finance Archives - Faithful with a Few

3 Ways To Keep God In The Center Of Your Financial Chaos

With the beginning of a new year, the internet is a-buzz with resolutions about saving money and getting out of debt. We have a few of our own goals, and since our savings challenge went well last year, we are doing it again this year with a few changes.

As Christians, we share a lot on this site about finance from a Biblical perspective. We believe the Bible has answers for many of the financial situations people find themselves in, and that God’s desire is for us to have a healthy relationship with money as a resource, while not allowing the love of it to take root in our hearts (1 Timothy 6:10).

When we are weighed down by financial stress, or are singular-minded in our desire to overcome debt’s hold, it can become easy to focus on our own abilities or helplessness and forget that we have a heavenly Father who sees our situation, is in control of it, and actively involved in working it out for His glory!

I have to be reminded that my finances are not separate from anything else in my life, and certainly not separate from my spiritual life. The same Biblical truths that govern everything else, should apply to how I view my financial situation.

1. Remember That God Cares About Your Situation

Whether I’ve made made poor financial mistakes and gotten myself into a mess, or am doing well and trying to decide what to do with the surplus funds I am taking in – God cares! In the sermon on the Mount, Jesus reminds the people that our Heavenly Father knows what we need and that he will take care of us (Matthew 6:28-33). While we should (prayerfully) plan and be diligent, those things should not lead to unhealthy anxiety and worry. Whatever is out of our control can never be out of His!

We are not alone in our sea of financial concerns just as we are not alone in our relationships, in our problems, in our struggles with sin. As you consider your next step on your financial journey, remember Who is walking with you, and already has the future all mapped out.

2. Remember That God Has Given You the Ability to Be Content in Any Situation

Many Christians struggle with contentment: the inward state of satisfaction (regardless of the outer circumstances), yet that is what God wants from His children. Contentment does not equate to complacency or surrender, nor does it mean that you have to put on a pretense of joy in times of hardship.

In Philippians 4:11-13, Paul says, “Not that I speak in regard to need, for I have learned in whatever state I am, to be content: I know how to be abased, and I know how to abound. Everywhere and in all things I have learned both to be full and to be hungry, both to abound and to suffer need. I can do all things through Christ who strengthens me.”

In many places, including the passage above, the Bible exhorts us to look to Christ as the source of our strength and our joy. Your happiness shouldn’t be determined by whether you can afford a certain luxury, or pay off your student loan. Those things are nice, but the contentment in your heart should not be affected by them, not if the true source of your happiness is the Lord.

3. Remember That God Will Use Your Life For His Glory

One of my favorite passages, and one I’ve heard many times in my life is Romans 8:28 “And we know that all things work together for good to those who love God, to those who are the called according to His purpose.” It used to make me feel great because it meant that eventually things were going to be okay.

But there is more than just the first half of the sentence, the last part is equally important “called according to His purpose”. Being a Christian means that my life is not my own, I follow and serve Christ. There are other passages that talk about the need for our focus to be on God and glorifying Him, like 1 Corinthians 6:19-20, or the end of the passage from the sermon on the Mount that I mentioned earlier – Matthew 6:33 “But seek first His kingdom and His righteousness, and all these things will be added to you“.

Even though things may not happen in the time frame you’d like, or the way that you’d like them to turn out, remember that God’s plan for you is bigger than what you have for yourself. The things that we go through serve reasons that go beyond our temporal success or satisfaction. While we are alive, we are also being made holy, and sometimes that happens through trials (James 1:2-3). That is only one of many possible reasons, we may never know the answer to until we meet the Lord.

As you go through your financial journey this year, whether with hope, gusto, or trepidation, please remember that God is your source. He is your strength, and your great reward.

Every Sunday I am blessed to look at this scripture on a banner in front of me during our service, and it is one I think of daily. I pray it will bless you also as you focus on God:

Proverbs 3:5-6 “Trust in the Lord with all your heart And do not lean on your own understanding. In all your ways acknowledge Him, And He will make your paths straight”.

Should I Cosign For a Loan?

