Matt Bell's Blog, page 12

Profitable Ideas: Buying (Big) Stuff With Friends, The Great Goals Debate, and More

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

They bought homes with their friends—and now they want out (Wall Street Journal). Even if selling will bring a profit, will the friendship survive?

8 reasons why college students need to start budgeting now (Christian Money Solutions). They may not have as many categories to manage as they will down the road, but establishing this habit early will pay dividends.

Take something away (Collaborative Fund). The author doesn’t connect all the dots, but it’s an interesting big-picture potential solution to a wide variety of problems, some of which are surely financial.

Training your children to manage money (Eternal Perspective Ministries). Wonderful guidance from one of my all-time favorite biblical money management teachers. 

The cult of blind ambition (Hot Takes). On the importance of staying true to what matters most.

This is why I don’t have goals (and what I do instead) (Ryan Holiday). I’m not sure this is really an either/or choice. See also, Financial goals and systems: can one exist without the other? (Sound Mind Investing).

8 ways to embrace a slower life (This Evergreen Home). Just reading this article is a good stress reliever.

Why you need to go through your online accounts (Clark Howard). Each account represents some degree of vulnerability for you.

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.

You Can Afford It, But Should You Buy It?

How well we manage money has much to do with getting some of the big decisions right. How much should we spend on a house? Should we finance a vehicle?

Other financial decisions can be simplified by using a Cash Flow Plan and taking an objective look at how much a household of our size and income can afford to spend on this or that (see my Recommended Cash Flow Guidelines, Cash Flow Plan and Cash Flow Tracker forms, along with the Budget Quick Start Guide).

However, using money well requires more than sound economics.

Beyond the Spreadsheet

For anyone whose faith is at the center of their life, the overarching financial goal isn’t just to live within our means. It’s to use money in a way that’s glorifying to God and has a positive impact on others, which is what makes the words from 1 Corinthians 10:23-24 so challenging:

“Everything is permissible”—but not everything is beneficial. “Everything is permissible”—but not everything is constructive. Nobody should seek his own good, but the good of others. – 1 Corinthians 10:23-24

If we can afford to buy a huge, lavish home, should we? Or, could living in such a home do something to our hearts? And could it put some distance between other people and us? On the other hand, could it be a blessing to others? Could it enable us to have a positive impact on people we might not otherwise have an opportunity to interact with?

If we can afford to buy an expensive vehicle that turns heads, should we? Or, could the different way people treat us because of our vehicle impact the way we view ourselves? Could it negatively impact how others in our sphere of influence use money? On the other hand, could such a vehicle be part of the “everything” God provides “for our enjoyment” (1 Timothy 6:17)?

It’s good to ask such questions, but it’s best not to think we know the answers too quickly.

WWJD?

In Chip and Dan Heath’s excellent book, Switch, which is about how to bring about a desired change in our lives, one of their most interesting findings has to do with how identity influences our decision-making. They use the example of a chemistry professor:

Imagine…you had a lucrative opportunity to consult on the toxicity study of a new drug for a big pharmaceutical company. From a consequences point of view, the decision to accept the job would be a no-brainer—the work might pay far more than your university salary. But from an identity point of view, the decision to accept the job would seem less clear-cut. You’d wonder what strings were attached, what subtle compromises you’d have to make to please the client. You’d wonder, “What would a scientist like me do in this situation?

That question is so simple. And so helpful.

When making financial decisions, we would do well to stop and ask, “What would a person of faith do in this situation?” And, assuming it’s a permissible decision, “How might it impact the good of others?”

Questioning Financial Decisions Large and Small

It’s especially helpful to ask such questions when setting the overall financial direction of our household, and when making big decisions like what type of home or car to buy.

But what about other decisions, like choosing a brand of laundry detergent? Do we really need to wrestle with that? Is it good stewardship to buy only what’s least expensive? (See The Case Against Frugality) Or, could it be best to pay a little more for a brand that’s more environmentally friendly? And what about trying to avoid products made in countries known for their human rights abuses?

I can’t tell you exactly what type of home or car to buy, or which brand of laundry detergent you should choose. But I’m confident that asking questions based on 1 Corinthians 10:23-24 will lead to benefits that extend far beyond the bottom line.

How has the distinction between what’s permissible and what’s beneficial or constructive impacted some of your financial decisions? How might it impact any decisions you’re considering right now?

Profitable Ideas: The Boring Path to $1 Million, Money Lessons to Teach Your Teens, and More

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

The number one way Americans are becoming millionaires (Morningstar). It isn’t very exciting, but it does have the advantage of being effective.

