If you’re the least bit interested in investing, I’m sure you’ve heard of ETFs (exchange traded funds) by now. They’re often touted as the lowest-cost option for investors who don’t want to pick individual stocks. Even my beloved Vanguard has begun pushing their ETFs much more than their index mutual funds – citing the lower expense ratios of the ETFs.

       But in all the fanfare about how cheap ETFs are, we seem to lose sight of the fact that you have to pay commissions when you buy or sell ETFs on the stock market. On the other hand, there is no cost to buy or sell mutual funds directly from Vanguard. There’s also the problem of bid/ask spreads on ETFs and premiums/discounts over the NAV (net asset value) of ETFs. I don’t have the data to analyze those costs, and it’s not possible to fully know the impact of those costs (because it depends on future prices as well).

       However, we can ask ourselves if the lower expense ratios on ETFs will offset the trading costs we have to pay to buy and sell them. This is a relatively easy question that just requires some math.

How Often Are You Trading?

       The more frequently you buy or sell ETFs, the more you’ll pay in trading commissions. So if you’re investing a certain dollar amount every month (also called dollar cost averaging), you’re going to pay one commission fee for each ETF in your portfolio every single month. (The same applies if you’re selling every month to generate income from your portfolio, though you probably won’t sell from every single ETF every month.)

       Those trading costs can add up very quickly and easily overcome your savings on the expense ratios.

A Cost Comparison

       Let’s use a simple example to see why you need to carefully consider all the costs involved with ETFs. We’ll assume you’re investing in a 100% stock portfolio that duplicates the world markets. That means you’d have 40% in U.S. stocks and 60% in International stocks. You could do this using Vanguard’s Total Stock Market Index and Total International Stock Index mutual funds. Or you could use Vanguard’s Total Stock Market ETF and FTSE All-World ex-US ETF. Your portfolio expense ratio for a 40% U.S./60% International mix would be:

  • Vanguard Mutual Funds – 0.28%
  •        

  • Vanguard ETFs – 0.19%

       That’s a difference of 0.09% – meaning that you’d save 0.09% of your portfolio value every year if you used Vanguard’s ETFs instead of their Mutual Funds. So what does that mean in dollars? It depends on how much you have to invest.

  • $10,000 to invest = $9 saved per year
  • $25,000 to invest = $22.50 saved per year
  • $50,000 to invest = $45 saved per year
  • $100,000 to invest = $90 saved per year

       This holds true until you have $250,000 invested, because at that point you can get a lower expense ratio on the Total Stock Market Index mutual fund – bringing the total expense ratio for the mutual fund portfolio down to 0.24% and lowering your savings to 0.05%.

  • $250,000 to invest = $125 saved per year
  • $500,000 to invest = $250 saved per year
  • $1,000,000 to invest = $500 saved per year

       So you can see the cost savings isn’t quite as great as the media makes it out to be. Yes, $500 saved is $500 saved – but you need $1,000,000 to invest before you’ll realize that kind of savings every year!

       Then we need to consider your trading costs for using the ETFs. The lowest commissions I’ve found are at TradeKing where they charge $4.95/trade or Zecco where they charge $4.50/trade. Here’s what your costs would look like for a 2 ETF portfolio if you’re using TradeKing (you’d save a little more by using Zecco):

  • Trading once per year – $9.90
  •        

  • Trading twice per year – $19.80
  •        

  • Trading six times per year – $59.40
  •        

  • Trading twelve times per year – $118.80

       So if you’re trading six or more times a year (buying or selling both ETFs in your portfolio) and you have less than $25,000 invested, you’re better off just getting the mutual funds directly from Vanguard (because you won’t have to pay trading costs). You could lower your trading costs by only buying one ETF at a time and only buying or selling once or twice a year, but that is not how most people invest.

       After you have $25,000 to invest you could use Zecco and get 10 free trades every month. But that $25,000 minimum balance for free trades applies to only one account, so if you have multiple accounts (more than one IRA, or an IRA and a taxable account) you can only get the free trades on one of them. If you’ve only got one account and you’ve got more than $25,000 to invest, then using Zecco to buy Vanguard ETFs could be a good choice. But there is a $30 annual fee for IRAs at Zecco, which will still eat into your cost savings (plus another $30 IRA closing fee if you ever decide to move to another brokerage firm). If you want to open an account at Zecco, you can go to their website.

It Only Gets Worse

       We only looked at a very basic portfolio in that cost comparison. But what if you want to invest in a more diversified portfolio or you want to add bonds? The trading costs only get higher and higher, unless, of course, you can use Zecco’s or another brokerage firm’s free trades program.

       However, as I pointed out, those free trades programs are generally quite limited and may carry other costs like annual service fees. You also have to deal with the uncertainty of whether those programs will continue. Once the terms of the free trades program changes (as they have in the past), you may end up paying a lot more in commissions than just $4.95/trade.

       You won’t run into those problems if you’re buying and selling mutual funds directly from Vanguard. And in many cases, you’re better off going that route anyway. Especially considering that the cost savings on ETFs don’t really amount to much even if you have a large portfolio. Add in those unknown costs of the bid-ask spread (probably negligible) and NAV premium/discount (could be a problem depending on when you buy/sell) and you have another variable in the equation.

