Archives For April 2012

Christianity, by tradition, has long affirmed the recognition of seven deadly sins. For those unfamiliar with them or the Christian tradition, they (as listed on wikipedia) are wrath, greed, sloth, pride, lust, envy, and gluttony. These seven deadly sins are considered unhealthy vices. Christian history has used these speculate what a healthy lifestyle would look like. Basically, take all of these things – make sure you don’t do any of them – and you are set.

While it may not be this simple, it is essentially the point. The truth is though, that the seven deadly sins is often ignored or forgotten. Despite learning about them from the financially successful Hollywood film ‘Seven’ by Andrew Walker, starring both Brad Pitt and Morgan Freeman, I would wager a bet that most people in my generation have not learned of the seven deadly sins. In fact, even as a Seminary student (who also grew up in a Christian family), I had to look up the seven. I new a few of them from memory, but there is no way I could name them all.

As a result of which, I thought it would be interesting to use the seven deadly sins as a structure for a financial article. What might these teach us about smart financial management and how might our lives be different if we did or did not follow them.

1. Wrath: Wrath  is often used in the Christian tradition to refer to God’s anger. This the essence of what this deadly sin refers to. Falling victim to excessive amounts of anger can do terrible things for one’s financial state. Making decisions based on anger can lead one to ignore all signs of wisdom or advice. It is always important to try and reflect on your financial state with a sound mind.

2. Greed: Greed is the strong desire for wealth, money, goods, etc beyond a healthy limit. If you are interested in reading more about greed, be sure to check out my article What is Greed? Greed can also cause all sorts of unbalance with your finances. It can cause you to be disconnected from your family or gamble away your money. It’s always important to balance your desire for more wealth with things that truly matter.

3. Sloth: Other than the movie film’s character Sid the sloth from Ice Age, the word sloth is not often used in popular conversations. This may make it hard to understand, but refers (in this case) to apathy. Apathy or sloth can cause a huge financial disaster. Not caring about monitoring your finances or even budgeting can lead to financial ruin. Before you know it, you can overspend and find yourself wondering how you are going to pay off debt. Financial management is an on-going activity that requires action and attention.

4. Pride: I am sure everyone has felt proud of an accomplishment. There are certain degrees of pride that are healthy – such as celebrating an achievement. However, there are also forms of pride that take control of your life. Before you know it, you can feel unstoppable and take risks that are unnecessary and unprecedented. It’s always important to critically question your actions when managing your finances. Can I afford to take this risk? Would I lose to much? Is my reasoning for doing so justified? These are all important questions to ask.

5. Lust: Lust, the cheap version of love, is often understood as some sort of sexual fantasy. While it doesn’t have to be limited to this definition, even this understanding helps us understand something about finances. Ignoring lust teaches us to place value on something long-term – something more than just an momentary feeling of satisfaction. The inherent message of resisting temptation and holding on to previous commitments also parallels advice given for retirement – that is, buy and hold. Thinking long-term for financial investments is a great strategy.

6. Envy: When was the last time you were envious of your neighbors new car or nicer house? Is is this effort to keep up with the Joneses that puts a lot of American families in consumer debt. Envy, or wanting to have what other people have, can lead to unnecessary spending. Take extra care not to place value in possessions – for you will never be satisfied and always wanting more.

7. Gluttony: Gluttony or the over-indulgence is a theme that I think Americans know all too well. Traditionally, Americans are known for their big houses, big cars, and many possessions. It’s unfortunate but true to a certain degree. I know that I personally have realized how much stuff I can accumulate over time. It is a struggle at times not to satisfy that urge to buy more or even eat more, but it is a healthy practice to avoid doing so. This reminds you that giving should be an important aspect of your life as well as keeps you from completely buying into the consumerism myth that possessions will make you happy.

I didn’t realize it when I started writing this post, but it’s remarkable how well the old, Christian traditions still speak to the experience of contemporary American culture. Managing your finances is never black and white, but full of shades of gray. It means weighing options and deciding which is the best one. Hopefully these deadly sins will give you an idea of what not to do.

Have you ever wondered what it would take to have a successful business? You might be looking to start your own business or take your existing one to the next level. Understanding the characteristics of a successful business might give you the tools necessary to transform your business into a profitable one. Not everyone is born with natural business insight, but it can be something that you learn.

