Do you need it — or just want it?

As we become a more and more data-centric society, all that information consumption not only eats up our time but also our money. And if you're anything like me (and for your sake I hope you're not), it's easy to fool yourself into categorizing a "want" as a "need."

Take, for instance the cell phone. Until January 2009, I was an anti-cellphone-ite, a breed on the doom of extinction. My wife, my son, my nephews — even my mom — had a cell phone. I didn't want the extra expense, the extra interruptions, and the extra cargo to lug around (I had trouble enough not forgetting my wallet and keys).

But I eventually caved, in part because my wife wanted me to have a cell phone, and in part because of the convenience factor. And if I was going to schlep one of these around everywhere, I wanted a good one... so I got an iPhone.

With all the things it can do, it's closer to 1-part convenience, 3-parts entertainment. There's nothing wrong with that, as long as I'm honest about it when factoring it into our budget: this is 75% an entertainment-budget item.

This leads me to a New York Times' piece on the cost of home entertainment. There are some interesting figures to consider:

It used to be that a basic $25-a-month phone bill was your main telecommunications expense. But by 2004, the average American spent $770.95 annually on services like cable television, Internet connectivity and video games, according to data from the Census Bureau.

By 2008, that number rose to $903, outstripping inflation. By the end of this year, it is expected to have grown to $997.07. Add another $1,000 or more for cellphone service and the average family is spending as much on entertainment over devices as they are on dining out or buying gasoline.

And those government figures do not take into account movies, music and television shows bought through iTunes, or the data plans that are increasingly mandatory for more sophisticated smartphones.

Incredible really. All this got me wondering 1) how bad the damage was at the Pryor household and 2) where could we cut costs on digital services yet still keep most of the functionality?

I started with our cell-phone plan. I went to the website, downloaded our usage, and checked our monthly average of minutes and text messages used. We use about 450 minutes a month, but had a 750-minute plan. Unfortunately, that's the lowest family plan listed on the site. But I called anyway hoping there were other unlisted options. Sure enough, there's a 550-minute plan that's $10 less. Then I asked about texting (which I use way more than I talk). Unfortunately, there's only one family plan and the individual plans wouldn't cover our average monthly texting. However, I'm experimenting with apps like textPlus which allows free texting to other textPlus users. This could reduce our phone bill by $20/month if we're diligent about using it.

My next call was to our cable company, which provides our home phone, internet, and TV. I started off by kindly letting them know I wasn't happy with my 15% bill increase over the past year and wondered what they could do to help me. In seconds, the rep offered to knock off $13 from the internet portion of my bill, but said that was all he could do. I took him up on his offer, thanked him, and hung up.

I then immediately called back to talk to someone about the TV packages we have. Turns out, we were paying for a package that has only two channels that we ever watch (and not with much frequency). Dumping that tier of service shaved off $10/month. Secondly, there was a package I NEVER signed up for (and never use) but was being charged $8/month for. I promptly canceled that one too and asked for a refund.

The rep was friendly but said she couldn't do that. Now in their defense, I understand: any yahoo could call up months after the fact and say they didn't ask for it and demand a refund. And had I diligently been studying my cable bill every month and comparing it to the ever changing TV package line-up options, I suppose I could have caught the error. But on principle, I couldn't let it go. I had been overcharged. And had they not made the error to begin with, I wouldn't be in this mess. So I called back the next day, spoke with a rep, and then that rep's supervisor. I'm still waiting for a call from the supervisor's supervisor.

Let's re-cap: to that point, I'd knocked off $10 + $13 + $10 + $8 = $41/month (not to mention all those convoluted taxes and fees). And this doesn't include a potential $20/month if textPlus meets our needs. But I wasn't done yet.

With our home phone getting used less and less, I've been wanting to get rid of it (and its $26/month fee) for quite a while. I nagged my wife to death and she finally relented. So I ordered an Ooma. In a nutshell, Ooma is a device that connects to your high-speed Internet and your home phone and allows you to make calls at no charge. It does other things as well, but we're getting it primarily so we can cut the $26/month phone bill. It will take about 10 months to pay for itself, but should be worth it (I'll do an article or post once we've been using it for a while).

So put all these things together and by the end of the year, I will have shaved $67-87/month off our monthly expenses, while not sacrificing a great deal in these luxury/entertainment categories. Notice I said "shaved" and not "saved" because as our good friend Mary Hunt says, "You don't save money buying things on sale unless you stop at the bank to deposit the money you saved."

