Matt Bell's Blog, page 27

Profitable Ideas: The Money/Happiness Connection, Protecting Your Home, and More

Weekly roundup of recommended personal finance articles from around the web.

Stop asking whether money buys happiness (The Atlantic). Does more money bring more happiness? It’s complicated.

How to know if a rental property is a good investment (The Long Game). A good starting point for an objective evaluation.

Do I need to re-visit my homeowners insurance coverage after years of high inflation? (Clark Howard). The common advice is to see if you could save some money on your policy, but as this article points out, it’s important to make sure you are properly covered.

In this high-price car market, use these tips to keep the car you have running longer (MarketWatch). We keep our cars a long time and always take them to a dealer’s service department for maintenance. I’ve always felt that it’s best to use mechanics who only work on that brand of car. How do you keep your cars in good shape?

Confronting the frog: overcoming fear & taking control of your finances (The Everyday Advisor). What are you afraid of? Is it a rational fear?

Time for a checkup: are your healthcare planning documents up-to-date? (Modera). Ah, paperwork. It’s easy to put it off, but it’s best to get it done.

A better path to contentment (Becoming Minimalist). What if we’ve been looking for contentment in all the wrong places.

Fidelity and State Street push to make 401(k)s more like pensions (Wall Street Journal). Annuities, or annuity-infused target-date funds, are probably coming to your 401(k) plan. See also, Coming soon to a retirement plan near you: annuities (Sound Mind Investing).

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.

Should You Give Your Kids an Allowance?

The topic of allowances can get surprisingly contentious. On one end of the allowance spectrum are parents who don’t believe in the idea. They point out that in life no one is going to just give our kids money; they have to earn it. So they require certain chores of their kids for no pay and then they provide jobs their children can do if they want to earn money. Or, like James and Amanda, in addition to the chores their kids have to do for no pay, there are two levels of paid chores—mandatory and optional. 

Our friends Keith and “Cag” (Caroline) raised their four kids on a no-allowance system where there were mandatory no-pay jobs and optional for- pay jobs. From a young age, their kids’ eagerness to earn prompted them to get outside-the-family jobs, delivering newspapers early in the morning before school, mowing lawns, babysitting, and working in a sandwich shop. Cag credits this system for instilling within each of their kids a “massive work ethic.” 

That’s been James and Amanda’s experience as well. “Our fifth grader will ask me, ‘Can I do this chore? I’m saving for something,’” James said. “That’s been great to see, as opposed to, ‘I’d like this. Can you buy it for me?’” 

In our home, our kids have long been expected to do their part around the house because they’re part of the family. That means taking turns setting the table, clearing the dishwasher, vacuuming, and more. We also provided an allowance for each of our kids beginning at age five because they’re part of the family. 

The size of the allowance was enough to help them learn some early lessons about managing money, such as how to set aside portions for giving and saving. At the same time, we made sure the amount we gave wasn’t enough to buy very much. If they wanted something more expensive, they needed to earn the money by doing extra chores. 

At age twelve, their allowance ended. We figured they were old enough to do bigger paid jobs, either for us or for others, such as mowing lawns or caring for neighbors’ dogs. They are still required to do certain chores because they are part of the family and are still expected to give and save, but these actions now flow out of their early training and their own initiative. 

Keep the Big Picture in Mind 

There are a few interrelated learning experiences going on here: 

Cultivating within our children a strong work ethic Bringing money into the equation to help them connect payment with a job well done Giving them hands-on experience managing money 

There is no single correct way to get money into our kids’ hands. Some families provide an allowance. For others, that word must never be spoken; the only way to receive money is to earn it. I know of kids raised under both systems who have turned out just fine. So don’t stress over this point or think that you have to choose the perfect and right answer to this question. Instead, prayerfully decide with your spouse what sort of chore/money system you will set up. Then implement your plan and stay with it. 

Excerpted from Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management.

Profitable Ideas: Science Says Less is More, Stop the Gravy Train, and More

Weekly roundup of recommended personal finance articles from around the web.

Ten scientific studies that will encourage you to own less (Becoming Minimalist). For those who need proof that less is more.

Your young adult children ‘may not want the gravy train to stop,’ but don’t let them ruin your retirement  (MarketWatch). It may be time to close the bank of mom and dad.

What is personal cyber insurance—and should you buy it? (Wall Street Journal). I’m a little skeptical about this one, but what do you think?

Stop wasting money: 5 ways you’re letting your money slip away (The Everyday Advisor). Little leaks can sink a ship.

