Faith Based Investing

What would you do with an extra $1,000 or $2,000?

The Tax Relief Act of 2010 will give many of us the equivalent of a 2% raise in 2011. Employee payroll taxes have been cut from 6.2% to 4.2% this year.1 So if you pay into Social Security, you are looking at a rise in your take-home pay.  

What are your plans for that extra money?

How about directing it into your retirement account? That 2% “raise” will show up in your paychecks throughout the course of the year – it will come to you incrementally rather than as a lump sum. Still, 2% is nothing to scoff at – if you make $50,000 in 2011, you’re looking at $1,000 of found money.

What could $1,000 do for you over 20 or 30 years? Well, let’s see. If you invest $1,000 today and simply let it sit there for two decades with a 6% annual return, you end up with $3,207.14 in principal and interest. If the initial grand just sits there for 30 years at 6% interest, it turns into $5,743.49. (That’s using annual compounding – if you plug in 30 years of daily compounding, it becomes $6,048.75.)

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Not the Monday I Expected

It is 6am and I awake from a deep sleep.  I jump out of bed! Another Monday morning has just begun.  I quickly make my way down the stairs and am startled by a horrific smell.  If I ignore it, it surely will go away, right?

I make my way to the kitchen through the living room.  In the corner of my eye I spot something humungous and gray.  I must be dreaming… No time for a second glance, what I need right now is a good old cup of Joe.

What was that oversized gray  thing in the living room? Huh? Not my problem. Someone else should have to deal with it!

I look down at my brand new cozy “cotton” pajamas that cost me 125.7% more than the ones I bought last year. You have to pay more for quality, I guess.

Where’s my cup of Joe?

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Spending too much can ruin any good financial plan

Baby boomers are known for wanting more out of life – and for living life on their own terms. They also get a bad rap as a generation weaned on instant gratification – wanting it all now, wanting to have it both ways.

It is neither wise nor truthful to paint a generation with a broad brush. What we do know in 2010 is that more Americans than ever are poised to retire. In fact, 10,000 Americans will turn 65 each day during the next 18 years. Will their retirements match their expectations?

Are boomers in for a collective shock? Many boomers are used to affluence and expect creature comforts in retirement. Yet many may not understand how much money retirement will require. A 2010 study from the non-profit Employee Benefit Research Institute estimates that about half of “early” boomers (those aged 56-62) will face a retirement shortfall – someday, they will have inadequate income to pay medical costs and core retirement expenses. EBRI also estimates that 43.7% of “late” boomers (those aged 46-55) are likely to exhaust their retirement savings as well.

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Tough times can make savvy shoppers out of us all…

With unemployment running rampant, housing prices still dropping, and consumers not spending, it is no secret that our economy is still in deep trouble.  Yet with adversity comes great opportunity! Frugality is en vogue!   Let’s look at some ways you can save money…

Visa released a study showing U.S. consumers cannot account for approximately $21 per week in cash spending.  This is over $1,000 per year. Those between the ages of 18 to 24 fare even worse – losing track of $2,500 annually.  That is a lot of cash!  Not only do many of us lose track of spending, we pay far too much for items because we fail to do a “little research”.  That is why I wanted to provide you with some online resources and tips to help save you money.  With budgets being reigned in, how can you minimize some of your ongoing expenses?  It pays to comparison shop more effectively. Here are ten tips to help you shop better and save more!

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Confessions from a wasteful spender
I have a confession to make: I am nowhere near as frugal as I should be. However with a large family like mine (wife and 4 kids), the grocery bills were getting out of hand! Feeding a family of 6 is daunting enough just trying to keep food in the house never mind thinking about clipping coupons. Or so I thought…

This past weekend, our family tried a little experiment. Spend 30 mins, save money!
Here’s what we did:

1. Karen, my high school sweetheart of a wife, started with where we were shopping: Harris Teeter and pulled up their sales flyer to see what the specials of the week were.
2. She made the grocery list of stuff we normally buy but noted items and brands that had “buy one get one free” or low prices.
3. Next she went to a couple of coupon sites and looked for coupons for the brands we were planning to buy. She used Coupons.com and couponmom.com
4. We printed the coupons, cut them out, and off to the store I went

Total investment: 30 minutes of time

How did we do?

