to dig wells for those who don’t have access to clean water, but you are free to give to whatever need the Spirit leads you. If you have a favorite charity, then give that extra money to them.

       This simple act of buying one less gift and giving that money to someone in need can change the world. And it just starts here. As you begin to Worship Fully, Spend Less, Give More, and Love All every day of your life, you’ll be walking in the footsteps of Christ. Your life will be a shining example of the power of God to change hearts, and you’ll change lives with small, simple choices. Join the conspiracy and enter the Story.

Rent or Buy - Your Choice!       I recently had a friend comment that renting is “throwing away money”. This is a common misconception because home ownership has been touted as the best path to building wealth and a great decision for everyone. But the truth is that renting isn’t really as bad as some would have you think. In fact, it can be the best choice for many people – it all depends on your situation.

       But specifically, I want to look at the idea that paying rent is just throwing away money. The unspoken assumption in that idea is that once you buy a home you’re no longer throwing away money. This simply isn’t true. Here are five ways you throw away money when you buy a home.

1. Mortgage Interest

       Assuming you get a mortgage when you buy a house, like most everybody does, you’re going to have mortgage payments to make. Part of those payments will go toward the principal (what you paid for the house minus your down payment) and part will go toward interest.

       The part of your mortgage payment that goes toward interest is just as much “throwing away money” as rent payments are. It’s money you’ll never get back and does nothing to improve your net worth. And on an average 30 year mortgage, it’s going to take you about 16 years before you’re paying more toward your principal than you are toward interest.

       Granted, this isn’t as big of an issue later in your mortgage and it doesn’t matter at all once it’s paid off. But don’t underestimate just how much money you’re going to be throwing away on mortgage interest – especially at the beginning.

       And while we’re on the topic of mortgage interest, let me just add that the mortgage interest tax deduction isn’t as good as you think

2. Homeowner’s Insurance

       Homeowner’s insurance can cost anywhere from about $600 a year to $1,200 a year or more. By comparison, my renter’s insurance policy costs about $110 per year and it’s some pretty good coverage. So you’re looking at an additional $500 to $1,100 or more in insurance premiums because you’re covering the entire value of the home. (Renter’s insurance is mostly just for liability and contents of the home.)

       Part of the money that’s “thrown away” in rent goes toward the insurance coverage the landlord buys for the home. So make sure you take this into account when comparing the difference between renting and owning.

3. Property Taxes

       Own a home? Be ready for your property taxes, which can be anywhere from 0.25% of the value of your home up to 3% or more. The national average was around 1% the last time I looked. So for a $150,000 to $200,000 home, you’re talking $1,500 to $2,000 a year in property taxes.

       Renters don’t pay separate property taxes on the home they’re renting. Those taxes come out of the rent they pay, but renters never see a separate bill for property taxes owed.

       And no, you can’t refuse to pay your property taxes. Do so and you can say goodbye to your home.

4. Home Maintenance and Repairs

       As a homeowner, you’re completely responsible for all maintenance and repairs on your home. These costs are going to vary quite a bit based on each situation, but I’d say a reasonable estimate would be about 1-2% of your home’s value each year. So for our $150,000 to $200,000 home, we’re talking about another $1,500 to $4,000 a year in costs. Maybe you could get away with less, but you’re looking at a minimum of $500 to $1,000 per year.

       Renters? Yeah, they don’t have to deal with these costs. They’re the responsibility of the landlord. And while you could have a landlord that doesn’t take care of the property, it’s pretty easy to move somewhere else. Which brings me to…

5. Higher Costs for Moving

       Moving tends to be much more of a hassle for homeowners than renters. It can take some time to sell a home – time you may or may not have before you need to move or start paying on your next mortgage. On top of that, you’ve got costs associated with selling that come out of your final price (commissions, inspections, and sometimes closing costs if you’re in a real hurry). Some of these costs can be reduced by doing it yourself (for sell by owner) but then you’re looking at more time and effort on your part (and you’ll still want to get a real estate attorney).

       Renters have it pretty easy here. Assuming you’re at the end of your lease, it’s no big deal to find another place and move. And if you’re not at the end of your lease, it’s probably going to cost you less to break the lease than it would cost a homeowner to sell their house.

Repeat after me: “Renting is not always throwing away money.”