Three Traits of a Successful Business

  1. Marketable Product/Service: All successful businesses are dependent on having a clear product or service that is marketable. If it is not clear what you can offer customers, it will be hard to earn a large profit, no matter how hard you work. The best business starts with a great idea – but it isn’t until this is made practical that success is reached. In other words, you have to be able to “sell” your product or service easily.
  2. Aggressive Marketing Campaign: The top businesses recognize that if you are going to get anywhere, you have to invest in your brand. Taking the time to establish a name for your business and advertising for your service/product will go a long ways to help you make out. I should point out that this will only work if you have a great product/service to begin with. Otherwise, it’s like throwing money down the drain.
  3. Easy Payment Options: The last thing that all business models have in common is making it easy for the customer to spend their money. If it is difficult for the customer to pay for whatever it is that you are selling, you can count on them going anywhere. In general, it is worth the money to have an elite finance department. Ensuring that all aspects of financing are taken care of, from supplier finance to customer transactions is a must for any business model. If you need an example, just think of Amazon. They have recently made it really for their customers to purchase something. Customers that have already logged in only need to click one button to order a product. It doesn’t get much easier than that.

Understanding the importance of marketing and appealing to the customer’s needs is business 101. Yet, it is what makes successful businesses stand out from those that go under. If you are wanting to establish a profitable business, think about how you can implement the same aspects. You will not regret it. Don’t forget that it’s all about keeping the customer happy and maintaining the flow of income. (If you need help keeping track of your business income, be sure to check out our business expense spreadsheet)

Can You Afford it?

Corey —  April 19, 2012

I remember growing up and having my parents tell me that they couldn’t afford this or that. You can imagine the trauma that this caused to a child, as I worried about whether my parents would have enough money to put food on the table. In reality, our family was doing just fine financially. It was a poor way of communicating to their child that they didn’t feel like buying me everything that I wanted.

We use this phrase, “I can’t afford it,” to describe what we are willing to pay for and what we are not. In reality, most of us can afford many things that we use this term for. You may say that you can’t afford something, but what you really mean is that you don’t care enough to prioritize that. Proper debt management is about prioritizing your expenses. It means avoiding unnecessary spending and using whatever excuse necessary to avoid going into debt.

Why Prioritizing Expenses Matters

While the phrase, “I can’t afford this,” may not be entirely accurate, it does represent an effort to prioritize your expenses. The fact that you are considering what you should and should not buy, shows that you are trying to resist going into debt. Surprisingly, this happens less than you would think.

Many people these days are going into debt without considering the consequences. They become attached to material possessions and lose track of everything else. They become convinced that this will buy their happiness. But, in reality, its putting them further away from it.

When you make your next big purchase, it is important to consider whether it is that important to you. While many people would ask, “Can I afford this?” the question is really “Is this important to me?” This is a better question because after the basic expenses like rent, we can afford to do a lot of things. It just means that we have to give up other things. When I am considering going on a vacation, I make sure that I can still afford to do other things that are important like saving for retirement, giving to charity, paying my bills, etc. Taking time to ask yourself these questions can go a long ways to help you stay out of debt and responsible with your finances.

Top 5 Mortgage Mistakes

Corey —  April 19, 2012

As someone who is looking forward to purchasing a condo next year, I have been doing a crazy amount of research on mortgages.  Honestly, I keep stumbling upon mistakes that people have made with mortgages.  Since I don’t want to be someone who makes a mistake with their mortgage, I’m planning on soaking in all useful advice and attempting to make the wisest decisions I can going forward!

So, what are the worst mortgage mistakes one can make?  Well, I’ve compiled the top five mortgage mistakes and hopefully you can learn from what other people have done wrong and not make the same mistake!

