I’m Back from Florida!

Corey —  November 16, 2010 — 8 Comments

Not in Florida - but we were by the ocean! :)

       I’m sure all of you were extremely upset when you didn’t get a new post last Tuesday and the rest of this past week! (I’m only kidding…) The reason you didn’t see any updates was because I was on vacation in Florida. My wife and I drove her grandma (a snowbird) down on Tuesday. Then we spent the rest of the time visiting my mom and step-dad, and my sister and new niece. We got back today, and Provident Planning will return to its regular schedule tomorrow!

(photo credit: joiseyshowaa on Flickr)

Should Christians Save Money?

Corey —  November 8, 2010 — 9 Comments

Saving Money - Greed or Wisdom?       My Sunday school class recently finished the book Crazy Love: Overwhelmed by a Relentless God by Francis Chan. I think it’s an excellent look at the dangers of being a lukewarm Christian, and Francis shares some valuable insights into the awesomeness of God’s love for us and how we should respond to that love.

       For the most part, I thought Francis was spot on in his assessment of lukewarm Christians and how we need to be obsessed with serving God. But one particular aspect of his ideas bothered me. Specifically, this part from page 78 concerned me:

Crazy Love:  Overwhelmed by a Relentless God by Francis Chan       Lukewarm People do not live by faith; their lives are structured so they never have to. They don’t have to trust God if something unexpected happens – they have their savings account. They don’t need God to help them – they have their retirement plan in place. They don’t genuinely seek out what life God would have them live – they have life figured and mapped out. They don’t depend on God on a daily basis – their refrigerators are full and, for the most part, they are in good health. The truth is, their lives wouldn’t look much different if they suddenly stopped believing in God.

from Crazy Love: Overwhelmed by a Relentless God by Francis Chan

       Francis then quotes the parable of the rich fool from Luke 12:16-21. Along with some other parts of the book, Francis seems to be hinting at the fact that Christians shouldn’t save money at all. They should be giving everything away.

       Make no mistake. I firmly believe that Christians should be marked by radical generosity. But I think the flaw in Francis’ ideas is that they ignore the counsel of Scripture as a whole.

Treasures in Heaven

       I think some people are quick to say Christians shouldn’t save because of Jesus’ words in Matthew 6:19-21:

       19 “Don’t lay up treasures for yourselves on the earth, where moth and rust consume, and where thieves break through and steal; 20 but lay up for yourselves treasures in heaven, where neither moth nor rust consume, and where thieves don’t break through and steal; 21 for where your treasure is, there your heart will be also.”

Matthew 6:19-21 (WEB)

       I’ve heard some comment on this passage as though Jesus is condemning anyone who saves up money. Their logic is that if you’re saving up money and not giving it away, then your heart is attached to that money rather than to God.

       But think for a moment about the word “treasures”. We’d hardly use that word to talk about just enough to meet our needs. Rather, it denotes the idea of wealth – an abundance that far exceeds our needs. When we look at the whole of Jesus’ teachings about money, we see that His warnings were targeted at greed and selfishness rather than prudent money management combined with contentment.

       I say this with some confidence because Jesus never contradicted Scripture. And throughout Scripture we see admonition and teaching to wisely manage our affairs while still trusting in God.

Prudence and Responsibility

       Consider the numerous verses in Proverbs that commend wisdom in handling money and our affairs. Here are just a few:

       The prudent sees danger and hides himself, but the simple go on and suffer for it.

Proverbs 22:3 (WEB)

       Precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it.

Proverbs 21:20 (WEB)

       6 Go to the ant, you sluggard. Consider her ways, and be wise; 7 which having no chief, overseer, or ruler, 8 provides her bread in the summer, and gathers her food in the harvest.

Proverbs 6:6-8 (WEB)

       Additionally, the New Testament speaks to our responsibility to care for the needs of our family (including ourselves) so that we will not burden the Church.

       But if anyone doesn’t provide for his own, and especially his own household, he has denied the faith, and is worse than an unbeliever.

1 Timothy 5:8 (WEB)

       If any man or woman who believes has widows, let them relieve them, and don’t let the assembly be burdened; that it might relieve those who are widows indeed.

