Personal finance doesn't need to be complicated.       Good money management isn’t about making all the smartest moves. It’s about avoiding the dumb mistakes. You don’t need the perfect budgeting method, the highest interest rates on your savings, the best investing strategy, or a flawless system for managing your money. Those things certainly won’t hurt you, but they’re not essential for financial success either.

       Learning to avoid the major pitfalls in personal finance is all you really need to be moderately successful. Getting a hold on the basics of personal finance is enough to get you most of the way there. The advanced stuff only helps you improve your success once you’ve gone as far as the simple stuff can take you. Let’s talk about a few examples so you can see what I’m saying.


       Dumb Mistake: Spending more than you earn.

       The Basics: Don’t spend more than you earn!

       It’s so simple that it almost sounds stupid, but spending less than you earn (or earning more than you spend…) is by far the most important step in personal finance success. Without it, you’ll be floundering in debt and never getting ahead. But with it, you’ll be well on your way to controlling your money and putting it to work for you.


       Dumb Mistake: Having no savings at all.

       The Basics: Keep an appropriate amount in savings for emergencies.

       Without some savings in place, you’ll have to rely on credit or gifts to cover your emergencies. High interest rates can crush your financial progress if you don’t repay quickly. And relying on gifts isn’t likely to produce much success if people keep seeing you make poor financial choices – eventually their generosity will dry up. Having access to savings will help you weather hard times and give you the ability to seize good opportunities that come along.


       Dumb Mistake: Ignoring insurance because you think you can’t afford it.

       The Basics: Make sure your major risks (life, disability, home, auto, health) are covered if they need to be.

       I’m not a big fan of insurance myself, so I can understand why people tend to ignore it and put it off. It can be confusing and it’s difficult to get objective advice from someone who’s not just out to sell you a policy so they can get a commission. But taking time to learn about insurance, figuring out how much you need (if any), and shopping around for policies will be well worth the reward. Insurance can help protect the financial progress you have made and ensure that setbacks won’t destroy your finances.


       Dumb Mistake: Saving nothing for retirement and hoping it all just works out.

       The Basics: Take a little time to estimate how much income you’ll need for retirement, save the right amount every year, and invest in it in a low-cost, diversified portfolio of index funds with an appropriate asset allocation.

       Ignoring retirement because you’re not sure what to do isn’t going to help anything. Too many people wait until 10 years before they want to retire to start thinking about whether they have enough saved or not. That’s just about the dumbest thing you can do in retirement planning because there’s very little you can do at that point without some drastic changes to your life. But a little basic knowledge and small time commitment can help you come up with a plan to save a bit each year for retirement. Revisit that plan every few years and you can approach retirement with more confidence.

Stop Worrying and Get Started!

       The basics of personal finance will get you a long way in your journey but not if you don’t start implementing them now. Yes, there’s much more to discuss about personal finance than the few things I’ve laid out here. But these few examples show that just a little basic knowledge will get you most of the way there. You can worry about all the complicated stuff as you get farther along, but if you don’t start using the basics now you’ll never get to a point where the complex stuff even begins to matter.

       So stop worrying about whether you’ve got it all figured out yet. If you know the basics, start doing that stuff now. You can improve things as you go along to increase your chances of success, but neglecting the basics will ensure that you’ll never have to worry about all the advance moves you could make in the future. Master the basics and you’ll be fine!

photo credit: (Eric Wüstenhagen on Flickr)

       We’ve already seen that God desires Christians to work hard as a way to glorify His name. But that’s not the only reason He calls us to work. There is value in hard work, and these tangible benefits are impossible to achieve without effort. Today, we’ll look at how hard work provides for our material needs.

Will Work for Food

       With the money we earn from work, we can buy the things we need. Food and water, shelter, clothing, fuel for warmth in the winter, and other necessities can only be obtained when we are willing to work for them. This could mean earning the money to buy those things, or putting in the time and effort to make or produce those things ourselves. Unless we are willing to work hard, we will not get the things we need to survive.

       One who works his land will have an abundance of food; but one who chases fantasies will have his fill of poverty.