Sinking funds: thinking backwards to plan ahead (MoneyNing). I’ve always thought of this as a periodic bills and expenses fund, but it was interesting to find out where the term “sinking fund” comes from.

What makes you happy (Collaborative Fund). Happiness is far too much a comparison game. I just listened to a great message by John Piper that points us down a much better path. (H/T to my 19-year-old son for sending me the Piper link!)

How free phone charging stations could present risks (Kiplinger). One more way that free can be costly.

A (God-centered) path from anxiety to peace (The Gospel Coalition). Money is common source of anxiety. Here’s some good counsel, whether you’re worried about money or something else.

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.

Teaching Kids About Money By Keeping It Real

Wise money management is one of the most important subjects typically not taught in school. And unfortunately, where it is being taught, such efforts have generated mixed results at best.

The issue seems to be that classroom teaching is too abstract. There’s too much lecturing and too little letting kids do real things with real money.

In our household, we continue to look for new ways to put that lesson into practice. And it seems to be paying off.

I remember when our now-19-year-old (how did that happen?) was 14 and wanted an update on his investment account. All three of our kids began their investing journey by following Sector Rotation, a very aggressive strategy offered by Sound Mind Investing, where I work by day.

They had some money building up in savings that we moved to an investment account. When kids are especially young, I’m a strong believer in opening savings accounts for them at a local bank or credit union and actually going inside to make deposits (I know — who goes inside a bank these days?). It makes the process of saving and earning interest much more real than using an online bank.

But as our kids have gotten older, moving things online and transitioning from saving to investing has made more and more sense.

So there we were, looking at his investment account online. It was fascinating to me how many questions he had. As he looked at the screen, he saw lots of unfamiliar terms. “Cost basis,” “unrealized gain/loss,” “small cap.” What does it all mean? He was genuinely interested and it led to a great conversation. The important point is that if I had tried to teach him about such concepts over dinner one night, he very likely would not have been interested. But because he had some of his own real money invested, he wanted to learn.

Later that same night, as I got our 10-year-old ready for bed, she handed me $100 and asked me to put it in her investment account. What kid does that? The money was mostly from three months’ worth of allowance payments.

Okay, we forgot to pay her for a while, so she got a pretty sizable lump sum. Some of it was also money she received for a recent birthday. I was amazed that she was so enthusiastic about investing the money instead of spending it. Apparently, she’s excited about an idea we had been talking about lately: compounding returns and the importance of starting early.

There’s nothing like hands-on experience

It’s been deeply satisfying to see our kids truly understand some important lessons about money, and I think much of it can be credited to this idea of teaching through hands-on experiences.

We’ve seen the benefits in the spending arena as well. Mary Hunt’s excellent book, Raising Financially Confident Kids, prompted me to give our kids their clothing budgets in cash and let them make their own decisions of how to spend it. It’s been a very effective way to teach them to make trade-offs, look for good deals, and save up for more expensive items (Read The Absolute Best Way to Teach Kids About Money.)

And we’ve seen the benefits of hands-on learning in the area of generosity. Ever since they were very young, we’ve encouraged our kids to give at least 10% of any money they receive. One of the best ways we’ve found to make giving real has been to sponsor some kids through Compassion International (World Vision offers a similar program).

I’ll never forget one morning when our oldest was about three or four and I sprang a surprise quiz on him over breakfast, asking what are the three main things you can do with money. The previous night we had talked as a family about one of the kids we sponsor, a boy named Aziz who lives in Burkina Faso. We have his picture and we exchange letters with him. Rubbing the sleep from his eyes, our son said, “Ah, you can save it, spend it, or give it to Aziz.” I loved that answer.

One time, while walking through a city where we were vacationing, we picked up some restaurant food and took it back to our hotel room.

Without any prompting, our then-12-year-old cut his hamburger in half, wrote a note on the top of the Styrofoam container promising that he hadn’t bitten off the part of the burger inside, and then asked me to take him back outside. He had noticed some homeless people earlier and wanted to give half of his hamburger to one of them. I watched as he approached an older man in a wheelchair who was asking people for money, gave him half of his dinner, and had a brief conversation.

The man was sincerely grateful. And so was I. It’s a powerfully moving experience to see young kids start to get this whole money/stewardship thing.

It takes time. It takes intentional teaching, often by “simply” talking to kids about financial decisions we’re making. It takes connecting the dots between what the Bible teaches about money and what that looks like in daily life. It takes hands-on experience, letting kids make decisions and make mistakes with real money—their money—in the real world. And it takes prayer, a whole lot of prayer.

