Christian Finance

A look forward...

Now that we are solidly into 2010 (day 2 LOL), I want to share my thoughts on what I believe is necessary if we, as Americans, are to make this decade better - from a financial perspective - then the one we just came out of.  Some of these themes will be familiar to regular readers, but I believe they are incredibly important and thus worthy of speaking about again.

Thus, I present to you five things that will make or break this decade for us all:

1.  An increased savings rate - in order to make the investments that are required for our economy to succeed (think infrastructure and business expansion), an increase in our savings rate is needed.  While this has been improving through the course of the recession, it will have to continue - otherwise we will continue to indebt ourselves to foreign creditors - which of course results in us exporting money to service such debt - leaving even less money for reinvestment at home.  It is a terrible merry-go-round that is next to impossible to get off without getting hurt, once it is spinning too quickly.

2.  Fiscal responsibility - governments at all levels are going to have to make a strong commitment to balancing budgets and living within their means.  Failure to do so will result in mounting debt levels, which in turn lead to higher interest rates; a high interest rate environment is not one that spurs economic growth.  Fortunately an increased savings rate will help finance government debt internally - and stop the export of our dollars to foreign creditors.

3.  Belief, innovation & hope - America has an innate ability to continually reinvent itself.  Think about it: how many times over the past fifty years has it appeared that America was floundering - and how many times did it come roaring back stronger than ever?  We are in one of those times again - fortunately this is the exact situation when we exhibit the best of what we are - and can demonstrate it yet again.

4.  Reduced consumer spending - look around your house and notice all of the junk that you probably don't even need.  Turn over some of it and see where it came from - likely not the USA!  Every dollar needed to manufacture those items - along with the manufacturer's profit - was directly exported from the USA to the country where the item was made.  And what happens when dollars leave the USA?  They are not available for re-investment in our economy, along with our roads, bridges and other things that keep us connected and together.

5.  Keeping focussed on God - while I listed this point last, it is obviously the most important.  Without a focus in Him, our nation will not succeed.  The one solace that can be found is that people have a tendency to turn to God when times are difficult - there is no doubt that we are in such a time right now, so perhaps the economy will be a catalyst for revival in our nation.

We are fortunate to be alive in these exciting times - I believe the innovation and excellence that will occur over the next ten years will restore our nation and rebuild it in ways that we have not yet conceived.  Hang on - it's going to be a fun ride!

Mortgage rates are down!

In the news today, mortgage rates in the United States have dropped to new record lows - the average rate on a 30 year mortgage is now 4.71% according to a news release from Freddie Mac.  This is the fifth consecutive week of lower rates.

If you haven't refinanced yet, it may be time to start thinking about it.  I refinanced my mortgage during the summer and have been enjoying paying 1.5% less on my mortgage rate. A lower rate means more money in your pocket - definitely something to be happy about!

Underwater on your mortgage

 This weekend I stumbled across an article regarding a paper written by Professor Brent White from the University of Arizona. The premise of his paper is that if an individual is 'underwater' on their mortgage (i.e. the mortgage is higher than the value of the home) then the homeowner should just walk-away from the home and not have any moral quandries about it.  Because this will cause an immediate hit to your credit score, he further advised buying major items such as cars, appliances, etc. that you may need credit for prior to defaulting - since you will not be able to obtain credit any time soon after default.

I thought about his suggestion a lot over the past couple of days.  In general, I heartily disagree with it, if only for the simple fact that when you borrow money to purchase anything - whether it be a car, home or whatever - you have made a promise to pay the lender back under the terms of the loan (whatever they may be).  As Christians, we need to keep our promises to everybody - even when there are financial consequences to them.

Having said that, I believe there are (very) limited circumstances when it could be acceptable for a Christian to walk-away from debt - this would include severe financial consequences that truly leave no other option.  Often situations like medical debt or other major hardships lead to bankruptcy anyway and would thus have the safe financial effects.

Before you are ready to take the easy way out, think about the promise that you made.  The frustration of being underwater is temporary.  Your house will eventually go up in value and your mortgage balance will go down.  And while you are waiting, you will know that you are doing the right thing.

Dollars in your wallet - Part 5: Low Interest Auto Loans

So your car is on its last legs and you've decided to take the plunge and purchase something new... In today's money saving tip, I want to show you a super low interest rate of 3.99% on new vehicle loans for terms up to 60 months!  Such an offer is available from Pen Fed Credit Union - as in Pentagon Federal Credit Union.  Yes - it is available to military members, but if you or a family member is not in the military or a volunteer with the Red Cross, then you are still eligible to join (and receive the loan) by becoming a member of the National Family Military Association (it costs just $20 to join this).

Financing costs can become a major portion of any vehicle purchase - so it is important to obtain the best interest rate possible when making your purchase. This rate is pretty much unbeatable outside of the occasional low interest rates offered directly by certain automakers.  So this becomes more dollars in your wallet - courtesy of Christian Finance!

Dollars in your wallet - Part 4: 0% Balance Transfers

In this installment of dollars in your wallet, I want to share with you an excellent credit card that can be used for balance transfers.  That means you can transfer existing - and high rate - credit card debt to this new card and save potentially hundreds of dollars in interest costs.

I found a balance transfer card for you that offers 0% interest for 6 months!  Where does such a card exist?  At Citibank - you can find it right here.

If you decide to transfer existing balances, I want you to use this as an opportunity to pay the debt down - not as an opportunity to charge up your old credit card again. That of course would defeat the whole purpose of doing this!

