The #1, best, top, absolute greatest financial decision we've ever made

In August, I did a post entitled The #1, best, top, absolute greatest spending decision we ever made. Many of you, I came to find out, had made the same sort of decision and felt it to be one of your best as well.

This week, I want to present you with the #1, best, top, absolute greatest financial decision we've ever made. I'm not confining the topic to spending, saving, investing, or what have you. This is bigger than that as it encompasses all things money.

I married my lovely bride in October, 1999. Two weeks after we got married, I learned that the corporate wellness center I was working for was shutting down at the end of the year. To top it off, my boss already knew this, knew I was getting married and becoming a step-parent, and he didn't have the common courtesy to warn me so that I could start looking elsewhere. My wife had a decent job in an operations department of a trust company, but we had a great deal of consumer debt, so money would be especially tight on one income.

A year later, I had taken my experience in the fitness industry and had launched a career as a personal fitness trainer. But it takes time to build a substantial client base. So I was doing odd jobs to help make ends meet. Furthermore, we were still adjusting to married life, let alone the intricacies of being a blended family. I had some upsetting events with a few of my personal training clients. Money was scarce, in spite of all our cost-cutting efforts, debt-snowballing, and frugal living. Truth of it was, not much was going right. It certainly was not the life Kim and I had dreamed of. But it wasn't just the growing pains of a new marriage…it was much deeper than that. It was a low-point in my life…and I believe I was being attacked spiritually like never before.

One fall afternoon that year, I was mowing grass for one of those odd jobs. I vividly remember driving the tractor up the hill towards the house on the property, reflecting on the state of things. And out of nowhere, the following thought occurred to me: We need to increase our giving. Say what? How could we? We were barely scraping by as it was. We had no business giving away any more money as we needed what little we did have.

But that was the thought I had. And here's why I had it: I knew increasing our giving during this time in our life would be an effective weapon in fighting our enemy. It was a battle cry. I was drawing a line. I was telling him that no matter what, I knew where my priorities were, where my strength came from, and who had my allegiance. I knew that this action would be utterly incomprehensible to him. After all, how could I serve a supposedly "all-loving" God in this way, when God allowed me to be in this position. And I knew he would hate it. All those thoughts, they not only comforted me, but they confirmed my desire to carry through with this decision. In fact, they fueled it even more.

And you'll never guess what happened the very next day, so I'll tell you. Nothing. Nothing happened the next day. No random check in the mail. No new out-of-nowhere job offers. No new training clients. Zilch. Nada. Zero. The only thing that happened was that we became poorer.

But while we may have temporarily become poorer, we also grew wiser. Looking back, I think it helped expedite a turnaround in our marriage, in our finances, and in our spiritual lives. It wouldn't be for several more years that we'd be debt-free. And it wouldn't be for an additional few years that I had a steady income that we could live on. But it was a watershed moment that would forever shape our attitude to how our spiritual lives and our financial lives are related. And I believe God honored that decision by giving us wisdom with other financial decisions (like the greatest spending decision we ever made). I think He blessed us financially by aligning better and better jobs for us. I think He rewarded us with healthy children (we're up to 4 now!) and even a great house which gave me the opportunity to become a landlord.

And ultimately, I think He orchestrated all this, as He is apt to do, to bring glory back to Himself. You see, we now make every effort to increase our giving every year, which brings Him glory. I'm writing this post, which I believe brings Him glory. I work for a newsletter whose sole purpose is to help you have more so you will give more... which brings Him glory. He is all about His glory... be it in your marriage, your work, and even in your finances.

So the next time you're feeling spiritually attacked, or your just in the mood to bring more Glory to our creator, I'd like to challenge you to increase your giving. It was certainly the best financial decision we ever made.

7 Key Principles for Christian Investing

IRAs, 401(k)s and Social Security: A Retirement Planning Primer

Gold as an Investment: Will Precious Metals Continue To Shine?

Inflation History: The Rise and Fall of the U.S. Dollar

Posted by Matthew | 8:55 AM | Comments (2) | TrackBack
Category(s): Giving and Stewardship
Tag(s): debt, family finances, giving, stewardship, tithe

Email this post

Share |

There is hope!