Make Sure ETFs Make Sense for You

       The point of all this is not to say that you should never use ETFs. The point is that you should carefully weigh the costs of using ETFs against the savings. That’s the only way you’ll know for sure if ETFs are actually a good choice for you.

       Or you can just ignore the math, listen to all the financial “experts” on the TV, and do what they say. It’s up to you.

       Chapter 7 of Hebrews is the last example of tithing in the Bible that we are going to examine in this series, and it’s also the only mention of tithing that occurs in the Bible after Jesus’ death. For this reason, we should pay close attention to what is said here since it applies specifically to Christians.

       Hebrews is a book of better things. It talks about how Jesus and the New Covenant surpass Moses, the Law, the priesthood, and the Old Covenant. Chapter 7 in particular discusses how the high-priesthood of Jesus has replaced the Levitical priesthood. It also makes it clear that a change of the priesthood requires a change of law (from the Law of Moses to the Law of Christ). Since tithing was commanded to the Israelites as part of the Mosaic Law, it has been replaced by the Law of Christ which requires generous giving to anyone in need.

After the Order of Melchizedek

       The author of Hebrews begins chapter 7 by explaining how the high-priesthood of Jesus surpasses and replaces the Levitical priesthood. Since God declared Jesus to be a priest forever after the order of Melchizedek, the author of Hebrews uses the example of Abraham giving a tenth of his spoils of war to Melchizedek to highlight the reasons why Jesus’ priesthood is higher and better than the Levitical priesthood. You can read Hebrews 7:1-10 for the actual text, but here are the main points:

  1. The Levites only took tithes from the Israelites because of a commandment that was part of the Law that came from God. That tithe was clearly connected to the Law of Moses.
  2.        

  3. Melchizedek accepted a tithe of the war spoils from Abraham and blessed him – showing that Melchizedek is “greater” than Abraham.
  4.        

  5. The Levites receive tithes but die, while Melchizedek received a tithe but Psalm 110:4 testifies that the priest after the order of Melchizedek (Jesus) lives forever.
  6.        

  7. We can say that Levi and all his descendants (the Levites) paid tithes to Melchizedek through Abraham.

       All of these facts indicate that a priest after the order of Melchizedek, Jesus, is higher than the Levitical priesthood. After His death, Jesus replaced the entire Levitical priesthood and became the high priest of all those who choose to follow Him. His sacrifice replaces all the sacrifices the Levitical priests made, and it is through Him that we draw near to God (where previously only the Levitical priests could draw near to God).

A Change of the Priesthood Requires a Change of Law

       This change of the priesthood necessitates a change in law, because the Law of Moses is what established the Levitical priesthood and tithing is how the Levitical priesthood was supported. If the Levitical priesthood has been abolished and replaced, then the statutes and ordinances surrounding that priesthood have also been abolished and replaced.

       11 Now if there were perfection through the Levitical priesthood (for under it the people have received the law), what further need was there for another priest to arise after the order of Melchizedek, and not be called after the order of Aaron? 12 For the priesthood being changed, there is of necessity a change made also in the law.

Hebrews 7:11-12 (WEB)

       The Law made no one perfect. If it had, then Jesus would not have needed to die on the cross for our sins. We could have simply followed the Law of Moses and received our salvation that way. But we all have sinned and no one but Jesus has kept the Law perfectly. Therefore, God chose to replace the Old Covenant with a new and better covenant through His Son. Since we now have Jesus as our high priest and we are the priesthood of believers, the Old Covenant and its rules about the Levitical priesthood (including tithing) no longer apply to us as Christians.

The Priesthood of Jesus Brings Us a Better Hope

       We no longer have high priests who are weak and just as unable as we are to avoid sin. Instead, we have Jesus as our high priest forever. And it is through Him and the hope that He brings that we can draw near to God.

       18 For there is an annulling of a foregoing commandment because of its weakness and uselessness 19 (for the law made nothing perfect), and a bringing in of a better hope, through which we draw near to God.

Hebrews 7:18-19 (WEB)

       By so much, Jesus has become the collateral of a better covenant.

Hebrews 7:22 (WEB)

       We no longer seek righteousness through the Law but through Jesus. We claim redemption of our sins through the blood of Jesus (an eternal sacrifice) and not through animal sacrifices. These are ways the New Covenant is better than the Old.

       In the same way, we no longer determine our giving based on the Old Covenant statute of tithing. We are to be led by the Spirit to be generous, cheerful, and sacrificial givers to the poor and needy. How is Spirit-led giving better than tithing? Because we must draw near to God through Jesus under the guidance of the Holy Spirit to know His will for our giving. You can’t figure out how much you should give by using a simple calculation. New Covenant Giving requires a close relationship with God, constant prayer, and careful discernment in order to glorify Him. Giving becomes a continual act of worship – we seek God’s will through prayer, we give according to His will, and then we repeat. This is a process that draws us nearer to God and helps us become more like Jesus.

Why Go Back?

