From the monthly archives: August, 2016

We are pleased to present below all posts archived in 'August, 2016'. If you still can't find what you are looking for, try using the search box.

Are you among the over-housed in America?

Forbes contributor, Joshua Becker, asks, do you really need that much home? His insightful article points out that we regularly only use 40% of our living space. Yet, Americans carry high mortgages and live with the stress of financial burden. More is not always better. A small home is typically less expensive, easier to maintain and faster to clean. Peter Dunn, at USA Today, reports that Americans suffer from over-housing: the concept of paying too much money for housing in relation to one’s income. Homes are emotional possessions that affect family harmony. So, how do we end up with big houses and big mortgages? Unless we know the realtor well, they will show us what our money can buy rather than what we truly need. And, that mortgage becomes an albatross when unforeseen problems arise that cause a fragile budget to collapse. Often buyers will deplete their emergency fund in order to get a down payment together, then face higher utility costs, greater home maintenance ...

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Do you consider yourself among the working poor?

I was struck by a recent Atlantic Magazine article titled The Lonely Poverty of America’s White Working Class. It shared the plight and impact of those who are working hard but can’t seem to make any progress financially. Interestingly, the article pointed out that faith is a factor. I quote from the article: The waning of religious belief may be another trend aggravating the modern malaise of the white working class. Since the ’90s, the number of Americans who declare no religious preference on surveys has almosttripled—from 8 percent at the beginning of that decade, to 21 percent in 2014. Whites fall disproportionately into this camp. The religiously unaffiliated are not necessarily secular in their outlook. Many of them are spiritually inclined but skeptical of organized religion, especially its intrusion into politics. However, in the absence of any other source of social support and collective meaning (say, unions), there’s less in the way of psychologic ...

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There is a good way and a really bad way to buy a car

British comedian John Oliver recently took aim at the rampant rip-off that currently takes place in the auto-lending sector with BUY HERE - PAY HERE loans. These are loans that make it easy to purchase a car on credit but with high interest rates and severe penalties for missing a payment or default.  These are called “sub-prime auto loans”.  In the video, a woman asking for a maximum $3,000 car loan ends up on the hook for a $13,000 loan (paying around 30% interest). One shows a purchaser who leaves her baby in the car, then the car is repossessed with the baby inside. Another shows a 2003 Kia Optima car that gets loaned and repossessed at least 8 times, each time valued at 2-3x its previous estimate. Right now, approximately 31% of subprime auto loans are currently non-performing. While auto sales are soaring, these practices are driving up the prices of used cars and ultimately leave most borrowers in a financial nightmare. Listen carefully. A car depreciates in value and is ...

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Do you have a negative wealth?

“According to the New York Federal Reserve, 14% of the U.S. population lives in households that have ‘negative' wealth." In plain terms, these are households who owe more money than they have the ability to pay, which means they don’t just have zero net worth, they are upside down. But what does a negative wealth household look like? VisualCapitalists, a firm that provides graphic illustration on financial topics, compares the data on negative wealth households with the data on their positive counterparts. There are some obvious and stark contrasts. “Households that are deep in the red have the majority of their wealth in the family car – automobiles make up 45% of the value of their total assets - while housing makes up 20% of their assets by value. For positive wealth households, it is the reverse: 40% of wealth is in the home, and 15% in vehicles.” There is an obvious challenge here. Houses have the ability to appreciate in value while cars typical ...

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Are you stressed over your medical bills?

I recently received this question: My husband and I could really, really use some financial advice. We are both in our 20's, have a baby, and have been married for a little over 4 years. Unfortunately, we've acquired quite a bit of debt, mostly from medical bills because I did not have insurance. But we do have some debt from other sources also. I was wondering if going through a Christian debt consolidation company would be a good way to go. I'm very overwhelmed and would appreciate any help.  She is certainly not alone in struggling with this issue. About 1 in 5 people under age 65 who have insurance reported difficulties in paying for medical debt, according to a survey sponsored by the Kaiser Family Foundation and New York Times. However, for people without insurance that number rose to more than 50%! I would encourage you to first take stock of all your debt by sitting down with your husband and going through a budget that details all your obligations and assets. Crown has some won ...