The most reliable car brands, according to Consumer Reports (Visual Capitalist). Not a ton of surprises here, except perhaps Porsche and BMW scoring higher than Kia and Hyundai. 

Let’s rethink how we’re spending money (No sidebar). Four good suggestions for wise, more satisfying spending.     

Spend your money according to YOUR plans (Darius Foroux). How to stay on track in a world that seems intent on running you off the rails.

Your kids don’t need smartphones (Wall Street Journal). At very least, establish some rules for your kids. I have a sample electronic device contract on my website. See also, Indiana’s cellphone ban means less school drama. But students miss their headphones (NPR). And, My teenaged son still doesn’t have a smartphone. Here’s why (The Globe and Mail).

Seven lessons to teach your teenager about building wealth (Lifehacker). With a lot of these lessons, you can start before your kids are teenagers. See also, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management.

81% of Gen Z feels behind financially (Relevant Magazine). “Across generations, 76% wish they’d been smarter with money in their 20s.” If you have a young person in your life, are you doing enough to teach them about money?

Can you leave your estate to your pet? (CNN). “What could go wrong? A lot.”

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 Successful Investors Talk, or Not

I had conversations with two investors recently that were very telling.

The first conversation was with a guy in his 40s who invests his own money—for a living. That’s what he does. It’s how he provides for his family.

It’s very unusual, and probably conjures up images of a day-trader, someone trying to sell positions by the end of the day for more than he paid at the start of the day.

But that’s not at all what this guy does. Importantly, he has an objective process that he follows meticulously. He’s a technical investor, using various financial indicators to determine when the U.S. stock market is likely to rise. I can’t say that I fully understand the buy and sell signals he uses, but he’s been at it a long time and has found objective measures that work for him.

The key is that he has an objective process and he patiently, methodically stays with it. My sense is that very few investors can say the same.

My second conversation was with a 70-year-old retiree. At first, he seemed to be doing just fine. He was clearly very frugal and conservative. He seemed to have no problem living on a combination of dividend income and Social Security. Eventually, though, I became concerned about three things he told me.

First, the vast majority of his portfolio is invested in his former employer’s dividend-paying stock. While he was able to buy it at a discount during his career, having so much of his portfolio devoted to a single stock is dangerous. Just ask the many people who retired from GE, counting on dividend income from that once blue-chip stock to cover their living expenses.

Then he told me that he had recently taken a portion of his portfolio and started to follow one particular objective, conservative strategy. No problem there. What concerned me was how often he kept mentioning three or four other strategies he wondered if he should be using instead. As he implemented the one, he kept getting phone calls and marketing pieces from various advisors and investment services that he thought might be better. He kept second-guessing himself, wondering whether he should be following one of the other approaches.

While it’s appropriate to consider your options, at a certain point, it’s important to choose a path and stay on it. Otherwise, at the first sign of trouble, someone else’s shiny brochure will look better.

My third concern was that he showed a surprising amount of interest in an especially high risk/high potential return strategy. He had heard about some especially attractive recent returns and was thinking about giving it a try. From everything he had told me, he didn’t need huge returns from his portfolio, nor would he be able to withstand significant losses—financially or emotionally.

If you only need an average annual return of 5-7% and are in your later years, why would you take the risks necessary to try for 12%?

The ideal approach to investing is to find and follow a strategy that, A) uses a purely objective investment selection process; B) is designed in a way you fully understand; C) has a good track record; and D) is emotionally acceptable to you—meaning you’re willing to do what’s necessary to execute it and you’re willing to keep following it no matter what happens in the market.

What I mean by a good track record is that it has generated the sort of returns you need, given your age, and it has done so with the sort of volatility you can live with. While the past certainly doesn’t guarantee the future, you should have some understanding of how a strategy you’re considering can be expected to perform in a bull market and a bear market.

Some strategies are designed to maximize returns during a bull market but are likely to fall hard during a bear. That’s okay as long as you’re willing to stay with it during the downturns. Others are designed to share in some of the gains of a bull market but protect against big losses in a bear. That, too, is okay as long as you’re okay underperforming the market in good times.

The strategy he was suddenly attracted to falls in the former camp. It’s easy to love when times are good. However, if he decided to follow it, my sense is that when the next bear market hits, it would cause him financial and emotional pain he would be ill equipped to handle.

How well does your investment selection process stack up against the four criteria I described above? How well has it served you in good times? And how willing are you to stay with it during the inevitable bear markets?

Profitable Ideas: Choosing What to Take In, Little-Known Ways to Protect Your Phone, and More

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

Mindful consumption (Becoming Minimalist). Living intentionally in a reactionary world.

