Matt Bell's Blog, page 29

Profitable Ideas: The Super Bet, A Financial Legacy Worth Leaving, and More

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

Record 50.4M American adults plan to water $16B on Super Bowl (Front Office Sports). Sports betting is becoming ever more normalized. I’m not a fan. See also, I treat people with gambling disorder — and I’m starting to see more and more young men who are betting on sports (The Conversation). And see, A psychologist explains why some people get hooked on sports betting apps (Fast Company).

Why do more buying choices cause unhappiness? (Psychology Today). On the benefits of becoming a “satisficer.”

Majority of teens feel unprepared to finance their future (savingforcollege.com). Parents, talk to your kids about money. (Help is on the way!)

What does it look like to be financially healthy? (The Long Game). A good list, but it’s missing something: You’re living generously.

21 life-changing minimalist experiments to try in your home (Becoming Minimalist). Lots of good first or next steps toward a simpler life.

Financial tips every young adult should hear (Relevant Magazine). The least expensive option may not be the most cost-effective option, and other lessons.

Research-backed ways to share generosity with family (FaithFi). To have raised generous kids seems like a worthy legacy to pursue.

The ‘Great Resignation’ is now the ‘Great Regret’ (Yahoo Finance). Words of wisdom for those who are thinking about making a job change.

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.

Why Invest?

Of all the many aspects of managing money, investing is arguably the most difficult. It can be intimidating and confusing. When the market falls, scary losses can pile up quickly. When it zooms, it can feel like everyone — everyone, that is, except you — is getting rich quickly. Is it even wise to invest in the stock market, or is that a form of gambling? I’ll do my best to simplify the topic over the next few posts.

However, before getting to the how-to’s of investing, let’s take a step back and look at why to invest. 

Motivations matter

As Christ-followers, we need to balance the truth that there is nothing inherently unbiblical about wealth and yet there are warnings about making it too much of a focus.

“A faithful person will be richly blessed, but one eager to get rich will not go unpunished.” – Proverbs 28:20

And there are cautions against finding our security in wealth. 

“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.” – 1 Timothy 6:17 

So, our goal with investing isn’t to build wealth for the sake of building wealth. Instead, building wealth can be a means to important biblical ends, such as providing for our family. 

“Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever.” 1 Timothy 5:8

Today, the mandate to provide for our families, especially after we retire, has become more challenging than ever. 

Is retirement even biblical?

Retirement is mentioned a grand total of just once in the Bible, and only in reference to Levitical priests (see Numbers 8:23-26). Assuming that’s not your line of work, is retirement something you should be striving for?

While our culture’s view of retirement as an extended time of leisure is not biblical, planning for retirement is an essential part of good stewardship.

That may sound like a contradiction, but the fact is that retiring from full-time work at some point is very likely to be a reality for most of us, whether due to our own declining health, the need to care for a loved one in our later years, or because God redirects us toward more volunteer work

So, while it’s healthy from a vocational, spiritual, and emotional perspective to plan to continue working in later life, it can be dangerous to count on it from a financial perspective. We simply may not be able to.

To get there, invest

Because of longer lifespans and the disappearance of traditional pensions, we will all probably need a fairly substantial nest egg to live on in our later years

Consider this: If you build a retirement portfolio of $500,000 and you follow common financial planning advice that you can withdraw 4% per year to live on (adjusted each year for inflation), that’s only $20,000. Social Security should supplement that to some degree, but you can easily see the need to build a decent-size nest egg in order to provide for your family in later life.

You can’t get there with a bank savings account paying an interest rate that’s lower than the inflation rate. But you can get there with the stock market.

Next week, we’ll look at some of the specific how-to’s of investing within a biblically-informed framework.

Take it to heart: “So whether you eat or drink or whatever you do, do it all for the glory of God.” – 1 Corinthians 10:31 

Take action: Take a few minutes to reflect on why you’re investing. What’s your motivation?

Read more: Three Essential Questions About Investing 

Profitable Ideas: This is Your Brain on Stuff, The End of Credit Cards, and More

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

Everything you can’t have (Collaborative Fund). “Your brain doesn’t want stuff. It doesn’t even want new stuff. It wants to engage in the process and anticipation of getting new stuff.”