Bottom line: Be honest about your budget categories and your "needs" vs. your "wants." Technology is nice, but all those 0's and 1's really add up.

Posted by Matthew at 9:20 AM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): budget, family finances, money saving tips

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Persevering through the rough places

Market reversals will come. If you didn't know that before, the period from October 2007-March 2009 made it abundantly clear!

Unfortunately, many investors run for the exits as bear markets unfold, and then are skittish about getting back in for fear that another drop might occur (statistics suggest many investors who bailed during '08 and early '09 still haven't returned). Such an approach to investing is rarely productive. Often, it all but guarantees poor long-term returns.

A better approach is to persevere through the tough spots. But you're not likely to persevere unless you have a plan — a plan you can stick with even when the going gets tough.

SMI's assistant editor Joseph Slife talked about this a few days ago with host Bob Crittenden on Faith Meeting House, a program produced by Alabama's Faith Radio.

Click the arrow below to listen (22 min.) — or use this link to download (right click/save as).

Posted by Matthew at 9:02 AM | Comments (0) | TrackBack
Category(s): Investing Principles
Tag(s): radio

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Kansas City Fed chief: Hyperinflation could happen here

I started working for Larry Burkett in 1990, about the time he was beginning work on a book called The Coming Economic Earthquake. Larry wasn't an economist. He was just an extraordinarily insightful, common-sense guy who had the uncanny ability to see around corners.

Although some criticized The Coming Economic Earthquake (I think unfairly) as alarmist and economically unsophisticated, Larry's point was simply this: a government that takes on obligations it can't pay for will eventually face a time of reckoning.

Today, who can deny that this is true? Just read the newspapers. Greece. Dubai. California.

I suppose what made The Coming Economic Earthquake controversial is that Larry argued that even the strongest nation with the largest economy — i.e., the United States of America — was not immune from the principle that too much debt and too many unfunded obligations will ultimately lead to financial upheaval.

If you remember the book, or recall hearing Larry talk about these issues on the radio, a speech delivered last week by Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, will seem eerily familiar.

Congressional Budget Office (CBO) projections have the federal debt reaching an unsustainable level of two to five times our total national income within the next 50 years, which leads us to an inescapable conclusion — U.S. fiscal policy must focus on reducing this debt buildup and its consequences....

[I]t strikes me that we have only three options. First...: We can knock on the central bank’s door and request or demand that it "print" money to buy the swelling amounts of government debt. Second..: We can do nothing so long as domestic and foreign markets are willing to fund our borrowing needs at inevitably higher interest rates. Or third, the most difficult and probably the least palatable politically: We can act now to implement programs that reduce spending and increase revenues to a more sustainable level....

Throughout history, there are many examples of severe fiscal strains leading to major inflation. It seems inevitable that a government turns to [the first option; it calls on] its central bank to bridge budget shortfalls, with the result being too-rapid money creation and eventually, not immediately, high inflation....

German hyperinflation [in the 1920s] is one classic and often-cited example, and with good reason. When I was named president of the Federal Reserve Bank of Kansas City in 1991, my 85-year old neighbor gave me a 500,000 Mark German note. He had been in Germany during its hyperinflation and told me that in 1921, the note would have bought a house. In 1923, it would not even buy a loaf of bread. He said, "I want you to have this note as a reminder. Your duty is to protect the value of the currency." That note is framed and hanging in my office....

Many say it could never happen here in the U.S.... [But] the unthinkable becomes possible when the economy is under severe stress....

[T]he fiscal projections for the United States are so stunning that, one way or another, reform will occur. Fiscal policy is on an unsustainable course. The U.S. government must make adjustments in its spending and tax programs. It is that simple. If pre-emptive corrective action is not taken regarding the fiscal outlook, then the United States risks precipitating its own next crisis.

Back in early 1990s, some of our elected leaders read Larry's book and took heed. I know because I accompanied Larry on a trip to Washington (made at the invitation of a Congressman) where he spoke to many members of the U.S. House about the direction of the nation's finances. For a time, in the mid- to late-1990s, the situation improved. Spending increases were slowed and some of the national debt was retired.

Today, the government's economic picture is far worse than when Larry wrote the Earthquake book. Let's hope and pray that today's leaders will listen to Mr. Hoenig, and to the hundreds of thousands of citizens who are rising up to say, "Enough is enough."