Here's a quick story of how one couple conquered $83,000 of credit card debt.

Not surprisingly, the key ingredients included cutting up the cards, learning to budget, and spend cash for everything.

But there was one other crucial piece — getting help from a credit counseling group that managed to negotiate their interest rates down from as high as 32% all the way down to 3%.

Obviously the best approach is to avoid getting into debt in the first place. But it's encouraging to read stories like this of how people have managed to dig themselves out. Not fun. But inspiring.

Have your own story? Tell us about it in the comments area.

Debt advice from the "Oracle of Omaha"

For the first Friday of each month, we invite a guest blogger to write our Personal Finance Friday feature. Today's guest writer is famed investor Warren Buffett!

Uh, perhaps we should explain that a bit more accurately. Once a year, Buffett — known as the "Oracle of Omaha" — issues a letter to the shareholders of his investment company, Nebraska-based Berkshire Hathaway. (For a list of the companies Berkshire Hathaway owns in whole or in part, go here.)

Buffet's latest letter (PDF) came out last weekend, and we thought we'd pass on a few of his comments about an important area of personal (and business) finance: debt.

So, here is our March 2011 SMI guest blogger (sort of) Warren Buffet!

Unquestionably, some people have become very rich through the use of borrowed money. However, that's also been a way to get very poor. When leverage works, it magnifies your gains. Your spouse thinks you're clever, and your neighbors get envious.

But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade — and some relearned in 2008 — any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.

Leverage, of course, can be lethal to businesses as well. Companies with large debts often assume that these obligations can be refinanced as they mature. That assumption is usually valid. Occasionally, though, either because of company-specific problems or a worldwide shortage of credit, maturities must actually be met by payment. For that, only cash will do the job.

Borrowers then learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, that's all that is noticed. Even a short absence of credit can bring a company to its knees. In September 2008, in fact, its overnight disappearance in many sectors of the economy came dangerously close to bringing our entire country to its knees....

My grandfather's name was Ernest, and perhaps no man was more aptly named. No one worked for Ernest, even as a stock boy, without being shaped by the experience.

[Below] you can read a letter sent in 1939 by Ernest to his youngest son, my Uncle Fred. Similar letters went to his other four children.... Ernest never went to business school — he never in fact finished high school — but he understood the importance of liquidity as a condition for assured survival.

Over a period of a good many years I have known a great many people who at some time or other suffered in various ways simply because they did not have ready cash....

[E]veryone should have a reserve. I hope it never happens to you, but the chances are that some day you will need money and need it badly, and with this thought in view, I started a fund by placing $200.00 in an envelope, with your name on it, when you were married. Each year I added something to it, until there is now $1000.00 in the fund....

It is my wish that you place this envelope in your safety deposit box, and keep it for the purpose it was created for. Should the time come when you need part, I would suggest that you use as little as possible, and replace it as soon as possible.

You might feel that this should be invested and bring you an income. Forget it — the mental satisfaction of having $1000.00 laid away where you can put your hands on it, is worth more than what interest it might bring....

If in after years you feel this has been a good idea, you might repeat it with you own children.

That's our Personal Finance Friday post for this week. Have a great weekend!

New rules for debt-settlement companies

The Federal Trade Commission has issued new rules that update our July 2009 SMI newsletter story, Settle A Debt for Less than You Owe?

The Baltimore Sun provides the basics.

Companies promising to settle debts for less than you owe soon won't be able to charge for their services until they do their job.

The Federal Trade Commission...plans to outlaw advance fees charged by for-profits pitching debt relief services over the telephone beginning Oct. 27. After that, consumers won't have to pay a fee until a debt is reduced.

Also starting next month, debt settlement companies must disclose to prospective clients the cost of the program, how long it will take to get the results promised and any negative consequences of the debt relief program.

USA Today personal-finance writer Sandra Block adds more:

The rule will crack down on marketing companies that earn big commissions for signing up as many customers for debt settlement as they can, says Gerri Detweiler, personal finance expert for Credit.com. These businesses have no interest in determining whether consumers are good candidates for debt settlement, she says....

