Matt Bell's Blog, page 11

Profitable Ideas: The Trick to Saving Money, Garbage Clothing, and More

Weekly list of curated personal finance articles from around the web.

9 psychological tricks to save you money (This Evergreen Home). Good ideas for turning the tables on the behavioral biases that often steer us off course.

The generosity power move that can boost your career (Wall Street Journal). There’s an art to networking so that it’s a win-win.

The laws of financial health (Mark Newfield). Wise money management doesn’t have to be complicated; it can be broken down to a small number of essential rules.

Online gambling has fueled an industry boom that threatens public health, commission finds (CNBC). This is one of the more harmful financial trends sweeping through our culture

How to protect yourself from scammers offering fake jobs (Associated Press). Job hunting is hard enough, and now this.

We’re in the golden age of garbage clothing (The Walrus). It has become truer than ever that the cheapest price isn’t usually the best value.

Making the most of holiday giving (Good Sense Movement). Guidance for navigating all the year-end requests for help.

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

Paying for Big-Ticket Items

A few years ago, we replaced the furnace/air conditioning system in our home. It was not the most enjoyable way to spend a big chunk of money. However, having the money set aside in savings made it far less painful than it might have been. 

If you own a home or a car, I hate to break it to you but you have some big-ticket expenses in your future. Do you know how you’ll cover the cost when you need to replace them? Here are my suggestions. 

Anticipate the expenses

When we bought our home in 2012, I knew the heating/cooling system wasn’t long for this world, so we set aside some money on a regular basis from day one. As the system needed more and more repairs, we finally decided it was time. 

The equipment was 19 years old. Could we have kept it running longer? Probably, but I didn’t want to take the chance. In our last home, the air conditioner failed on a Saturday in the middle of a hot summer. Oh, and we had just brought one of our kids home from the hospital after an asthma attack. That’s the worst possible, gun-to-the-head circumstance for making an expensive decision.

What expensive ticking time bombs do you have in your life? How old are the shingles on your roof? What kind of shape are your washer and dryer in? (Here’s some guidance for how long certain pieces and parts of your home should last).

Keep and maintain

The best overarching philosophy when it comes to expensive items is to keep them a long time and keep them maintained. We try to keep vehicles at least 15 years past their manufacture date. 

I’ve always taken our vehicles to the dealer for maintenance and repairs. That’s certainly not the cheapest option, but I want the mechanics that work on our vehicles to be specialists in working on the brands we own.

Over the years, as I’ve reviewed lots of people’s budgets, items that are commonly missing are maintenance and repair allocations for vehicles and homes. I recommend about $100 per month per vehicle and about 1-1.5% of the purchase price of your home divided by 12 for home maintenance and repairs. You won’t spend that much every month, but some months you’ll spend a lot more, so let the unspent money build up.

With our furnace and air conditioner, I’ve always opted for the seasonal maintenance in the spring and fall. With our cars, I stay on top of all the scheduled maintenance.

Save in separate accounts

An important key to replacing big-ticket items is to save for them regularly in a dedicated savings account.

If you have no emergency fund, my recommendation is to automatically transfer 10%-15% of monthly gross income into a dedicated savings account. Once you have three-six months’ worth of essential living expenses saved, you can redirect most—but not all—of that money toward investing. 

If you were saving 15%, you might redirect 12% toward investing while you keep putting 3% into another dedicated savings account (not your emergency fund) for the replacement of big-ticket items. If you were savings 10%, you might  redirect 7-8% toward investing while you keep putting 2-3% into savings.

I like the idea of separate savings accounts for specific purposes because what I’ve found is that mingled money leaks. It gets used for other things.

You’ll probably always have some expensive item that’ll need to be replaced, so save for their replacement regularly.

How have you paid for the replacement of big-ticket items?

Profitable Ideas: The Word on Money, Life-Improving Micro-Habits, and More

Weekly list of curated personal finance articles from around the web.

Why does how we view money matter? (Eternal Perspective Ministries). “The sheer enormity of Scripture’s teaching on this subject screams for our attention.”

The most important financial planning recommendation (SignatureFD). When there’s a 100 percent certainty you will need something, you should probably get it.

Payment apps are popular, but here’s why you shouldn’t store money in them (Fast Company). For one thing, there’s no insurance guaranteeing the safety of the money as there is with banks.

3 steps to uncovering your true financial goals (Morningstar). Geared toward investors, this article helps you step away from the noise and consider what goals matter most.

20 micro-habits that will change your life (This Evergreen Home). Okay, the headline may be a little overblown, but there are some really good ideas on this list.

How to build your credit score from scratch (Clark Howard). If you have a teen in your house, this is especially relevant.

What to do if you lose your phone (Fast Company). Of course our phones are much more than phones these days, which makes it important to know what to do if yours goes missing.

