Matt Bell's Blog, page 24

Profitable Ideas: Other Forms of Wealth, When Saving Becomes Hoarding, and More

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

The five types of wealth (The Knowledge Toolkit). Some healthy new ways of thinking about what’s valuable.

What is Service Line Insurance and Do I Need It? (Clark Howard). You probably get lots of pitches for this. Here’s one personal finance expert’s take on whether it’s worth it.

Survey: 47% of U.S. adults have at least one unused gift card (Bankrate). Don’t let all that value go to waste.

When does saving become hoarding? (Good Sense). Saving money is a good thing, but even a good thing can go too far.

What you need to know about the incandescent light bulb ban (CNN). Most types are no longer available.

Talking to your kids about money (The College Financial Lady). “One of the best ways to make money conversations less awkward at any age is to have more of them.”

Why you should never use your retirement savings to pay off debt (Lifehacker). It’s tempting because the money is easy to access, but you’ll be better off looking elsewhere.

5 ways budgeting makes your life easier, not harder (Christian Stewardship Network).  I’ve said it before and I’ll say it again: a budget is the single most powerful tool for wise money management.

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.

Living “The Life That Is Truly Life”

Money is a tough enough topic for a lot of folks, but put the focus on giving and many people get really uncomfortable. So, feeling much like I’m stepping into a lion’s den, I’d like to inch my way into an honest conversation about generosity.

Before you click away, let me just bottom-line my overarching point of view. Far too many of us are missing out on one of the most joyful—and one of the most effective—uses of money.

I’m not at all a fan of the prosperity gospel. In fact, I think it’s an affront to God to give out of a motivation for getting something in return. As the apostle Paul said,

Who has ever given to God that God should repay him? – Romans 11:35

Good question. God is the giver. We are the recipients. Every time we give to our church or other ministry, we’re simply giving back some of what God first gave us.

Which is why it can be challenging to fully understand verses such as Proverbs 11:25:

A generous person will prosper; whoever refreshes others will be refreshed.

Or Luke 6:38:

Give, and you will receive. Your gift will return to you in full—pressed down, shaken together to make room for more, running over, and poured into your lap. The amount you give will determine the amount you get back. (NLT) 

Motivations matter

In no way are we to interpret such verses as teaching, “give in order to get.” Giving is best motivated not by an “in order to…” perspective, but by a “because of..” Perspective — because of God’s love for us. 

And yet, it’s clear that there are blessings that come our way when we live generously. It’s simply that we were designed to live that way. It’s like eating healthy and getting enough exercise. Our lives work better when we choose to live as we were designed to live.

The Bible says we were made in God’s image, and God is endlessly generous. That means generosity is woven into our spiritual DNA. To live generously is to live in concert with how we were made and what we were made to be about.

And yet, many of us either have not heard that we were designed to live that way or we’re consciously choosing not to live that way.

Here are the results of several recent studies about generosity:

According to Nonprofit Source, nationwide, Christians today give 2.5 percent of their income, only 5 percent of church members give regularly, and 37 percent of those who consider themselves evangelicals do not give to churches at all. According to a study from the University of Notre Dame, only 2.7 percent of people, religious or nonreligious, give at the level of a tithe (10% of income). According to a Barna Group study, 84 percent of millennials report to giving less than $50 to charity per year, even though charitable giving ranks high on their priorities. 

Listing these research findings isn’t intended to shame anyone or make anyone feel guilty. Mostly it’s to say, “Wow, I’m surprised.” And it’s also to say I think too many of us are missing out on “the life that is truly life.”

If you’re not giving, or not giving very much, I’d like to encourage you to spend some time this week reflecting on that. What’s holding you back from living more generously? Or, if you are giving generously, is there a next step you sense God encouraging you to take with your generosity? 

Next week, I’ll get more specific about what the Bible teaches about living a life of generosity.

Take it to heart: “Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment. Command them to do good, to be rich in good deeds, and to be generous and willing to share. In this way they will lay up treasure for themselves as a firm foundation for the coming age, so that they may take hold of the life that is truly life.” – 1 Timothy 6:17-19

Take action: If you don’t already know this, figure out what percentage of your income you are currently giving. As we’ll discuss more next week, the Bible teaches us, in part, to think of giving as a portion of our income, so it’s helpful to know what portion (what percentage) we’re giving.

Read more: Living a Better Financial Story 

For ideas on cultivating a heart of generosity in your children, pick up a copy of my new book, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management.