1 Timothy 5:16 (WEB)

       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)

       Clearly, we are to do what is wise and honorable so that we can provide for our family and our needs within reason. This would also include saving, since we know that the unexpected happens. Car repairs, medical expenses, job loss – they often come without warning and we should be prepared for them. That doesn’t mean we aren’t depending on God or trusting in Him. We’re simply fulfilling our responsibility to do what we ought to do.

The Danger of Saving

       Despite the fact that we are encouraged to save and handle money wisely, we must still be on our guard against trusting in money. This is what Jesus was warning against. In our efforts to provide for our family, we can go overboard. We can save too much.

       But the Christian who is seeking contentment in Christ and the heart of God will be concerned for the poor as well as responsible money management. That’s where our total walk with Jesus works to help us understand our true needs, meet those needs through work and saving, and generously give away as much as possible. I think Paul’s words to the Corinthians summarize the basic idea of Christian giving well:

       13 For this is not that others may be eased and you distressed, 14 but for equality. Your abundance at this present time supplies their lack, that their abundance also may become a supply for your lack; that there may be equality.

2 Corinthians 8:13-14 (WEB)

       The goal is not to live on the edge but to give generously from our abundance so that we can meet the needs of others. The idea is almost communistic except that it is not forced. This is the kind of giving that flows from love. We restrict our standard of living by not satisfying all of our wants so that we can show love to others through generosity. That’s the key to Jesus’ message on wealth and giving.

Your Thoughts

       Do you think Christians shouldn’t save money? Why? And if not, have you ever encountered someone who felt this way? How did you approach this issue with them? Share your thoughts in the comments below!

(photo credit: Liz West)

       Besides providing for our needs and bringing honor to our name and God’s, hard work can help us to gain wealth beyond what is required to meet our needs. To honor God with this extra money, we need to be focused on how we can serve Him with our extra instead of thinking about how we can use it all for ourselves.

Hard Work Brings Wealth

       Hard work is the fuel for wealth. (The engine would be spending less than you earn because that’s what actually gets you to wealth.) We cannot gain wealth without hard work, regardless of whether we’re trying to honor God or ourselves. And it’s not enough to work “just enough”. We have to be willing to put in the effort:

       He becomes poor who works with a lazy hand, but the hand of the diligent brings wealth.

Proverbs 10:4 (WEB)

       Once we combine work with diligence and focus, then we can begin to gain wealth. We can all think of people we’ve worked with who did only what was required so they didn’t get fired. But it’s rarely those people who get the promotions, raises, and bonuses. This principle of working with a diligent hand is even more important for the self-employed. When you are your own boss, your income is primarily the result of your effort.

Honoring God with Your Wealth

       We’ve already determined that God calls Christians to work hard. Being lazy and bumming around when we are able to work does not glorify God at all. When we begin working hard, we not only honor God but we also reap the benefits of our work – namely providing for our needs.

       The desire of the sluggard kills him, for his hands refuse to labor.

Proverbs 21:25 (WEB)

       But it’s not just how we work that makes Christians different from the rest of the world. It’s what we do with the wealth we gain from our work. The worldly view is to use whatever you earn for yourself – it’s your money, so do what you want with it. The Christian view should be vastly different. Everything we have, do, earn, or gain belongs to God. And after meeting our needs, we are to honor God with the rest of our wealth by giving generously. (And by needs, I do not mean a luxury car because you “need” transportation.)

       Take a moment to realize how different that idea is from the rest of the world. While everyone else is worried about how they can get a bigger house, better car, nicer clothes, fancier country club – more and nicer stuff – Christians are supposed to be focused on how we can glorify God with what He has given us. How can we bless more people, meet the needs of the hungry, cloth the naked, shelter the homeless, heal the sick, comfort the mourning and the lonely? Those are the things that should constantly be on our mind. While the world is seeking more and more for itself, we’re trying to give more and more of ourselves.

       There are those who covet greedily all day long; but the righteous give and don’t withhold.

Proverbs 21:26 (WEB)

       This idea of giving generously out of our wealth, even to the point of denying many of our own wants, seems like utter foolishness to the world. But for Christians who trust in God and believe Christ, it is a sure reward. We are no longer working just so we can buy more stuff. We’re not breaking our backs so we can keep a house that’s much larger than we actually need. We are working so we can glorify God by giving away the wealth we gain and blessing the poor and needy. We are working for a sure reward.

       Wicked people earn deceitful wages, but one who sows righteousness reaps a sure reward.