Proverbs 28:19 (WEB)

       Working hard with what God gave us will provide an abundance for our needs. But sitting around talking about what we could do or will do brings us nothing but poverty. This clear advice from Proverbs tells us that we need to focus on actually doing the needed work instead of chasing fantasies. Those dreams of getting easy riches from the stock market or some get-rich-quick scheme will bring you no closer to actually meeting your needs.

       In all hard work there is profit, but the talk of the lips leads only to poverty.

Proverbs 14:23 (WEB)

       Hard work will provide for our needs. Talking about our needs and how we wish we had the money to get the things we need does absolutely nothing to bring us closer to meeting our needs. God’s wisdom has not changed throughout the ages – this is as true today as it ever was in the past.

       Before I go much further, I want to stop and look at what our needs really are. When I’m talking about needs, I mean the things we actually need to survive. Food, clothing, a place to live, a way to stay warm in the winter, transportation to our jobs (if necessary), etc. – these are things required to survive. Cell phones, cable/satellite, entertainment, eating out, internet, and other things that aren’t absolutely necessary for our survival are luxuries or wants. We’ve forgotten these definitions of needs and wants in the U.S., but spend any amount of time learning about living conditions in third-world countries and you’ll start to realize how easy we have it here.

       It’s important we understand the difference between needs and wants when we start talking about budgeting or giving. Part of denying yourself and taking up your cross is realizing what the “wants” are in your life and choosing to forgo those in order to help the poor. In some cases, this may even mean helping yourself. If you’re struggling to get by every week and keep going deeper in debt, one of the first things you need to do is break down your expenses into absolute needs and unnecessary wants. Eliminating the wants can give you the cash flow you need to make it to the next week and begin getting out of debt.

       Once we know what our real needs are, we know what our soul desires and requires to survive. Then, through hard work we can meet the desires of our soul:

       The soul of the sluggard desires, and has nothing, but the desire of the diligent shall be fully satisfied.

Proverbs 13:4 (WEB)

       God can bless us and fully satisfy our needs. But we must be willing to work hard instead of sitting around waiting for God to hand everything over to us. Working hard is no guarantee that we’ll get everything we want. But God promises to meet our needs if we diligently work and trust in Him.

Raising a Cow for Beef: Month 14

Corey —  October 20, 2010 — 3 Comments

       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 14. As always, let’s first check Bambi’s growth. Here he is at thirteen months old:

Bambi - 13 Months Old

       And here he is at fourteen months old:

Bambi - 14 Months Old

       I had a hard time getting a good picture this month due to lighting levels and moving cows. (Still haven’t gotten Bambi to say cheese…) It’s hard to tell from the pictures, but he did seem to be a bit bigger to me than the last time I saw him. He should certainly bulk up now that he’s being fed a high corn diet. We’ll see how he looks in a month!

Costs & Time

       I’ve finally got the costs for boarding Bambi included in this update. I’m paying about $1/day for boarding him, which seems to be a reasonable rate. (Is it? Anyone know for sure?) This is actually a better deal than feeding him myself, but that’s because farmers are able to buy feed in bulk and/or grow most of it themselves.

  • 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
  • Boarding – $100.00
  • Total Spent – $684.18
  • Time – 102 hours

       I paid ahead for the next month or so for Bambi’s last bit of boarding costs, so next month there won’t be much to add. The final update (after he’s slaughtered) will include the last $10 or so for boarding plus the butcher fees. I’m not sure yet, but I’m estimating butcher fees will be around $300. So maybe I’ll have a final cost of right under $1,000 (more if I include the cost of my time). I have no idea how much meat I’ll get, so it remains to be seen how this all works out financially.

       This month Bambi moved from one farm to another. Why? Well, the friends that have him now are the ones who will be taking him to the butcher when they take their cow, so it just makes things a little easier. But also, several people recommended finishing Bambi by feeding him lots of corn for the last couple of months and we can’t do that where he was staying before. He was in with many other cows, so we couldn’t feed him anything special. Now that he’s at our other friends’ farm, he’ll be staying with just one other cow and they’ll both be on a heavy grain diet.