Profitable Ideas: Financial Regrets, Money is Messy, and More

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

Survey: 74% of Americans have a financial regret, most frequently not saving for retirement early enough (Bankrate). If we could better envision our future selves, we would probably save more—and eat better, and get more exercise, and…

Am I being tricked into overtipping when I eat out? Should I tip before or after sales tax is added? (MarketWatch). Everywhere we turn, it seems, we’re being guilted into tipping.

When usefulness is a burden (Common Good). We’re more than what we do and what we get done.

10 timeless truths that will make you embrace minimalism today (Becoming Minimalist). This has become one of my favorite blogs. There’s just something very compelling about the vision of living a more minimalist lifestyle.

Legislation could wipe out credit card rewards—big spenders stand to lose the most (Barron’s). I didn’t even know this was being considered. Did you?

Rich and anonymous (Collaborative Fund). Money. Ah, it’s complicated, and messy.

5 pillars of post-grad financial planning (Washington Post). Got a recent college grad in the family? I especially like the idea of having a financial mentor.

Biblical financial principles and 5 practical steps to live by them (Christian Stewardship Network). Good foundational reminders about living a God-honoring financial life.

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 Uncommon But Brilliant Money Move for Young Couples

As my family prepares to go to a wedding, I’ve been thinking about the best financial advice my wife and I received before we got married. It came from the pastor who led us through some pre-marital counseling.

What to do with a second income

When a couple gets married, one of the biggest financial temptations they face is Delusions of DINKhood (Double Income No Kids). Since they typically both have jobs, it’s easy to get swept up in thinking of all they’ll be able to afford with two incomes. The home! The cars! The vacations!

It sounds like such freedom. And it can lead to such a jail.

If you want to have kids, the absolute best money move you can make is to build a lifestyle based primarily on one income. If and when kids come along, that’ll give you the freedom to choose to have one of you step out of the paid workforce.

It’s really easy to get used to a two-income lifestyle. And once you do, it’s really difficult to go back to a one-income lifestyle.

Even if you don’t plan to have kids, or if you plan to have kids and you both plan to continue working, basing your lifestyle primarily on one income still makes sense. That way, if one of you loses your job, you’ll be in a much better position to handle the loss of that income.

Since housing is usually people’s biggest expense, a one-income lifestyle is mostly about choosing a home that you can afford on one income.

A Personal Example

When Jude and I got married, we rented an apartment for the first 10 months. That gave us the freedom to enjoy our new life as husband and wife without all the responsibilities of home ownership. When you rent, if something in your apartment breaks, you just call your landlord.

When we bought our first home, we chose a condo and lived there for five years. When you own a condo, if some things break, you call the condo owner’s association.

Now that we own a house, when anything breaks, it’s all on us.

I highly recommend that step-by-step progression into home ownership.

The Freedom of an Uncommitted Second Income

Renting for those first 10 months and then buying a condo we could afford on my salary alone gave us huge financial freedom. We based our giving on our joint income and then, since neither one of us brought any debt into the marriage, we used her income to save like crazy.

That enabled us to build up a year and a half’s worth of living expenses, which was hugely helpful in enabling me to eventually quit my corporate job to write and speak full-time. Before we had our first child, living primarily on one income also gave us the margin to take several nice trips.

If you’re entering marriage with debt, living primarily on one income will give you the means to get out of debt ASAP.

Keys to Making It Work

To be sure, living on one income requires making some uncommon choices. The condo we bought, for example, was in what Realtors optimistically termed “an up and coming neighborhood” in Chicago. The spray-painted symbols that often appeared overnight on the mailbox on the corner, we quickly discovered, was not the handiwork of the neighborhood’s Welcome Wagon. It was the work of a local street gang staking its territory.

We are also committed to not financing vehicles, so we keep our cars for a long time.

Whenever I recommend building a lifestyle primarily on one income, I can see the looks of dejection on the faces of some couples. But for those who take the advice to heart, I can also envision the happiness to come from the uncommon level of financial freedom they will soon experience.

What are your thoughts about the idea of building your lifestyle primarily on one income? And if you’re married, what’s the best financial advice you received before getting married?

Take it to heart: “Then he said to them, ‘Watch out! Be on your guard against all kinds of greed; life does not consist in an abundance of possessions.'” – Luke 12:15

Take action: If you know someone who plans to get married soon, consider forwarding them a link to this article (and a copy of Money & Marriage!)

Read more: The Three Expenses You Have to Get Right

If you haven’t done so already, please sign up for a free subscription to this blog.  Twice a week you’ll receive ideas and encouragement for using money well.