Proverbs 11:18 (WEB)

Using Rules of Thumb for Retirement Planning?  FAIL       In my post on why the save 10% of your income for retirement rule is stupid I mentioned that expecting you’ll need 80% (or 90% or any other %…) of your pre-retirement income in retirement is stupid as well. How much income you’ll need in retirement is one of the major variables in calculating what you should save for retirement, so it’s important to use the most accurate estimate you can. Relying on a percentage rule of thumb is likely to steer you in the wrong direction for several reasons. Here are a few.

Housing

       Do you plan on downsizing in retirement? Or maybe you’re thinking about upgrading. Planning to move? That’s going to change more than just your housing costs. If you’re going to be renting or still paying a mortgage in retirement, you’ll need to figure that in as well.

       Consider maintenance costs as well. If you’re a handyman now and do most of your own repairs, how long will you be able to keep that up in retirement? Eventually, your physical abilities are likely to become limited and then you’ll need to hire others to do those repairs.

       You can’t plan for every possible variable in your housing costs, but these are the kinds of things you need to consider when figuring out how much income you’ll need in retirement. Housing is the highest cost for most people, so it’s even more important you get this one as accurate as you can.

Transportation/Travel

       Have you thought about how your transportation and travel costs might change in retirement? I’m guessing they’re probably not going to mirror your pre-retirement spending. The lack of a commute and the desire to travel more may offset each other for some people but not for most. This one might be difficult to figure out all at once, but if you take each aspect at a time you can come up with a reasonable estimate.

Food

       Will you be more likely to eat out in retirement, or do you want to improve your culinary skills and cook more at home? You’ll have an excellent opportunity to lower your food costs in retirement by cooking more from scratch, but many retirees look to eating out as a way to engage in social life and get out of the house. Depending on your preferences, skills, and plans, this could be another area that you’ll need to consider carefully.

Health

       During retirement, you’re going to be shouldering more of your health insurance expenses. Your health will also be at a higher risk of declining as you age, so you’ll have to expect more health costs overall. This is one area where many retirees experience a large increase in spending – especially as retirement goes on.

Income Taxes

       Depending on your personal situation and how you decided to save for retirement, your taxes in retirement could look quite different than before retirement. This is especially true if the income you’ll need in retirement is very different from your pre-retirement income. There are a number of variables that affect income taxes and they change from person to person. Assuming you can count on an average to help you might the right decision for your retirement is foolish.

Savings

       This is at least one area where the percentage rules directly account for some changes in retirement. But there’s still a problem. Maybe you waited until 10 years before retirement and had to save 30%, 40%, or 50% of your income to catch up. That’s going to drastically change once you enter retirement, so you need to look at your unique circumstances. Or maybe you hit a windfall sometime in your life and haven’t been saving anything for retirement. Following one of these rules of thumb won’t work for your situation either.

       It doesn’t matter if you don’t fit into one of the examples I shared above. The point is that your situation is different and unique to you, and you need to plan accordingly.

So How Should You Figure Out How Much Income You’ll Need in Retirement?

       I think it should be clear by now that the only prudent way to figure out your retirement income needs is to carefully consider your own situation by looking at your circumstances and expenses alongside your goals. When I was creating my free retirement calculator, I wrote an article specifically designed to help you start thinking about how much income you’ll need in retirement based on your situation. It doesn’t cover every possibility, but it will help you get started.

       My goal in pointing out how stupid these rules of thumb are is not to make things difficult for you or to make fun of others who give this kind of advice. I want you to see that your financial decisions involve factors that are unique to you. You shouldn’t risk making a wrong decision because you followed an easy rule of thumb. Take the time to really think about your situation, learn what you need to know so you can make a smart choice, and use that knowledge to manage your money well.

photo credit: (Hans Gerwitz on Flickr)

This article was included in the Best of Money Carnival.

This article was included in the Carnival of Financial Planning.

Redefining Riches: Giveaway

Corey —  November 2, 2010 — 6 Comments

Redefining Riches       My friend Rob Kuban at Dollars and Doctrine has recently released a four lesson Sunday school series called Redefining Riches. It’s a great series and I highly recommend it if you’re interested in studying this at your church or small group. It’s an excellent value at only $3.99 as it includes PowerPoint slides, leader’s guides, handouts, and the right to print as many copies as you need for your group.