The full text of Thomas Hoenig's address to the Peterson-Pew Commission on Budget Reform Policy Forum is here (PDF).

Posted by Joseph at 10:55 AM | Comments (0) | TrackBack
Category(s): Inflation Watch
Tag(s): current market events, hyperinflation, inflation

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The Olympics... cheapskate style

In her never-ending quest to get/keep us debt-free, Mary Hunt posts rules for the Debt-Proof Living Winter Olympics. I haven't entered yet, but I'm considering the No Eating Out event. I'm sure I've qualified many times over.

What about you? What spending area needs the most discipline and training? And certainly, if you enter, let us know on our Facebook Page. And then together, Team SMI will cheer you on to fiscal excellence!

Posted by Matthew at 8:40 AM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): family finances, money saving tips

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A law with unintended consequences

"It wasn't supposed to turn out this way." So we wrote in our November 2009 article (subscribers only) about the unintended consequences of the Credit Card Accountability Responsibility and Disclosure (CARD) Act, signed into law last year by President Obama. The law takes full effect today.

AP Personal Finance writer Eileen AJ Connelly picks up the theme:

During the past nine months [since the bill passed and before it took full effect], credit card companies jacked up interest rates, created new fees and cut credit lines. They also closed down millions of accounts. So a law hailed as the most sweeping piece of consumer legislation in decades has helped make it more difficult for millions of Americans to get credit, and made that credit more expensive.

It wasn't supposed to be this way....

[The new law is expected to sharply] cut into future profits [for credit card issuers]. FICO Inc., the company best known for its credit scores, projects the average card will generate less than $100 a month in revenue within three years, down from $200 a month before the law.

That helps explain why the industry reacted so aggressively to the legislation.

No kidding.

"It's unprecedented that the government will come in and restrict the ability of [a company] to price the product the way they want to," Ben Woolsey, director of consumer research for CreditCards.com told the Atlanta Journal-Constitution. "But the fact that credit cards touch so many American households, the political pressure was so great that something had to be done," he said.

(Now that the precedent has been set, President Obama wants the federal government to have the authority to block insurers from making premium rate increases. Story here from today's Wall Street Journal.)

Going forward, the CARD law does offer new protections for consumers. Here is a list from the Journal-Constitution:

1. 45-day notice: Card issuers must give a 45-day notice to cardholders in advance of an interest rate change.
2. If you opt out of card changes, you have five years to pay off your balance at the existing rate.
3. Monthly statements must be mailed or delivered 21 days prior to the due date. Card issuers can no longer set a deadline before 5 p.m., cannot charge for online, phone or mailed payments unless it is made on the due date or the day before.
4. Card issuers cannot issue cards to anyone under age 21 unless they have a co-signor [sic] or can prove they are able to repay debt.
5. The pay-off period when making a minimum payment must be disclosed, along with how much would need to be paid per month to pay off the balance in 36 months.
6. Card issuers can no longer employ double-[cycle] billing.
7. Cardholders must opt-in to be able to exceed their credit limit.

CreditCards.com has additional details on how the new law is likely to affect card users.

Posted by Joseph at 10:45 AM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): christian financial, credit cards, family finances, money saving tips

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Buying coupons can be a big money saver

Are you aware that you can buy coupons? If that isn't the perfect marriage of the Internet and the American capitalist spirit, I'm not sure what is!

I found out about this one day when I Googled "Lowes promotional code" for an online purchase. Next thing I know, I'm on eBay where there's an entire Coupons on eBay section.

Hmmm. I hadn't done this before, but I thought, "Why not? I'll give it a try." I needed to buy siding for a shed I'm building and there were lots of Lowe's and Home Depot coupons on the auction block. Sounded like an easy way to save some cabbage. So I bid on eBay and won an auction — $24 for a 20%-off-your-entire-purchase-at-Home Depot coupon.

Lowe's honors competitor's coupons, so after the coupon I arrived, I headed to Lowe's for the moment of truth — and was a little nervous for a couple reasons: 1) The Home Depot fine print specifically excluded vinyl siding. Since I was there primarily to buy siding for the shed I've built, I knew this would present a problem if Lowe's terms were the same; 2) Lowe's didn't stock the color I wanted, so I was going to have to place a special order.