How to sell your car in 6 steps (Clark Howard). If it seems intimidating, this step-by-step guide will help.

Who was “i” without my iPhone? (The Gospel Coalition). Great first-person account of a digital detox.

My 27-year-old car will make me a multimillionaire (The White Coat Investor). Long, funny, helpful post about the benefits of being intentional in how you buy cars.

Bank of Dave on what you MUST do to keep your phone safe (This is Money). Do you know your phone’s IMEI code? Neither did I, but I do now.

Why credit card fraud alerts are rising, and how worried you should be about them (CNBC). If you haven’t already done so, freeze your credit files at the three major credit bureaus: Equifax, TransUnion, and Experian. 

25% of young adults don’t want to have kids because of finances (Relevant Magazine). Yes, having kids is a big commitment, and an immeasurable joy.

Who is the faithful and wise servant? (The Gospel Coalition). Reflections on the parable of the talents.

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.

An Investor’s Got to Know His (or Her) Limitations

Fear finally caused me to stop. I was in Colorado, reconnecting with some long-time friends, one of whom is an experienced mountain climber. He had slowly driven us up a perilous-looking, narrow and rocky path cut along the side of a mountain. There were no guardrails to protect us from the sheer drop-off. Bouncing around in the back of his two-seat 1960s Willys Jeep, I alternated between glancing at the incredible scenery and keeping my eyes inside the Jeep to ease my fears.

After we had gone as far as his seemingly unstoppable vehicle would take us, we got out to hike. There were no paths that I could see, just my friend’s knowledge of the area, having been there before. The higher we climbed, the looser the footing became. As one who doesn’t like heights, I conquered fear after fear, but finally decided that the next steep portion was too much.

So I spent 90 minutes drinking in the view from about 12,600 feet shown in the photo above as my friends continued to climb. (The highest peak in Colorado is about 14,400 feet.)

Not all fear is bad

I’m well aware that “Do not fear” is the most common command in the Bible. But there are two sides of fear, as Donald Miller describes so well: “Fear isn’t only a guide to keep us safe; it’s also a manipulative emotion that can trick us into living a boring life.”

In other words, fear can be useful when it moves us out of harm’s way, but it can be destructive when it holds us back from doing what God calls us to do.

Fear works in similar ways with investing. The negative side of fear can drive us out of a falling market, causing us to lock in our losses and usually miss the recovery that follows.

But it can also keep us from taking more risk that we should when we set up our portfolio. Think about this: How much do you fear the possibility of a significant market downturn? What if your portfolio lost half its value over the next six months, just as the U.S. stock market did between September 12, 2008 and March 9, 2009? If that strikes a paralyzing fear in your heart, an all-stock portfolio is too risky for you. There’s no shame in acknowledging that; it’s wise.

Experience counts for a lot

Throughout our time on that mountain, my friend was not the least bit afraid. When he said he saw no reason for fear, he wasn’t boasting; he was speaking from experience. And when he said he would never put us in danger, I trusted him. I was very confident that he knew what he was doing. That’s what got me as far as I went, which was much farther than I ever would have dared to go on my own. And my growing fear told me when I finally had to stop.

There are two ways to bring that type of experience into your investment portfolio. First, you may have personal experience. If you had money in the market during the Great Recession and didn’t make any panicked decisions, that tells me you were using a trustworthy investment strategy and you have the emotional fortitude to successfully navigate the next downturn.

Second, you could purchase that experience, whether by subscribing to an investment newsletter or working with an investment advisor. Chosen well, either one could provide a calm, experienced voice of reason that helps you make it through the storm.

Growing concerns

Investors are often described as “climbing a wall of worry.” The idea is that as the market rises, so do concerns about the next significant downturn. With a lot of such talk going on these days, let me ask you: As an investor, are you climbing alone in unfamiliar territory? Or do you have experience—whether personal or purchased—on your side?

Profitable Ideas: Learning to Let Go, The Pros and Cons of Allowances, and More

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

Helicopter money (The Contessa Counts). Letting go isn’t easy, but it’s so important.

31 years of stock market returns (A Wealth of Common Sense). To succeed as an investor, you have to stay with it.

Do you spend money more like a millennial or a boomer? Take this quiz to find out. (Washington Post). I’m not sure you’ll gain any major life insights here, but it’s interesting.

How do I prepare my kids for financial responsibility? (FaithFi). Preparing your kids for college begins well before high school.

College isn’t for everyone (World). It’s a complicated decision that goes beyond career path considerations.