TikTok executives know about the app’s effect on teens, lawsuit documents allege (NPR). Parents, have you established ground rules for when your kids can use social media and which platforms?

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

Dads (and Moms), Teach Your Kids About Money!

I’m passionate about everything that relates to biblical financial stewardship, but I’m especially passionate about seeing today’s young people grow up learning biblical financial perspectives and practices. And the best teachers for that are parents.

That’s why I’m thrilled to have been a guest on the Father On Purpose podcast recently with hosts Kent Evans and Lawson Brown.

In our conversation, we talked about why it’s so important to teach our children a biblical approach to money (the many benefits of engaging with our kids on this topic, and the risks of not doing so), how to do that in some specific areas like helping our kids develop a diligent work ethic, and much more.

To go deeper on this topic, pick up a copy of, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management and the free companion small group discussion guide.

As you might guess from its name, the Father on Purpose podcast is intended for dads, but moms are invited too!

Please take a few minutes to listen and send it on to other parents you know. Be sure to check out Kent’s other resources via his Manhood Journey website as well. 

Profitable Ideas: Boomer Money Secrets, Nothing Average About the Market, and More

Weekly list of curated personal finance articles from around the web.

How boomers’ money secrets are a ticking time bomb for their kids (Sherwood). Parents, talk with your adult children about your finances—for their sake.

Here’s the science behind our stupid money mistakes (Fast Company). How to retrain your brain to do better.

How to use a crisis to help your parents (Kindness Financial Planning). Far better to start a conversation before a crisis.

Why your kids should start making their holiday wish lists right now (Lifehacker). What they want won’t be on sale Christmas week.

An extraordinarily average stock market stat (TKer). To stay with investing, you have to understand that the market is rarely average.

Seven 401(k) mistakes that could tank your retirement (Kiplinger). Traditional pensions aren’t coming back. You’re responsible for your retirement account.

When luxuries become necessities (A Wealth of Common Sense). “The crazy thing is our vehicles are getting bigger while our families are getting smaller.”

Help for those bad at budgeting (Crown). Some suggestions for improving your budgeting experience.

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

How’s Your Financial Health?

If you were to take your financial life in for an annual check-up, how would it look? To put it in cholesterol terms, would your LDL (debt) be too high? Would your HDL (savings) be too low?

Each year, researchers at the University of Southern California and a group called The Financial Health Network use a survey to assess the financial health of the U.S. adult population. According to its latest Financial Health Pulse, a lot of people could stand to improve. For example, just 47% say they spend less than they earn and just 56% have enough money in savings to cover three months’ worth of living expenses. People with outstanding credit card debt are in far worse shape.

Maybe because I used to work in the market research industry, it made made me think about what questions I would ask in order to assess someone’s financial health. I’d include the following 10 topics. As you read each description, rate yourself on a 5-point scale, with 5 being the most positive score.

Biblical financial worldview. How well do you know what the Bible teaches about money and to what degree have you put biblical financial principles into practice?

Income. While there’s no such thing as guaranteed employment, evaluate your employability. Are your skills up to date and in demand? Are you taking steps each year to hone your skills? How’s your network? Unless you’re independently wealthy, your ability to earn income is the foundation of your financial life.

Planning. Do you use a budget to proactively manage your household’s cash flow? Some people say they have a budget, but really what they have is a big picture idea in their head of how much they can spend. What I mean by a budget is a written plan that allocates your income toward giving, saving, investing, and spending.

Giving. Are you giving at least 10% of your monthly gross income to Christ-centered causes? I know some people get uneasy with specific generosity guidelines, but I believe 10% is the biblical starting point.

Saving. Would you be able to live off your savings for three to six months if you lost your job tomorrow? If you’re single and rent an apartment, you’re probably fine with three months’ worth of savings. If you’re married with kids and a house, you have what I call more breakable moving parts and should have at least six months’ worth of essential living expenses in savings. This emergency fund should be in a dedicated savings account, not mingled with your checking account money.

Also, do you save for periodic expenses, such as an annual life insurance premium, Christmas gifts, or other expenses that aren’t paid every month but will need to be paid at some point in the year? And do you save for the replacement of big-ticket items, such as your car?

Debt. Are you debt-free, with the possible exception of a reasonable mortgage—one that requires no more than 25% of monthly gross income for the combination of your mortgage, property taxes, and homeowner’s insurance, and preferably no more than 20%?

Investing. Do you know how much you should be investing to build a nest egg for your later years and are you investing that much? If you have kids, are you investing to help pay at least a portion of their college costs? And are you investing knowledgeably?

Protecting. Do you have adequate insurance—health, vehicle, homeowner’s, life, and possibly disability insurance?