The vehicles we choose to drive (Becoming Minimalist). Come for the Harvey Mackay quote, then stick around for the rest of the article.

How to make (and stick to) a budget (Relevant Magazine). Don’t let the title put you off. This is really an article about contentment, a really good article about contentment.

Companies save billions of dollars by giving employees fake “manager” titles, study shows (CBS Money Watch). Beware the big title.

The hidden link between workaholism and mental health (The Atlantic). Three ideas for those who work too much.

The money move that has people ditching their banks (Wall Street Journal). Why settle for so little interest?

Extreme couponing is back. But it’s on TikTok this time (Marketplace). Everyone likes to save money, even young people!

Will digital wallets kill credit cards? (The Ascent). Everything is moving to the phone.

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 Three Types of Savings Everyone Needs

Of all the things you could do with money, parking it in a savings account isn’t likely to move the excite-o-meter. But it does have the advantage of being highly useful. So useful, in fact, that I want to encourage you to not just double down on the idea, but to triple down on it. 

Here are the three types of savings I encourage everyone to have.

An emergency fund

You knew this one was coming. And yes, I agree with the majority of financial writers and advisors who peg three to six months’ worth of essential living expenses as the right amount to strive for here. 

So, which is it? Three months’ or six months’ worth of living expenses? It depends on how many breakable moving parts you have in your life. If you’re single, rent an apartment, and your job is fairly secure (or at least your job skills are in demand), then you’re fine at the three months’ side of the spectrum. But if you have a spouse and some kids depending on you, own a home, and your job is even a little bit tenuous, you really should have six months’ worth of living expenses in reserve.

A big-ticket item replacement fund 

Speaking of breakable moving parts, a house has lots of these, many of which are expensive. Okay, your roof doesn’t actually move (at least it shouldn’t), but it’ll need to be replaced one day. And that’ll be an expensive day. Same thing with your furnace, air conditioner, water heater, washer and dryer, and on on. And same thing with your car.

How do you save for such things? Once your emergency fund is built, if you had been saving 10%, keep saving 2% for a big-ticket item replacement fund and redirect 8% toward investing. If you had been saving 15%, keep saving 3% and redirect 12% toward investing.

When we bought our house, we knew the furnace and air conditioner were not long for this world, so we started putting money aside each month earmarked toward their replacement. They ended up lasting a bit longer than we thought they would, so when we finally had to replace them we had more than enough in savings. Then we renamed that fund our “car replacement fund” and have been adding to it for the eventual replacement of our oldest car.

A periodic bills and expenses fund

This is an account (separate from your emergency fund and big-ticket item replacement fund) where each month you transfer one-twelfth of the annual amount that you have budgeted for bills and expenses that need to be paid sometime during the year but not every month. Examples include a semi-annual auto insurance premium, an annual life insurance premium, vacations, and Christmas presents. When the bill or expense needs to be paid and the money is there because you’ve been saving for it each month, that’s a beautiful thing.

Building this savings account doesn’t require using a portion of your overall savings allocation. It just requires making sure to include all periodic bills and expenses on your monthly cash flow plan and then transferring the total of all such monthly amounts into a separate savings account each month. For example, if your car insurance costs $600 every six months, there should be a $100 allocation for car insurance listed on your monthly cash flow plan. Each month, you transfer that $100, along with all other monthly allocations for periodic bills and expenses, into a savings account. When the bill or expense comes due, you just transfer the amount you need from savings to checking and make the payment.

But how?

If finding the money to save looks like a challenge, just start where you can. To increase your savings rate, think about the financial framework I’ve written about before where you orient your finances with generosity, saving, and investing coming before anything else (see The Priorities That Lead to Financial Success and Satisfaction). It may take some time to get there, but begin moving in that direction.

Think of it this way. If you work a 40 hour week, the four hours you work on Monday morning would be devoted to giving generously to support God’s work in the world. The four hours you work on Monday afternoon would be devoted to saving and investing in order to build a solid financial base for your family today and provide for your family in your later years. Then, all the money you earn Tuesday, Wednesday, Thursday, and Friday is available for spending. That’s not so unreasonable, is it?

Take it to Heart: “Precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it.” – Proverbs 21:20 (ESV)

Take Action: Use separate savings accounts for each of the three purposes described in this post. 