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

Profitable Ideas: How Money Breaks Marriages, One Good Reason to Buy a House, and More

Weekly roundup of recommended personal finance articles from around the web.

Money can break a marriage, even getting more of it (Wall Street Journal). Money and marriage — it can get messy. No easy answers here, but it helps to talk openly about money and maintain complete financial transparency.

So much to like (Humble Dollar). Bear markets are a grind, which is why it’s encouraging to hear from experienced investors who are good at maintaining the long view. 

Your life is too valuable to waste chasing possessions (Becoming Minimalist). We know it’s true, but we could all use a reminder from time to time.

Most adults make this simple money mistake, and it’s hurting their financial well-being (CNBC). Do you know how credit scores work?

40% of Americans are missing the chance to earn hundreds — if not thousands — of dollars in interest each year (MarketWatch). If you have a savings account at a traditional bank, you’re probably missing out.

Why it’s now easier to underestimate your expenses and overspend (Wall Street Journal). If you’re not tracking your use of money and managing to the numbers in your cash flow plan, it’s all too easy to overspend in this era of high inflation.

There’s exactly one good reason to buy a house (The Atlantic, via MSN). Too many people overspend when they buy a house or buy it for reasons that may be too much about the house itself.

Why are insurance premiums skyrocketing across the board? (Clark Howard). If you haven’t compared prices recently, maybe now’s the time to get a few quotes.

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.

“Trusted” — New Book on Teaching Children About Money — is Now Available

This week marks the release of “Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management.” I’m so grateful for the opportunity to have written this book and I couldn’t be more excited about the opportunity to encourage and equip parents to help their kids get on a good, God-honoring path with money at an early age.

Focus on the Family (along with its partner, Tyndale House) is the publisher, and here’s the just-released interview I did with Focus on the Family President, Jim Daly, and program co-host, John Fuller.

Of all the many biblical money management topics I’ve written about over the years, this is the one I’m most excited about. I say that for three reasons.

First, I made a lot of mistakes with money when I was younger and I’d love to spare today’s young people all that pain.

Second, there’s a lot at stake here. It isn’t that if we don’t teach our kids about money they won’t learn. They will learn, but our consumer culture — with its messages “You don’t have enough” and “You’re not enough” — will be their teacher. Far better for us to teach our kids about money!

And third, there is SO MUCH INCREDIBLE POTENTIAL HERE! Compounding is a phenomenon usually associated with investing. It’s the idea that, over time, a small amount of money invested in a way that generates a return can turn into a lot of money. For example, if someone had $3,000 in an investment account at age 18 and generated an average annual return of 12%, even if they never added another penny, by age 70 it would be worth nearly $1.5 million!

But I love thinking about how that same power could apply to other areas as well, such as generosity. If a child developed a heart of compassion for some of the world’s great needs and cultivated some generous habits at an early age, just think of how God could multiply the impact over her lifetime. And not just with regard to the tangible financial investment she makes in Christ-centered ministries, but in how her generous heart will ripple out into all of her relationships and how living generously will impact her joy.

Or think about another young person who gets is relationships with God and money sorted out early in life. He knows who he is. He’s not the brands he wears or the type of car he’ll eventually drive. He’s a child of God. Just think about how God could multiply that in his relationship with his future wife and how it will free him to make the difference with his life he was designed to make.

I am endlessly excited about the potential for this book to reach many parents and how they could impact their kids in life-changing and even eternity-shaping ways.

A simple proposition

Would you partner with me in this quest? If you have kids at home, would you purchase a copy of “Trusted” and put it to work in your family’s life?

If you don’t have kids at home, would you purchase a copy for a family that does and encourage them to put it to work their family’s life?

Here’s the Amazon link.

Or, if you prefer, here’s the Christianbook.com link.

Once you’ve read the book, if you would consider posting a review on Amazon or Christianbook.com, I’d appreciate that as well.

And lastly, would you spread the word further within your circles of influence? Would you tell your friends about “Trusted,” post something about it on social media, or get the word out through whatever means you have available?

This isn’t just about helping our kids learn how to save or make good buying decisions, as important as those things are. This is very much about their faith. The Bible says, “Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.” Let’s protect our kids through some early intentional teaching about the resources God entrusts to them.