Five money lessons from a dad — and a financial advisor (Kiplinger). Some good lessons that can be taught within the rhythms of daily life.

Do allowances help children become good money managers? Maybe. (Washington Post). “Unless you are prepared to use the transaction to teach your child how to be money smart, don’t do it.”

What to do when someone wants to “keep insurance out of it” (bankrate.com). You need to have more than insurance; you need to be ready to deal with what can happen if you ever need it.

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.

One Habit That Will Greatly Improve Your Finances

What if there were a single step you could take to greatly increase your sense of financial control and confidence, decrease your financial stress, make your marriage work better, free up money for generosity, increase your savings, and speed the process of getting out of debt? What if this single step were available to you no matter how much money you make? And what if it only required a few minutes of your time each day? Wouldn’t you take it?

What is this mysterious, seemingly too-good-to-be-true step? It’s tracking your cash flow – monitoring how much is coming into your household each month, how much is going out, and where it’s all going.

An Unpopular Step Toward Uncommon Financial Success

I know that using a budget, and especially tracking your spending, is not exactly the most appealing idea around.

There are even personal finance writers who advise against it. One such writer recently sent an e-mail, warning people that keeping track of their spending would be “psychologically overwhelming,” and that even if they overcame that hurdle, seeing where their money goes each month would, in his words, only make them feel bad.

I disagree. I doubt that any drivers are psychologically overwhelmed by their fuel gauges. I find it somewhat helpful to know if I’m about to run out of gas!

Income is financial fuel, and each category in a Cash Flow Plan has its own fuel tank. Your decisions about how much of your income to allocate to giving, saving, and spending on food and clothing and everything else, sets each category’s fuel gauge on full. Monitoring how much of that fuel you’re actually giving, saving, and spending gives you the information you need to keep your household humming like a well-oiled machine.

Will it make us feel bad to know where our money is going each month? Maybe — if we discover that we’re wasting it on things that don’t really matter to us. But that information is helpful, giving us the knowledge and motivation we need to make any needed adjustments.

Getting Started With Cash Flow Tracking

I realize that tracking your money is not quite as simple as glancing at your car’s fuel gauge, but some of the online budget tools come close to that level of simplicity. And even if you use a manual money tracking system, it only takes a few minutes each day to record your spending and see where you stand.

If you’ve never tracked your cash flow, just start keeping your receipts. At the end of the day, write down what you spent in the appropriate category.

If you are using a paper & pencil system, keep your Cash Flow Tracker somewhere that you’ll easily see it – on your kitchen counter or maybe your nightstand. That way you’ll be reminded to record each day’s spending.

Or, if you use an electronic system like we do, get in the habit of checking your transactions once a day. I usually do it in the morning before I begin my workday. Within minutes of logging on, our recent transactions are automatically updated. I just have to make sure they’re categorized accurately, manually enter any cash transactions, and then I take a glance at how we’re doing in our various categories versus our plan.

The Main Benefits of Tracking Your Cash Flow

If you’ve never tracked your cash flow before, here’s what you’ll find. First of all, you’ll very likely begin spending less than before. Just knowing that all of your spending will be recorded will make you think twice about many purchase decisions.

Second, you’ll have a greater sense of financial control. Stress often comes from feeling out of control. When you go to the store and you don’t have any idea how your spending may impact your ability to save or pay other bills, that’s stressful. But when you know where you stand in your grocery budget before heading to the store, that gives you a sense of freedom and peace of mind. You know how much you can spend without messing up any other aspect of your finances.

How Often to Track Your Finances

Even pro-budget financial writers often advise people to track just some of their spending or track all of their spending but only for a week or two. You wouldn’t limit your use of your car’s fuel gauge to just a week or two, would you? I say track it all, and track it all the time. Doing so will give you the facts you need to manage money well.

Once You Track, You’ll Never Go Back

Test me on this. Track your spending. All of it. I’m confident that once you get started you’ll see so many benefits you won’t want to stop.

If you already track your cash flow, what pros and cons have you experienced? If you don’t currently track your cash flow, what’s holding you back?

And did you know that as soon as your kids start having any money flow into their lives, such as an allowance or gift money, that’s the time to teach them some basic lessons of budgeting. I write about this in Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management.

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Profitable Ideas: Needless Stress, Becoming a “Financial Mutant,” and More

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

The stress we needlessly bring into our lives (Becoming Minimalist). Some stress is unavoidable, but there’s a lot of consumerist stress we can do something about. 

Do I need to unfreeze my credit to shop for car insurance? (Clark Howard). Freezing your credit files is highly recommended, but it’s important to know when and how to temporarily unfreeze them.

