Thursday, November 28, 2013

Tis the Season to Be Mindful, Not Foolish!















The holiday season is upon us. Nowadays when you look in almost any direction you see advertised holiday specials on TV and cable, at supermarkets and at local dining establishments that will be serving Thanksgiving dinner and other holiday fare. And right alongside are the Christmas gift giving promotions, new store shopping hours and special sales pricing offers for those who like to shop early. Sadly, all but a few of the big box retailers have declared "Why wait to open for the Black Friday Rush when we can open Thanksgiving Day!"

That’s right. Retailers have decided that Americans should spend even less time gathered together sharing a Thanksgiving meal and instead should opt to go to the malls and giant specialty stores and shop longer, even all-day. So, as a consumer, know what you are really up against this year. 


So, what does this actually mean for the easily swayed shopper who is lulled into choosing between a so-called sale and holiday time with family and friends? With several more hours now to shop, will this advertising tactic increase how much earlier and how much more people might spend over the holiday season this year?

Never Mind the Store, Who Influences You More?


This is a disturbing trend as it undermines the long held American tradition established in 1863 by Abraham Lincoln: established by proclamation and setting aside the last Thursday in November as a “national day of thanks.” This gave birth to recognizing a single yet very significant national day that all Americans would go on to adopt and celebrate for the past 150 years. So, the question we should ask ourselves is whether this tradition should change now for the sake of holiday profits? 



Personally, I see an unhealthy trend; a slippery slope of social acceptance and another challenge to family values and quality fellowship. I mean why stop here? We are already shopping almost 365 days a year, 24 hours a day from even the most personal places, just as some do now from their home, the doctor’s office, a laundry mat, gym, airport or other public place.

Caveat Emptor, Sort Of!


On the Harry Jackson Radio Show--which aired November 16, 2013 via the Internet on American Family Radio and Urban Radio Ministries--I offered the following Savvy Holiday Spending Tips, including on the topics of debt and debt spending. Incurring debt is a big problem this time of year, and what is worse is that retailers know it but do not care. Some consumers will spend money they do not have either beyond their cash on hand or by using credit. Either way, you should be aware, and Count the Cost! So, here are my tips and recommendations:

Don’t Ignore the Wealth Effect on Holiday Spending!


The Wealth Effect says that consumers will likely spend more when one of two things is true: when people actually are richer (objectively speaking), or when people perceive themselves to be richer. Recent stock market increases and appreciation in retirement accounts, housing and gas price reductions create for many—the perception of increased wealth. But it is an allusion! New economic highs have some thinking that their future is or, at least, feels brighter financially.


According to the National Bureau of Economic Research, “On average, a single dollar increase in housing wealth raises consumption by between five and eight cents.” In some markets real estate inventory is low and values have appreciated up 20-25%. We may even be heading towards an economic reversal and towards a seller’s market soon; at least some will promote this idea, especially during the holidays!



There is even Age-Related Spending this time of year. Young people tend to feel less of the recessionary effects of our economy if they are still living in their parent’s home. So, of course they think they have more to spend, but it is simply not true. Older Americans feel better if their personal financial status is stable or has improved. However, the confusion surrounding the Affordable Care Act (ACA) and Medicare/Medicaid is having the opposite effect on their perception of being better off today. This may prove a healthy benefit of the law's botched roll-out.

Remember that the goal of Retailers and Advertising are to "Prime-the-pump of holiday glee" as early in the year as possible. K-mart will open 6 am; Target and others between 5 and 6 pm Thanksgiving Day. WalMart recently announced it will remain open all day on Thanksgiving. So, there is accommodation here for every type consumer, right? How convenient!

I see it a bit differently. First of all, time spent with Family, Friends, etc. on Thanksgiving Day should not be intruded upon with tantalizing (shopping) offers. With so little time invested in this rich tradition called Thanksgiving, what are we really saying about social gatherings and time well spent together? 

Accepting that some will shop, and shop, and shop more this holiday season, here is my general advice: If you are a cash shopper, take a moment to assess what you can actually afford to spend over the holidays. There will be many kinds of social events such as parties, dinners, office gatherings etc., and there are still gifts to be purchased. So you must Count the Cost!

I suggest you look at the last 3-4 months of your personal spending and determine what amount—if any—has been available at the end of each month for discretionary spending. If the assessment shows no discretionary funds available each of those months, then that is what you have available to spend during the holidays. Zero dollars! You might find that you can adjust your other budgetary expenditures, but there is no new or additional money to spend. That is just sheer—and I hope—acceptable fact.

If you intend to charge your holiday gift spending, please don’t! Sure, you may have reduced your credit card balances during the rough recession, so why go back to increasing your debt? If you can afford to pay your balances in full over the next few months, then why not use any available cash instead? In this economic season, even family and friends should understand if your gifts are a bit more modestly priced this year.