1- Taking out an adjustable rate mortgage

Can someone say 2008?!  This is what caused our most recent recession among some other things.  An adjustable rate mortgage plays into the greedy side of Americans and allows you to buy a bigger house than you can afford.  The first few years, you’ll have a really low interest rate but then this rate ends up shooting up over time.  The problem with this is that you’ll end up drowning in interest payments and more than likely lose your home!  Talk about humiliating…

2- Settling for a reverse mortgage

For the crowd of age 62 and older, a reverse mortgage may seem inviting but it’s designed to bite you in the butt.  What a reverse mortgage does is provides a stream of income by pulling out funds from your home equity.  This can be paid out through an annuity or monthly payments.  It’s up to you what poison you pick because either way, you’ll be faced with hefty fees and you will slowly lose ownership over your home and have to hand it all over back to the bank.  Does not sound like fun to me!

3- Skipping the down payment

If there is one thing you need to remember from this article, it’s that you NEED to put down a down payment!  Why you ask?  It’s not unusual to find yourself upside down with your mortgage if you don’t.  You can end up owing more money than your home is worth.  At this point, it’s flat out painful.  You want to avoid this situation.

4- Can anyone say exotic mortgages?

I bet you’ve never heard of these bad boys.  Exotic mortgages may sound enticing but they are dangerous financial vehicles!  Instead of building up your equity, exotic mortgages produce negative equity.  Yes, you’re naming your payment price, but at some point, all the debt you took out for your mortgage is going to come due.  As the years go on, you are increasing the amount you owe.  It’s counter-intuitive and I advise that you avoid this at all costs.  Owning a home is not worth this risk!

5- Liar, liar, pants on fire: liar loans

Liar loans make me sick just thinking about them.  Not only are they irresponsible to take out but they can ruin your financial life.  At the core of a liar loan is that you don’t need to produce any verifiable documentation in terms of income and job stability.  In theory, people can lie on these loans and the bank will just assume you’re telling the truth.  Because you lied on your income statement, you will soon find yourself not being able to make the monthly payments.

Don’t fall for these mistakes!

In conclusion, don’t fall for these bad decisions.  While they may seem cool and unique, they are designed for your failure.  There is something to be said about ethical mortgages and choosing responsibility over showing off a big house.  At the end of the day, you should only be buying enough house for your needs.  It’s anti-American to do that but times are changing!

One of the most obvious bible passages that relates to personal finances is the story of the rich young ruler. The passage, which is found in all three of the synoptic gospels (Matthew, Mark, and Luke) tells the story of a man asking what he needs to do to obtain eternal life. The question is one of the most pertinent questions because since those of us living in western society are the rich, it forces us to ask whether we need to give away all of our wealth. Does God’s message suggest those who are following Jesus to give away everything we have? Such an extreme message seems to suggest that financial planning of any sort is the opposite of what Jesus commands. This seems to be the opposite of what this blog is about, but if we refuse to go the extreme, do we lost the identity as Christians. This paradox is one that has puzzled the church for some time, so I thought I would spend some time reflecting on it.

Here’s the exact words from Mark 10:17-31:

17  And as he was setting out on his journey, a man ran up and knelt before him and asked him, “Good Teacher, what must I do to inherit eternal life?” 18 And Jesus said to him, “Why do you call me good? No one is good except God alone. 19 You know the commandments: ‘Do not murder, Do not commit adultery, Do not steal, Do not bear false witness, Do not defraud, Honor your father and mother.’” 20 And he said to him, “Teacher, all these I have kept from my youth.” 21 And Jesus, looking at him, loved him, and said to him, “You lack one thing: go, sell all that you have and give to the poor, and you will have treasure in heaven; and come, follow me.” 22  Disheartened by the saying, he went away sorrowful, for he had great possessions.

23 And Jesus looked around and said to his disciples, “How difficult it will be for those who have wealth to enter the kingdom of God!” 24 And the disciples were amazed at his words. But Jesus said to them again,“Children, how difficult it is[a] to enter the kingdom of God! 25 It is easier for a camel to go through the eye of a needle than for a rich person to enter the kingdom of God.” 26 And they were exceedingly astonished, and said to him,[b] “Then who can be saved?” 27 Jesus looked at them and said, “With man it is impossible, but not with God. For all things are possible with God.” 28 Peter began to say to him, “See, we have left everything and followed you.” 29 Jesus said, “Truly, I say to you, there is no one who has left house or brothers or sisters or mother or father or children or lands, for my sake and for the gospel, 30 who will not receive a hundredfoldnow in this time, houses and brothers and sisters and mothers and children and lands, with persecutions, and in the age to come eternal life. 31 But many who are first will be last, and the last first.”