       Now that we have a New, Better Covenant, why would we choose to go back to the Old? When you choose to limit how you give by the Law of Moses you are rejecting the guidance of the Holy Spirit and God’s desire for New Covenant Giving. Allow God’s Word to teach you how He wants you to give according to the teaching of Jesus and the examples we have in the New Testament. Here are a few articles that outline New Covenant Giving principles for Christians:

       Seek the guidance of His Spirit before deciding how much you should give. His will for you may be to give much more than just 10% or it may be to give less or nothing at all depending on your circumstances. Let God determine how much you should give instead of leaving it up to arbitrary percentages.

Why I Use Vanguard

Corey —  December 10, 2009

       Last week, I outlined my reasons for using and recommending index funds. Today, I’m going to give you my reasons for using and recommending Vanguard‘s index mutual funds in particular. I don’t have any affiliation with Vanguard. I have just found them to have a great product and great service, so I feel comfortable recommending them to you. There are no affiliate links in this post, and nobody paid me to write this.

Low Costs

       On average, Vanguard has the lowest cost index funds available in the market. Yes, there are a few competitors like Schwab and Fidelity who beat Vanguard’s expense ratio on the S&P 500 index fund. But that’s generally the only index fund category where anyone comes close to Vanguard’s low expenses. By and large, Vanguard beats the pants off everyone else who offers index funds.

       In addition to their low-cost index funds, Vanguard charges no commissions when you purchase their mutual funds directly through them. They also won’t eat you alive with account fees. They only fee they charge is $20 for each fund where your balance is less than $10,000, but they’ll waive this fee if you sign up for electronic delivery of your statements!

       Three of their mutual funds have purchase fees, but these are only international funds and the fees are below 0.75%. These fees are used to offset the costs of purchasing international companies. (However, I don’t recommend using any of the funds with a purchase fee.) Several of their mutual funds have redemption fees, but I only recommend three of these. Within the three I recommend, two of them don’t have a redemption fee after 2 months and the other one doesn’t have a redemption fee after one year. The redemption fees Vanguard charges are all meant to discourage active investors from short-term trading in Vanguard’s funds. This is good for the long-term investor because short-term investors create extra costs for everyone else when they actively trade in mutual funds. (Those extra costs would include trading costs and tax costs.)

       It’s hard to beat Vanguard when it comes to low costs, and that’s because of my second reason for using them.

Client Owned

       Vanguard is different from the other mutual fund companies because it’s not publicly traded or privately owned. Vanguard is owned by the mutual funds it manages, and those mutual funds are owned by the clients. So Vanguard works like a credit union for mutual funds.

       What does this mean for you? It means Vanguard has no conflicting interests. Their main goal is to keep your costs as low as possible – not to give big profits to private owners or dividends to stockholders. Vanguard keeps the interests of it’s mutual fund shareholders in mind and always seeks ways to provide great service while keeping costs low. Those low costs mean you get to keep more of your investment dollars.

Excellent Customer Service

       Vanguard has a long history of excellent customer service. When you call, you’ll speak to a human in less than a few minutes. I’ve only had great experiences with their customer service representatives, and they always seek to help you with any problems you might encounter. Even if they didn’t have such low costs, you’d probably consider using them just for their customer service.

Extensive Selection of Index Mutual Funds

       Vanguard has the largest selection of index mutual funds available, which means I can easily construct a diversified portfolio with low-cost funds. This factor also plays into the low cost point I explained above. You see, when you go to Schwab or Fidelity for index funds you’ll find one of two things:

  1. They charge much higher fees than Vanguard on their other index funds.
  2.        

  3. They don’t have many other index funds to choose from.

       For other mutual fund companies, their low-cost index funds are a loss-leader. They use the promise of a 0.07% expense ratio on their S&P 500 index fund to suck you into buying their 1% expense ratio funds for other asset classes. Think of it like a sale at the grocery store. The hot dogs are half price, but they’ve marked up the buns, ketchup, mustard, and relish.

       Vanguard has more index funds than anyone else and they’re consistently low cost. There are no loss leaders here.

No Noise

       Finally, Vanguard doesn’t bombard you with useless financial noise. They don’t come on TV (another reason they have such low costs) telling you that you should meet with an advisor now to buy more because the market’s going up or to sell more because the future is so bleak. If you check out Vanguard’s website, you’ll see that they teach you to focus on the long-term and watch your costs. They’ll tell you to avoid:

  • Trying to time the market
  •        

  • Worrying about day-to-day price changes
  •        

  • Trading for the short term
  •        

  • Listening the the market “noise”

       That’s the same thing you’ll hear from me, The Oblivious Investor, and others who don’t have a vested interest in selling you something that’s overpriced or making you think they can “beat the market”.

       So those are my reasons for using Vanguard. If you want to figure out how to invest in a diversified, low-cost portfolio of index funds at Vanguard, I recommend checking out my free Vanguard portfolio allocator. It provides portfolio advice based on your age and the amount of money you have available to invest. If you’ve used Vanguard in the past, let me know about your experience in the comments!