       Other than that, there’s not much to talk about. We’re still looking for a freezer. I think I’ll need at least 14-16 cubic feet of storage space for the meat. And we still have to decide on the cuts we want, but there’s plenty of time left for that. I’ll probably focus on getting these things done in November before he goes to the butcher in December.

       If you haven’t already make sure you sign up for free updates to Provident Planning so you don’t miss out on the final steps in the process of raising a cow for beef!

Redefining Riches       My friend Rob Kuban at Dollars and Doctrine has recently released a four lesson Sunday school series called Redefining Riches. I’ve had the chance to review it and I can tell you it’s an excellent introductory course to the core principles of a Biblical approach to finances. If you’re looking for something related to finances to do in your Sunday school class or small group, I highly recommend this as a starting place. (I’m not getting paid to say this, and I don’t earn anything if you buy it. I just believe Rob’s put together a great resource with a heart for helping people understand Biblical truths about God’s desires for our finances.) It’s only $3.99 for all four lessons, which includes PowerPoint slides, leader’s guides, and handouts. You can print as many copies as you need for your group, so it’s a great deal.

       Today’s post is from the content in the lesson on generosity, which I’ve reprinted with Rob’s permission. I’m not devaluing Rob’s work because the value of buying Redefining Riches is in having the lessons already prepared for you along with the PowerPoint slides. You’ll get a good idea of the content by reading the excerpts I’ll share, but you’re still missing out on some additional content Rob includes as well as the leader’s guides and handouts.

Generosity: A Labor of Love

       Generosity is the result of a transformed heart.

       “Each one must do just as he has purposed in his heart, not grudgingly or under compulsion, for God loves a cheerful giver.” (2 Corinthians 9:7)

       God loves a cheerful giver and if we let Him, He will cultivate a joy in generosity within our own hearts. This is how we learn to give with pure motives and pure hearts. We are wasting our money and embittering our hearts when we give out of guilt or obligation. As we allow Christ to transform our hearts, we joyfully give first, proportionally, secretly and sacrificially. (See Also: Proverbs 3:9-10, 1 Chronicles 29:5-9, Acts 11:29)

       Generosity is a lifestyle of giving and loving fully.

       “Remember the words of the Lord Jesus, that He Himself said, ‘It is more blessed to give than to receive.'” (Acts 20:35)

       The call to generosity is hardly limited to the offering plate. We are called to be generous people. We should gladly choose to be generous with our money, time, energy, talents, gifts, and on, and on. Generosity, when understood Biblically, is a way of life. (See Also: Galatians 1:3-4, John 15:13)

       Generosity is a spring of life to those who give Biblically.

       “Instruct those who are rich in this present world…to do good, to be rich in good works, to be generous and ready to share…so that they may take hold of that which is life indeed.” (1 Timothy 6:17-19)

       The Bible teaches that it is better to give than to receive. We are told that generosity is one component of taking hold of “that which is life indeed”. When we give, we live as Christ calls and love others well. When we withhold, we follow the world’s idolization of consumption and love ourselves well. (See Also: Luke 6:38, Philippians 4:17, Proverbs 11:25, Proverbs 22:9, Proverbs 28:27)

What Is an Enrolled Agent (EA)?

Corey —  October 18, 2010 — 3 Comments

What Is an Enrolled Agent (EA)?       After hemmin’ and hawin’ about it for a while, I finally signed up to take the exams to become an Enrolled Agent. I’m excited about it (and a bit nervous), but I’m guessing most of you have no idea what I’m talking about. That’s because I didn’t even know what an Enrolled Agent was until I had a couple years of experience doing taxes and working as a financial planner. So here’s a basic overview of what an Enrolled Agent is and why I decided to become one.

What Is an Enrolled Agent (EA)?

       An Enrolled Agent is a person who has been authorized to represent taxpayers (without the taxpayer’s presence) before all administrative levels of the Internal Revenue Service (IRS) for audits, collections, and appeals. They aren’t restricted on which taxpayers they can represent and what types of tax matters they can handle.