Most Importantly, Remember the True Reason for the Season


Commercialization Versus Christ’ Birthday - Most retailers rely on making their profit for the entire year during the Thanksgiving and Christmas buying season. So they will promote anything they think will stimulate impulse buying and sheer exuberance in spending. They care nothing for the consumer or the real Reason for the Season!


We Christians must not forget our reason to truly celebrate Christmas, as it is when we remember the birth of our Lord and Savior Jesus Christ. We must “push back” against the advertisers and retailer’s influences in motivating actions for the wrong reasons! Accordingly, consider these ideas:

  • Adapt a Birthday Buying Mindset Instead of Runaway Exuberance -
    Former Fed. Reserve Chairman Alan Greenspan penned the term Irrational Exuberance when unable to fully explain why the stock market was booming back in the late 90’s and early 2000’s. What Mr. Greenspan saw was irrational behavior by Americans who were spending on anything they could, especially stocks. We now know that there was intentional stimulating of consumers spawned by toxic mortgages and sub-par underwriting of mortgage loans, among other forms of economic stimulus.
  • Since Christmas is Celebrated as Christ’s Birthday, What Is Considered an Appropriate Gift?
    What, for example, would you spend to buy a family member, friend or colleague a gift on their birthday? More specifically, what would you give to a King, that is, someone who owns everything? And what would you consider appropriate for that reason?

    Consider Gifts with More Than a 30-Day Expiration


    Novelty gifts have their place and can add a personal, even humorous touch to the holiday exuberance. Is that enough reason to give them to someone at Christmas? Perhaps a gift that can endure for a longer time-frame or even a lifetime might also work this holiday season. Consider these:
    • First and Foremost, Acknowledge the Source for All Gifts - Psalm 24:1
      Since God is the source for our prosperity, we should think of what He may expect us to do with what He has entrusted to us! Remember the Parable of the Talents (in Matthew 25).
    • Invest in Someone’s Purpose - (Jeremiah 29)
      The Three Wise Men brought what some might consider practical gifts to the baby Jesus. But, have you ever stopped to consider that the Gold, Frankincense and Myrrh were tradable commodities that would enable Mary and Joseph to care for Jesus for a very long time?
    • Help Someone Enjoy The Holiday More -
      Personal charity towards others or on their behalf is a gift that keeps on giving. What if you had a friend that has suffered a job loss and cannot pay their debts? Perhaps an appropriate Christmas gift would be to help them pay down or payoff one of those utility bills or other financial obligations … maybe as part of pooled effort with others! The recent devastation in the Philippines and parts of our nations’ own mid-western states has left families to deal with death, lack of housing, a need for clothing, food and medical care.
    • Underwrite Someone Else’s Gift-Giving Desire -
      Maybe giving to the Red Cross, Salvation Army or other charities on someone else’ behalf is a good way to express your love and concern. Or, what if that same person loves animals and is quite charitable towards their cause. How about a donation to the SPCA or Humane Society on their behalf? Why not? You can give them a sweater at any time!
    • Consider the Future Value of Your Gift -
      How about a cashmere sweater at $75 versus purchasing 1 Share of Proctor & Gamble @ $85 (paying a 2.90% dividend yield). Which is better? The stock share could continue its growth at an annual rate of 10-12% plus pay a quarterly dividend. Or, what about gifting an investment in Exchange Traded Funds (ETFs) which closely perform as the Dow or S&P, which are soaring.

      Even a musical instrument would provide more potential for a Return On Investment than a cell-phone or electronic game would. They are good gifts at times, just not always right for Christmas when prices tend to be higher than at any other time of year…
    • Consider Estate Type Gifting; Inheritance -
      Talk about a gift that keeps on giving. Imagine being given several stocks (or equivalent shares) or an investment property as a Christmas gift? There are some gift tax and possibly capital gains tax issues that may need to be considered beforehand, but the big idea here is sharing the future and allowing another to see their role in it through your very special gift; a gift given, I might add, at the most precious time of any celebrated holiday. It really says You Are Special.
    • Commit All Big-Ticket Purchases to Other Occasions -
      Christmas invokes lots of Impulse Buying often met with buyer’s remorse afterwards. Generally speaking, even the lowest priced bargain items at Christmas can be purchased for the same sale-price or less sometime later in the year. For example, Wide-screen TVs during Super Bowl; or laptops at Back-to-School time, etc. Retailers know this, and so should you!
    • Finally, Remember to Celebrate Jesus!
      He is and will always be the true reason for the season!



    ENDING THOUGHTS:


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    Saturday, September 28, 2013

    "Count the Cost" of Affordable Healthcare for All Americans













    Some Issues Can’t Wait! 


    In preparing to publish Part 3 of the Count the Cost Series on Buying a Home, I felt there was a more pressing subject that needed to be addressed right away, and by many. As such, I ask you the reader to please forgive my interruption of this series and know that I will publish Part 3 in mid-October.