Money was the means through which God drew me into a relationship with Him. Over the years, He has taught me countless lessons about money. And I know that it was through Him that I was given this opportunity to write “Trusted.” My prayer is that the book will reach as many parents as possible, that it will encourage and equip them to help their kids develop God-honoring perspectives and practices around money, and that those young people will know the lifelong joy of using money in ways that bring glory to Him.

Profitable Ideas: The Good Life, Adding by Subtracting, and More

Weekly roundup of recommended personal finance articles from around the web.

What is the good life? (Randy Alcorn via FaithFi). It’s something quite different than what our consumer culture leads us to believe.

The power of adding subtraction to your life (No Sidebar). It’s more difficult to subtract than to add, but so worth it.

Should young people save less & spend more? (A Wealth of Common Sense). Some good thoughts about walking the line between responsible saving and investing in memories.   

What’s the best college major for your child? (A Teachable Moment). The headline is a little misleading, but this is a helpful article about choosing a college. 

All you need to know to build generational wealth (The Big Picture). This picture tells a very powerful story.

So your kids got rejected from her dream school(s) (Psychology Today). Acceptance (or not) letters are hitting mailboxes.

4 financial lessons that will stick with kids through adulthood (Money Ning). Giving kids some hands-on experience with money sooner than later is very wise.

IRS: Don’t trust all social media tax tips (Kiplinger). Just because they have a microphone doesn’t make them an expert. 

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 Benefits, and Some Major Limitations, of Financial Automation

The other day, I looked outside from the comfort of our home and took in a wonderful sight: one of our sons mowing the lawn. It was a beautiful thing to see a chore I used to do being done by someone else! 

Much the same can be said for some of our financial chores. Automation can do those jobs for us.

A one-time decision

Saving money is a lot like going to the dentist. You know you should, but it’s not a lot of fun. What can take the sting out of saving is putting it on auto-pilot. 

If you need to make the decision to save every time you get paid, chances are you won’t. There are so many other uses of your hard-earned money. There are so many things you need to spend money on, and so many others you’d like to spend money on. But if you need to make the decision to save just once—the day you set up an automatic transfer from your checking account to your savings account, or from your paycheck to your retirement account—that’s much more doable.

This is one form of financial automation I use. Every paycheck, the maximum amount I’m allowed to contribute to my employer’s 401(k) plan goes into that account. I didn’t start out at the maximum, but over time, my wife and I chose to increase the amount.

Other forms of financial automation

There are a lot of places in your financial life where you could use financial automation. I especially recommend it for saving and investing. You could also pay many bills automatically, such as your mortgage or insurance premiums. Some companies may even give you a financial incentive for setting things up on auto-pay. We’ve chosen to pay our cell-phone bill automatically because of that. But be forewarned. There can be a downside to financial automation as well.

When it may NOT pay to automate

Automation has become very common within 401(k) and other employer-based retirement plans. It used to be that when you joined a company you had to opt in to the retirement plan. Now it’s much more the norm that you are automatically part of the plan. If you don’t want to participate, you have to take steps to opt out. And in important ways, that’s been a good thing. Participation rates have increased as a result of the change.

But here’s the downside. The percentage of your salary that is automatically transferred to the retirement plan is usually set pretty low—too low, in fact, to enable you to save enough for retirement. But very few employees ever increase that amount, perhaps assuming their company knows what’s best. If you’ve been automatically enrolled in your workplace retirement plan, take a few minutes to run some numbers, estimating how much you really should be contributing each month. Then contact your human resources department to make any needed changes.

Another potential downside to automated retirement plans is that they tend to automatically choose what participants invest in—usually a target-date fund. Target-date funds have many benefits, but just be sure you understand how a target-date fund works and see if the stock/bond allocation in the one you’re using is truly right for you.

One other downside to financial automation is that it could prevent you from noticing a price hike in one or more of your monthly bills, which is what happened to me recently. I hadn’t noticed for several months is that one of our streaming services had increased our rate. That’s one of the few bills we had set up on auto-pay, which led me to pay less attention to it.

We actually have very few of our monthly bills set up on auto-pay—our cell-phone bill, that streaming service bill, and our internet bill since that one is locked in at a low $55 per month for five years. I like to be able to check over most bills, looking for changes or possible errors. And clearly, with that streaming service experience, I’m reminded of the potential downside of financial automation.

What’s been your experience with financial automation? 

Take it to heart: “Now, a person who is put in charge as a manager must be faithful.” – 1 Corinthians 4:2 (NLT)

Take action: If you haven’t done so already, a great first step with financial automation is to set up an automatic monthly transfer from checking to savings and/or automatic contributions to a retirement plan.

