Christian Finance

Our Purpose

Because of a very major deadline - that was met this morning incidentally - I have had an extremely busy couple of weeks at work.  That has been compounded by an unusually hectic schedule at home, and the end result is that I am sitting here feeling completely exhausted from everything.

After everybody left the office this afternoon, I stuck around for a while getting a couple of small things taken care of, and it struck me that it was absolutely insane that I was working late on a Friday afternoon after already having done everything that could possibly be conceived - let alone expected - and then some. Having a busy personal schedule mixed with a demanding occupation can take any of us off track at times, and we almost need a reset button to make everything right again.

On the drive home, purely out of weariness,  I selected the 'Worship' playlist from my iPhone and one of the songs I listened to was 'Runner' by Twila Paris.  The lyrics really struck me hard, because they were expressing exactly what I needed to hear:

Runner, when the road is long

Feel like giving in but you're hanging on

Oh runner, when the race is won

You will run into His arms

Mindful of many waiting to run

Destined to finish what you've begun

Millions before you cheering you on

Godspeed to you runner

Carry it home

It was at that moment I remembered what my purpose is:  I am here to serve my Jesus and to carry on His mission using the gifts that He has been so gracious to grant to me. It is for that very reason that I began this blog, and it is the only reason why I will continue.

No matter where you may be in your life right now, remember what your purpose is.  We are here to glorify our Savior and do what He wills for us.  Once we fully accept that, it can make the hard times in life go by much easier.  We are on a journey - and our destination is in another place.  Don't let this world knock you down while you are traveling down what can be a very long and sometimes rather lonely road.

Is it safe to buy GM - Part 4

Over the past month, I have made several entries on the status of GM - both from the perspective of purchasing one of their vehicles, and regarding the purchase of its common stock.

It is becoming apparent that GM is likely to undergo a Chapter 11 bankruptcy reorganization.  What this means is that the assets of GM are likely going to go to a 'new' company which will be owned primarily by the United States, but also by the United Auto Workers union as well as GM bondholders.  

Where would this leave you as a current common shareholder in GM?  Chances are, you will be left with nothing. Notwithstanding what may be happening with the current stock price, in a reorganization process, common shareholders are generally left holding an empty bag.  That is not to say that there may not be profit potential over the short-term because investors will still be purchasing the shares and individuals who have short-sold the stock will have to re-purchase it to cover their positions.  These will lead to some demand - but this is demand that will quickly drop-off.

God suggests that we invest with prudence - think about the parable Jesus told about the gold talents (Matthew 25). Purchasing a company that appears to be on the verge of bankruptcy is not a very prudent thing to do - avoid the temptation to do so.

Market Noise

The past week or so has seen a lot of noise in the market.  Last we heard rumors that the credit rating of the United States may be lowered from its current AAA status causing a decline in the value of the US dollar on world currency markets.  However, with North Korea testing nuclear missiles over the weekend, there was somewhat of a run back to safety this morning - which of course means the US dollar showing gains.

In the meantime, today it was announced that U.S. consumer confidence increased at the highest rate in six years - notwithstanding the announcement that housing prices decreased by a very large margin this spring (that is supposed to be news?)

Mix it all together and it resulted in an almost 200 point run-up in the Dow Jones average today.  

Is there any rational explanation for this increase today?  Well, indeed there were some more positive signs about the economy - and this will generally lead to market increases.  At the same time however, there are some fundamental issues that exist within the economy that are going to take a long time to work out - housing prices and unemployment for example.

What is my point to all of this?  Oftentimes the 'news' that relates to the markets is just noise and can often contradict itself.  In my opinion, it is basically impossible to make any sound judgement on the economy or potential direction of the market based on any single statistic or piece of news from any single day.

There is an old market saying: 'the trend is your friend'.  While it generally applies to the direction of the market, it also applies to the news surrounding it.  A series of statistics and news (whether they be positive or negative) that reinforce each other will be a far greater predictor of economic and market direction - and anything that happens on a given day becomes just market noise.