    As October 1st is just around-the-corner and so many Americans are still confused about the Affordable Care Act (ACA), also known as Obamacare, it seems only fitting to try to address the many articles and viewpoints being expressed nationally that are for-or-against this seemingly unpopular legislation. Hopefully, this article will be fair and balanced in its approach; although I must say that I am writing [this article] because like Social Security, I believe that the Affordable Care Act is going to become one of America’s greatest legislative achievements.


    There Is Good Precedent for Our Differences


    There have been many public policy issues in the past few years that have splintered the ideological and practical views of Americans. Going back to the enactment of the U.S. Constitution during a time when dissenters preferred secession to a law that imposes federal power over states’ rights. During the days of Robber-Barons [i.e., a wealthy few running amuck] trying to monopolize the most prosperous industries serving our nation, its dissenters were against anti-trust legislation that would prohibit monopolies. And, after the Stock Market Crash of 1929 that led to the Great Depression, much of the public developed such a disdain for banks and investment markets that they started keeping money in other, safer places which they could control. It did not matter that a new Federal Reserve System—designed to safeguard America’s bank deposits against complete loss, was just instituted—the die was cast and Americans were against any innovations and social-economic progress by government.

    And finally, when the Social Security Act of 1935 was enacted by Congress during the term of President Franklin Delano Roosevelt, the public outcry was extremely audible but contrastively muted by the millions of Americans whose social well-being was about to improve. There was no question that after the Great Depression and catastrophic losses of both property and lives, something major needed to happen. There was an outcry for sure, but not for our nation to remain a spectator of events but rather to take decisive action that might offer remedy to those millions of Americans who were poor , disabled and hurting, and without hope.


    A House Divided


    Well, the same outcry has permeated the airwaves within our nation today. With over 35 million Americans with no healthcare coverage, some 12% of our nation’s population and, in many cases to no fault of their own, a long-term infectious ailment has finally worsened. While the merits of why so many people are without adequate [or any] healthcare coverage today can be debated, are we really more concerned with the ideological view that some people are undeserving because they do not care for themselves, or others are simply poor money-managers? Clearly, both types are integral to any discourse of reforming a national social program. But, to what end is such a debate or discourse beneficial?

    Let’s not get hung up on the rhetoric that has been ever vigilant in keeping a national debate on healthcare at the forefront. Keep in mind that such a debate has multiple sides and not just two. There are the taxpayers and the beneficiaries, the politicians (or elected officials) and their political affiliations who dig their heels in the sand, and there are the various businesses and professions in the legal, third-party administration, medical manufacturing, pharmaceutical, dental and medical fields that must also weigh in. All told, many voices have differing views in part because they are personally, professionally and, in some cases invested significantly in the potential outcomes of this social reform issue.


    So, who’s Right?


    Will there be winners and losers financially and where profits, salaries and job opportunities are concerned? Yes. And, like other industries that were causally impacted by federal intervention, such as the postal services system, the railroads and the utility conglomerates, there will be changes that make huge gainers of a few at a loss to many. But the real question we should ask is this: Are we better off as a nation today—given the railroads, highways and utilities infrastructure, and related regulations enacted—than we were before these unpopular but necessary reforms were implemented? Personally, I would say yes.


    Let’s Look Within Ourselves and Find the Answer


    While this is not a religious issue, generally speaking, our opinions [as Americans] should be informed (and perhaps persuaded) by what is the moral issue we are really debating. In the Old Testament book of Deuteronomy (15:11) we can find where our modern-day social challenges could be objectively considered by this verse: “There will always be poor people in the land. Therefore I command you to be openhanded toward your fellow Israelites who are poor and needy in your land.”

    Now, some might say that America is not the Nation of Israel, and we are not living in the time before Christianity came on the scene. However, is the issue of the poor or the moral commitment to help those in need any less relevant in our day than thousands of years ago? In the NT Gospels, Jesus refers to this sobering truth about the poor as always existing within a nation’s borders—alluding, of course, to the Old Testament facts above—but His context also had to do with the right for any of us to prefer Him over the poor. So, His message is actually two-fold:

    1. A fact about the poor, but also:
    2. An exhortation that in His short time on earth that His presence should take precedent in what others focused on.
    And, less we forget, His most important exhortation was to simplify the instruction to each of us to: “Love the Lord your God with all your heart and with all your soul and with all your mind. This is the first and greatest commandment. And the second is like it: ‘Love your neighbor as yourself.” Matthew 22:36-40 NIV).  Do I really need to say any more?


    Truth and “Untruthful” Consequences


    As the author of the Count the Cost Series, I would ask you to consider for yourselves how the Affordable Care Act will make life more difficult for any of our citizens. This is the central debate of our day, not just that some undeserving Americans (other people’s words, not mines) will benefit from free or subsidized healthcare by the government. To that I would respond, the ACA is not a government program and it is not free. Yes, taxpayers pay for the program guidelines to be adhered to and we all subsidize those who cannot pay. But make no mistake; ACA is still private, non-governmental insurance.