Read more: Automating Financial Wisdom 

Profitable Ideas: Determining Whether Your Money is Safe, Bend it Like Buffett, and More

Weekly roundup of recommended personal finance articles from around the web.

How to tell whether your money is safe in the bank (Lifehacker). I especially like the idea of setting up a news alert to track any articles about your bank. For example, see also, 20 banks that are sitting on huge potential securities losses — as was SVB (MarketWatch).

Charted: the auto loan crisis of America (World Economic Forum). If you have an auto loan, I strongly encourage you to make this the last car you finance. See also, Breaking the cycle of financing vehicles. 

Bend the market like Buffett: stop checking your stock portfolio — especially on your phone — and you’ll make more money. (MarketWatch). Information about the markets—and everything else—is readily available, often to our detriment.

(Wall Street Journal). This one might not have anything to do with personal finance (or it might!), but there are some interesting insights here.

The happiness paradox (A Wealth of Common Sense). Our pursuit of money is often tied up with our pursuit of happiness, so it would be good to know what really does cause happiness.

The legacy we leave: why every decision matters (Becoming Minimalist). Eight ideas for living with intention.     

7 lessons on my journey from maximalist to minimalist (No Sidebar). Some good steps toward less.    

Why I’m not writing about kids and screen time anymore (Wall Street Journal). Five recommendations from someone who has covered this issue for a long time has.                                                                 

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.

Stronger Than Fear

I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want. I can do all this through him who gives me strength. – Philippians 4:12-13

But godliness with contentment is great gain.For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that. – 1 Timothy 6:6-8

As we navigate this crazy world where “it’s always something” — a global pandemic, war in Ukraine, bank failures, the prospect of a recession — it would be easy to give in to fear. The faltering stock market has, no doubt, hit your retirement account, and maybe you’re not feeling so secure about your job. Sensationalist headlines and uninformed social media fear-mongering only make matters worse.  

So, why the verses about contentment at the top of this post? Aren’t they the equivalent of painting a smiley face on a bad situation?

I’d like to think our faith has the power to help us experience contentment even in the face of tough circumstances. But how?

Giving thanks

Recently, I connected with some friends I’ve known for 30 years. We live in different parts of the country now, so we talked by Zoom. After we finished our conversation, I was overwhelmed with a deep sense of gratitude. Reflecting on some memorable adventures we’ve had together over the years, and all that we’ve seen each other through — marriage, kids, job changes, the death of loved ones, and so many highs and lows in between — I thanked God for their friendships.

Yes, the day was filled with news about the banking crisis and the market falling. But I was filled with a deep sense of gratitude and contentment. It’s been my experience that the two are related. Gratitude fosters contentment, and contentment is an incredibly powerful antidote to fear.

Intentional prayer

Do you have some tangible concerns right now, financial or otherwise? Take them to God.

Give all your worries and cares to God, for he cares about you. – 12 Peter 5:7

Are there some decisions in front of you right now? Ask God for help.

If any of you lacks wisdom, you should ask God, who gives generously to all without finding fault, and it will be given to you. – James 1:5

And in the midst of those concerns or decisions, do something that may not feel natural. Give thanks.

Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus. – Philippians 4:6-7

Rejoice always, pray continually, give thanks in all circumstances; for this is God’s will for you in Christ Jesus. – 1 Thessalonians 5:16-18

Shortly after I became a Christian in my late 20s, someone taught me the ACTS “method” of prayer. To overcome our tendency to jump right into requests, ACTS saves the asking for last. You begin with adoration, then confession, then thanksgiving, and lastly, supplication. 

Adoration will remind you of who God is—that his strength and his goodness and his love are unmatched and eternal. Confession is always good for the soul. I think of it as spiritual deep cleaning. As you move into a time of thanksgiving, don’t rush this part. Spend time thinking of relationships you’re grateful for, the many ways God has provided for you, the freedoms you enjoy. Then take your concerns and requests to God.

Controlling what you can

Even when times are good, there are countless things that are beyond our control. But there are always some very important things we can control. We can control how much time we’re spending in God’s Word, in prayer, and in giving thanks. And in doing those things, we can find contentment in every situation. 

Take it to heart: “Let the peace of Christ rule in your hearts, since as members of one body you were called to peace. And be thankful.” – Colossians 3:15

Take action: Pause whatever you’re doing right now and pray, using ACTS as your guide.

Read more: Anchors in the Storm