How Is an Enrolled Agent Different from Other Tax Preparers?

       Until 2011, Enrolled Agents are the only tax preparers required to demonstrate their competence in tax matters to the IRS. (This is changing – see my note in the section below on why I decided to become an EA.) Attorneys and CPAs may or may not specialize in taxes, but all EAs specialize in taxation. They’re also required to fulfill continuing education requirements by law – at least 72 hours every three years. While CPAs have continuing education requirements for their license, the courses EAs take must be related to Federal tax laws. CPAs often take courses on a variety of topics not related to taxes.

       Unlike other tax preparers, Enrolled Agents (along with CPAs and attorneys) can represent taxpayers before the IRS even if they didn’t prepare their return. This is important because these other tax preparers can’t represent a taxpayer before appeals officers, revenue officers, or IRS Counsel. A tax preparer must be an Enrolled Agent, CPA, or attorney to do that. Also, an unenrolled tax preparer cannot execute claims for refund, receive refund checks, execute consents to extend the statutory period for assessment or collection, execute closing agreements, or execute waivers of restriction on assessment or collection of a deficiency in tax.

How Do You Become an Enrolled Agent?

       There are two ways to become an Enrolled Agent. You can pass a three part exam (called the SEE or Special Enrollment Examination). The three parts cover individual taxes, business & other entity taxes, and representation, practices, and procedures. Each part of the exam contains 100 questions. It’s a very comprehensive and difficult exam. Here’s a list of the documents the IRS recommends reviewing before taking the exam.

       The other way to become an Enrolled Agent is to work for the IRS for five years in a position that regularly required you to interpret and apply the tax code and its regulations. Regardless of which method you choose (exam or IRS work experience), you have to undergo a thorough background check on both your criminal history and your personal tax filing history. You can be sure you’ll be denied if you didn’t file, didn’t pay your taxes, or filed a fraudulent return. (You’d think they would have run this kind of check on Timothy Geithner before Obama nominated him to become the Secretary of the Treasury!)

Why I Decided to Become an Enrolled Agent

       I have three main reasons I decided to become an EA. Here they are:

  1. Provide Better, Higher Quality Service – I didn’t want to be in a position where I couldn’t represent my tax clients if they had an issue with the IRS that involved appeals or collections. Becoming an EA ensures that I can help my clients no matter what tax issue comes up. (Except for going to court – you need an attorney for that.)

  3. Strengthen My Tax Knowledge – Taking the Enrolled Agent exams requires you to carefully study all aspects of Federal taxes. I’m familiar with most individual tax issues and some business, trust, and estate issues, but there’s still quite a bit that I’m not 100% comfortable with. Passing the exam won’t magically make me an expert, but it, along with the continuing education requirements, will ensure that I have a more complete and deeper knowledge of Federal taxes.

  5. Upcoming IRS Requirements for Tax Preparers – Starting in 2011, the IRS is going to require all paid tax preparers (except EAs, CPAs, and attorneys) to register, pass a knowledge examination, and complete continuing education. The test likely won’t be as difficult as the EA exam, and the continuing education requirements aren’t as stringent either. But these tax preparers will still be limited in which taxpayers and tax matters they can represent before the IRS. It seemed to me that it would be better to just become an EA in the long run.

       Obviously, I’m not doing it for the marketing advantage as I’ll probably spend the rest of my professional life explaining what an EA is. But that’s OK with me because I know it’s valuable and will help my clients.

       Well, now you know what an EA is. What do you think? Sound like it was a good thing for me to pursue?

photo credit: (Alan Cleaver on Flickr)

       In the last part of this series, we looked at how God created us to work and our need to work. Today, we’re going to look at God’s call for Christians to work hard.

Glorifying God with Our Work

       There are many examples in the Bible where God calls us to good works for His glory. However, we’re going to look at a few that specifically pertain to our temporal work as a means of glorifying God.