If you are currently carrying a $5,000 balance at 18% interest, you have the chance to save $450 over the next six months by using this Citibank card!  Enjoy the extra dollars in your wallet!

Dollars in your wallet - Part 2: Cash Reward Credit Card

If you are the type of individual that can completely pay off your credit card balance each month, then please read on.  If you do not fall into this category, please stop reading now.

Schwab - the investment company - offers a cash-back visa card with a 2% cash rebate on ALL purchases, paid to you each and every month.  Considering that there is no annual fee associated with this account and you do not need to have a brokerage account with them to receive the card, it is truly a credit card that pays you for using it.

Like I said however, I only encourage you to look at this IF you pay off your credit card balances COMPLETELY each and every month. 

Here is the link if you are interested: 

http://www.schwab.com/public/schwab/banking_lending/credit_card

Importance of Planning

In my office, there exists a small group - including myself - that have made a committment to better physical health.  In that regard, we try to workout several times each week, and do other things to help each other - like keeping chocolate out of sight!

Today I was talking to one of our group and she was describing what she had packed for lunch - she had made a chicken wrap and instead of using mayonnaise or other condiment, used low-fat sundried tomato basil cream cheese. That caught my attention because it sounded so good.  But she continued her story by saying that eating good was actually a lot of work - she had to go shopping for the cream cheese, had to cook the chicken breast and put the whole thing together the night before.

I contrasted her lunch with mine - I stopped by a local teriyaki place and grabbed chicken and vegetables on a bed of rice - still healthy, but her lunch just sounded so much better than mine (and cheaper too!).

In my mind, this really put the importance of planning at the forefront.  Because she had the insight to think ahead and take action ahead of time, she was able to put together something unique (and delicious) - on the otherhand, due to my lack of planning, I wound up with something rather average instead.

This anecdote illustrates the importance - and benefit - of proper planning. Although it is only talking about today's lunch, planning is very important when it comes to your financial life.  What are your goals?  Do you have children or want to have children?  Do you have aspirations to return to college?  Any and all goals require some way of paying for them!

Without a healthy financial plan in place, you will be stuck with average (at best) outcomes because you will often be compelled to take whatever option may be presented to you at decision making time rather than having the luxury of time and choice beforehand.

Take a moment to step back and think about where you are - and where you want to go. Create your own personal roadmap to get to where you want to go. And then work back and determine whether major decisions have to be made along the way. Put these important timeframes on a calendar and give yourself enough time to research and investigate your options so that you will be fully prepared at decision-making time.

Yes, planning - just like making lunch for tomorrow - does take effort.  But doing so will minimize your need to react in haste at circumstances - a wise financial approach indeed.

Credit Card Use

Have you taken a look in your wallet lately?  At the back of it, do you have an 'emergency' credit card - one that you normally don't use, but keep for those 'just in case' purposes?

If that card is getting dusty, you may want to pull it out and make at least a token purchase on it (say for example fill up your gas tank), just to keep it active.  The reason I make this suggestion is because banks have been rapidly closing inactive accounts or changing the terms and conditions on them making it onerous to keep an inactive account open.

For example, in the recent past, American Express has closed out 2.7 million inactive accounts.  Imagine the frustration if you had one of these accounts and your card did not work when you pulled it out in that emergency.  That could put you in a major bind, or at a minimum be a serious inconvenience.

I am not condoning regular usage of emergency cards - just a small purchase every couple of months is generally enough to keep such an account active.  Don't be caught unaware!

Our refinance story - part 9 (the conclusion)

As our last official act of business prior to going into vacation mode, I am happy to say that we signed the docs to close on our re-fi today!

It has been a long and tedious process - the lender took an impossible amount of time every step of the way.  However, because our new interest rate is so low (4.5%), I would not let the slowness of the process stop me from going through with it.

Some interesting things I noticed:

1.  They did not do an income verification.  I know that they called my HR department to verbally confirm my employment, but they did not request salary information.

2.  They did not request any financial information (e.g. checking account statements, investment account statements, etc).  

3.  Things moved impossibly slow at the beginning - we originally applied in April and the file did not even get looked at until well into May.  Over the past month however, contact with the loan processor was more frequent, so it appears that the lender has either hired more staff or the volume of work for them has dropped off significantly.

Points 1 and 2 surprised me quite frankly.  With all of the talk about higher mortgage standards and difficulties in getting financing, I would think that a lender would at least demonstrate a small amount of interest to confirm that I can actually afford to make my mortgage payments.

Notwithstanding the process, I am pleased with the final outcome. We managed to take 8 years of payments off of our old loan and will be saving thousands of dollars in the process.  I am thankful that this is finally complete!

I'll be back in a week.

Our refinance story - Part 8

After a rather strange week, our mortgage re-fi is finally ready to close.  We are scheduled to sign the docs on Saturday.  

There was a small hiccup this week that had the potential to delay things - it related to certain closing costs and whether they would be rolled into the loan.  When I applied for the re-fi, I was specific as to what I expected to roll in, but somewhere along the line, this was 'forgotten' by the bank and the net result was that I now have to come up with extra dollars at closing time.

Even though I was right - and the loan processor even admitted that they messed up - I still decided just to close as is.  I had calculated that each day this process dragged on was costing me about $15 in additional interest costs (yes, $450 per month) so it just wasn't worthwhile to potentially delay closing by a couple of extra weeks over this issue.

I am very excited by this - our new loan will be for 15 years with a 4.5% interest rate (8 years and 1.5% less than our current mortgage).  This will save us thousands of dollars over the life of the loan - good stewardship indeed!