       It should be clear that there are plenty of ways to throw away money if you own a home – enough ways to make it worse than renting. That’s the case for me, at least, and that’s why I plan to rent for quite a while longer. I’d need a phenomenal deal to make buying a better choice than renting at this point. And it may be the case for you as well. The least you could do is take some time to play with a rent vs. buy calculator and see how the numbers work out for you.

       I should add that I didn’t even discuss the fact that many people tend to overbuy when they become homeowners. And did I mention the desire to remodel, upgrade, paint, redecorate, landscape, and on and on and on? Home ownership isn’t quite the great financial asset many make it out to be.

(photo credit: Phil Sexton on Flickr)

This post was included in the Carnival of Personal Finance.

This post was included in the Festival of Frugality.

Death and Taxes - The only sure things!       Some people think starting a “business” so they can put losses on their tax return is a good way to reduce their taxes. The idea is that you’ll reduce your taxable income, which in turn reduces your taxes and can make you eligible for some credits or deductions that you couldn’t get before. Others think it can be a good way to write off personal expenses as “business” expenses and save some taxes that way.

       But the IRS caught on to this idea a long time ago and there are specific regulations in the Internal Revenue Code to prevent this kind of abuse. Specifically, section 183 of the code limits the deductions that can be taken when an activity is not being carried on to generate a profit. If the IRS determines that your activity is not being engaged in for a profit, then your allowable deductions will be limited to your gross income from the activity – thus eliminating the opportunity to offset your other income with losses.

       This section of the law, called the “hobby loss rule,” can throw a wrench in your business plans if you’re not careful. However, a little knowledge will go a long way in protecting you from breaking this rule accidentally and suffering the tax consequences. Here’s what you need to know.

What Is the Hobby Loss Rule?

       If you’re carrying on an activity that isn’t for profit, you cannot use losses from that activity to offset other income you might have. Basically, the IRS will limit the allowable deductions you take against your income from the questionable activity so that you can’t claim a loss.

What’s So Bad about Breaking the Hobby Loss Rule?

       If your business is found to be a hobby rather than a legitimate business, several bad things happen. First, your gross income from the business is included as “Hobby Income” which goes above the line and increases your adjusted gross income (AGI). This can have several unfortunate effects like making you ineligible for certain tax credits or phasing out some deductions. It also makes it more difficult to take deductions for your hobby expenses because…

       Second, your “business expenses” will not be allowed as business expenses. Since your business is considered a hobby, you have to take the expenses on Schedule A as an itemized deduction just like any other hobby expenses. These are considered miscellaneous deductions, which are subject to a floor of 2% of your AGI. This means you only get to start including the deductions after they exceed 2% of your AGI. Remember how you had to add your gross income above the line? Yeah, this is where it can hurt. Even worse, if your itemized deductions (these hobby expenses plus your other deductions like medical, taxes, charitable, etc.) aren’t more than your standard deduction, then you don’t get any benefit from your expenses at all.

       Finally, you’re not allowed to take a loss from your hobby activities. You can only offset all your income. Once you’ve done that, the rest of your hobby expenses are disallowed and cannot be used in future (or past) years. Tough luck.

Who Is Subject to the Hobby Loss Rule?

       Nearly every single type of business is subject to the hobby loss rule. If your business is structured as a sole proprietorship (individual using Schedule C), partnership, S corporation, an LLC taxed as any of those, or an estate or trust, then you need to be thinking about the hobby loss rule. The only business structures not subject to the rule are C corporations and LLCs that have elected to be taxed as a C corporation.

       So if you’ve started a little informal business on the side to earn some extra income, you need to be aware of the hobby loss rule and how to avoid breaking it.

How Can You Prove That You’re Running the Business to Make a Profit?

       There are two ways to prove that your business activity is actually for profit. First, there’s the presumption rule. If your business shows a profit for three out of five consecutive years, the IRS is required to presume that your business is for profit and not just designed to generate losses.

       So you can have losses for two years out of five and not have to worry about the hobby loss rule. If the IRS wants to make the case that your business is not for profit even though you meet this presumption rule, then the burden of proof is on them – not you. (And just to complicate things a bit…if your business primarily involves breeding, showing, training or racing horses, then you only need to show a profit in two out of seven years to meet the presumption rule.)