Profitable Ideas: Exploding Closets, Simplicity Wins, and More

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

Consumers have ‘5 times’ more clothes than they did in the 80s. This is the impact (CNN). I once heard that people typically wear only 20% of the clothing in their closet. I’m guessing that percentage is even lower now. See also, Fast fashion is literally making us sick (Fast Company).

Try ‘habit stacking’ to be more productive (Lifehacker). On the benefits of tying a desirable habit to an existing routine. See also, How to do great work (Paul Graham).

‘Concerning’ number of savers raid 401(k) accounts before retirement (MarketWatch). It looks like found money, but if you use it all up, where will you find the money to retire?

Minimalism vs. consumerism: the benefits of choosing a simple life (Becoming Minimalist). “This endless cycle of desire and disappointment leaves us with cluttered homes, strained wallets, and distracted minds.”

Why you should always ask your pharmacist the price of your prescription without insurance (Clark Howard). You may be in for a big surprise.

Rover review: how I made $10k dog sitting (Marriage, Kids and Money). Looking for a side hustle?

Why $1,000 car payments are becoming the new normal (Money). “The country’s love for cars often leads buyers to make decisions ‘economists would consider irrational.’”

Cut down your debt: 33 proven strategies that work (No Sidebar). Lots of good money-saving ideas here, which can free up cash to help you pay off debt or just enjoy more margin. See also, Beyond lattes and avocado toast: budgeting hacks that actually work (Fast Company).

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.

For Better Investing, Be Selective About Who and What You Pay Attention To

If you pay close attention to investment news, it’ll either make you laugh or it’ll drive you crazy. Within the same hour, the popular MarketWatch investment news website often runs completely contradictory articles. One says the market is headed higher; the next says the market is about to tank.

What’s a smart investor to do? Be very careful about how much and what information you take in.

Less is more

In the late 1980s, former Harvard psychologist Paul Andreassen conducted an experiment to see how the quantity of market information impacted investor behavior.

He divided a group of mock investors into two segments — investors who received frequent news updates about the companies they invested in and those who received no news.

Those who received no news generated better portfolio returns than those who received frequent updates. The implication? The more closely you monitor news about your investments, the more likely you are to make changes to your portfolio — usually to your detriment.

In another study, renowned behavioral psychologists Daniel Kahneman, Amos Tversky, Richard Thaler, and Alan Schwartz compared the stock/bond allocations of investors who checked on their investments at least once a month against those who did so just once a year. Those who took in the least information about their portfolios made fewer investment trades and generated higher returns.

When Helping Hurts

One factor at work here is “loss aversion.” First quantified by Kahneman and Tversky, it’s the idea that people feel the pain of loss more acutely than the pleasure of gain. The frequent monitoring of investment portfolios brings every downward market move to the attention of investors, who tend to react by moving money into less risky assets (bonds instead of stocks), thereby locking in their losses.

Misinformation Is Not Power

Another factor has to do with the tales told in the investment press. Each day’s market performance is reported — what happened, and why. The first part is factual. The market either went up or down and by a certain amount. The second part is mostly opinion. 

No one can say with certainty exactly what moved the market. Was it fear over the growth rate of China’s economy, a contraction in the oil supply, or that XYZ company missed its quarterly earnings projection by a penny? No one really knows. But that doesn’t stop the explanations from flowing across the pages of investment news sites.

Late December and early January are especially dangerous times to read market news. That’s when market forecasters spin their yarns, undaunted by their previous year’s miss or economist John Kenneth Galbraith’s famous scolding that “The only function of economic forecasting is to make astrology look respectable.”

When we pay attention to such forecasts — and even worse, we change our portfolios because of such forecasts — we do so at our peril.

Selective Listening

You can’t control the stock market or what is said about it, but there are certain factors you can and should control, such as:

Estimate how much you need to invest each month in order to accomplish your goalsDetermine your optimal asset allocationChoose a trustworthy investment selection processAdd to your portfolio regularlyExpect market turbulenceBe very, very careful about what investment news you take in and how muchKeep moving forward

Of the many factors involved in successful investing, selective listening may be the most underrated.

Take it to heart: “The wisdom of the prudent is to give thought to their ways, but the folly of fools is deception.” – Proverbs 14:8

Take action: Be selective about the investment writers you pay attention to. Because of my job, I’ve read investment articles from a lot of sources over the years and have figured out which ones to pay attention to and which ones to ignore. I link to some of the best every Friday on this blog, and a co-worker and I do the same every Friday at Sound Mind Investing.