       The Gospels only mention tithing twice: once in Matthew 23:23 & Luke 11:42 (parallel verses) and once in Luke 18:12. Both times, Jesus condemns the Pharisees who believed they were righteous because of how carefully they tithed. The Pharisees believed tithing was more important than doing justice, showing mercy, having faith, or sharing the love of God. But Jesus attacked their hypocrisy and the wrong attitudes in the held in their hearts. Jesus explained that God cares more about how you love others and what is in your heart than about how carefully you follow the tithing laws.

       9 He spoke also this parable to certain people who were convinced of their own righteousness, and who despised all others. 10 “Two men went up into the temple to pray; one was a Pharisee, and the other was a tax collector. 11 The Pharisee stood and prayed to himself like this: ‘God, I thank you, that I am not like the rest of men, extortioners, unrighteous, adulterers, or even like this tax collector. 12 I fast twice a week. I give tithes of all that I get.’ 13 But the tax collector, standing far away, wouldn’t even lift up his eyes to heaven, but beat his breast, saying, ‘God, be merciful to me, a sinner!’ 14 I tell you, this man went down to his house justified rather than the other; for everyone who exalts himself will be humbled, but he who humbles himself will be exalted.”

Luke 18:9-14 (WEB)

Condemning the Self-righteous

       Jesus did not use this parable to support the idea that only those who tithe would go to heaven. Instead, He explained that those who exalt themselves above others and believe themselves to be righteous because of the things they do will not be justified before God. Rather, we are to humble ourselves and accept the righteousness that comes by faith in Him.

       The Pharisees looked down on others because they felt that they were the only ones keeping the tithe correctly. They used very strict rules about tithing and made it a point to tithe even the tiniest herbs that grew in their gardens. Since most other Jews did not observe the tithing statutes so strictly, the Pharisees believed they were more righteous than everyone else.

       I see this today among those who believe Christians are bound to tithe if they are to glorify God. Among those who support tithing as a requirement for Christians, you have some who believe you must tithe on your gross income and others who believe you can tithe on your net income (after taxes). The gross-tithers often seem to have the same attitude toward the net-tithers as the Pharisees had toward the other Jews. Tithing on your gross income is obviously more righteous than just tithing on your net…

       Again, those who believe tithing is a requirement for Christians and practice it themselves often believe themselves to be more righteous than those Christians who do not tithe. I have seen numerous comments on blogs and forums where tithers condemn Christians who do not tithe. I’ve seen people say that the church (their church) is only able to keep going because of their tithes and those who do not tithe are just “free-loaders”.

       Tell me, after reading Luke 18:9-14, what do you think Jesus would say about such attitudes? Those who exalt themselves will be humbled. I don’t care if you believe tithing is a requirement for Christians or not – if you boast in your giving and believe you are more righteous than others because of how much you give, you will not be justified before God! God is more concerned with the state of your heart than He is with how much you give. We see this reflected in Jesus’ words in the Sermon on the Mount.

       23 “If therefore you are offering your gift at the altar, and there remember that your brother has anything against you, 24 leave your gift there before the altar, and go your way. First be reconciled to your brother, and then come and offer your gift.”

Matthew 5:23-24 (WEB)

       God desires that you offer your gifts with a humble, pure heart. The gift given with self-righteousness, unforgiveness, or neglect of God’s love will not be honorable to God.

No Support of Tithing

       As I said before, the Gospels only mention tithing twice – here and in Matthew 23:23 & Luke 11:42 (which discuss the same event). When Jesus taught about giving He never said “tithe and you’re good”. Instead, He focused on making sure your heart is right before God – humble and sharing His love. He told us to give generously and freely to anyone who asks. He told us to give to the poor – not the rich. When He taught about the Law, He rejected legalistic interpretations of God’s Word and taught us to live according to God’s nature by seeking the guidance of His Spirit.

       To understand what I mean, read the Sermon on the Mount (Matthew 5-7). Every time Jesus teaches about the Law he starts by saying, “You have heard that it was said…but I tell you…” Where the Law says “Do not murder.”, Jesus says “Don’t even get angry with another person.” Where the Law says “Do not commit adultery.”, Jesus says “Don’t even think sexual thoughts about (lust after) another person.” This pattern of teaching shows that Jesus desires us to strive not just for some minimum standard – He wants us to seek God’s nature and conform ourselves to Him.

       Now let’s apply that same line of reasoning to giving. Where the Law says “You shall tithe all the increase of your fields and livestock.”, what would Jesus say? Perhaps He would tell us to give to anyone who is in need as much as we are able. Although He didn’t give us any teaching about tithing in the Sermon on the Mount, He often spoke of giving to poor and needy throughout His ministry. That alone should give us some indication as to the type of giving God is interested in. Yes, we may need to support our churches and those who labor in teaching and preaching the Word, but meeting the needs of the poor and showing them love are far more important to God than buildings or giving to people who have more than they need.

       Consider this, would God rather we feed, clothe, and shelter a poor, homeless person or have us go to a religious conference? Would God rather that we give water to the thirsty or build bigger churches?