Read More: Finding the Money to Save or Invest: An Overlooked Essential Step 

Profitable Ideas: Investing in Happiness, Financial Opposites Attract, and More

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

Avoiding unhappiness (Humble Dollar). If we could better envision our future self, we’d be more cautious in our use of debt.

KidFinLit series: 10 children’s books that teach kids about saving money (Forbes). A fun way to help kids learn about money.

‘Young people know more about TikTok and Minecraft than money.’ Teenagers want to be smarter about finances—teach them. (MarketWatch). The author of this article is a teenager who’s intent on helping his peers learn about money.

When it comes to marriage and money, opposites attract (Wall Street Journal). In marriages that go the distance, husbands and wives tend to move toward each other financially over time.

Are digital wallets safe? Here’s what to know as the battle between big banks and Apple Pay heats up (CNBC). From what I understand, digital payments can be more secure than credit cards, but I’m not a fan of Zelle.

You can find out what your “check engine” light means for free (Life Hacker). A fix might be less expensive than you think.

Why giving your stuff away is better than selling (Rose Lounsbury). It comes down to this: what’s worth more—your time or your stuff?

Overconfidence can be ‘a pathway to poor portfolio performance,’ says chief investment officer. How to check your ego (CNBC). As the Bible says, “Enthusiasm without knowledge is no good; haste makes mistakes” (Proverbs 19:2, NLT).

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.

Profitable Ideas: The Money Mindset Forms Early, The High Cost of Cheap Clothing, and More

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

Your money mindset forms by 7: and the gift keeps on giving (Kiplinger). Why it’s so important to teach kids about money from an early age.

How to ask for a raise, without alienating your boss along the way (NY Times). These people should know; they’re the boss.

I ruined my family’s finances by withdrawing from my 401(k) to buy a house—and I regret it (MarketWatch). While it’s generally a bad idea to raid your retirement fund, if you have to, there’s a right way and a wrong way. 

Survey: nearly a third have experienced financial infidelity (US News). And that’s just the number who admit to it!

Your credit card rewards might not be worth it (Vox). Somebody pays for those rewards, and it might be you.

What is the child tax credit? (US News). There was an increase to the child tax credit during the worst of the pandemic, but now it’s back to where it used to be.

Does it matter where you clothes come from? (Relevant Magazine). This is a tough issue, but one that’s well worth thinking about.

FOMO: the worst financial trait (Collaborative Fund). Why subtracting bad traits may be more profitable than adding good ones.

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 Priorities That Lead to Financial Success and Satisfaction

I’m fascinated with the process of life change. So many of us would like to make some changes — in our health, our relationships, our finances. And yet change seems hard. We might make progress for a while, but then we slip back into old familiar patterns. What does it take to make changes that last?

A couple of weeks ago, we looked at the importance of identity. As James Clear, author of Atomic Habits, puts it, “The most effective way to change your habits is to focus not on what you want to achieve, but on who you wish to become.”

As Christ-followers, we know who God made us to be. Financially speaking, we’re stewards or managers of God’s resources. We’re called to be wise builders, building our financial lives on the solid rock of God’s Word.

When faced with a decision, Clear suggests asking ourselves, “What would a person with the identity we aspire to do?” 

Because the Bible affirms planning (Proverbs 21:5), one thing a wise builder would do to manage money well is use a plan — a budget, or as I prefer, a cash flow plan. (See Building the Best Possible Financial Life — The Right Tool for the Job.)

How do you put such a plan together?

Putting first things first

There are five things you can do with money. You can: 

Spend itUse it for debt paymentsSave itInvest itGive it away

And that’s the order our consumer culture teaches us to follow. It says, “Great, you’re making $75,000 per year? That means you can drive this type of car, wear that brand of clothes, vacation over there…” 

Spending comes first, and when spending comes first, debt always comes along for the ride. If anything is left over after all that spending and after making all those debt payments, some might be saved, invested, and given away, but there isn’t usually much, if anything, left over.

The Bible suggests a very different order: 

GiveSaveInvestAvoid what the Bible describes as the bondage of debtSpend

That’s a really simple framework, and yet it’s profound. Deciding to arrange our finances this way is the first step in putting a cash flow plan together. It’s a huge strategic decision that orients our finances toward success and satisfaction. 