       I should add here that it is illegal to manipulate your income or expenses to try to meet the presumption rule. You are required to report all income and all eligible expenses for your business activities. This is something auditors will look for if you are audited and have reported business income on your tax returns. The reason you are required to report everything is because some people falsely report business income in an effort to manipulate their tax refunds (for things like the Earned Income Credit). The IRS doesn’t like this (because it’s illegal!) and specifically looks for people who might try that sort of thing…so just don’t do it. OK? :)

       The second way you can show your business is being run to make a profit is to prove it by the facts and circumstances. This comes in handy if you are honestly trying to make a profit but still end up showing losses in more than two years out of five. Here are the factors the IRS considers when determining whether you’re engaged in the business to make a profit:

  1. Are you running the business in a way that’s focused on making a profit? If you’re generating losses, have you been trying new methods to make a profit?
  2. Do you have the knowledge needed to make a profit in this business, or are you working with advisers who have that knowledge?
  3. Does the time and effort you’re putting into the activity show that you intend to make a profit?
  4. Do you have assets used in the business that can be expected to increase in value?
  5. Have you had success at making a profit in similar activities in the past?
  6. What does the history of your profits and losses look like for this business? Could it be considered suspicious or is it typical for this type of activity? Are the losses from the start-up phase? Are the losses due to circumstances beyond your control?
  7. Have you made a profit from the activity in some years?
  8. Do you depend on income from this activity for your finances?
  9. Is this activity purely for personal pleasure or recreation?

       No single factor controls whether your activity is for profit or not. The IRS has to weigh all the objective facts in making a determination, and they can’t make assumptions just because the number of factors showing your activity is not for profit outweighs the number showing it is for profit.

       It all comes down to the facts at hand, so the more you can do to show that it’s a legitimate business the less you have to worry about. Things like having a separate bank account, keeping good business records, advertising your business, tweaking your business to improve profitability, and spending a significant amount of time working on the business will all work to your advantage.

Public Service Announcement

       If you think you’re getting crafty with the IRS, don’t be so sure of yourself. I can assure you that they’ve seen just about everything by now, and their job is to make sure people are paying all their taxes according to the law. They’re not “out to get you,” but they aren’t going to let you cheat on your taxes either. Don’t try anything fishy, and you don’t need to worry.

       And if you’re trying to be honest and just didn’t realize these laws applied, then you might want to consider hiring someone to help you with your taxes. At the very least, you need to sit down with someone knowledgeable in this area so they can help you understand what you should know. The IRS doesn’t take “I didn’t know.” as an excuse. You’re responsible for understanding which tax rules you’re subject to and making sure you pay the taxes you owe. Failing to due so is known as negligence and doesn’t exempt you from penalties and fees.

       If you have any questions, let me know in the comments below and I’ll try to help you!

(photo credit: lucyfrench123 on Flickr)

This article was included in the Carnival of Personal Finance.

       God wants us to rest not only to remember Him but also because we need to rest. He knows it’s good for our bodies and minds to rest – especially after a period of hard work. God wants us to be ready for His work when the time comes, and that requires regular periods of rest from our work.

In the Image of God

       After creating the universe and all that is within it, God rested from His work:

       2 On the seventh day God finished his work which he had made; and he rested on the seventh day from all his work which he had made. 3 God blessed the seventh day, and made it holy, because he rested in it from all his work which he had created and made.

Genesis 2:2-3 (WEB)

       In light of God’s actions, it makes perfect sense that our bodies and minds require rest after periods of hard work. We are created in the image of God, and we, as Christians, are called to be holy as He is holy. We are to copy what we see God doing. When we rest after working hard, we are not being lazy. We are doing what God created us to do. It is for our own good that God gave us His example of resting and even commanded us to rest.

For Our Own Good

       God wants us to rest so we’ll be refreshed. But He commands us to rest for our own good. He knows that it’s easy for our work to overtake our lives to the point that we neglect Him and our families. His command to rest is an important reminder that we need to rest.

       Six days you shall work, but on the seventh day you shall rest: in plowing time and in harvest you shall rest.

Exodus 34:21 (WEB)

       I live in a very agricultural area, and I’ve seen firsthand why God added the “in plowing time and in harvest you shall rest” part to His command. When it’s time to plant, farmers have all their regular work to do on top of plowing or getting the fields ready, fertilizing, and planting seeds. And when it’s time to harvest, farmers usually need to harvest the entire crop in a short period of time – again, in addition to their regular work. It’s easy to feel like you’ve got to keep working all the time during planting time and harvest time because there is so much work to do.