       In 1 Thessalonians, Paul encourages the church at Thessalonica to lead lives that will set a good example to those outside the church:

       11 …and that you make it your ambition to lead a quiet life, and to do your own business, and to work with your own hands, even as we instructed you; 12 that you may walk properly toward those who are outside, and may have need of nothing.

1 Thessalonians 4:11-12 (WEB)

       When we work hard and lead respectable lives we glorify God’s name. We show people the fruits of the Spirit within our lives and give them no reason for attacking the Church because of our actions. Our honest work also provides for our needs and beyond, enabling us to honor God by giving to the needs of others as well:

       34 You yourselves know that these hands served my necessities, and those who were with me. 35 In all things I gave you an example, that so laboring you ought to help the weak, and to remember the words of the Lord Jesus, that he himself said, ‘It is more blessed to give than to receive.’

Acts 20:34-35 (WEB)

       We ought to work hard so that we can support ourselves and have more left over to give to those in need. It is in this way that we can honor Jesus’ teaching to give generously and care for the poor. When we combine our hard work with contentment in Christ, we’ll find that we have even more to give to the poor. If we can be content but continue to earn more, we can do even more in Christ’s name and to the glory of God.

       When we accept Christ, our entire mindset changes. We are no longer concerned only about ourselves and our own needs. Christ’s love in our hearts urges us to do what we can for those in need – even changing those who were thieves into workers for God:

       Let him who stole steal no more; but rather let him labor, working with his hands the thing that is good, that he may have something to give to him who has need.

Ephesians 4:28 (WEB)

       It is with that mindset we should approach all our work. We are no longer working just to meet our own needs (and then our wants) – but we are working so we will have something to give to the needy. And all this is not for our own glory and recognition, but all for the glory and honor of God.

       So let’s remember that when we work, we should work as if we’re working for the Lord. (Colossians 3:23-24) For the fruits of our labor will further the fruits of the Spirit by enabling us to give more and more in Christ’s name. And it is in this way that our work can glorify God.

Investing Is Not About Beliefs

Corey —  October 13, 2010 — 5 Comments

Scratching Head       In all my reading about investing (especially online), I’ve noticed a disturbing trend. People tend to talk about investing in terms of their beliefs. One might say, “I don’t believe people can’t beat the market. You can find good stocks by using your brain and analyzing information. I believe in active investing.” Another says, “I don’t believe anyone can beat the market. Most professional fund managers can’t do it consistently, and you probably can’t either. I believe in passive investing.” Still others say, “Market timing doesn’t work. It’s like predicting the future. I don’t believe in trying to time the market.” While some argue, “You CAN time the market if you know how. I believe it is possible to miss the bad days and save yourself a lot of money. I believe in market timing.

What’s Missing?

       You know what’s missing in most of these “belief” statements? Data. Facts. Testable, verifiable information. Knowledge. You don’t often hear people say “I know active investing works.” unless they’re talking about anecdotal evidence. And sadly, you don’t often hear people say “I know passive investing works.” They believe it because someone else believes it. Or because someone else told them to believe it. Or because it just “makes sense”. (This is true of any investment philosophy…)

Check Your Facts

       The thing is we have data, albeit historical data, but data nonetheless. We can’t guarantee that the future will look like the past, but we can learn some valuable lessons from it. We can learn that it is absolutely true that most people don’t beat an appropriate market benchmark consistently. (And when I say most people I mean 90%+ and by consistently I mean at least 10+ years in a row.) And we can verify data about market timing by looking at the results of those who try it.

       Then we get into the dangerous area of trying to predict the future. We make conjectures about what we think may or may not happen in the future. Then we build up our investment philosophy around that. Too often, we build it only on those conjectures and ignore all the data. And that’s the problem I’m seeing.

Belief or Reality?

       I’m not going to get into the details of what we think we know and don’t know. I simply want to ask you to think the next time you talk about your investing “beliefs”. Are you basing your beliefs on facts, data, and information you can test? Or are you basing it completely on feelings, conjectures, and guesses about the future or what makes sense to you?

Photo Credit: (SAN_DRINO on Flickr)