A little context

Are you giving generously and saving or investing adequately? More specifically, are you giving at least 10% of your income? And are you saving or investing at least 10%? Does that seem like a stretch?

Think of it this way. If you work a 40-hour week, giving 10% means the money you earn on Monday morning is going to the Lord’s work. Saving or investing 10% means the money you earn on Monday afternoon is going toward building a peace-providing reserve now and providing for your family’s later life needs. That leaves all the money you earn on Tuesday, Wednesday, Thursday, and Friday for spending. That doesn’t seem so unreasonable, does it?

And here’s an important point to know about life change. Just as identity shapes our behavior, our behavior shapes our identity. Doing the things you know a manager of God’s resources — a wise builder — would do, further molds that identity.

So, that’s the big picture. From a really practical perspective, a wise builder prioritizes money this way: Give, save, invest, avoid the bondage of debt, and then spend. 

Take it to heart: “Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much. So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? And if you have not been trustworthy with someone else’s property, who will give you property of your own?” – Luke 16:10—12

Take action: Write down your monthly gross income on a piece of paper. How much is 10% of that? If you gave away that much each month and saved or invested that much, would you be able to live on the remaining 80%? If it doesn’t seem like it, don’t be discouraged (or upset with me for suggesting those amounts!). If you’re far from being able to do that, just starting to take some steps in that direction will be a win. We’ll take a closer look at why those are even good objectives, and how to pursue them, next week. 

Read more:  The Heart of a Giver and Saving Money is All About the Why

Profitable Ideas: When Failure to Launch Isn’t a Failure, Online Scammers are Coming for Your Money, and More

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

Nearly half of Americans age 18 to 29 live with their parents (Relevant Magazine). It’s common to criticize this as evidence that today’s young people are not “launching” well, but in this interview with on Focus on the Family, Washington Post columnist Michelle Singletary convincingly argues in favor of the practice. 

ARM borrowers gamble short-term savings on long-term risk (US News). Nearly half of those who took out an adjustable-rate mortgage came to regret it.

Save for college or retirement? New 529 rule makes it easier to help your kid do both (Money). New flexibility for those using a 529 plan to save for college.

These online scams to steal your money will shock you — even if you think you’ve seen them all (MarketWatch). You have to be so incredibly careful these days.

10 smart money moves middle-class families can make to set their kids up for success (Wealthy Nickel). There are a lot of good ideas here, and not just for middle-class families.

5 reasons to put together an essential emergency binder (Christian Money Solutions). Oftentimes, the more complicated our financial lives become, the more scattered our financial information. It would be a gift to our loved ones to get it all organized. Another good resource for that purpose is Set Your House in Order. 

How to talk to adult kids about money and inheritances (Kindness Financial Planning). It’s good to have a will or trust in place. Even better if you pair that with a conversation. 

Should you set a financial finish line? (National Christian Foundation). This may sound like a radical idea, but people who have done it say it’s been transformative.

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.

Building the Best Possible Financial Life — The Right Tool For The Job

In a recent post, The Starting Point for Building Effective Money Management Habits, I talked about the importance of understanding our biblical financial identity. We’re not consumers, as our culture suggests. We were designed to be wise builders who manage money in a way that enables us to build a thriving relationship with God, loving relationships with others, and lives of meaningful contribution. But how?

Creating a blueprint for uncommon financial success

If you were a home builder, you wouldn’t just show up on the job site with a hammer, some wood, and a box of nails, and just start pounding away. You’d have a plan, a blueprint.

In order to build a great financial life, we need a blueprint as well. Yes, I’m talking about a budget. I know that many people can’t stand even the sight of that word. It sounds restrictive, and it seems like it would take a lot of work. But it isn’t, and it doesn’t.

I’ve heard from some high-income people who say they see no need for a budget. They have plenty of margin and are never in danger of overspending. To which I would gently reply: “If a company grows to the point of great success, would it stop keeping its books? Would it stop analyzing income and expenses, setting departmental budgets, and proactively managing to the numbers in its plan?” I doubt it.