Spending. Are you proactive about controlling your spending, being intentional about managing to the numbers in your budget?

Temperament. Especially if you’re married, knowing your temperament and your spouse’s temperament can be really helpful in managing money as a team. Even if you’re single, understanding how God has wired you up, and the financial tendencies that are associated with your temperament, can help you learn to play to your strengths. So, do you know your temperament and its financial implications?

Since there are 10 topics, there are 50 possible points. How did you score? While this is certainly far from scientific, I’d say if you got 45 points or higher, you’re in “very good” shape financially, 40-44 points means you’re in “good” shape, 35-39 points means you’re in “fair” shape, 30-34 means money is probably somewhat of a struggle for you, and anything less than 30 means you’ve got some work to do.

Use this list as a diagnostic tool that can help you develop goals for the next 6-12 months. Start with the topics where you gave yourself the lowest scores. Then search for articles about those topics on my site for guidance. Or if you’re part of a church with a stewardship ministry, see what classes are being offered and sign up.

Money is one of those things we never get fully right. We all have room for improvement. Hopefully by honestly assessing where you’re at with the 10 topics above you’ll be able to focus your financial improvement efforts in the right places.

Profitable Ideas: The High Cost of Changing Jobs, College Rankings That Matter, and More

Weekly list of curated personal finance articles from around the web.

Changing jobs can put a $300,000 dent in your retirement (Wall Street Journal). Auto-enrollment retirement plans can give you a very costly false sense of confidence. See also, Financial automation: when helping hurts. 

Overcoming the emotional impulse to spend (FaithFi). The lies of our consumer culture don’t stand a chance against the Truth of God’s Word.

Ranking colleges (Humble Dollar). In the long-run, it isn’t how comfortable the dorm rooms are that will matter most.

I’m a doctor. I limited social media and quickly saw health benefits. (Washington Post). Social media is today’s primary conduit of the consumerist messages, “You don’t have enough” and “You’re not enough.” Choosing limits can pay all kinds of dividends.

What if you only invested at market peaks? (A Wealth of Common Sense). A message that’s especially relevant for young investors.

Millions of dollars in tax refund checks are getting stolen (Wall Street Journal). If you get your refund via check, it’s time to make a change.

Will your house flood? We ask the experts (Kiplinger). Only 4% of homeowners have flood insurance. Do you need it?

A life-changing truth: we’re all minimizing something (Becoming Minimalist). A helpful insight for those who are intrigued by minimalism but think it will be too difficult.

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

The Most Underrated Type of Financial Knowledge

When it comes to managing money, there’s a lot to know. Which retirement savings vehicle is best, an IRA or a 401(k)? Which type is best, traditional or Roth? How much should you spend on a house?

But there’s a type of knowledge that’s arguably even more important. Not having this knowledge can cause all sorts of problems—from settling for too small a salary to spending irresponsibly. It can spell the difference between knowing what to do and actually doing it. And it’s at the heart of more financial disagreements between husbands and wives than most realize.

What is this mysteriously powerful form of knowledge? Self knowledge.

Everyone is born with a certain temperament. It doesn’t change. Going through life without knowing your temperament leaves you vulnerable to being ruled by your tendencies.

On the other hand, knowing your temperament is like having access to the notebooks kept by an unbiased person who’s been observing you for a very long time. The insights will be invaluable.

At first, it’ll explain a lot. Why you’ve been having such a difficult time saving money, or why it comes so naturally. Why you love to give money away, or why it’s difficult. Why you actually like using a budget, or why you don’t.

If you’re married, and if you both take the time to understand each other’s temperaments, it’ll open up a whole new level of understanding. It’ll also give you an opportunity to divvy up financial responsibilities in a way that puts each others’ strengths to work while working around some of each others’ weaknesses. (Within each temperament, there are tendencies that really help you manage money well, and there are tendencies that get in the way.

I unpacked some of the financial implications of each tendency with separate posts about Sanguines, Melancholies, Cholerics, and Phlegmatics. A graduate level understanding of temperaments would look at the financial implications of the various temperament pairings. You see, each of us has a primary temperament and a secondary temperament.

You can gain some insights into all of this via a 1994 book written by Jerry and Ramona Tuma called Smart Money (Click on the hardcover or one of the used options).

For example, my primary temperament is temperament is Melancholy, which the Tumas describe as “driven to achieve perfection” (yup), “among the most critical people alive” (I have to confess to a critical spirit; it’s something I’ve had to work on), and “they will finish projects simply because they need to be finished” (very true). My secondary temperament is Choleric, which is why I tend to be so obsessed with getting places on time.

Do you know your temperament? If not, I highly recommend that you begin exploring this topic. You should be able to identify your primary and secondary temperaments by taking a quiz put together by the Tumas, which is available for free in the Resources section of my site.