I had been burned by Lowe's before when I bought several garage storage chests online (because they didn't have them in stock in the store) and then wasn't eligible for the promised rebate because it wasn't an "in-store" purchase. I wasn't sure if this special-order siding would somehow fall into that same category.

Anyway, I placed the special order for the siding, got my paperwork, and started to head to the cashier's desk up front. But wait. I decided to use the coupon on something else, as well. After all the coupon was for an entire purchase, not a single item. So, being the good steward that I am (and the good husband that I am), I decided to go ahead and get a new dishwasher for my wife (she was in a daily struggle with the old one). I knew which washer I wanted, so I told the guy, signed some papers, and I was ready to check out.

I went up front to pay for everything at the customer-service desk. I explained I had two orders in the computer and that I wanted to apply a Home Depot coupon against my overall purchase.

The customer-service rep looked up the orders and started reading over the coupon. I started wondering if I blew 24 bucks.

One minute turned into two, then five, then ten. At this point, I'm thinking I'm toast and my shed will forever remain vinyl-less. But I was wrong. She told me that the hangup was that they couldn't invoice the orders on the same ticket and that I would have to pay for them separately. No problem-o. She also told me that the labor charges to install the dishwasher wouldn't get the 20% off. I wasn't counting on that anyway.

So a couple of card swipes later and I scurried out the door before they could tell me they messed up and couldn't honor the coupon. Whew!

Bottom line: $132 (siding discount) + $70 (dishwasher discount) - $24 (cost of coupon) = $178 savings.

So, the next time I build a shed, buy an appliance, or know that I'm going to spend enough money to more than recoup the cost of the coupon, I'm heading to eBay first to buy some cheap money.

Sniff sniff, sniff sniff. Hey! I think I smell the next great work-at-home-in-your-jammies business model! Or maybe not...

Posted by Matthew at 12:07 PM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): family finances, money saving tips

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On Presidents' Day, financial wisdom from past presidents

Below are several quotes about money management from late U.S. presidents. Some quotes relate to personal financial management, others to the management of the government's finances. Some touch on both areas.

First, from Kiplinger.com:

George Washington: "As a very important source of strength and security, cherish public credit. One method of preserving it is, to use it as sparingly as possible… but remembering also that timely disbursements to prepare for danger frequently prevent much greater disbursements to repel it" (Farewell Address, 1796).

Thomas Jefferson: "Never buy what you do not want because it is cheap" (from "A Decalogue of Canons for Observation in Practical Life," 1825).

Abraham Lincoln: "That some should be rich, shows that others may become rich, and hence is just encouragement to industry and enterprise. Let not him who is houseless pull down the house of another; but let him labor diligently and build one for himself" (from an address to the New York Workingmen's Democratic Republican Association, 1864).

Now, a few more from other sources:

Grover Cleveland: "I feel obliged to withhold my approval of the plan to indulge in benevolent and charitable sentiment through the appropriation of public funds.... I find no warrant for such an appropriation in the Constitution" (from an 1887 veto message, when vetoing an appropriation to help drought-stricken counties in Texas).

Calvin Coolidge: "I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we prudently save means that their life will be so much the more abundant. Economy is idealism in its most practical form" (Inaugural Address, 1925).

Franklin D. Roosevelt: "Any government, like any family, can for a year spend a little more than it earns. But you and I know that a continuation of that habit means the poorhouse" (from address made as a presidential candidate in 1932).

And here's a personal favorite, specifically about government, but apply it to your household finances as well — and take warning:

Ronald Reagan: "Government always finds a need for whatever money it gets."

Posted by Joseph at 10:10 AM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): christian financial, christian investing, family finances, investing principles, money saving tips

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Author: Even rich would come out ahead by using simple index funds

The New York Times' "Wealth Matters" column — targeted to wealthier readers — has served up a profile of Princeton economics professor, Burton G. Malkiel, author of the long-time bestseller, A Random Walk Down Wall Street, and now (with Charles Ellis), The Elements of Investing (Wiley, 2009).

Dr. Malkiel is a strong proponent of investing via no-frills, low-cost index funds. He argues that even the wealthy are more apt to come out ahead by using simple indexes, rather than hiring advisers to help them try to find outperforming stocks, hedge funds, and/or alternative investments.

From the Times:

For the wealthy, index funds have an image problem. They are considered the economy cars of the investing world: they'll get you there but not in style and you're always worried they may break down. Anyone at a serious level of wealth, the thinking goes, needs the equivalent of a luxury sedan, with strategic stock choices, hedge funds, private equity, real estate.