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Want to know how to avoid fighting about money and have a better marriage?

My wife and I are working on a book together right now on this topic. It will be published and available early next year, but in the meantime we will share some of our tips and advice.  In every home, it is vital that at least one of you takes the responsibility to be the Peacemaker. Now it is even better if you are both assuming this responsibility, because it is almost impossible to avoid misunderstandings, hurts, and stress over money in any home. The question is not if you will have stress and arguments, but how you will resolve them. Nicky Gumbel, founder of the Alpha Course, has a wonderful way to frame the role of the peacemaker. It is worthy of writing on a note and posting it in your home to see everyday.  The first to apologize is the bravest. The first to forgive is the strongest. The first to forget is the happiest. Just this week, Ann and I had a spat about something – unimportant. I went in to my office to begin working on the book and was reminded of this method to ...

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When was the last time you only carried cash in your wallet?

Yahoo Finance recently reported that paying with cash helps you save and gives you more joy. Avni Sha, a professor at the University of Toronto Scarborough, studied the effect of paying with cash and says it does indeed make us more frugal and adds positive emotion to transactions. Further, it potentially promotes repeat business. On July 16th, 2016, Ethan Wolff-Mann at finance.yahoo.com reported that shopping with cash is one way to stick to your budget and limit impulse spending tendencies.  Cash forces you to consciously think about what you are buying. Rather than blindly using your credit card and deferring payment, cash forces you to make that decision at checkout. It enables you to say “No” when your children ask or beg for things that they do not need. Each dollar you physically spend leaves less in your wallet. And, that causes a pain that we need to occasionally experience. For a minimum of two weeks, monitor what you spend and record all transactions. Does that me ...

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Have you thought about purchasing an annuity?

If you are 66 years old and someone offered to sell you an annuity with these terms: For $260,000, you will receive back $1,300/month for the rest of your life. Would you take it?  Far too many decide for this option without doing the math. David Marotta had an excellent article in Forbes Magazine examining this very scenario.  Careful analysis reveals that the insurance company will be paying you back the money you gave them for the next 16 years and 8 months or until you are nearly 83 years old. Only then will you begin earning anything over and above what you originally handed over to them.  If you live to be 100, your return on investment will equal about 4.5%.  But remember, at age 66, life expectancy is only to age 85.  So the odds are greatly in favor of the insurance company that they will only be paying you back the money you gave them in the first place. I am not saying that you should not buy an annuity. It may give you great peace of mind to have this type of i ...

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Ready to learn how to be a better investor?

Matt Bell, a friend and financial author has written an excellent article called The Essentials of Investing on his blog, Matt About Money.  It is a very helpful, basic guide for those who need to know how and where to get started. Matt says that to lower the fear and confusion follow five simple recommendations: First, Get in the Game. Allow money to multiple for you. A long-term investment strategy allows us to earn compound interest. In essence, compound interest is interest earning interest. Once you’re out of debt other than a reasonable mortgage and have an adequate emergency fund, you’re ready to get compound interest working for you. Second, Estimate How Much You Need to Invest. Of the various online retirement calculators you could use, one of the easiest is Fidelity’s myPlan Snapshot. Then click “Create a Plan” to run a more detailed analysis. Third, Determine Your Optimal Asset Allocation. It’s important to understan ...

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Have you appreciated a Christian radio station lately?

Day in and day out, week after week and year after year, Christian radio stations in America bring you uplifting music, informed talk on key issues and teaching of God’s Word.  They are to be honored and appreciated for this service by thanking them and supporting their good work.  Just a few months ago, I was driving in northern California in a remote area west of Redding where there were almost zero radio signals that I could receive on my car radio.  Every so often I would hit scan on the FM dial and the AM dial just to see if I could pick up any music or news or talk while I was making a long drive.  To my absolute shock, the radio in my car was only able to pick up one signal: KVIP, a Christian broadcaster.  And what was even more shocking, I recognized the program on the radio. It was me! That’s right, I found myself listening to My MoneyLife as I drove in my car in an area where no other radio signal was reaching the people! What a surprise. It put a smile on my f ...

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