Read more: Four “Blind Spots” to Watch Out For When Investing

In my new book, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management, I devote a chapter to helping our kids get started with investing. They have an abundance of an invaluable asset. They have time. Put to good use, it’s incredible what they could accomplish.

Profitable Ideas: The “Good News is Bad News” Economy, Politeness Won’t Get You Hired, and More

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

Why are experts talking about low unemployment like it’s a bad thing? (CNN). A good explainer of this “good news is bad news” economy.

Ways to teach your kids about money on vacation this summer (Saving For College). A lot of this has to do with setting expectations before the trip begins.

Gen Z and millennials are already dipping into their retirement funds—even more than Gen X (Fast Company). It’s great that automated enrollment has increased retirement plan participation, but taking the money out early defeats the purpose.

Why you need medical, financial powers of attorney for your high school grad (Kiplinger). You blinked and they became an adult. If they get hurt or sick now, you’re going to need permission to talk with their doctor.

12 polite habits job interviewers actually dislike—and what to do instead (Reader’s Digest). Lots of helpful, counter-intuitive tips for making a good impression.

How I found true happiness living with less (Becoming Minimalist). One person’s journey toward a simpler, better life.

You may soon get an IRS letter promising unclaimed tax refunds. It’s a scam. (USA TODAY). Be on the lookout.

Money makes a horrible master and a valuable servant (Eternal Perspective Ministry). An essential reminder from one of my favorite biblical money management teachers.

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 If Your Kid is a Spendthrift?

During a recent podcast interview related to my new book, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management, I completely muffed an answer. The host asked what I would suggest doing about a kid who spends every dollar he receives. I don’t remember what I said, but I know I didn’t give a direct answer to that question. Here’s what I should have said.

Expecting too little

If your child is spending everything he gets, you may be making life a little too easy for him!

Good parents often do too much for their children. This is their one great mistake.
– Edward Hallowell, author of The Childhood Roots of Adult Happiness

If your child receives an allowance, spends it all very quickly, sees something else she wants, and you buy it for her, you’re doing too much for that child! Far better to practice the authoritative style of parenting talked about in my book where we set high standards for our kids and then warmly enforce those standards.

In this case, you could say something like, “I’m sorry, I know you want that right now, but you’re going to have to wait until next week when you receive your next allowance.”

Introduce the give-save-spend framework, and introduce it early!

As soon as your kids have any money flowing into their lives, teach them to give the first portion back to God, save a portion, and then the rest is available for spending.

Maybe you’ve heard of the 10-10-80 framework. The idea is to give 10 percent, save 10 percent, and then spend 80 percent. That’s fine for adults (although I prefer 10-15-75), but for kids, something like 10-50-40 makes more sense: give 10 percent, save 50 percent, and then spend 40 percent. 

Kids don’t have a lot of expenses that they will have when they get older. They don’t have to pay for food, clothing, insurance, or taxes. So, if they get used to spending 80 percent on trinkets and toys, that won’t be sustainable when they get older and have all those other expenses to cover.

Plus, soon enough I’d like the saving category to be split in two, with some money going into savings and some being used for investing.

But again, you ask, what about the kid who won’t save?

Feeling some pain

Spendthrift kids are probably not experiencing any consequences for their free-spending ways. It’s time to expect more from them.

If your kids are free to fritter away money they should be saving, I would take a closer look at how much you’re buying for them and make them responsible for more and more of what they want. Maybe they’re getting too much for their birthday or at Christmas, so they never have to save for anything remotely expensive.

If your son wants a new skateboard, I’d put that on him. Help him shop for the skateboard he wants, break the price down to a weekly savings goal, and figure out how many weeks of diligent savings will enable him to accomplish his goal. 

When he’s tempted to overspend, remind him of his goal: “Let’s think of future you, the one with that great skateboard.”

If going with you when you go shopping is creating too much temptation, don’t take him to the store so often.

Help him see how much progress he’s making by coloring in a thermometer, just like you see towns use when they’re raising money for some worthy cause.

And celebrate the accomplishment of his goal with a special dessert. 

‘Well done!’

Be sure to also teach him what God’s Word has to say about saving:

“The wise man saves for the future, but the foolish man spends whatever he gets.”
– Proverbs 21:20.

Tell him how proud you are of him and how pleased God surely is with him for saving for the future.

Your kids may not like the process early on, but cultivating within them the habit of patiently saving for a future need or want will serve them well for the rest of their lives.