By // by Khaleef Crumbley

A friend or family member needs a loan, but their credit score is not high enough (due to terrible or no credit history, or massive credit card debt), or they don’t have a large enough down payment or some other reason. So they come to you and ask you to be a cosigner on their loan.

What Does It Mean To Be A Cosigner?

To be a “cosigner”, simply means that you agree to assume the responsibility of another person’s debt if they are unable to pay it. For example, if you are a cosigner on your brother’s $20k car loan, you have now agreed to pay the bank back that $20k (or whatever is left at the time of default) if your brother is not able to pay it back.

Many people will face this dilemma at one point in their lives. In fact, many people will actually cosign for loans even when they do not feel comfortable doing it. It is usually due to not wanting to be the bad guy, or is sometimes a genuine attempt to help someone. This is often viewed as a way to help out someone in need – such as a responsible, young person who just needs a chance to display or prove their credit worthiness; or a way to assist your child at the beginning of their “independent life”. But is this a wise thing to do?

What Does The Bible Say About Being A Cosigner?

Proverbs 17:18 tells us that,

A man lacking in sense pledges and becomes guarantor in the presence of his neighbor.

Right away we see that the bible describes one who becomes a cosigner on a loan as “senseless“! We can see that it is not a wise thing to make a pledge based on someone else’s ability to pay back a loan.

We also see such council in Proverbs 22:26,

Do not be among those who give pledges, among those who become guarantors for debts.

Not only are we instructed not to cosign for a loan, but we are also shown some of the dangers of doing so… Proverbs 11:15 tells us that:

He who is a guarantor for a stranger will surely suffer for it, but he who hates being a guarantor is secure.

So, we are actually told that we will “surely suffer” if we decide to pledge ourselves for another person’s debt; and that one way to stay secure is to “hate being a guarantor“! Those are very strong words to describe what has become such a common practice today.

Also in Proverbs 20:16 we find these words,

Take his garment when he becomes surety for a stranger; and for foreigners, hold him in pledge.

It was common to pledge a garment as security for a loan, but – according to Exodus 22:26-27 and Deuteronomy 24:10-13 – that garment had to be returned by sundown.

The idea here is that one who is foolish enough to pledge himself for the debt of a stranger will most likely never be paid back; so the one making the loan should demand the cosigner’s garment as security for the loan.

This shows the senseless and unpredictable nature of pledging your possessions or your life based on another person’s ability or willingness to pay their debts.

Also, one question that must be asked is, “Why does this person need a cosigner?”. The most basic reason is that their bank does not believe that they will pay back the loan.

They use their own experience, a few calculations and the potential borrower’s history with loans (usually expressed on their credit report) to make their decision regarding the loan.

When they request a cosigner they are basically saying, “We don’t trust this person to be able to pay us back, but if YOU are willing to take all the risk then we will give him the money!

What Should You Do If You Have Already Become A Cosigner?

Proverbs 6:1-5 gives us additional instruction. This time however, the instruction is given to one who has already pledged himself on behalf of someone else:

My son, if you have become surety for your neighbor, have given a pledge for a stranger

If you have been snared with the words of your mouth, have been caught with the words of your mouth

Do this then, my son, and deliver yourself; Since you have come into the hand of your neighbor; go, humble yourself, and importune your neighbor.

Give no sleep to your eyes, nor slumber to your eyelids;

Deliver yourself like a gazelle from the hunter’s hand and like a bird from the hand of the fowler.

As we can see from the strong language in this passage, it is a serious matter to pledge yourself on behalf of another. This is because you have essentially given up control of something that God has given to you as a stewardship, and have become “snared” by your pledge.

This situation is so serious that you must do everything that you can to free yourself from this arrangement and gain back control of your God-given resources. Look at how strong the language is here; you are told to “deliver yourself” and not to sleep until you have freed yourself (see Proverbs 22:7)! You are to act as a gazelle or bird that is about to lose their life to the hunter!

So, if you are in this situation, it should be your highest priority to free yourself from this before you “surely suffer” (Proverbs 11:15; cf. Genesis 43:9, Genesis 44:32-33).