       I’m not saying these are always either/or questions or that it’s wrong to go to religious conferences or build bigger churches. I’m simply saying that the needs of the poor hold a special place in God’s heart. We know that through His Word and through the life of Jesus. And if we are to reflect His nature and become like Him, we must approach giving with the same mindset – a mindset focused on needs and not legalistic requirements. We must look at how we can meet the needs of the poor by carefully examining our own needs and wants.

Only One More

       We have just one more Scripture to examine about tithing, and then I’ll finish up with a summary post of what we’ve learned so far. Please feel free to share your thoughts so far in the comments below!

       There are only two places in the New Testament that tithing advocates can go to find any support of the idea that Christians should tithe: Matthew 23:23 and Luke 11:42. However, we’ll quickly see why these verses do not apply to Christians. Both of these verses discuss the same event – Jesus declaring the woes to the Pharisees and scribes for believing that carefully observing the Law in some things would bring righteousness while they continually neglected the Law in the more important matters. Here are the verses:

       23 “Woe to you, scribes and Pharisees, hypocrites! For you tithe mint, dill, and cumin, and have left undone the weightier matters of the law: justice, mercy, and faith. But you ought to have done these, and not to have left the other undone. 24 You blind guides, who strain out a gnat, and swallow a camel!”

Matthew 23:23-24 (WEB)

       But woe to you Pharisees! For you tithe mint and rue and every herb, but you bypass justice and the love of God. You ought to have done these, and not to have left the other undone.

Luke 11:42 (WEB)

       Tithing advocates use these verses to teach Christians that Jesus commanded us to tithe. He clearly says that you should not have left the other (referring to tithing) undone. But interpreting and applying these verses to mean that Christians should tithe completely ignores some very important facts surrounding these Scriptures.

Jesus Was Under the Law

       The first thing we have to understand when we look at these verses is that the New Covenant did not begin until Jesus died on the cross. These verses occur in the context of the Old Covenant and were directed to people who were still under the Old Covenant. Jesus was born under the Old Covenant and under the Law of Moses, as were all the Jews who were alive during Jesus’ life. It was necessary for Jesus to be born under the Law and to keep it perfectly so He could serve as the perfect sacrifice to cover the punishment of our sins.

       4 But when the fullness of the time came, God sent out his Son, born to a woman, born under the law, 5 that he might redeem those who were under the law, that we might receive the adoption of children.

Galatians 4:4-5 (WEB)

       During His life, Jesus kept the entire Law perfectly and by His death He redeemed us from the punishment of the Law. Through Him we receive the adoption of children and become God’s very own children. This would not have been possible if Jesus had not kept the Law. And Jesus would not have been keeping the Law if He had not taught others who were still under the Law to keep it as well.

Jesus Was Speaking to Those Who Were Still Under the Law

       It should also be very clear to us that Jesus was explicitly speaking to those who were still under the Law when He said they should tithe. Who was He speaking to? The scribes and Pharisees – Jews who were required to keep the Law. Jesus would never have taught the Jews to break the Law, and He would have never imposed the Law on Gentiles who were not part of the Old Covenant.

       Consider all the times Jesus healed people. The only times we ever see Him command people to go show themselves to the priests and make the appropriate sacrifice are the times when He is speaking to Jews. He never tells Gentiles to do this. Why? Because only the Jews were under the Law! If we were to follow everything Jesus said, we would still be bringing sacrifices to the altar and following the cleansing rituals required by the Law of Moses. Consider these words of Jesus:

       23 “If therefore you are offering your gift at the altar, and there remember that your brother has anything against you, 24 leave your gift there before the altar, and go your way. First be reconciled to your brother, and then come and offer your gift.”

Matthew 5:23-24 (WEB)

       2 Behold, a leper came to him and worshiped him, saying, “Lord, if you want to, you can make me clean.” 3 Jesus stretched out his hand, and touched him, saying, “I want to. Be made clean.” Immediately his leprosy was cleansed. 4 Jesus said to him, “See that you tell nobody, but go, show yourself to the priest, and offer the gift that Moses commanded, as a testimony to them.”

Matthew 8:2-4 (WEB)

       Do we still take sacrifices and offerings (as required by the Law of Moses) to the altar? Do we require lepers and any others who would be ceremonially unclean to follow the cleansing rituals required by the Law of Moses? Why not? Jesus commanded those things to be done here in these verses. Why would we choose to continue enforcing tithing only and not these other things which Jesus told the Jews to do? Clearly, something is missing in such an application of Matthew 23:23 and Luke 11:42.

Christians Are Not Under the Law of Moses

       The reason this command does not apply to Christians is because we are not under the Law of Moses. We have received the adoption of children and have become the children of God – and this is through faith in Jesus. We live under grace and not the Law. We are justified by faith – not the Law! Any who choose to receive justification under the Law have rejected Jesus as Lord:

       1 Stand firm therefore in the liberty by which Christ has made us free, and don’t be entangled again with a yoke of bondage. 2 Behold, I, Paul, tell you that if you receive circumcision, Christ will profit you nothing. 3 Yes, I testify again to every man who receives circumcision, that he is a debtor to do the whole law. 4 You are alienated from Christ, you who desire to be justified by the law. You have fallen away from grace. 5 For we, through the Spirit, by faith wait for the hope of righteousness. 6 For in Christ Jesus neither circumcision amounts to anything, nor uncircumcision, but faith working through love.