    Another concern is that somehow the general cost of healthcare services will go up significantly. My question would be on whom will these cost escalate? Advertising campaigns against the healthcare law have presented images of older and not-so-healthy Americans who say their rights are being taken from them to visit their current doctor, specialist or to have the freedom to choose whoever they will. And the medical professionals are saying that their current rates for service will naturally rise because they have to reduce their billing to those who cannot pay or can only afford to pay less. Here are two more distortions of the actual law.

    No one will be required to see any healthcare professional they do not want to see, unless they are part of a PPO (Preferred Professional Organization/Association). Well, that is exactly how medical insurance and medical professions have grouped themselves and are paid today. Nothing about these facts changes under the new law. And, as for the notion that some who cannot pay will be subsidized at the expense of the medical professional is a really bad distortion. Truth is, future billing schedules that healthcare company and independent professionals put out do not have to change. Americans qualifying for healthcare under the ACA, and even for subsidies, will have a specific healthcare plan that entitles them to certain services which are covered under their plan, or that may require them to pay a higher premium for a better plan. The only change from existing medical coverage today is that as on October 1st, millions more Americans become eligible to obtain the services of the current professionals, which—in turn—dramatically increases their business opportunities without causing them to charge less for care.


    Still Feeling the Same about the Affordable Care Act?


    There is no law mandating that a heart surgeon lower their rate for a bypass surgery. Instead of a long three-tiered process of billing and remittance, that surgeon can expect that every patient they see will have sufficient coverage to obtain their service or be re-directed [based on the plan] to someone who can assist them. This does not change who that surgeon would usually have as patients, nor does it prevent someone needing bypass surgery from obtaining it elsewhere. Again, I would ask, who is really being harmed in the enactment and administration of the Affordable Care Act?

    My final thought is this. What is it that Wal-Mart discovered that may have overlap with healthcare? I think the success that Wal-Mart gained was in choosing a different business model than their retail competition. They built huge stores that allowed many businesses to be under one roof, thus generating tenant revenues. But, even bigger was the idea of volume discount, that is, the more of something we can sell for less, the more we will sell. Wal-Mart set itself apart from most competitors by using this strategy, and today they are heralded as one of the world’s most successful companies.

    And, think about it this way. Ask any professional salesperson in the insurance, medical equipment, banking or real estate industries whether they would like to have millions of new customers/clients waiting for their services. Only the foolish among them would say no. My point simply, in a few months millions of Americans guaranteed to be eligible to have healthcare insurance will be hitting the marketplace and registering via exchanges seeking medical services. Should this really be seen as a problem by any professional genuinely seeking to help others medically, or who are interested in making more $ by serving more people?


    An Objective Summary and Prayer


    If the average new healthcare insurance were simply $1,000 a year in premiums, multiplied by 35 million new beneficiaries, imagine the amount of new money there will be circulating in America, particularly into the healthcare profession that is not there now. If you’re doing the math, that’s a $35 billion transfusion (on the low end) into an already very prosperous industry. Real losers?.. I think not!

    Soon the sound of Ca-ching! Ca-ching! will pour over into many industries: such as preventative care services, higher education and training, nutritional food manufacturers, and other professions as well. So, why not keep our minds and biases in check and let’s consider those fellow Americans that will now realize that we—as fellow taxpaying citizens—do care for one another, just like after Katrina and 9-11, and are here to help.

    _________________________________________________________________

    If you have an opinion or other thoughts to share, please tell us. We value your feedback and we want to share truth and practical advice whenever we can. Please add your comments so we can begin real dialogue on this important topic. Thank you!


    ENDING THOUGHTS:

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    Sunday, September 15, 2013

    “Count the Cost” Of Becoming A First-Time Home Buyer (Part 2)















    In Part 1 of this subject, we listed four considerations for any Believer that is considering becoming a home buyer. These are universal considerations, we believe, but they are especially important for Believers who, by virtue of their commitment to live for Jesus Christ, have a different standard to follow.



    Part 2 attempts to provide further reasons to consider these tips, and it concludes by offering what we at the LifePlanning Institute consider are viable alternatives for the property virgin(s) or any home buying experience. We hope you agree.


    Consider Everything before Deciding



    And, let us not overlook the significant impact that today’s college loans will have on these property virgins. Young professional couples could be carrying between $150,000 - $300,000 in student loans, which is the equivalent of a conventional home loan and mortgage payment. This means couples already debt-burdened will now incur the equivalent of two mortgages, which well exceeds the recommended budgeting percentage for housing (of no more than 50% of gross income). Given this scenario, some couples are already obligated to pay $1,000 a month towards their student loans (for possibly 10+ years) and now will obligate themselves to another $1,500 - $2,300 a month (over 30 years) for a $300,000 mortgage loan. 