Initial Commentary on Rich Young Ruler Passage

There are a few preliminary points that I need to point out before reflecting on the question of whether you need to give away all of your wealth. The first, and perhaps more important, is our understanding of “eternal life.” Most often, in Christian circles, this is understood as the path to Heaven. When understood this way, the rich ruler’s question to Jesus seems to be phrased as such: “Jesus, what do I need to do in order to get into Heaven?”

This couldn’t be further from the truth of what he is asking Jesus. Instead, eternal life is more accurately referring to a way of life. In the same way that the “kingdom of God” is referring to a movement that Jesus is starting (instead of some place you go after you die), so is eternal life.  This interpretation is supported by Jesus’ response. He instantly refers to the commandments. The commandments were a part of the covenant of Israelites with God – it was about their life with God right now – in this world. Therefore, the rich young ruler’s question, when paired with this understanding of ‘eternal life’, affirms the importance of our action now.

A Possible Interpretation of Rich Young Ruler Passage

The question remains then, what should be the Christian response when it comes to using our wealth. Does this passage suggest that we need to give everything away?

While it may be tempting to support such an idea, I think reading the passage in this way is too simplistic and misses the point of the passage. Jesus’ point is not that everyone who is rich should give away everything that they have, but instead to point out that we are too strongly connected to our possessions. After all, verse 22 says,

 Disheartened by the saying, he went away sorrowful, for he had great possessions. (emphasis added)

I am not sure about you, but I know that I can relate to this state of being. I know that I am considered on of the richest people in the world. While I strive not to be tied down to physical items or consumed with buying the latest, fastest gadgets, it can be difficult at times. I think we can all relate to wanting the best stuff. The problem is too often we let our consumerism get in the way of following a better path. Instead of feeding the poor, or contributing to a better society, we are caught up taking care of our items. It was just today that I had to run to the DMV before work, drop off my car to get the oil changed, and will have to do several other errands this just to take care of my car. While it is a blessing to have such items, it can also be a curse, as it has the potential to drain all of my free time.

If we understand this passage this way, it helps re-affirm our act of being intentional with our finances. Planning, one of the core fundamental values of this blog, is supported. Following Jesus or even caring for others does not mean that we do the opposite of financial planning, but the exact opposite. In order to help others, we need to weigh the options and be purposeful to not get caught up in consumerism. Jesus asks us to step away from the distractions for the benefit of others. Last but not least, it is important to point out that I am not saying that you should forego giving. This isn’t in support of the idea of hoarding all of your wealth to yourself because it is yours and we are supposed to be wise with our money. Instead, this is an attempt to hold in tension the willingness to help others while also planning ahead for the financial needs that will come up with your family.

Do you identify with the rich young ruler? Is it difficult to avoid buying the latest items?

Do you know how missionaries in the traditional sense fund their efforts? Growing up in and being an active of a Christian church, I have become quite familiar with how missionaries fund their mission efforts. In fact, it was just last week that I met up with a friend of mine who, with his wife, is an official missionary with a particular denomination.

He and his wife returned from overseas for 2 short (and meeting-filled) weeks in the U.S. In fact, it was so busy for him and his wife that I only got to see him for a couple hours. One of the primary purposes of their trip back to the U.S. was to raise more monetary support. While it was great to see him and he was able to connect with friends, I can’t help but question the sustainability of the Missionary system. While my particular friend wouldn’t consider himself a traditional missionary, I still can’t help but criticize the traditional system of missionaries, with particular attention to the finances.

What is a Missionary?

For those who didn’t grow up in the church, you may be wondering what I am referring to or what/who is a missionary. Let me first start by defining missionary, as it has traditionally been understood within Christian churches. While I would like to trace the development of this term, it would take thousands of words to do so – and unnecessarily so.

In the traditional sense, a Missionary is one who is on a mission by God. While this is the basic understanding, the term is most often used to refer to a religious individual who travels overseas for the sake of spreading the gospel – i.e. sharing about the influence of Jesus Christ in their lives in order to make the world a better place. The actual work that missionaries get involved in varies from person to person. Some see the most important aspect as winning souls, saving innocent people from an eternity in Hell. Others find the purpose in making this world a better place and focus more on social justice issues.