Galatians 5:1-6 (WEB)
emphasis mine

       What good was Christ’s sacrifice if we still seek to be justified based on how well we keep God’s Laws? If you believe that Christians who do not tithe will be under “the curse” (which, by the way, is death), then why do we need Christ? All we’d need to do is tithe (and keep the other 600+ commandments in the Law) and we’d have eternal life. If you desire to live under the Law, then you’re really desiring to live a life apart from faith in Christ. Your faith is in the Law and its ability to save you.

       But we are not called to live under the Law of Moses. We are living under the Law of Christ. And the Law of Christ is a law of freedom from the punishment that is due to us (the curse, death, eternal separation from God), grace to be led by the Spirit, and justification that comes through faith in Christ (not through the Law of Moses).

       Does this mean that I’m saying Jesus abolished the Law of Moses or that the Law was not good? Does this mean we’re free to sin as much as we want? No! Jesus fulfilled the Law by calling us to serve under the Spirit and not the letter. He covered the debt of death that we owed to God for our sin and freed us to live the Law of Love.

       13 For you, brothers, were called for freedom. Only don’t use your freedom for gain to the flesh, but through love be servants to one another. 14 For the whole law is fulfilled in one word, in this: “You shall love your neighbor as yourself.”

Galatians 5:13-14 (WEB)
emphasis mine

       You see, there’s no need to require Christians to give a specific percentage of their income to the poor because we are called to love each other as we love ourselves! Following that Law of Love will meet the needs of all people and truly make God happy. Tithing because you want a blessing from God or because you fear a curse from God are not the ways to please Him. But giving because you love your neighbor will bring joy to His heart as He sees His children loving others.

       The New Covenant began at Jesus’ death when His blood was shed. After that point, all who believe in Him live by faith in His name and are called to be led by His Holy Spirit. We are called to live out the love of God and show it to those around us. And if we have faith in Christ and we are led by the Spirit, then we are under grace and not the Law of Moses.

The Tithe Was Still Only Food

       It may seem ridiculous to bring this up (again), but even here the tithe still only contained food. In the Bible, the tithe never contained money. But those who teach tithing today tell Christians to tithe on any and all income and only want Christians to give money in the offering plate – not food. You’ll see that Jesus noted the Pharisee’s focus on tithing their garden herbs – the least of all agricultural produce. The did not tithe money because it was not required by the Law of Moses.

       And we cannot say it is because they did not have money. Consider the numerous times Jesus discussed money or used money in His parables. The Jews had shekels, denarii, and other forms of currency available to them, but they never tithed their money. (Yes, there was money available when the tithe was enacted in the Law of Moses as well.) The addition of money as an object to tithe is a modern twist in an attempt to get as much money into the churches as possible. It is not Biblical and cannot be supported by any Scriptures at all.

You Can Tithe and Still Be Sinning

       Finally, the most important point in these verses is that tithing is less important than living a life that’s right before God. Even under the Law of Moses, God counted justice, mercy, faith, and sharing His love as more important than tithing. Even now, God does not desire your gifts if your heart is not right before Him. He loves a cheerful giver – not someone who is giving because of compulsion. He desires that you ask forgiveness of your neighbor before you try to give anything in His name. Your relationship with money has a huge impact on your relationship with God, but your relationship with other people is far more important.

       Jesus cursed the Pharisees even though they were keeping the tithing statutes as literally as possible. They were even tithing the tiniest of their garden herbs. But they did it with a wrong heart and neglected to do the things God desired most (justice, mercy, faith, and love). You can be tithing today and still be sinning. You can be giving 90% of your income, and God will still desire that you repent if you’re not doing justice, showing mercy, having faith, and sharing love. Love trumps giving any day.

Only Two Left!

       We only have two more Scriptures on tithing left to examine. Make sure you’ve signed up for free updates to Provident Planning if you don’t want to miss them!

       Before we get to the verse most frequently used to teach tithing as a requirement for Christians, let’s make sure we have a firm foundation for understanding the context of Malachi. If you haven’t read my discussion on 2 Chronicles 31 and Nehemiah 10, 12, and 13, please take the time to go back and study those articles. This post will still be here for you to read later. It’s important to have the right historical context for Malachi before reading and interpreting it. (Nehemiah and Malachi probably lived in the same place at the same time, so studying Nehemiah will help you better understand Malachi.)

Robbing God’s Tithes and Offerings

       Malachi 3:8-12 begins by accusing the sons of Jacob of robbing God in tithes and offerings.

       6 “For I, Yahweh, don’t change; therefore you, sons of Jacob, are not consumed. 7 From the days of your fathers you have turned aside from my ordinances, and have not kept them. Return to me, and I will return to you,” says Yahweh of Armies. “But you say, ‘How shall we return?’ 8 Will a man rob God? Yet you rob me! But you say, ‘How have we robbed you?’ In tithes and offerings.”