    Combined, these two monthly expenditures could be a potentially damaging duo of debt-to-income for a new home-buyer especially if their annual income is not much higher than $50,000 annually or $4,250 a month. Add to this the usual monthly expenses for transportation, utilities and the common service contracts for cell phones, Internet and other electronic communications and, of course, food purchases for the home and eating out, and you can have real financial challenges brewing. And, even when couples say they will hold off having children for a few years, things have a way of changing when you least expect it!


    Living like the Jones-es



    Just think of it. In many cases first-time home-buyers say they are looking for a home like their parents or friends own who may have done well in buying their own sizable home. With that as their motivating goal, the only other consideration is simply how much [mortgage] they qualify for in the way of a home-buyers’ loan. 



    Fact is, at its peak, home-ownership in the U.S. once reached nearly 70%. This means there was and will continue to be a segment of Americans that will never become homeowners, maybe never even pursue this lifestyle choice. When the U.S. wanted to incent home ownership (after the Post-Depression era of 1935-1940) it founded the Federal Housing Authority (FHA), and, in 1938 Congress enacted legislation to create the Federal National Mortgage Association or Fannie Mae. This helped mortgage-lenders gain further access to capital for mortgage loans. Then in 1968, Ginnie Mae (Government National Mortgage Association) was established, which provided the only mortgage-backed securities that are backed by the "full faith and credit" guaranty of the United States government. 


    And to increase the assurance of a viable secondary market for trading mortgage-backed securities, the infamous Federal Home Loan Mortgage Association (FHLMA) known as Freddie Mac was formed (in 1970) as another government-sponsored enterprise (GSE). However, in spite of these many government-sponsored agencies and private enterprises, America still entered into its worst housing debacle ever, and in 2008, Fannie Mae and Freddie Mac went into conservatorship under another government intervention agency called the Federal Housing Financial Agency (FHFA). Today our nation is still reeling from the effects of our housing crisis, and millions of American homeowners have been adversely and irreparably harmed by this mortgage-based financial crisis. 

    More to the point, in the past Americans thought long and hard about homeownership which resulted in a growth rate rising from 25% to almost 70% in sixty-five years. However, starter home prices back then ranged from $7,500 - $15,000 with interest rates around 2% for a 20-25 year mortgage. Today, of course, the average home is appraised at $190,000 and the interest rate most people hold today can range from 7% to double-digits.

    From a Kingdom Financial Planning perspective, a Christian should consider the following before this or any other major purchase:

    1. Is This Purchase One That I Want Or Really Need? And, If Needed, Why?
    2. How Does This Purchase Fit In With The Accomplishment Of My “P” (Pursuit-of-Purpose)?
    3. After Careful Review Of My Entire Financial Budge and my “P”, Can I Honestly Afford This Purchase?
    Viewed from this more comprehensive perspective, perhaps there are a few sensible ways to approach this major acquisition which can still accomplish the same goal. For example:
    1. Set a Goal to Save For that First Home

      While this option is usually the least desirable when someone wants immediate gratification, it is often the best first option for all purchases. This is what many other buyers did between the years 1945-1970. If they could not save 100% of the home’s value, they set aside at least 20-25% as a down-payment which prevented their additional expense for Property Mortgage Insurance (PMI).
    2. Buy a Smaller Home with Cash and Gradually Upgrade

      This does not result in getting that ultra-modern home with all the latest in silver or platinum appliances right away, but it does get you into your own home more quickly and securely. And, during your ownership, set aside money for do-it-yourself upgrades that add significant value to your home. That way, when you do list it for resale, it will appraise much higher, perhaps well above your purchase price.
    3. Ask Friends, Relatives and Colleagues Whether They Know of Homes for Sale

      Again, it may not result in getting you that dream home, but you might find that a good and affordable home was only an inquiry away. You may have a relative that is planning to move soon, or they may know no someone who is selling their property and prefer to sell to someone they know.
    4. Consider Unconventional Purchase and Payment Options

      By asking around you might discover a quick-sale option with much more favorable terms. For example, a seller might even agree to a private sale with payment terms more suitable to your own financial benefit. They may have an existing mortgage you can assume at a lower rate than you might qualify for today. And, there is always the Rent-to-Own option that is becoming increasing popular among sellers who are interested in helping others afford a home. Point is you will never know what options exist until you ask.
    5. Buying Simply to “Flip” or Rent A Section

      While many of today’s reality shows make the art of buying and flipping homes seem easy, it is not. More to the point, getting into this activity to make substantial profits is a strategy that is also a way of life. That means unless you are called to be in the real estate industry, beware. It is costly and time-consuming, so you must consider what the actual cost to you might be. Choosing a home that will allow you to rent a section—such as the basement or an extra wing—can present its own unique challenges and activity. So again, count the cost and related toll on your time and use of resources.