       And farmers aren’t the only ones who have busy times like this. We all experience times in our work when there’s more work to be done than the days will allow. But God tells us that it doesn’t matter how much work we have to do, we need to take time to rest – to refresh ourselves and to remember Him. As long as we are fulfilling God’s call to work hard, rest is necessary to ensure that we stay healthy and sane, continue to do a good job, and don’t let our work overshadow God.

Working Too Hard

       It’s very important for us to remember that while God wants us to work hard He also wants us to rest. We can work too hard. When we work so much that we forsake God and believe our success is completely in our hands, we are working too hard. God wants us to maintain a healthy balance between working hard and resting when needed. We sometimes think that if we just work harder we’ll find the success we seek. But God wants to bless us if we’ll just rely on Him. Part of relying on God is doing the hard work He calls us to, but the other part is taking the rest He wants us to.

       It is vain for you to rise up early, to stay up late, eating the bread of toil; for he gives sleep to his loved ones.

Psalm 127:2 (WEB)

       When we work hard and rest as God wants us to, God promises to bless us and meet our needs. When we start to doubt God’s promises and begin to work ourselves to exhaustion in an attempt to do it all ourselves, we wear ourselves out for nothing.

Jesus’ Examples

       During His time on Earth, Jesus gave us many examples of our need for rest. When the Twelve disciples returned after Jesus had sent them out to preach, there were so many people coming and going that they didn’t even have time to eat. Jesus told them to go away and rest for a while:

       31 He said to them, “You come apart into a deserted place, and rest awhile.” For there were many coming and going, and they had no leisure so much as to eat. 32 They went away in the boat to a deserted place by themselves.

Mark 6:31-32 (WEB)

       The disciples had done the work that Jesus had asked of them, and now He wanted them to rest and refresh themselves. Jesus had more work for the disciples, but He needed them to rest so they could be ready for the work. In our secular work or church work, we must take time to rest. It’s clear that if Jesus told His disciples to take time to rest, He’d want us to do the same.

       Jesus also took time to rest and refresh Himself. Various times during His ministry, Jesus would try to go away to a secluded place to take rest. But because the people heard of His teachings and miracles, He could not escape the crowds. Here’s just one example:

       From there he arose, and went away into the borders of Tyre and Sidon. He entered into a house, and didn’t want anyone to know it, but he couldn’t escape notice.

Mark 7:24 (WEB)

       There are several other examples where Jesus tried to get away from the crowds and take time to rest and pray. His example clearly demonstrates that it would be wise for us to do the same. We need to take time away from our work, no matter what it is, to rest and refresh ourselves and to spend time in prayer and reflection.

       We’ve looked at how God has called us to work hard, the value of hard work, the dangers of laziness, and our need for rest. We’re going to finish up this Bible study on work by looking at God’s business values and ethics. What are the principles that should guide our work? The next five parts of this series will look at the answers to that question.

Advent Conspiracy: Give More

December 14, 2010 — 2 Comments

       So far, I have discussed the first two concepts behind Advent ConspiracyWorship Fully and Spend Less. Today, we’re going to look at the third concept – Give More. Here’s the Advent Conspiracy video in case you missed it:

Give More

       When you choose to Spend Less, the idea isn’t that you don’t give anything at all. The goal is for you to Give More. Instead of buying something that doesn’t really let someone know you care about them, you give them something more – more valuable and more meaningful – like your time.

       Christmas should be a time to love our family, friends, and even our enemies in the most memorable ways possible. But what do you remember most from Christmas as a kid? Was it the presents? Or was it the time spent making memories with your family and friends?

       The best memories we have of Christmas are the times spent deepening our relationships with each other. So after you decide to Spend Less, choose to Give More by giving your time.

       Give your time by making a special gift that will be cherished for years to come. Or give your time by writing a letter of appreciation, encouragement, or just to keep in touch. You can give time by taking your kids sledding or going ice skating with your friends. Or take time to bake some really good cookies.

       When you Give More of your time, you’re making your love visible to others. You’re creating memories that both of you will fondly remember many years down the road. You’re choosing to make Christmas less about buying gifts and more about giving love.

       That’s what God did when He sent His Son to us. He was giving His love to us because He wanted a relationship with us. And that’s why we are drawn to the idea that Christmas should be a time to love our friends and family in the most memorable ways possible. God gave us the Greatest Gift not by going to the mall and buying lots of Stuff but by giving us a Way to have a deeper, more meaningful relationship with Him.

       So follow God’s example this Christmas season and Give More. Give presence!