We all live in Vegas now (NY Times). Unintended or not, the consequences of legalized gambling run deep.

These are the financial moves Americans regret the most (CBS Money Watch). Far better to learn from other people’s mistakes than to make them yourself.

Are you a ‘financial mutant’ (and why you should be) (Lifehacker). It starts with a mindset.

I moved from California to the midwest —and now save $46,000 a year (realtor.com). If you have some flexibility in where you could live, moving to a lower cost-of-living area could have a huge impact.

5 best places to buy pet medicines (Clark Howard). You don’t have to buy from your vet.

I kept track of every single item that entered our home over a month (To Love and to Learn). Moving toward a more minimalist life often involves doing time in the messy middle.

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.

Where Are You Setting Your Hope?

I came across a new phrase that I really like in John Eldredge’s latest book, All Things New (which I highly recommend). He wrote about “shepherding our hope.”

I’ve never thought about hope that way, that’s it’s something to be shepherded.

This idea has the potential to very positively transform our relationship with money and what it can buy.

What are you hoping for?

In her book, “The Overspent American,” Juliet Schor cites research noting that 61% of adults in the U.S. always have something in mind that they look forward to buying. I suspect the actual number is higher.

In and of itself, looking forward to buying a new TV or car isn’t some horrible crime. But here’s the danger: It’s easy to allow such hopes to become our greatest hopes. It’s why so many people find themselves running on the treadmill of wanting something, buying it, enjoying it for a while, getting used to it, wanting something more, and then repeating that cycle again and again. It’s tiring, discouraging, and not at all good for our finances. I know all about that, having logged many a mile on that treadmill.

Getting caught up in that cycle is an indication that our hopes are too small, that we’re pursuing false hopes that have no chance of satisfying.

Aiming higher

But sometimes our use of money gets us closer to our true hope. A few summers ago, my family vacationed in Maine. On our first full day there, we climbed on huge rocks along the ocean while strong waves crashed against the coastline. As our then-14-year-old took it all in, he declared it to be the most scenic thing he’s ever seen. I can’t begin to tell you how much joy it gave me to hear that.

Here’s Eldredge again:

Some sort of promise seems to be woven into the tapestry of life. It comes to us through golden moments, through beauty that takes our breath away, through precious memories and the hope even a birthday or vacation can awaken…

That promise is God’s promise to make all things new, which Eldredge wonderfully unpacks in his book.

Our first hope

Hope is one of our most powerful emotions. Most of us have experienced the truth that, “Hope deferred makes the heart sick” (Proverbs 13:12). But my sense is that too few of us have experienced the other side of that coin, that a well-placed hope gives the heart great joy.

Understanding that the deepest joys we’ve ever experienced in this life are God-given glimpses of the far greater joy we’ll experience in eternity is, in my view, one of the highest forms of spiritual maturity and the single highest form of financial maturity.

That’s why it’s so important that we are intentional about shepherding our hope. As Eldredge writes, the renewal of all things “is meant to be the center of our view of the world, our hopes, and our tangible expectations as we plan our lives going forward.” It is “meant to be your first hope in the way that God is your First Love.”

If that’s vague or unexciting for you, please read “All Things New” as it will transform your view of the future God has planned for those who love Him.

Who cares?

When I write such things, I confess to hearing a little voice within me, scolding me not to waste my time—telling me as if for the 20th time that people read financial blogs to learn how to save money at the grocery store or on their cable TV bill, that writing about money within the context of eternity is a non-starter, something far too disconnected from the realities of people’s daily lives.

But there’s another voice I hear as well, telling me I have to write such things because I know to the core of my being that living from this perspective is the only way any of us will ever use money in a constructive and satisfying way.

Important questions

Eldredge recommends pausing every now and then to ask ourselves, “How is my hope these days? Where is my hope these days?”

It’s perfectly fine to look forward to your next vacation or to remodeling your kitchen one day. But it’s essential that we hold such things with open hands, and to set such hopes within the context of a far greater hope.

To paraphrase what Eldredge wrote in another book, living with an eternal perspective is what enables us to deeply enjoy what there is now to enjoy as we look forward to a far greater feast that is yet to come.

I thought of that as we took our second son to college recently. It was so bittersweet. I’m so happy and excited for him, and so sad that he won’t be around the house anymore. Just a week later, I made the two-hour drive to his campus and we played nine holes of golf together. Neither of us played very well, and it was such a joy to be together.

Oh, how I can relate when Eldredge writes, “I am treasuring now every taste of the promise that comes my way.”