Understanding your temperament isn’t as simple as opening a savings account. It’s an ongoing process. First you’ll gain a basic understanding of some of the tendencies that come with your primary and secondary temperaments. Then you’ll notice more and more ways your temperaments influence your feelings and decisions. Then you’ll see how situational your temperaments can be—how your primary temperament is on full display in certain situations and your secondary temperament in others. When you discover ways to put your natural strengths to work while working around some of your natural weaknesses, you’ll really be maximizing this knowledge.

Do you know your primary and secondary temperament? If so, how have you seen it impacting your financial beliefs and behaviors?

Profitable Ideas: Crypto Scams, What Jesus (Never) Said About Money, and More

Weekly list of curated personal finance articles from around the web.

Americans lost $5.6 billion last year in cryptocurrency fraud scams, the FBI says (Associated Press). Beware the new online “friend.”

The buying power of your credit card points is tanking (Wall Street Journal). Shrinkflation comes for your credit cards.

My spending rules (Humble Dollar). Jonathan Clements has long been one of my favorite financial writers. I’m paying even closer attention to his work now.

Two roommates. A communal bathroom. Why are college dorm costs so high? (USA TODAY). Off-campus apartments are no bargain either (as I’m discovering!).

What did Jesus actually say about being rich? (Relevant Magazine). This writer brings a unique perspective to the topic.

3 money lessons from Luke (FaithFi). Getting to the heart of the matter.

The biggest risk in real estate (A Wealth of Common Sense). Helene left behind a devastating path of destruction, and financial lessons for all.

3 things Jesus (never) said about money, wealth, and possessions (Christian Stewardship Network). Clearing up some common misunderstandings.

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

What Matters More — Your Spending Rate or Your Saving Rate?

Those of us who write about money for a living can get a little carried away by some of the nitty-gritty details. That seemed to be the case in a surprisingly impassioned debate that sprang up recently over what a person’s higher priority should be—controlling spending or controlling saving.

At first, it seemed kind of silly to me. They’re just two sides of the same coin, aren’t they? But as I thought about it more, I realized it’s a pretty important idea. And I disagree with the conclusion two bloggers I generally respect came to.

It all started on the blog of highly regarded financial planner Michael Kitces. He believes trying to control your saving rate is unrealistic, arguing, “most households struggle to save because there is no money left at the end of the month to save in the first place.”

To which I would say, putting spending ahead of saving will virtually guarantee there will be nothing left to save!

He also said “there is remarkably little guidance available to households about what a prudent spending rate should be in the first place. In some of the largest categories, which tend to be financed with debt – e.g., homes and automobiles – lender guidelines… are based on what the lender believes will extract the maximal amount of interest with an acceptable level of defaults… despite the fact that many of those borrowers will be in over their heads and struggling just to make their repayments!”

I would argue that people are not helpless victims who are forced to borrow beyond their means. I’ve long encouraged people not to finance vehicles and, in fact, not to have any debt other than a reasonable mortgage. What’s reasonable? My recommendation is to devote no more than 25% of monthly gross income to the combination of your mortgage, real estate taxes, and homeowner’s insurance—preferably no more than 20%.

So, yes, those decisions (housing and transportation) have much to do with controlling spending, BUT controlling spending comes from a commitment to first give at least 10% of monthly gross income, save or invest at least 10%, and then consider what you can afford to spend on a home and everything else.

I was surprised to see another financial blogger I like agree with Kitces’ premise. He wrote, “In the fundamental wealth equation, the two variables that you control are your income and your spending. You don’t directly control your saving. That rises or falls depending on the other two factors.”

I respectfully disagree. If your monthly salary is $5,000 and your first thoughts are about what you need or want to buy, with a hope somewhere in the back of your mind that at the end of the month you might have something left over to give and save, how much do you think will be left over to give and save?

But if you know that of your $5,000 monthly salary you can spend $4,000 on what you need and want, I’m confident you’ll figure out how to live on $4,000.

I know this math doesn’t make sense on a calculator or a spreadsheet, but what I’ve seen over the years is that people have an easier time living on 80% of their income than 100%. Given 100% to live on, people often end up living on 105% or 110%, financing the extra spending. In other words, a spend-first way of approaching money typically leads to overspending. But when giving and saving are higher priorities than spending, people are able to live on what remains.

The best way to save is to decide to save, proactively controlling your saving by automating it. It’s the same with giving. You don’t necessarily have to automate your giving, although you certainly could. You just have to make giving your top financial priority, creating a cash flow plan that allocates percentages of income to giving (and saving/investing) before making your allocations to other categories.

What are your thoughts on this chicken or the egg question? Which comes first — controlling spending or controlling giving and saving?