Don't panic if you hear somebody say something negative about the economy or a stock - and on the flipside, don't get too positive if you hear a piece of good news.  Always step back and take a look at the big picture around you.  Then you can make your decisions based on a much broader perspective - and generally have far more success as a result.

Memorial Day

On this day when we remember those who fought and died for the freedoms that we enjoy today, be thankful for the selfless acts of those countless men and women.   Please say a prayer for those who have lost loved ones that served our nation with honor. 

God has blessed us with an incredible country to live in - don't ever forget the true reason why we are here in this world.

Financial Decisions for Couples - Part 4

Unlike previous entries on this topic, today I am going to look at something a little more laid back.  I’ve heard people call it ‘fun money’, ‘mad money’ or the like.  Basically, I am talking about the things outside of the regular family budget - this may include your Starbucks habit, the occasional lunch out, or perhaps even your passion for golf or scrapbooking.

Quite simply, every couple should have ‘fun money’ for themselves as individuals to do with as they wish.  We all have certain habits and hobbies and having this sort of financial allocation is an easy way to be able to address those desires in a responsible manner.

What is a responsible manner you may ask?  In order for ‘fun money’ to work in a functional way, it must have the following qualifiers attached to it:

1. You - as a couple - must be responsible in the other aspects of your financial life.  This means living by the 80-10-10 rule, managing your debt wisely, and being responsible in your financial activities with your spouse.  Obviously, ‘fun money’ allocations cannot overturn your fiscal responsibility with the rest of your finances.

2. Each spouse must have their own ‘fun money’ to work with.  It will not be a tenable situation if one spouse has it while the other doesn’t, or if the amounts are not equitably distributed between both spouses.

3. You must not question your spouse in how they handle their ‘fun money’.  If they choose to spend it all at Starbucks, then that is their choice.  In the same manner, don’t let it drive you crazy to watch your spouse engage in some type of activity or hobby if that is where they desire to funnel their funds.

We all work hard, and in return for that, we can expect some small pleasure and enjoyment outside of our day-to-day routines.  The judicious use of fun money allows you to increase your life pleasure while still maintaining responsibility with the financial things that matter most to your family.

Good News Today

The Conference Board - an independent business research organization - announced that the Leading Economic Indicator for April advanced one percent in April, which is the largest gain since November 2005.

If there is one economic statistic to follow, this is the one, because it combines a series of ten economic data points such as stock prices, unemployment claims, and manufacturing orders. Historically, it has been an excellent predictor of where the economy is heading in the next quarter or two.  Thus, a positive reading such as this is indicative of an improving economy through the second half of this year.

It is a little ironic that this positive news was released on a day that the stock market suffered a large decline.  However, I strongly suggest that you pay attention to this index nonetheless. It is generally quite reliable for what is to come rather than what is right now - and as both Christians and investors, this is the correct approach to take.

Positive Aspects of the Credit Card Bill

Yesterday, I emphasized the negative aspects of the credit card bill that was sent to the President's Office today.  Since President Obama has indicated that he plans on signing the bill into law, today I am going to outline some of the positive changes that will occur:

1.  Credit card companies will be required to give at least 45 days notice of an interest rate increase and such a rate increase could not apply to existing balances unless the cardholder is at least 60 days late in making payments.  

2.  It will be more difficult for credit cards to be issued to children under age 21 (generally students). In most cases - and unless a student can provide his or her own source of income to support paying off the debt- one of the student's parents will have to be the primary cardholder on the account.

3.  Over-limit fees will have to be 'opted in' by the card user - companies will no longer be able to automatically allow an individual to exceed their credit limit which currently leads to an automatic over-limit fee.

4.  Customers with account balances subject to different interest rates (e.g. a promotional balance transfer rate and a regular rate) will now have payments applied to the higher interest rate balances first.

5.  After getting hit with an interest rate hike for late payment, users who successfully continue to make timely payments for 6 months will see their interest rate reduced.

It is my understanding that these changes will take effect in nine months, so be ready.

