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College tuition goes up faster than regular inflation. Inflation of goods and services averages about 4 percent per year, while tuition inflation averages about 8 percent per year.
I suggest funding college, or at least the first step of college, with an Educational Savings Account (ESA), funded in a growth-stock mutual fund. The Educational Savings Account, nicknamed the Education IRA, grows tax-free when used for higher education.
If you want to do more than the ESA, or your income rules you out, you may want to look at a 529 plan. These are state plans, but most allow you to use the money at any institution of higher learning, which means you can save in New Hampshire’s 529 plan and go to college in Kansas.
The lists of these scholarships can be bought online, and there are even a few software programs you can purchase. Denise, a listener to my show, took my advice, bought one of the software programs, and worked the system. That particular software covered more than 300,000 available scholarships. She narrowed the database search until she had 1,000 scholarships to apply for. She spent the whole summer filling out applications and writing essays. She literally applied for 1,000 scholarships. Denise was turned down by 970, but she got 30, and those 30 scholarships paid her $38,000. She went to
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One, most people have lost their hope, and they don’t really believe there is any chance for them. Two, most people believe all the mortgage myths that have been spread.
MYTH: It is wise to keep my home mortgage to get the tax deduction. TRUTH: Tax deductions are no bargain.
If you do not have a $10,000 tax deduction and you are in a 30 percent bracket, you will have to pay $3,000 in taxes on that $10,000. According to the myth, we should send $10,000 in interest to the bank so we don’t have to send $3,000 in taxes to the IRS.
If you get a big tax refund, you’ve just allowed the government to use your money interest-free for one year.
MYTH: It is wise to borrow all I can on my home (or continually refinance for cash out) because of the great interest rates; then I can invest the money. TRUTH: You really don’t make anything when the smoke clears.
Let’s look at borrowing $100,000 on your home to invest. If you borrowed at 8 percent, you would pay $8,000 in interest, and if you invested the $100,000 you borrowed on your home and made 12 percent, you would make $12,000 in return, netting you $4,000. Or would you? Where I live, if you make $12,000 on an investment, you will pay taxes. If you are in a 30 percent bracket, you will pay $3,600 in taxes at ordinary income rates or $2,400 if you invest at capital gains rates. So you will not net $4,000, but instead $400 to $1,600. But we aren’t through yet.
MYTH: Take out a thirty-year mortgage and promise yourself to pay it like a fifteen-year, so if something goes wrong you have wiggle room. TRUTH: Something will go wrong.
Research has found that almost no one systematically monthly pays extra on their mortgage; you simply can’t kid yourself.
If you have a great interest rate, it is not necessary to refinance to pay a mortgage off in fifteen years or earlier. Simply make payments as if you have a fifteen-year mortgage, and your mortgage will pay off in fifteen years.
The Mortgage Bankers Association says the average life of a mortgage is only about three to five years, so on average you don’t save enough to get your money back before you pay the loan off by moving or refinancing.
MYTH: It is wise to use the lower rates offered by an ARM mortgage or balloon mortgage if you know you’ll “be moving in a few years anyway.” TRUTH: You will be moving when they foreclose.
MYTH: The home equity loan is good to have instead of an emergency fund. TRUTH: Again, emergencies are precisely when you don’t need debt.
The banking industry calls these loans HELs for short, and my experience tells me they simply left off an L. These loans are very dangerous, and an unbelievable amount of them end in foreclosure.
MYTH: You can’t pay cash for a home! TRUTH: Bet me.
The Bible states, “In the multitude of counselors there is safety” (Prov. 11:14 NKJV). A good estate-planning attorney, a CPA or tax expert, an insurance pro, an investment pro, and a good Realtor are a few of the essential team members you should gather around you.
Only the strong can help the weak, and that is true of money too. A toddler is not allowed to carry a newborn; only adults who have the muscular strength to ensure safety should carry babies.
The Bible states that pure religion is actually helping the poor, not theorizing over why they are poor (see James 1:27).
Proverbs 10:15, a rich man’s wealth can become his walled city. In
Antoine Rivaroli said, “There are men who gain from their wealth only the fear of losing it.”
Another paradox is that wealth will make you more of what you are. Let that one soak in for a minute. If you are a jerk and you become wealthy, you will be king of the jerks. If you are generous and you become wealthy, you will be most generous. If you are kind, wealth will allow you to show kindness in immeasurable ways. If you feel guilty, wealth will ensure that you feel guilty for the rest of your life.
Dallas Willard, in his book The Spirit of the Disciplines, says to use riches is to cause them to be consumed, to trust in riches is to count upon them for things they cannot provide, but to possess riches is to have the right to say how they will or will not be used.
If you are a good person, it is your spiritual duty to possess riches for the good of mankind. If you are a Christian like me, it is your spiritual duty to possess riches so that you can do with them things that bring glory to God.
I’m being very spiritual here at the end, but the spiritual is a legitimate aspect of behavior. I see well-rounded, mature people who become all God designed them to be when they get their money closets cleaned out. God has a plan for your life, and that plan isn’t to harm you; it is a plan for your future to give you hope (see Jeremiah 29:11).
Dave once signed our Total Money Makeover book with Romans 12:2: “Transform!” By following Dave’s plan—which is really God’s plan—that’s exactly what we’ve done. It has been an amazing financial, relational, and spiritual transformation!
https://www.biblegateway.com/passage/?search=romans%2012:2&version=NIV
Do not conform to this world