    A Call for a Higher (More Purpose-Oriented) Standard of Living



    Remember, our lives were designed with purpose, and God wants to use us in many ways as instruments that bring Him honor and glory in the earth. But to do so requires that we make ourselves available. Buying a home may be part of that plan, and it certainly will make the buyer feel as if they accomplished something important. So expect God’s favor on such an acquisition. However, do not let this goal undermine your willingness to serve Him as He directs (Proverbs 19:22) nor compromise your ability to respond to His will for your life.



    In the end, by using one of these options you may avoid incurring high, long-term debt that could derail your efforts to make other more important purchases relating to your “P,” and that demonstrate poor overall stewardship of what God has entrusted to you. In Part 3 we will discuss more Do’s and Don’ts.


    ENDING THOUGHTS:

    1. Is this helpful? Please let me know in the comments below what you’d like to watch and read more of.

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    Wednesday, September 4, 2013

    “Count the Cost” Of Becoming A First-Time Home Buyer (Part 1)













    For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Luke 14:28-30 ESV


    Ever watch any of the cable-network shows that feature first-time home buyers in the process of being shown potential homes? One of the more popular of these reality shows refer to its buyers as “Property Virgins.” Oftentimes these episodes feature young couples (or families) somewhere between the ages of 22–30 which, in this day and age, symbolizes early achievement towards attaining the coveted American Dream.

    The episodes generally start out innocent with each potential buyer-couple being shown at least three different properties. The host starts with a brief overview of the home-buyer’s qualifications for a loan followed by a description of their dream home. This means they are looking to satisfy their wants, desires and aspirations in this first-time home buying experience. This is why, in my view, the home buying process becomes suspect, at least to me.

    Think about it. A young couple usually both employed at fairly new jobs, usually well-paying jobs, are asked to describe the type house they are looking for. What often surfaces as common among all the property virgins is a desire for a home with no less than 3-4 bedrooms, at least as many bathrooms and a kitchen with all upgraded amenities. The husbands typically look for the must-have man-cave or a basement-room where he can set up the equivalent of an exclusive men’s club. Even couples without children ask for guest-rooms as large as a typical master suite so that the bundle-of-joy they know will someday arrive will have plenty of space for growth.

    When Is Enough Really Enough?


    In all, these property virgins are typically shopping for a first home ranging in price from $250,000 - $400,000, and interior space averaging between 2,000 - 3,000 square feet. Some of these buyers even seek up to 5,000 square feet of habitable space because: 1) they feel they can afford it (and deserve it), 2) it signals to others their perceived economic class and, 3) they believe lots of space is needed to entertain friends and family today, and to raise a family many years into the future. I consider this process suspect because one essential ingredient that is never shown is whether these couples receive any home-buyer counseling beforehand … and, if not, why not?


    Financial counseling would ensure that each potential buyer is not just financially qualified to obtain a mortgage but that they also understand the many factors that affect home-ownership both near-term and in the years to come. For example, when setting your sites on a home you consider your dream home, yet you are only 25 years old, you should consider the following statistical facts about home-ownership:

    1. According to the U.S. Census Bureau, among many sources, half of all first-time marriages in the U.S. end in divorce, and often because of financial differences.
    2. According to the OMB (Office of Management and the Budget) and the IRS (Internal Revenue Service), the median annual income in the U.S. over the past decade has hovered around $49,000. And that includes two wage-earner householders. Divided over 12 months, this implies an average gross income of $4,000 a month.
    3. According to Fannie Mae and many real estate industry experts, the average length of home ownership (among first-time home-buyers) in the U.S. is six years. Better employment opportunities, military service, divorce and separation (as shown in Fact #1), even extended job lay-offs are the common reasons for this short-term ownership. Another reason is to upgrade to a bigger, more expensive (or rightly suited) home.
    4. Because of the recent Great Recession (2007-present), the national unemployment rate is still above the historical—and preferred rate—of 6.5% This reflects the continued malaise and lack of confidence among the business community, and the lack of steady and certain employment which has been at the heart of increased home foreclosures and loan defaults.

    These are just four of several considerations that make a commitment to repay a 30-year mortgage a decision that deserves more thought than whether the property is affordable today. With the popularity of reality TV shows and the aggressiveness of realtors who are always out to make a market even under the worst of economic circumstances, purchasing homes without serious consideration of these facts has been bolstered, even encouraged by these realty influencers. To these two prominent forces, there is always a buyers’ or sellers’ market to promote, no matter the economic climate. So, truth is, it is just a matter of selling the benefits of same to the public. Never mind that 3-4 years into home ownership any number of things can go wrong, even to no fault of the home buyers.



    Remember, one or both new home-buyers could be laid-off. One or both could get ill and incur a long-term illness. And, worst, one or both could be fatally injured. Homeowner’s insurance can make a huge difference where the mortgage balance is concerned, but will it provide enough (given such young ages) for everything else they will face in the decades to come? 

    Is it possible one or more of these scenarios can happen to you? Who really knows… This is why proper planning from a Kingdom Perspective is so much more beneficial. Tell us whether you agree, and please read Part 2 of this article in the following week to get the full view—including recommendations—that the LifePlanning Institute offers.