While there are recent voices who stress the importance that anyone can be a missionary in their home location, there is a strong correlation with moving overseas or to a foreign place.

How Missionaries Traditionally Fund their Efforts

Moving to a new place is difficult enough without having to worry about how to provide for the family. Given the primary purpose of a Missionary’s effort to be about church-related activity, it is often difficult, if not impossible for Christian missionaries to provide for themselves as they work in a new place. As a result, missionaries are often financially able to do what they do only by support from the sending communities. It is through the financial support or sponsorship that they are able to leave and pursue this work.

My friend and his wife are only able to live overseas as seminary instructors and members of the church through the support of many local churches here in the U.S. Simply put: sponsorship makes their work possible. This means lots of visits to churches and correspondence with local churches to fund their trip(s) and effort(s).

Is this Missionary System Sustainable?

While I think sponsorship is an important step in the right direction, I can’t help but wonder about the sustainability of this system. First and foremost, (and not just financially) this form of Missionary work can easily be seen as charity (in a bad way). What I mean is that this type of work, while helpful for many people, does nothing to help the other community long-term. It is a short-term fix; a band-aid.

Financially speaking, the system to fund missionary work is very similar. In order to obtain enough money to support their efforts, missionaries are often required to return to their home to ask for financial support. For many people, this could mean long periods of time away from what their work. It is not only dependent on the willingness to give of the rich communities, but does nothing to stimulate the economy where Missionaries are working. This is all done instead of trying to create a business in the new community, which would be of greater help to the communities in which missionaries serve.

To put it simply, the traditional ways that missionaries fund their efforts is not sustainable. It is always dependent on the sending community’s support and does very little to empower the community that missionaries serve. I don’t mean to say that the entire concept should be thrown out the window. But, if Missionaries want to have any lasting influence on the community that they are serving, they should make every effort to create sustainable change.

What are your thoughts on Missionaries?

How Much Do I Need to Give?

Corey —  April 3, 2012

Have you ever wondered how much you NEED to give? Whether you are wondering about the standard amount of tithing or giving to charities, this is a very popular question. Regrettably, this question has been debated for decades (if not longer) with no happy answer. While I will work to answer this question, I want to point out that I don’t intend to give an easy answer. I won’t suggest that you should give this much or that much.

Should Giving be a Necessity?

The first thing I want to point out is that giving should not be a necessity. In my opinion, the question, “How much do I NEED to give?” is the wrong question to ask. In fact, it often misses the purpose of giving altogether. Let me explain. By asking how much do you need to give, you are looking for a set amount to satisfy some mysterious requirement. When we ask this question, as we often do, we are acting as if God wants us to give a certain amount away. I don’t know about you, but I don’t think God is about easy answers. The world that we live in is much more complicated than a simple black and white solution – It’s easy to see why this applies to giving. People’s financial situations are different for everyone, so how can there be a standard for giving?

More importantly, asking what is necessary to give away defeats the purpose of giving in the first place. Giving is suppose to encourage generosity and help for others. Asking this basic question, while it may be intended for good, is actually (at least partially) motivated by selfish desires to satisfy this false assumption of good. I know this to be the case for me. Usually when I ask how much should I give, I am trying to give the bare minimum to appease my conscience or guilt.

Giving Should Never Be Coerced

If you are asking this question, while it may be motivated by this desire to keep more money for yourself, it is moving in the right direction. Asking this question in the first place suggests that you recognize that the world is in bad shape and you want to contribute towards making it a better place. The simple fact is that no one is perfect. There is no ideal person for giving. If we wanted to, we could criticize everyone for being too selfish at times. The purpose is not point out everyone’s faults and therefore justify how we spend our money on ourselves, but instead move towards giving freely.

I should point out that giving should never be seen as a competition. The point isn’t all about just giving more, but changing the motivations behind our giving. After all, the widow’s offering shows us that it’s not the amount that is important, but the sacrifice.

Perhaps the question should not be how much do I need to give or even should I give… but instead, “Why Should I Give?” Perhaps when we begin to buy into this idea of generosity, we will move beyond these legalistic questions of how much or how little… Instead, we may be able to start making a difference in this world.

Why is Giving Important for You?