Burton G. Malkiel says this is all hogwash....

[He argues that the wealthy] would have fine returns without the volatility and high fees if they simply used indexes to diversify their money across asset classes. "This is still a strategy that is good for people of all income levels," he said.

Malkiel says many wealthy people waste money by paying for advice that doesn't improve their investment performance beyond what they would experience with index funds.

While the old adage says you get what you pay for, Mr. Malkiel argues the opposite. "The one thing I'm absolutely sure about is the less I pay to the purveyor of the service, the more that will be left for me," he said....

This makes sense for the modest investor with a straightforward portfolio. But the counterargument is that the wealthy need more advice because of the complexity of their assets, and that the advice is worth the fees. (Mr. Malkiel would say the rich just need more tax-planning advice.)...

"You don't need a commodities fund if you're really well diversified and into emerging markets," he said. "You’re going to have some investments in Brazil, which is natural resource rich. It's simple."

We agree with Dr. Malkiel that many investors — including many wealthy investors — overcomplicate matters, thereby increasing expenses without any significant increase in performance. That's why we developed our simple Just-the-Basics strategy.

Although SMI's Upgrading strategy clearly offers superior performance to indexing over the long haul, if the simplicity of indexing strikes your fancy, you won't get any argument from us. Indexing is a solid approach that (as Dr. Malkiel says) "is good for people of all income levels."

Not an SMI member yet? Today's a great day to join and gain access to all of our investing strategies and online tools!

Posted by Joseph at 1:45 PM | Comments (0) | TrackBack
Category(s): SMI Model Portfolios
Tag(s): christian investing, index funds, investing principles, IRAs & 401ks, stock market, upgrading

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For-profit colleges: Market-driven education

Two days ago, we made note of a Wall Street Journal report that served as an interesting follow-up to our October 2009 cover article, Is a College Education Still Worth the Investment? The Journal found that the earnings gap between high-school grads and college-grads has long been overstated.

This story, from Fast Company magazine, touches on a different aspect of that same October '09 cover article: for-profit colleges. It begins with a very interesting angle.

Michael Clifford never went to college. He was a trumpet player "strung out on sex, drugs, and rock and roll," he says, until he started a new life as a born-again Christian and successful tech investor. Then Bill Bright, founder of Campus Crusade for Christ, gave him a life-changing piece of advice: "He knew I loved business and did a lot of charity work," says Clifford. "He told me education is the one business where you can help people live better lives and make a lot of money for your investors."

Today, Clifford chairs Significant Federation, a private equity firm that is a principal investor in a half-dozen higher-education companies, including the most successful IPO of 2008 (Grand Canyon University) and one of the most successful of 2009 (Bridgepoint Education). His six colleges have almost 100,000 students — 90% of them studying online.

The article notes for-profit colleges now enroll almost a tenth of all students, many of them in online programs. The biggest players are Kaplan (part of The Washington Post Co.), DeVry, and the University of Phoenix, now the largest university in North America (42,000 students).

While private colleges have taken huge hits to their endowments, and public universities weather historic cutbacks, for-profits like Clifford's keep costs down with innovative use of technology, publish metrics like job placements, and are open to any high-school graduate. They target under-served markets like first-generation students and working adults with convenience and a customer-service ethic....

"I don't even use the term 'for-profit' anymore," Clifford says. "I say schools are 'market-driven' or 'publicly funded.' Everyone has to put their guns away and focus on providing the best experience for the student. Market-driven can learn a lot from traditionals, and the traditionals have a tremendous amount to learn from market-driven best practices."

You can read an interview with Michael Clifford here.

Posted by Joseph at 10:50 AM | Comments (0) | TrackBack
Category(s): College
Tag(s): christian financial, college

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Earnings gap between college grads, high-school grads overstated

Here's an addendum to our October 2009 cover article, Is a College Education Still Worth the Investment?: The long-touted lifetime-earnings gap between college graduates and high-school graduates isn't as wide as commonly reported.

The Wall Street Journal has details in a story that bears out some of the analysis in our cover article.

In recent years, the nonprofit College Board touted the difference in lifetime earnings of college grads over high-school graduates at $800,000, a widely circulated figure. Other estimates topped $1 million.

But now...some researchers are questioning the methodology behind the high projections....