I realize that I was somewhat negative regarding the effects of this bill in my post yesterday - and for the reasons stated in that entry, I do believe that there may be some negative effects on responsible consumers.  However, the legislation does have positive aspects for all borrowers (e.g. you will no longer be penalized with a higher interest rate if you accidentally miss a payment) and in that regard, the efforts of Congress and the Administration should be applauded.

Penalized for being responsible

There is a credit card bill currently moving through Congress that is likely to lessen the penalties and costs associated with poor credit card usage and management.  A potential - and disappointing outcome of this legislation is that credit card companies may start charging their responsible clients more to make up for the lost revenues from others.

First let me back up a moment.  Credit cards - if managed properly - can be an excellent way to manage your spending and earn rewards.  Of course, this means not charging more than you can pay at any given time, and ensuring that you pay your balance in its entirety each month. My wife and I have utilized this methodology for several years, and as a result, we now have enough frequent flier miles for two first class tickets to Europe! And along the way, we have not paid a dime in interest or penalties to the issuer of the card.

However, users such as myself are now considered a liability to the issuer and very soon changes may be coming that may do things like shortening grace periods (i.e. the amount of time you have to pay before interest is charged), or implementing annual fees on the cards. Effectively, I may be penalized for being responsible.

Is this fair?  Banks are in the business to make profits so from a business standpoint I cannot argue that they do not have the ability or right to make such changes.  However, in order to recover lost revenues from irresponsible credit users on the backs of those who are responsible is just not ethically the right thing to do.

So what can you do?  If your credit card issuer starts implementing new fees (e.g. an annual fee or some type of 'convenience fee') then I would suggest immediately calling them up, and informing them that unless those fees are waived that you will close your account and take your business to another issuer who will not penalize you for being responsible.  More often than not, this will result in a satisfactory resolution - it can cost a credit card company a materially significant amount to obtain a new customer so they are often quite willing to accomodate situations such as this.

How expensive is gasoline going to be this summer?

One of the negative effects of the improving economy - or depending on who you talk to, the economy that at least isn't getting any worse - is the price increase in crude oil.  After staying within the $40 to $45 dollars per barrel range for most of the winter and spring, prices started rapidly increased over the past month and recently touched $60.  They pulled back a little today, and closed at $56.34 per barrel.

As we are all too aware, higher crude prices mean higher gasoline prices.  I have noticed the price of gasoline steadily increasing over the past month or so, and today I paid $2.40 per gallon (I live in Washington State which has a high gas tax).  

Since gasoline prices have a tendency to peak around Memorial Day and last well into the summer driving season, I believe that $3.00 gasoline is not out of the realm of possibility this summer.  Granted that's cheaper than the $4.40 I paid last summer (this was the highest price I have ever paid) but is still a far cry from the $1.60 I was paying in the winter.

So be prepared - gasoline prices are likely to go up a little higher than where they are at today. Summer driving season generally brings with it increased gasoline prices and unfortunately, this summer looks no different than any other one.

Financial Decisions for Couples - Part 3

Part 1 and Part 2 of this series focussed on larger purchases such as houses and durable goods - when it is generally necessary to have the input and support of both spouses when making decisions.  This entry is going to focus on day-to-day expenses of your household - things like groceries, household supplies and personal care items.

If your family is like ours, there’s a good chance that one spouse tends to have more responsibility for this area of household finance.  Whether this is by choice, natural determination, or necessity, it is generally fine to occur as long as it works for you. 

The reason for this is simple - most purchases of this nature tend to be relatively straightforward and on their own do not have a dramatic effect to a couple’s financial situation.  For that matter, having dual input on day-to-day expenditures may actually be harmful (I know that our Costco runs get a lot more expensive when I tag along!).

There’s a good chance that one of the spouses in your relationship is very organized, detail oriented and has the broad perspective necessary to make the choices regarding nutrition, family care, etc.  Let that spouse take care of this area of your financial decisions.  This will free up the other spouse to perhaps take responsibility for a different financial area such as investing.  We will address that topic in a future entry.