    ENDING THOUGHTS:

    1. Is this helpful? Please let me know in the comments below what you’d like to watch and read more of.

    2. Do you know someone who will find this conversation just as interesting as you? Take a second and use the social buttons below to share it with them. I create these blog posts and videos for you, and your closest friends.
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    Friday, August 23, 2013

    "COUNT THE COST" Of Purchasing And Owning a Car














    28 For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it— 29 lest, after hehas laid the foundation, and is not able to finish, all who see it begin to mock him, 30 saying, ‘This man began to build and was not able to finish’? Luke 14:28-30 NKJV

    I never thought I’d have a segment to write which was this personal in nature. On the other hand, I am glad I did. It just shows that no matter what our own children see or hear, they do not always consider the information as applicable to themselves.


    I share this because only a few months ago, my daughter and I had a conversation about buying a car. Specifically, one day she approached me and asked, “Dad, I was told that I could buy a car for $110 a month if I could get you to co-sign." My daughter is 22, a full-time college student with a minimum wage (15-hours-or-less per-week) job.


    Needless to say she had my attention. I responded in dismay and asked what made her think she can afford a car, and she responded that a car-salesman told her that he could get her a loan, but she would need a co-signer. After I paused again and displayed a look of utter frustration--particularly with the entire auto industry—I said to my daughter, “Honey, it is time we talked about costs and borrowing money!”


    Using my
    Kingdom Life Approach Financial Model, I began to illustrate how I+P=V is the universal strategy I use before making any purchasing decisions. I explained what the acronym stands for, how each letter represents a specific financial consideration, and how anyone can use this approach as well.

    I further explained how
    “P” requires you to ask certain and specific questions that will help guide you in your decision-making process. Three central questions that should always be asked and that apply to almost every purchase consideration are:

    1. Is This Purchase One That I Want Or Really Need? And, If Needed, Why?

    2. How Does This Purchase Fit In With The Accomplishment Of My “P” (Purpose)?

    3. After Careful Review Of My Entire Financial Budget, Can I Honestly Afford This Purchase?

    After this discourse, I then introduced my daughter to the LPI Financial Evaluator, for calculating the true cost for purchasing a car. The calculator factors in every car-related consideration, such as down-payment and loan terms, insurance premium, annual registration and property taxes (where applicable), annual estimated maintenance costs, monthly driving distances and related mileage and gas consumption, and even an average monthly cost for washing and detailing your car.

    With the help of this tool I showed my daughter that the $110 loan payment she assumed would be her only expense for 72 months, is only 20% of the total estimated monthly expense, which is actually closer (for the make and model she had in mind) to $850 per month. Finally, I was showed her that the $600 per month that she now earns was simply not enough income to purchase a car at this time, let alone truly qualify for an auto loan.


    Using this conclusion, I saw this as an opportunity to share with her what the Bible says about debt. I showed her where the Bible actually discourages us from becoming surety or serving as a co-signer for anyone, which includes family. Proverbs 22:26 says,
    "Don't agree to guarantee another person's debt or put up security for someone else." A loss of your job, an emergency expense or other purchases all put at risk your ability to repay what you borrowed which places the co-signer at risk for a debt they did not incur but are now responsible to repay. This can adversely affect relationships, even among loved ones, like nothing else can.

    I decided at this point that I should offer her a few options that might work better, that is, are more cost-effective and align better with pursuing one’s
    ”P.” For example:

    1. Set a Goal to Save For the Cost of Your First Vehicle
      While this option is usually the least desirable when someone wants immediate gratification, it is often the best first option for all purchases. The exceptions are typically buying a home, a car and paying for college.

    2. Buy an Older Model Vehicle for Cash and Gradually Upgrade
      This does not result in getting that late-model, fully-equipped and never-driven vehicle you may have wanted, but it does solve the issue of immediate transportation. And, depending on your pace for saving for an upgrade, you can eventually purchase the car of your dreams without ever financing it.

    3. Ask Your Parents, Other Relatives and Friends Whether They Have a Vehicle to Sell You
      Again, it may not result in getting you that dream car, but you might find that good and reliable transportation was only an inquiry away. You may have a relative that no longer drives a particular vehicle they own or that someone you know no longer wants a vehicle they own and are willing to let you have it now with very reasonable and non-financing payment terms.

      In the end, by using one of these options you may avoid incurring high, long-term debt that could derail your efforts to make other more important purchases relating to your “P,” and that signal poor overall stewardship of what God has entrusted to you. Of course, these are but a few thoughts. Remember, the real objective is not making any purchase without counting the cost first.


    ENDING THOUGHTS:

    1. Is this helpful? Please let me know in the comments below what you’d like to watch and read more of.

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    Thursday, August 8, 2013

    Factors Most Affecting Your Giving, Spending and Saving in 2013: A Mid-Year Check-Up.







    by Willie Thomas Butler

    If you are like most Americans who make resolutions each year, you’ve probably made one involving your finances. If so, then perhaps now is a time to reevaluate your strategy…

    Have You Considered All The Cost?