The problem stems from the common source of the estimates, a 2002 Census Bureau report titled "The Big Payoff" (PDF). The report said the average high-school graduate earns $25,900 a year, and the average college graduate earns $45,400, based on 1999 data. The difference between the two figures is $19,500; multiply it by 40 years, as the Census Bureau did, and the result is $780,000.

There at least two significant problems here: 1) An average is just that — it isn't predictive of actual personal experience; 2) The earnings estimates from the College Board don't take into account any debt incurred in earning a degree. In other words, the estimates show only the revenue side of the picture, but ignores the ongoing liability incurred in an effort to produce that future income.

The WSJ notes that some researchers have been disputing the $800,000 for years, yet the College Board has continued to overstate the earnings gap.

[The Board] recently said on its Web site: "Over a lifetime, the gap in earning potential between a high-school diploma and a bachelor of arts is more than $800,000...."

The $800,000 number, it turns out, was pulled from a footnote of the College Board's 2007 "Education Pays" report (PDF) that explained lifetime earnings. The report's author, Sandy Baum — an emeritus Skidmore College economics professor who didn't write the promotional text on the Web site — says that $450,000 is actually a more reasonable estimate of the difference in lifetime earnings.

A College Board spokeswoman told the WSJ that the person writing the website copy apparently "misinterpreted the data." No doubt. But that same misinterpretation has been going on for about eight years now. Perhaps now that the Wall Street Journal has blown the whistle, the misinformation will be corrected.

Posted by Joseph at 4:25 PM | Comments (0) | TrackBack
Category(s): College
Tag(s): christian financial, college

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Big Brother is watching... and compiling... and selling

The Information Age seems to have taken us full circle back to the days of hunters and gatherers — only now they're digital hunters and gatherers. Massive bureaucracies and corporate entities are all too happy to hunt down the details of our lives, scoop 'em up, and sell 'em to a willing bidder. And it's only going to get worse.

Don't believe me? Read this piece from Consumer Reports and you'll be enlightened. It outlines eight ways Big Brother is behind the scenes, quietly rummaging through life's daily transactions. Sure, some of these are supposed to be for our protection, but mostly they're for Big Brother's.

Remember that ill-fated sweater you bought for your wife last year, the one that she returned to Kohls? Big Brother remembers it:

Your purchase returns
The Retail Equation maintains information on merchandise returns made to an undisclosed number of national retailers...

What’s here?
It can include a record of your past returns at participating stores, the purchase prices, and whether or not you had receipts.

How is the information used?
Retailers are on the lookout for certain fraudulent and abusive practices.... If your pattern of returns at a particular store raises red flags, you might not be able to get your money back the next time you try. (emphasis added)

Yikes! Makes me a little nervous about my next home improvement project when I'll inevitably buy the wrong thingamajig — many times. Will I have to kowtow at every trip to the return register, praying I don't hear the dreaded, "No return for you!"?

If there's an upside, perhaps it's a potential business opportunity. I'm not sure how it would work, but there's a mint to be made for a company that can sell anonymity. If you have any ideas on how to make this happen let me know, I would love to go into business with you. But first I'd need to access your credit report, run a criminal background check, examine your insurance-claim history...

Posted by Matthew at 9:17 AM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): christian financial, family finances

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In scary times, looking to the God who gives a "sound mind"

Here is an interesting tidbit from former Treasury Secretary Hank Paulson's new book, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System.

Back in my temporary office on the 13th floor, a jolt of fear suddenly overcame me as I thought of what lay ahead of us. Lehman was as good as dead, and AIG's problems were spiraling out of control. With the U.S. sinking deeper into recession, the failure of a large financial institution would reverberate throughout the country — and far beyond our shores. It would take years for us to dig ourselves out from under such a disaster.

All weekend I'd been wearing my crisis armor, but now I felt my guard slipping. I knew I had to call my wife, but I didn't want to do it from the landline in my office because other people were there. So I walked around the corner to a spot near some windows. Wendy had just returned from church. I told her about Lehman's unavoidable bankruptcy and the looming problems with AIG.

"What if the system collapses?" I asked her. "Everybody is looking to me, and I don't have the answer. I am really scared."

I asked her to pray for me, and for the country, and to help me cope with this sudden onslaught of fear. She immediately quoted from the Second Book of Timothy, verse 1:7—"For God hath not given us the spirit of fear, but of power, and of love, and of a sound mind."