For more on teaching your kids about money, pick up a copy of Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management.

Profitable Ideas: How to Have “Enough,” The Science of Giving Great Gifts, and More

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

If your only goal is more, you’ll never get there (Becoming Minimalist). There’s no objective measure of “enough.” You just have to decide.

The 3 kinds of inflation (A Wealth of Common Sense.) The third type is one we can control. Here how.

How to give great gifts: what science teaches us (Wall Street Journal). Ideas for upping your gift-giving game.

Numbers on a screen (The Belle Curve). With the world becoming ever more financially abstract, it’s important to keep things real when teaching our kids about money.

The paradox at the grocery store (The Atlantic, via MSN). One solution for choice overload: switch where you shop.

How to visit colleges (The College Financial Lady). A helpful list of questions to ask on a college visit.

Here’s what you need to know about travel medical insurance (Kiplinger). Especially if you’re going overseas, you probably need this.

Here’s why 1,500 square feet is the best home size (Southern Living). This won’t work for big families, but for smaller families and empty nesters, here’s how to get the most out of a not-so-big house.

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 I Found Financial Freedom

“God paid a high price for you, so don’t be enslaved by the world.” – 1 Corinthians 7:23

I’ll never forget the day my parents invited me home for a little chat. They had started to sense that all was not well, and they were right. I was in financial trouble—deep trouble. My credit card debt had gotten so out of control that I could no longer make the minimum payments while also paying my rent or buying groceries.

Just two years earlier, when I was in my mid 20s, I had inherited $60,000 from an uncle and used it to create my dream job. But now, all the money was gone, plus another $20,000.

I ended up moving home with my parents for six months as I started to get things turned around. At first, it was brutally depressing. I looked forward to the night and dreaded the day.

But it was also the catalyst for so much positive change. When a friend from college got in touch and talked to me about matters of faith, I was receptive. Later that year, I committed my life to Christ. I also became passionate about learning everything I could about wise money management. After becoming a Christian, I was amazed at how much the Bible teaches about money.

Here’s a condensed version of how I got out of debt.

I recognized my need to change. I was completely broken by my prodigal son experience, and I was teachable. My friend said, “Matt, the more you’ve leaned on your own understanding, the more things haven’t worked out so well.” (I later realized that was a paraphrase of Proverbs 3:5.) It was a bold thing for him to say, and he was absolutely right.

I took responsibility for my situation. We live in a culture that tends to blame others for our problems, but I knew I had no one to blame but myself. Of the many people I’ve met who had a lot of debt, the ones who’ve been most successful at getting and staying out of debt are the ones who accepted responsibility for their situation.

I received help. I will always be grateful for my parents. They gave me relief from many of my bills at a crucial time and were very supportive.

I worked really, really hard. After a couple months of struggling for motivation, I got going. I went back to the work I was doing before receiving the inheritance—freelance radio reporting. I took on any and all assignments I could get, working nights, weekends, whatever it took to make as much money as I could to pay off my debts as soon as possible.

I kept working the plan. Once I got the debt payoff machine going, I was intent on keeping it going. The plan was simple, but not easy. Work hard, shovel as much money as possible each month toward my debts, and repeat.

I took encouragement from God’s Word. Right after becoming a Christian, I got involved in a small group Bible study. One night, our leader asked us to turn to 2 Corinthians 12. After someone helped me find that, I read about Paul, the “thorn” in his flesh, how he pleaded for relief, and how God told him, “My grace is sufficient for you, for my power is made perfect in weakness.”

When I read those words, it was as if a heavy weight was lifted from my shoulders. My debt had felt like the nastiest of thorns twisted into my side, and many times I had pleaded for relief. But now I saw more of God’s plan. He had already used my financial mess to draw me into a relationship with Him, and now He was using it to teach me patience, trust, and perseverance.

It took five years to pay off my credit card debts and another year to pay off my car. Seeing God’s plan in the journey gave me motivation to push on.

Since then, the keys to staying out of debt have been using a budget, maintaining an emergency fund, and most importantly, letting it sink deep within my soul that God paid an incomprehensible price for me, so it makes no sense to allow myself to become enslaved by the world.

If you need help getting out of debt, I recommend reading the following articles:

Freeing Yourself From The Financial Ball & Chain Radical Ways To Accomplish Your Financial GoalsHow Serious Are You?

If you’re struggling with debt, I hope my story is an encouragement to you. It may take some time, but each day if you take positive action toward getting out of debt, one day you will experience the incredible freedom of being debt-free.