Malachi 3:6-8 (WEB)

       As we’ve studied already, these tithes and offerings are the things God specifically commanded to the Israelites. Although tithing advocates use these verses to support a single 10% tithe to the church, they do not discuss the other tithes God required of the Israelites or the various offerings (sin, peace, wave, etc.) He required of them as well. God was calling the people and the priests to return to keeping all of His commandments, statutes, and ordinances – not just those concerning a single 10% tithe. Using this passage of Scripture to teach a requirement of tithing to a church without including the requirement to follow all of the Law is abusing the Scriptures and twisting it for man’s purposes.

Cursed with the Curse

       God makes it clear that He is specifically speaking to the nation of Israel (and not to Christians) by cursing them with “the curse”.

       You are cursed with the curse; for you rob me, even this whole nation.

Malachi 3:9 (WEB)

       The nation of Israel had bound themselves to follow all of the commandments, statutes, and ordinances found in the Law under penalty of the curse (see my discussion on Nehemiah). What is “the curse” if not the curse that applied to those who did not keep the whole Law?

       Those who use these verses in Malachi to teach Christians that they will be cursed if they do not tithe are seriously misusing the Scriptures. You must understand that the curse God is referring to here is the same curse found in Deuteronomy 27 and 28, which applies to the Israelites who do not keep the Law of Moses.

       So if you want to teach Christians that they must tithe or else be cursed by God, then you must also teach them to keep every single commandment in the Law or else be cursed. And if you want to do that, you might as well ignore the fact that Jesus came to die for our sins and take away the curse of the Law. But we know that we (Christians) no longer live by the Law but by faith because Christ redeemed us from the curse.

       10 For as many as are of the works of the law are under a curse. For it is written, “Cursed is everyone who doesn’t continue in all things that are written in the book of the law, to do them.”
       
       11 Now that no man is justified by the law before God is evident, for, “The righteous will live by faith.” 12 The law is not of faith, but, “The man who does them will live by them.”
       
       13 Christ redeemed us from the curse of the law, having become a curse for us. For it is written, “Cursed is everyone who hangs on a tree,” 14 that the blessing of Abraham might come on the Gentiles through Christ Jesus; that we might receive the promise of the Spirit through faith.

Galatians 3:10-14 (WEB)

       So we should not be teaching that Christians must tithe under penalty of a curse from God, or else we completely ignore all that Jesus did for us. We cannot place ourselves under the yoke of the Law with regards to tithing and choose to ignore all of the other commandments, statutes, and ordinances that are found in the Law.

The Tithe in the Storehouse

       Verse 10 then says to bring the whole tithe into the storehouse so that there may be food in God’s house.

       “Bring the whole tithe into the storehouse, that there may be food in my house, and test me now in this,” says Yahweh of Armies, “if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough for.”

Malachi 3:10 (WEB)

       As we learned in our study of Nehemiah and 2 Chronicles 31, the Temple storehouse was not designed to hold the entire tithe of Israel. Only the Levites received the tithe, and they received it in their Levitical cities (not at the Temple). It was then the duty of the Levites to bring the tithe of the tithes to the Temple so there would be food available for the Levites and priests serving at the Temple during their shifts. Nehemiah specifically notes that the priests had stolen the Levites’ portion of the tithe of the tithes and the Levites went home so they could eat. (And remember that Nehemiah and Malachi address the same time period in Israel.)

       Tithing advocates stretch the meaning of this verse to include the full tithe that went to the Levites and say that the storehouse is the local church. However, the clear context of these verses and the Bible’s teaching on the tithe do not support these ideas. Furthermore, placing Christians under the burden and curse of the Law entirely ignores Christ’s sacrifice for us.

The Tithe Was Still Food and Only Food

       Finally, these verses continue to make it evident that God’s tithing statutes for the Israelites only included food and never money.

       10 “Bring the whole tithe into the storehouse, that there may be food in my house, and test me now in this,” says Yahweh of Armies, “if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough for. 11 I will rebuke the devourer for your sakes, and he shall not destroy the fruits of your ground; neither shall your vine cast its fruit before its time in the field,” says Yahweh of Armies. 12 “All nations shall call you blessed, for you will be a delightful land,” says Yahweh of Armies.

Malachi 3:10-12 (WEB)
emphasis mine

       Every single instance of tithing in the Bible, including this one, refers to the tithe containing only food and never money. The entire description of how God would bless the Israelites in this passage relates to the production of food. It’s all about how God would send them rain (open the windows of heaven means to send rain) and protect their crops. It says nothing about money or income – only food because that’s all the tithe ever contained. It was not that the Israelites did not have money – there are plenty of Biblical examples that show the use of money before, during, and after tithing was enacted among the Israelites. God never intended for the Israelites’ tithes to contain money.

       But modern tithing teachers tell you that you must give 10% from any and all sources of income – not just agricultural produce. At the same time they claim to be holding to the Bible’s teaching about tithing. It should be very clear by now that the Bible never taught anyone to tithe money, but men today want your money and teach false doctrines in an effort to get as much as they can. When will we open our eyes to this truth?