The Wall Street Journal has a longer version of this excerpt, courtesy of the Hachette Book Group, Inc.

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Category(s): Christian Interest
Tag(s): christian financial, christian investing, investing principles, IRAs & 401ks, retirement, stock market

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Fidelity one-ups Schwab on no-fee ETFs, stock-trading fees

Just weeks after Charles Schwab shook things up in the ETF world by introducing its own brand of commission-free exchange-traded funds, Fidelity has unveiled a commission-free model for 25 ETFs from iShares (managed by BlackRock). Schwab currently has only eight commission-free ETFs.

The no-fee ETFs from Fidelity include some of the most popular ETFs on the market, including the iShares S&P 500 Index, iShares Russell 2000 Index, iShares MSCI Emerging Markets Index, and the iShares Barclays Aggregate Bond fund.

A Reuters report characterized Fidelity's move into commission-free ETFs as a belated recognition that exchange-traded funds have gained a significant presence in the mutual-fund marketplace.

[Fidelity's] new alliance with BlackRock of New York marks a final acknowledgment of the growth of ETFs and their importance to retail investors, said Paul Justice, an analyst who follows the industry for Morningstar in Chicago.

Although the industry has more than doubled since 2005, to $1 trillion globally by BlackRock's count, ETFs will continue picking up market share, Justice said. Following Fidelity and BlackRock's move "you will see a great deal of competitive response," he added.

The rapid growth of ETFs offered by iShares, State Street Corp and others is in stark contrast with the skepticism investors have shown traditional stock mutual funds, which saw high outflows as stock markets sank.

Fidelity introduced a single ETF of its own in 2003, but never followed up with additional products....

Tom Lydon, editor of the ETF Trends newsletter, said he expects ETFs to continue to grow as investors realize their fee benefits. ETFs also have room to gobble more assets in 401(k) retirement-savings plans, where they have been little used to date, Lydon said.

Fidelity also announced it is replacing its current tiered-pricing model for stock trades with a flat $7.95 fee for online trades — $1 less than the stock-trading fee recently implemented by Schwab.

Neither Schwab nor Fidelity has announced any changes in their pricing structure for traditional mutual funds.

Posted by Joseph at 3:16 PM | Comments (0) | TrackBack
Category(s): Mutual Funds
Tag(s): christian investing, ETF, investing principles, IRAs & 401ks, stock market

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It's not how much you earn...

While searching for something else, I stumbled across this ABC News story from October: "Latest Celeb Money Meltdown: Nicolas Cage." The article recounts the financial trials of various celebrities and semi-celebrities who have seen the the financial rewards that accompanied professional success somehow slip away.

Among those on the list:

• photographer Annie Leibovitz ("has struggled to stay out of debt");
• actor Stephen Baldwin (he and his wife "defaulted on over $824,000 in payments to their mortgage");
• baseball great Lenny Dykstra ("foreclosure sale of [his] $18 million California mansion");
• mob-boss daughter Victoria Gotti ("apparently owes $650,000 to JP Morgan Chase Bank");
• actor Willie Aames, former star of 1970s and '80s hit shows Eight is Enough and Charles in Charge ("filed for bankruptcy last year, and his home is in foreclosure");
• actress Jodie Sweetin of Full House fame ("house is in foreclosure...water has been shut off twice").

As for Nicholas Cage, one of Hollywood's highest-paid stars, the ABC report says he "owes the IRS more than $6.6 million in income taxes." A CNN story quotes the actor's former attorney (against whom Cage has filed a lawsuit) as saying Cage needed to earn $30 million a year "just to maintain his lavish lifestyle."

In a court filing, the attorney noted that in 2007 Cage went on a "shopping spree" that included "the purchase of three additional residences at a total cost of more than $33 million; the purchase of 22 automobiles (including nine Rolls Royces); 12 purchases of expensive jewelry; and 47 purchases of artwork and exotic items." Cage also reportedly bought two castles, one in England, one in Germany.

Nicholas Cage may earn millions of dollars a year, but I'm reminded of a line from Dickens:

Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.

The numbers, of course, are relative. Annual income $20 million, annual expenditure $20,600,000 (or more), result misery.

Financial security/stability is far less about how much you earn than it is about how much you spend — and, of course, how you choose to invest any surplus.

Posted by Joseph at 9:33 AM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): christian financial, family finances, money saving tips, mortgage

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