Managing Money God’s Way

One of the most talked about topics in the Bible is money and possessions.  Depending on what information you read, there are almost 1000 scriptures in the Bible that deal with this topic.  Even if you are not a Christian or read the Bible, a lot of the financial information found in the Bible makes very good practical sense.

Sound Mind Investing is one of the leading voices when discussing Biblical Financial principles.  In addition to their monthly newsletter, they also offer The Sound Mind Investing Handbook.  Here is a list of just a few of the things you will find in this edition.

• Six characteristics of investing that glorifies God
• What mutual funds are and why they make investing easier than ever before
• How to implement an investing strategy that’s guaranteed to help you keep pace with the markets
• Tax-wise ways to invest for college, including the new state-sponsored 529 savings plans
• The rules governing IRAs and 401(k)s and which should have the priority
• How to make the calculations needed to make sure your retirement countdown is on schedule

The latest edition of the handbook is now ready and you can get your copy and enjoy a 35% discount.  Sound Mind Investing has been endorsed by respected Christian teachers Ron Blue, Randy Alcorn, Mary Hunt, Howard Hendricks, and Beverly LaHaye.  Previous editions endorsed by Larry Burkett, Bill Bright, Adrian Rogers, and D. James Kennedy. Get your copy of this great resource today.

Last time we looked at Baby Step 4, investing 15% of your gross income into Roth IRAs and other pre-tax retirement accounts.  Before we dive head first into step 5, here is a review of the Baby Steps we have covered so far:

Dave Ramsey’s 7 Baby Steps

• Step 1:  Emergency Fund – When It Rains It Pours
• Step 2:  Pay Off All Debt Using The Debt Snowball Method
• Step 3:  3-6 Months Of Expenses In Savings
• Step 4:  Invest 15% of household income into Roth IRAs and pre-tax retirement

Baby Step 5:  College Fund For Your Children

Now that you have your debt paid off, and saving 15% towards your retirement, it is time to start thinking about saving some money for your children’s education.  You should only start this step AFTER completing steps 1-4.  Here are some options for saving for that college education.

• Education Savings Account (ESA):  With this you can save $2,000 (after tax) per year, per child that will grow tax free!  Money must be used for education purposes only, otherwise a 10% penalty and taxes will apply.  Money must be used or rolled over to a qualifying family member by age 30 or a 10% penalty and taxes will apply.
• 529 Plan:  If you do not meet income limits for an ESA, or if you want to put additional money aside, you can use a 529 plan.  With this plan you can save up to $12,000 per year, per child.  The money must be used for higher education only, otherwise a 10% penalty and taxes will apply to the gains.  Many states offer a 529 plan, and you do not necessarily need to live in that state to use their 529 plan.
• UTMA/UGMA Plans:  This stands for Uniform Transfer (Gift) to Minors Act.  According to Dave, this one is not as good as the ESA or 529 plans.

Dave also notes several ways he would NEVER use to fund a college education.  These include:

• Insurance
• Savings Bonds
• Pre-paid college tuition
• Zero-coupon bonds.

Why Complete Steps 1-4 Before Funding College For My Children

Many people will disagree with this being step 5, and that you should only start this step after completing steps 1-4, but listen to the logic behind this.

Your kids can always help pay for their own college education or get scholarships, grants or loans.  But if you don’t pay off your debt and start saving for retirement, you might not be able to catch back up.  It is better to get your own financial house in order first.

Personally, I think that even if you are able to pay for your child(s) education, it is still a good idea to have them participate in paying for their own schooling.

What is your opinion of paying for your kid’s college?  Are you saving for their college funds now?  Should they even go to college?

Today we talk about investing 15% of your household income.  So far, the steps we have covered in the Dave Ramsey’s 7 Baby Steps series are:

• Step 1:  Emergency Fund – When It Rains It Pours
• Step 2:  Pay Off All Debt Using The Debt Snowball Method
• Step 3:  3-6 Months Of Expenses In Savings

In Babystep 4, Dave Ramsey suggests saving 15% of your household income in good solid long term investments.  No more (for now) and NO LESS.

Why Should I Save 15%?

Because this is your nest egg.  This is what you are saving for your future, your future when you are retired and no longer working.  If you are anything like me, I want to save as much as I possibly can for our retirement.  I am not counting on Social Security to even be around when I retire, and I DO NOT want to eat dog food.  The point to all of this is that 15% is usually going to be adequate to get you to where you need to be.  The longer you have until retirement, the bigger the gains you will see through compounding interest.

If you are older nad have less time until retirement you may need to be investing a higher percentage than 15%.  You started late, so you have some ground to make up.

What Should I Invest In?

Dave Ramsey suggests the following investments:

• Company 401k or other plan up to the match
• Roth IRA for you and your spouse
• Back to the 401k or other plan

What you invest your money into within these types of accounts, I am not going to try and give you any advice.  You should make that decision as a couple.

Will 15% be enough for your retirement?  Do you think you should save more or less?

MicroPlace - A place to give back

I was in the process of doing some daily reading when I came across a great review of the MicroPlace social business site by Jonathan over at My Money Blog that I wanted to share some of my thoughts and a brief review with you.

What is MicroPlace?

It is a site owned by eBay who’s mission is to alleviate global poverty by offering investments that enable loans to hardworking poor people.

How Does MicroPlace Work?

According to the MicroPlace website:  “A loan of $20 can allow a poor woman to start a business and work her way out of poverty.”  You start out by opening an investment account (just like at Schwab or another online broker).  You can fund your account with either PayPal or your bank account.  You then use the search tools on their site to find an investment(s).

Is Your Money at Risk?

According to the statistics at their website, historically 97% of poor people have actually paid back their loans.  So there is some risk to your principal investment.  MicroPlace does perform due diligence on the institutions that actually make the micro loans to make sure they meet certain business and regulatory requirements.  They state that to date “none of our institutions have ever defaulted on their payments to investors.”

What Impact can You Have?

Well, I think that is the easy part.  You can help a poor person start a business and work her way out of poverty.  You are also participating in a solution that can help alleviate global poverty by helping people help themselves.

The Bonus

Do we really need one?  I feel just being able to potentially make a difference in someone’s life is enough for me, but they are offering a free solar powered flashlight for investing as little as $20.

Conclusion

I personally have not invested any money yet.  I plan on sitting down with my wife and determining the amount we will initially fund our account with.  I will follow up with another posting to let you know what we do with our investment.

But as Christians, should we always expect a monetary return on our investment?  Maybe, just maybe the return we should look for sometimes is not necessarily monetary in nature.  As those that have much, maybe knowing we helped someone escape poverty is return enough?

For as our Lord said “Instruct those who are rich in this present world not to be conceited or to fix their hope on the uncertainty of riches, but on God, who richly supplies us with all things to enjoy.  Instruct them to do good, to be rich in good works, to be generous and ready to share, storing up for themselves the treasure of a good foundation for the future, so that they may take hold of that which is life indeed” (1 Timothy 6:17-19).