Your household is like a small business. It’s owned and funded by God, but you’ve been given the opportunity to run it. Or, to stick with the metaphor from last week’s post, you’re a wise builder who has been given all the materials needed to build an amazing life. While a consumer might wing it, a wise builder surely wouldn’t.

What would a wise builder do?

In James Clear’s book, Atomic Habits, he stresses the importance of identity in shaping our behavior.

Imagine two people resisting a cigarette. When offered a smoke, the first person says, ‘No thanks. I’m trying to quit.’ It sounds like a reasonable response, but this person still believes they are a smoker who is trying to be something else. They are hoping their behavior will change while carrying around the same beliefs. The second person declines by saying, ‘No thanks. I’m not a smoker.’ It’s a small difference, but this statement signals a shift in identity. Smoking was part of their former life, not their current one. They no longer identify as someone who smokes.

In the same way, I’m encouraging all of us to consciously reject the identity of a consumer and embrace the identity of a wise builder. With all financial decisions, it would be helpful to consider, “What would a wise builder do?”

One thing I know for sure is that a wise builder wouldn’t just spend and hope it’ll all work out. A wise builder would use a plan to build a life of uncommon financial success—a life of proactively using money to build a thriving relationship with God, loving relationships with others, and meaningful contribution. Given the loftiness of those aspirations, a budget may seem like a big comedown. But it isn’t. It’s the most powerful tool you can use to manage your finances accordingly.

Next steps

If you’ve never used a budget, let me encourage you to start now. At my day job with Sound Mind Investing, I wrote a three-part series about getting started with mint.com, the budget tool my wife and I use. You’ll find the first article here, which has links to the other two.

If you’re an experienced budget user, right now would be a good time to consider any tweaks you should make going into the new year. In our household, we made two changes. The first one has to do with our clothing budget. When Jude and I were first married, we each had separate budgeted amounts for clothes. When our kids came along, we added a third clothing budget — “kids’ clothes.” But we decided to split that into separate budgets for each of our three kids, so now we have five clothing budgets in total. It should help us spread our former “kids’ clothes” budget more evenly across our three kids.

Next, we added a “pet food & supplies” category for expenses related to our dog, Toby. We used to put such expenses in our entertainment budget, but honestly, while we love our little guy, his upkeep can’t compare with a night out at the movies. It seemed like an unfair weight on our entertainment budget to put his expenses there. 

Whether you’re struggling financially or thriving, a budget will help you use money with greater effectiveness, peace of mind, and joy. If you have questions about how to set up or use a budget, please ask. I’d love to help you put this powerful tool to use.

Take it to heart: “The plans of the diligent lead to profit as surely as haste leads to poverty.” – Proverbs 21:5

Take action: If you don’t use a budget, read the articles I linked to over at Sound Mind Investing, download Mint to your computer, and get started. It’ll take a little time to get set up, but trust me—it’ll be worth it.

Read more: The 5 Budget Mistakes I See Most Often and How to Fix Them 

Profitable Ideas: Investing Time Well, The Hidden Cost of Cheap TVs, and More

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

Don’t just spend your time—invest it (Wall Street Journal). After all, it’s your most valuable asset.

Distractions: understanding the biggest productivity killer (Lifehack). Pro tip: turn off 80-100% of notifications. Read also, Bob Goff on a less distracted life (Relevant Magazine).

The hidden cost of cheap TVs (The Atlantic via MSN). “The companies that manufacture televisions call this ‘post-purchase monetization.’” It begs the question, Who’s watching who?

Always add these skills to your resume if you can (Lifehacker). Of course, you need to actually have any skill you include on your resume, but you may be overlooking an ability that matters to employers.  

Should I buy additional insurance from a rental car company? (Clark Howard). In short, no, but double check what coverage is available on your credit cards. Some cards have recently stopped providing rental car insurance as a cardmember benefit.

How to stop shopping impulsively in 2023: 23 frugal tips! (No Sidebar). Regular readers know that I don’t care for the term frugal, but there are some good ideas on this list!

Scammers pretend to be from your bank to drain your savings (USA TODAY). You have to be really careful these days. See also, My experience with check fraud — and what you can learn from it (Oblivious Investor).

It all belongs to God (FaithFi). “Are you carrying a burden of ownership that you have not been designed to carry?” Good question.

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.