No More Lies

       I challenge you to study the truth of what I am saying and to read what God has to say about this issue. Stop listening to men long enough to hear God and then you will find His truth. We have seen that Malachi 3:8-12 plainly does not apply to Christians, but it is constantly used to force Christians to tithe out of fear of a curse from God. Do not let these lies infest your church any longer! Stand up for the truth and follow God’s principles for New Covenant giving.

Stay Tuned!

       With this we’ve looked at all the Old Testament examples of tithing. (I didn’t look at Amos 4:4-5, but it barely mentions tithing and hardly applies to our study.) I’ll begin looking at New Testament verses on tithing next week. Make sure you sign up for free updates to Provident Planning if you don’t want to miss anything!

Why I Use Index Funds

Corey —  December 3, 2009

       If you’ve used my free portfolio recommendation calculator, you’ll know that I recommend a diversified portfolio of low-cost index mutual funds. Some people recommend actively managed mutual funds or picking your own stock investments, but here are my reasons for using and recommending index mutual funds.

Maximum Diversification

       Index funds offer unsurpassed access to a diverse number of stocks and bonds within any single asset class. A single index fund can give you a piece of over 4,000 companies. Try replicating that with individual stocks and you’ll find yourself sinking under all those commission charges. Most actively managed funds are concentrated on no more than 30 stocks. If they’re investing in more than that, then what are you paying those “smart” fund managers for anyway?

Low Costs

       Index mutual funds handily beat actively managed mutual funds when it comes to costs and fees. This is especially true when you compare low-cost index funds (like those at Vanguard) to actively managed funds. On average, other mutual funds cost six times more than Vanguard’s. Mutual funds at Vanguard have total expenses of about 0.2%, while the expense ratio on actively managed funds is commonly 1.2% or even higher. The less you pay in costs, the more you keep for yourself. Additionally, index funds have lower portfolio turnover (buying and selling stocks) than actively managed funds – resulting in lower trading costs and lower taxes.

Tax Efficiency

       Because index funds trade much less often than actively managed funds or stock-picking brokers, you’ll pay lower taxes. Now this only matters in taxable accounts (not 401(k) plans, 403(b) plans, 457 plans, IRAs, or other similar accounts). But in taxable accounts it can make a BIG difference in your net returns.

Market Performance Less Fees

       An index fund will always perform exactly as well as the index it tracks less the fees (expense ratio). So if you invest in an S&P 500 index fund, you can be guaranteed to get returns equal to the S&P 500 minus the expense ratio you pay for the index fund. This is essentially guaranteed because that’s the purpose of the index fund – to match the index.

       This is not true with stock picking or actively managed funds. You have no idea what your performance will be. Actually, there’s a good chance you’ll underperform an index fund invested in similar assets. A study by the Center for Research in Security Prices (CRSP) found that over a 31 year period (1970-2000) only 19 of 345 mutual funds (only 5.5%) beat their benchmarks by 1% or more. Another 42 funds (or 12.2%) matched their benchmarks within 1% (plus or minus). Meanwhile, 80 of the funds underperformed their benchmarks by at least 1% and another 204 funds were discontinued due to their dismal performance.

       So if you took your chances with funds that try to beat the market, you only had a 17.7% chance of at least matching the market. That’s worse than a 1 in 5 chance. You would have had over an 80% chance of doing worse than the market! If you had used index funds, you would have had a 100% chance of matching the market’s performance within 1%. Take your pick.

Less Time Required to Monitor

       Using index funds requires far less time than stock picking or using actively managed funds. If you’re picking stocks, you’ll have to continually keep up on your “favorite picks” to make sure you don’t miss any “opportunities” or pitfalls. If you’re using actively managed mutual funds, you have to keep up on your fund manager and you might have to search for replacement funds if yours is discontinued because of poor performance.

       Using index funds allows you to focus on more important things in life – things you enjoy more than poring over financial statements, mutual fund prospectuses, and investment research. Even though those sound like worthwhile activities to increase your investment returns, research has shown that there is little to no evidence that such strategies are profitable in the long run.

The Evidence Favors Indexing

       Mountains of evidence exists in the form of academic research supporting the case of index funds. There’s far more than I can cover in this short post, and most of you won’t be interested in reading it. But if you are, I highly recommend checking out the 12 Steps at Index Funds Advisors. There you can find all the evidence you need to see that index fund investing is far better than stock picking or using actively managed funds.

       The investment and financial services industries have a vested interest in convincing you that it’s possible to beat the market – either by doing it yourself, buying their systems, or letting them do it for you. But Nobel laureates and academic researchers have found that no evidence exists to support the idea that such strategies will work in the long run. The successes you see among investment professionals and individual investors are exactly what you’d expect to see based purely on statistical luck. Don’t let a lucky few tempt you into frittering away your investment dollars.

Stay Tuned!

       There you have it – my reasons for using and recommending index funds. I’ll be writing more about investing over time, but that’s a good basic introduction as to why index funds are the best choice. If you’re interested in learning more about personal finance, make sure you sign up for free updates to Provident Planning!