Normally, we spend at least $200 a week on groceries. This week was no exception! The total bill was $216! Wow…what a waste of time, right? Wait a minute…I forgot one important detail. At the register I gave them my VIC card (Harris Teeters Free Reward Program) and Karen did well: we saved $43 by taking advantage of the weekly specials. Next came the coupons: At Harris Teeter, they double manufacturer coupons up to $0.99. I used approximately 30 coupons and saved another $65. Now let’s do the math:

We spent 30 mins.
We normally pay $200+ per month

This week the total bill was $216
Minus $43 (in store savings)
Minus $65 (in manufacturer coupons)
Total savings $108
Final Bill: $108

Not only do I have an incredible wife and Mom to our 4 children, we now have a prudent shopper! This literally saved us $108 or 50% off our normal weekly bill. If we did this every week, we’d save over $5,600!!! Wow! Think of all the things you could do with an extra $5k…maybe being more frugal is the way to go? You think?

What are some good coupon sites you use?
Any extra frugal tips you want to share?

Want More? Spend Less!

Many wished that money grew on trees.  Just seed, plant, and let it grow!  Having a never-ending supply of cash may be a dream. Wouldn’t you love to do whatever you want whenever you want? The truth is, if you plan properly, this day of true financial freedom can occur.

It is far better than the alternative—incurring debt. In order to pursue true wealth, you need to understand the difference between “good” and “bad” debt.

So how can you tell the good from the bad?

Here are the working definitions of what I am talking about:

Good debt: Good debt involves purchasing something that will gain, retain, or create value. A home mortgage is a prime example of good debt.

Bad debt: To put it simply, bad debt is any debt you incur when buying something that will lose value.

Ugly debt: Ugly debt is debt incurred when purchasing something consumable (meaning it will have no further value). This seems logical, right? Spending does not equal happiness

Many spend more than they make going deeper and deeper into debt. Before you consider debt, ask yourself:

• Is this adding to my wealth or subtracting from it?
• Do I really need this now?
• Do I have enough in savings to pay for this?
• If I borrow, how much interest will I pay?
• Does this make financial sense?

Here are some suggestions to consider BEFORE you make your next purchase:

1. Pay only with cash or check. Stop using your credit cards. Try this for one month. You will find you think and plan more–much more. Plus, at the end of the month you will find you will have spent far less than normal for the ―normal‖ things of life. (Credit card companies have statistics to show that you will normally spend 34% more if you use credit as compared to cash.)

If you really want some excitement in your life, go on a cash only basis AND carry a small note pad to write down everything you spend down to one penny. This simple exercise will help you identify and correct some of your poor spending habits.

2. Is the thing you want to buy a necessity or an indulgence? Can you meet the need for this thing in any other way?

3. Does it reflect your Christian ethics? For example, what magazines, TV, radio, INTERNET, etc., do you allow into your home? Do you even know what is in your home?

4. Is this the very best possible price you can get? Are you buying on impulse? You are if you don’t take the time to check around for better prices—check Consumers’ Reports, etc.

5. Is it a highly depreciative item? If it is, look for a better alternative. For example, you can choose to buy used cars and appliances. You can also choose to buy basic cars and appliances and forgo some or all the bells and whistles.

6. Does it require costly upkeep? There is nothing wrong with Christians owning boats, motor homes, lake lots, swimming pools, etc. But, before you buy, consider the cost of upkeep. Many folks get into trouble because they can afford to buy, but cannot afford to maintain.

7. Can you rent or borrow rather than buy? You don’t have to own all that you use or enjoy.

8. And finally, does it bring you closer to God?

Any other questions or thoughts I missed?