       You can see an overview of the main areas it covers in these posts on Provident Planning:

The Redefining Riches Giveaway

       If you’d like to try this series out with your group but aren’t sure about buying it, here’s your chance to win a free copy! Rob has agreed to let me give away one copy of the Redefining Riches Sunday school series. You’ll get the whole package if you win.

       To enter, simply leave a comment at the bottom of the post letting me know you’d like to enter. I’ll randomly select a winner and announce it on this post. I’ll email the package to the winner, so be sure to use a valid email address! You’ve got until 7:00 P.M. EDT on November 3, 2010 to enter.

       In addition to providing for our material needs, hard work brings honor to our name and glory to God. People don’t look at a hard-working person and think ill of them. Diligent work brings respect and reward. It is key to remember, however, that this aspect of work is not to bring honor to ourselves. Our hard work is a sign of our dedication to God’s ways, so when we are honored because of our work we also honor God.

Hard Work Brings Responsibility and Reward

       In 1 Kings, we find the story of Jeroboam. He’s introduced by his reputation as a hard worker, and we see that this is why he became one of Solomon’s officials:

       The man Jeroboam was a mighty man of valor; and Solomon saw the young man that he was industrious, and he put him in charge of all the labor of the house of Joseph.

1 Kings 11:28 (WEB)

       As we continue reading the story of Jeroboam, we see that God used him and his position of power to accomplish His will. The good reputation we can build through hard work may put us in positions to do much good work for the Lord. This idea is also outlined in Proverbs:

       The hands of the diligent ones shall rule, but laziness ends in slave labor.

Proverbs 12:24 (WEB)

       Through our hard work, God can bless us and put us into positions of power – power that may then be used to further glorify God and do His will on earth. Though many people work hard to gain power for their own edification, Christians should use positions of power to build up the Lord and do His work.

Hard Work Brings Honor

       Our hard work may not always put us in positions of power, but it can help us influence those who are in leadership. Those who do their work well are often called upon to serve powerful people or to offer their advice:

       Do you see a man skilled in his work? He will serve kings. He won’t serve obscure men.

Proverbs 22:29 (WEB)

       We’ve seen this clearly in the life of Billy Graham. His reputation for clearly teaching the Word of God and explaining salvation simply has brought him into contact with many powerful people. God can use such opportunities in our lives to influence leaders to follow His will.

       God can work through many circumstances in our lives to accomplish His will, but our hard work can put us in a position to do even more for God. Next week, we’ll look at how our hard work can help us gain wealth that can be used to bring glory to God.

Is this the face of a tax evader?       So I was studying for my enrolled agent exam the other day and came across an interesting bit of information that I doubt many people know. If you host a sales party or product party (the kind that Pampered Chef, Tupperware, and others like them depend on), then you’re legally required to include any gift or gratuity you receive in your income. Here’s what the IRS says:

       If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. You must report this item as income at its fair market value.

       Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party.

From the Other Income section of IRS Publication 17

       I have a feeling the IRS is missing out on tons of revenue due to all the under-reporting that happens as a result of these parties!

What Happens If You Don’t Tell the IRS?

       Now, obviously, the IRS isn’t going to lock you up if you forget to include this income on your tax return. But if you are audited and the IRS agent can somehow figure out that you hosted such a party and received cash or items for hosting, then you will have to increase your income, pay additional taxes, and possibly pay a 20% tax penalty.

       But now you have a problem. You know about this tax rule and you should follow it. That’s going to sound ridiculous to some people, and I’m not saying our current tax system is great or makes sense. But as Christians, we must follow the laws of the government that is over us unless those laws would force us to act contrary the laws of God. This is a matter of conscience and our witness to the world – not an issue of whether the law is stupid.

       I doubt income tax laws will ever cause us to violate God’s commandments, so our aversion to an admittedly silly law is mostly because we don’t want to do it. And that’s not a very good excuse (and not one the IRS will accept either!). So as crazy as it sounds, we ought to follow these laws and report our income accurately as the IRS requires.

What Do You Think?

       I know most of you will think this is a dumb rule. I agree with you. But it’s still a dumb rule we ought to follow. My question is this: Now that you know, are you going to report this income on your tax return? Let me know in the comments below!

P.S. I’m not going to report you to the IRS either way…I just thought it would be interesting to discuss!

photo credit: (Athenamama on Flickr)

This post was included in the Carnival of Financial Planning.