[Still,] Detweiler contends that debt settlement remains a viable option for some consumers who have large credit card debts but aren't good candidates for bankruptcy....

[T]he FTC rule provides a good guide to the kinds of questions you should ask before you [sign up with a debt-settlement company]. For example:

• What's your success rate, and what percentage of people drop out of your program?....
• How much will it cost, and how long will it take to settle my debts?....
• How much will I need to save? Debt-settlement companies typically ask you to make regular payments to a dedicated account. When a certain amount has been saved, they'll go to your creditors and offer to pay off a percentage of the debt. The rule requires debt-settlement firms to provide a reasonable estimate of the amount you'll need to save before they'll make an offer.

Despite the new rules, the advice in our 2009 article still stands: "Although debt-settlement companies have helped some debtors, this is definitely a 'let-the-buyer-beware' area."

Another point worth mentioning — FTC chairman Jon Leibowitz says that before hiring a debt-settlement firm, it's a good idea to call your creditors and explain your situation. "You can sometimes develop your own workout plan," Leibowitz says. He notes that in some cases creditors "are willing to help consumers because it's in their own best interest."

Or as Larry Burkett used to put it, "It's better to run toward your creditors than to run away from them."

A review of Swaptree.com

Last summer, we wrote about Swaptree, a website that allows you to list and trade books, music, DVDs, and video games for free (and soon you'll able to trade Blu-ray discs and audio books). Since then, I've had a chance to use it in real life.

Here's how it works in general. Lots of individuals create lists of items they want, as well as items they have to trade. For the most part, you're saying that you're willing to trade any item on your "have" list for any item on your "want" list. (You always have the opportunity to reject a trade, but if you do this too often, Swaptree will evidently get cranky.) This is important, because in most cases Swaptree arranges deals among three parties, rather than two. In other words, you're sending an item to person A while getting an item from person B.

Here's the detailed version of how this works:

After you sign up for a free account, you are prompted to list items you have to trade and those you'd like to have. Listing items you have is quite easy. You either search for it or, better yet, simply enter in the UPC or ISBN in the "Have" list box and click "Add". From there, you select the item's condition and give a description if you'd like, then submit. Very quick and easy.

To add items to your Want List, type in the name of the item in the search box, then click the "Want It" link when it pops up. It's really that easy.

Next, you can view potential trades by clicking on your "Want List" and then sort the selections by "View Only Get Now Items." If there are any trades available to you, they will show up here. Next you can initiate a trade, assuming you are okay with the exchange. But not all items are equal. You may not want to trade a popular movie for an old paperback. But if you are good with the terms, you can initiate the trade and wait for the other party to accept (they are given roughly 2 days). If it's accepted, you'll get an email (or you can check back on the status by clicking the "My Trades").

Assuming it's accepted, you have a couple days to mail the item. Swaptree will give you the person's mailing address. You can either have Swaptree calculate and print the postage/mailing label for you right then (you'll need a credit card to pay for the postage if you select this option and they charge a small fee for this service - but it's extremely convenient and the prices are quite reasonable), or you can calculate your own postage.

After you mail it, you can "Contact the user" to notify them of your ship date and/or ask them questions/make comments. Once you've received your item, you can come back to "Rate the User". This rating might make a difference with whom you trade in the future. Since other users also likely take notice, it's advisable to solicit positive feedback if they haven't already rated you.

And that's Swaptree in a nutshell. We recently moved and came across some old movies and video games that I had intended to sell on eBay. But since I didn't want to hassle with auctions, and there were some DVDs we wanted, I thought I'd give Swaptree a try. And it works as advertised. I'm notified when someone initiates a trade and I check back once a week to see if there any available trades I may have missed or if I want to add some items to our Want List. So far, I've made 4 trades (traded movies for movies and traded video games for movies) and haven't had any issues. The only fees I've paid were the shipping costs. Again, Swaptree makes a small profit when you buy and print postage but you don't have to use their postage generator.

If there's a downside to Swaptree, it's that pending the size of your Want and Have Lists, a trade could take a while. So if you're in a rush, this probably isn't your best option. But it will likely be on my pre-eBay checklist if there's an book, movie, CD, or video game I'm interested in getting. And it sure beats paying retail because as is often the case, patience pays dividends for the frugal.