    You may have committed to save more and spend less, or better yet, give even more to charity than you have done in the past. On the other hand, if you made no such resolutions, how do you determine your financial priorities? At the top of any list should be those financial obligations for which you have little to no control. These consist of your federal, state and local income taxes, additional payroll withholding's (such as Social Security and Medicare, healthcare premiums and retirement contributions) or varying local property, excise or special utility taxes. Of course, some individuals will also have to consider estate taxes, sales taxes and other revenue taxes incurred for other specific reasons throughout the past year.

    Combined, these can diminish as much as 40% off some taxpayers’ annual income, leaving them with only 60% to actually budget for the year. Add to this your average gasoline, food and other retail spending activity for the year coupled with additional taxes and fees for annual memberships, online shopping, and a myriad of other activity, and another 10%-15% of your income could easily be consumed in taxes.

    How Have You Fared So Far?


    Sobering news, I hope. Imagine having more than 50% of your annual income redirected towards taxes, and having little to no control over the choice to pay it. And, to the charitable-minded, particularly the Christian, just how much might this impact your giving to your church or to others in need?

    Statistically speaking, the median income of Americans in 2011 still hovers around $49,000 annually. In that range, the average (single) American may end up paying anywhere from 0% - 30% in just federal and state income taxes this year. Fortunately, with most of our legislated tax deductions and credits still in place, a good percentage of taxpayers—especially married and head of households may not incur more than a 10% - 14% adjusted income tax liability.

    However, remember that there are many ways that taxes are incurred. A heavy-spending consumer type will still incur significant tax obligations on just about all of their regular and daily purchases, including food, restaurant dining, entertainment, phone service contracts, and clothing and appliance purchases.

    A Better Planning Method For Kingdom Representatives


    Because of these facts, I have a suggestion. Why not try this simple yet powerful formula: I call it I + P = V.™ In short, this formula will enable anyone using it to quickly assess the best way to manage their personal finances more purposefully. The acronym stands for Imposed Monetary Obligations + Pursuit-of-Purpose = Voluntary Obligations, or I+P=V™. Though simple to remember, this financial concept will help you immensely in learning how and why you should set goals that truly matter.

    Your Plans and Priorities Are Important For Many Reasons


    This financial planning formula provides a guaranteed way for a truly committed Christians to become an effective steward and to strategically exercise control over the spending-craze encouraged through the world’s economic system. Why is this important? Because in the eyes of God, you are His earthly steward with whom He has deposited certain of His treasure.

    “The earth is the Lord’s and everything in it, the world, and all who live in it…” (Psalm 24:1) NIV. Because of this truth, the Lord expects that believer’s will acknowledge His ownership and our possession of the many good treasures, which include our time, our talent and our finances; and that we should manage what has been entrusted to us according to His expectation. This principle is best reflected in the story Jesus shared with His disciples in the Parable of the Talents, found in Matthew 25:14-30.

    You can learn more about this formula in my book The Kingdom Life Approach: A Purpose-Driven Strategy for Living Your Best Life Ever. You can read free excerpts online via GoogleBooks, AmazonBooks, or BarnesandNoble.com, and through my publisher Xulon Press. Or, you can also visit the LifePlanning Institute’s website at http://www.MyLPI.org to obtain additional information about our programs, courses and other books and materials.

    Consider Adopting A Kingdom Living Strategy


    In the Kingdom of God—which, as a believer you are a citizen—the principle of love as expressed through giving is at the core of God’s, therefore, our true nature. Keep in mind that we were made in His image and likeness. This is what we read in John 3:16: “God so loved the world that He gave His only begotten Son…” Sound familiar? Well, has giving been at the top of your priorities in 2013?

    The Bible also teaches us that God has a plan for each of us. Therefore, will knowing this have any effect on your plans for giving, spending and saving in the remainder of the year? In Jeremiah 29, the prophet wrote as God declared to him, “For I know the plans I have for you…, plans to prosper you and not to harm you, plans to give you hope and a future. “

    Sounds to me that the wise steward would benefit from first knowing Gods’ plan before venturing out to spend or even save what is within their possession to manage. If so, then it leads to one last question? Are you going to serve God as one of His wise and faithful stewards in 2013?

    If your answer is yes and you’d like help to accomplish this, the LifePlanning Institute is here to assist you. Try http://www.MyLPI.org. If you have a different point of view, please take a moment and share it with us. In fact, please help us to collect even more views by sharing this article with others.



    ENDING THOUGHTS:

    1. Is this helpful? Please let me know in the comments below what you’d like to watch and read more of.

    2. Do you know someone who will find this conversation just as interesting as you? Take a second and use the social buttons below to share it with them. I create these blog posts and videos for you, and your closest friends.
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