UPDATE: Swaptree has acquired Swap.com. Besides an eventual name change and a bigger user base, the changes brought about by this acquisition will take some time to manifest. In the meantime, it's free trading as usual.

An "easy" way to reduce your mortgage

Wanna get out of debt? Start by looking at your biggest expenses and find ways to reduce or eliminate them. For many of us, that biggest expense is our mortgage.

But not for 45-year-old Jay Shafer of Sebastopol, California. Why? Cause Jay has taken downsizing to a whole other level. Jay lives in an 89-square-foot house he designed and named "Tumbleweed." Jay, a former grocery store clerk, now designs these houses for a living. And not only has his mortgage disappeared, his utilities are now under $100 a year. Here's his story:

To be honest, this lifestyle appeals a great deal to me. Not only because of vastly reduced expenses, but also because of the burden of choosing, maintaining, replacing, cleaning, and storing our "stuff."

That said, I wouldn't go near this lifestyle till we're empty nesters because of the following equation:

And even once the kids leave home, really, let's be honest, what's the likelihood?

Debt-relief programs often put debtors in deeper hole

A year ago, in an article titled Settle A Debt for Less than You Owe?, we looked at so-called debt settlement companies, noting that (to put it charitably) they tend to over-promise and under-deliver.

[R]eaching a debt settlement isn't quite as easy as [these companies'] ads imply. A settlement works only if you qualify and only if everything goes just right....

[I]f things go wrong, the debtor could end up with more debt, an angry creditor, a severely damaged credit score, perhaps a lawsuit — plus be out hundreds (maybe thousands) of dollars in fees.

We also warned that "this is definitely a 'let-the-buyer-beware' area. The field of debt settlement is replete with firms that appear to be little more than scams."

On Saturday (June 19), the New York Times published a helpful (though somewhat heavy-handed) front-page follow-up.

[Debt] settlement companies typically harvest fees reaching 15 to 20 percent of the credit card balances carried by their customers, and they tend to collect upfront, regardless of whether a customer's debt is actually reduced.

State attorneys general from New York to California and consumer watchdogs like the Better Business Bureau say the industry's proceeds come at the direct expense of financially troubled Americans who are being fleeced of their last dollars with dubious promises.

Consumers rarely emerge from debt settlement programs with their credit card balances eliminated, these critics say, and many wind up worse off, with severely damaged credit, ceaseless threats from collection agents and lawsuits from creditors....

In the typical arrangement, the companies direct consumers to set up special accounts and stock them with monthly deposits while skipping their credit card payments. Once balances reach sufficient size, negotiators strike lump-sum settlements with credit card companies that can cut debts in half. The programs generally last two to three years.

"What they don't tell their customers is when you stop sending the money, creditors get angry," said Andrew G. Pizor, a staff lawyer at the National Consumer Law Center. "Collection agents call. Sometimes they sue. People think they're settling their problems and getting some relief, and lo and behold they get slammed with a lawsuit."...

In April, the United States Government Accountability Office released a report drawing on undercover agents who posed as prospective customers at 20 debt settlement companies. According to the report, 17 of the 20 firms advised clients to stop paying their credit card bills. Some companies marketed their programs as if they had the imprimatur of the federal government, with one advertising itself as a "national debt relief stimulus plan."...

"The vast majority of companies provided fraudulent and deceptive information," said Gregory D. Kutz, managing director of forensic audits and special investigations at the G.A.O. in testimony before the Senate Commerce Committee during an April hearing.

The Federal Trade Commission is expected to release new rules (PDF) this summer aimed at curbing abuses in the debt settlement industry. In addition, several states may act to cap fees that debt settlement companies charge.

As we noted in Settle A Debt for Less than You Owe?, a more fruitful approach for those struggling with significant debt problems is to work with a nonprofit credit-counseling agency to set up a debt-management plan (DMP). A DMP helps consumers pay their debts (in full) over 36-60 months.

DebtAdvice.org, the website of the National Foundation for Credit Counseling, offers a searchable database of such counseling agencies.

Powered by Movable Type  |   Subscribe  |   Email Updates