What can you do instead if you want to help?

If you still want to help while obeying God’s word regarding cosigning, there are a few things that you still can do.

Give Them An Interest-Free Loan:

If you know the person is in need, this is one way to help them that will honor God. Proverbs 28:8 assures us that,

He who increases his wealth by interest and usury gathers it for him who is gracious to the poor.

According to Deuteronomy 23:19-20, it was against the law for an Israelite to charge interest to fellow Jews (of course, loans were only to be requested in times of extreme need and poverty – not to fund frivolous, sinful spending like we see today), but many violated this command. As we see here, giving someone in need a loan and not charging interest is a way that you can assist the one in need and please God.

Give them the money that they need.

Proverbs 19:17 tells us that,

One who is gracious to a poor man lends to the Lord, and He will repay him for his good deed.

If you are able, giving your money to one in need – and only expecting repayment from the Lord – is another way to assist a brother in need and honor God with your finances.

Final Thoughts:

As mentioned earlier, since the bible teaches that debt is slavery (Proverbs 22:7), borrowing should only be done when one has a basic need that cannot be met by their income. It was usually a short-term loan, and the Israelites were commanded to forgive all debt every seven years (see Deuteronomy 15:1-15).

Much of the borrowing that we see today represents a person’s desire to live above their means, and I do not believe that type of borrowing (or giving) is what God is speaking of. Hopefully, I will have a chance to address this in much detail in a future article.

So overall we see that God is completely against the idea of one becoming a cosigner for the debt of another, even if we are really seeking to be a blessing to someone in need. However, the bible does teach us other ways in which we can assist others.

I mentioned stewardship earlier. I realize that this may not be a term or concept that is familiar to many modern readers, but this is a concept that God expects us all to understand. A steward is one who manages another person’s property, finances or other affairs. Here are several articles that do a good job of describing the concept of stewardship:

http://onemoneydesign.com/blog/2010/01/10/what-the-bible-says-about-money-financial-stewardship/
http://www.biblemoneymatters.com/2010/04/financial-stewardship-the-forgotten-component.html

I would love to hear your thoughts on cosigning – even better would be your experiences with it. If you have any questions on this or other concepts, please leave your comment below.

photo credit: 4PIZON

5 Simple Ways To Take Advantage Of Low Interest Rates

By // by Khaleef Crumbley

Many people are disappointed because of the low interest rates available today. They look at the fact that their bank accounts are paying pennies per year in interest, and conclude that they cannot get ahead financially. However, there are things that you can do to take advantage of low interest rates.

Refinance Your Mortgage With Low Interest Rates

This is one of the most common ways to take advantage of low interest rates. This is because most mortgages involve hundreds of thousands of dollars and span across multiple decades. Even a small change in the interest rate of your loan can have drastic effects on your monthly payments.

The best time to refinance your mortgage is when you owe at least 20% less than the appraised value of your home. This way, you won’t have to worry about private mortgage insurance when you refinance.

If you do decide to refinance, make sure you perform an analysis to see if the expected savings outweigh the points, fees, and other expenses associated with the refinance to make sure it is actually going to save you money.

A great way to pay off your mortgage early is to refinance at a lower rate, secure a lower monthly payment, but continue to pay the higher amount. This way you will be able to pay a few hundred dollars extra on your mortgage each month, without having to change your current budget. Just make sure that your additional payments are applied to the principle of your loan.

Negotiate Lower Rates

When you notice that interest rates are going lower, that should be a signal to you that it’s time to negotiate lower rates with your creditors. Give your credit card companies a call and ask them to lower your interest rate.

If you have an excellent payment history with that company and you have good credit, you should be able to get them to lower your interest rate. In fact, even if we aren’t in a low-interest-rate environment, you should be able to secure a lower rate if you have those credentials!

Consolidate High-Interest Debt

If your individual credit card companies and banks aren’t willing to give you a lower interest rate, a consolidation may be in order. Actually, depending on my situation, I may try to consolidate my debt first!

When dealing with high-interest credit cards, there are typically two ways in which you can consolidate your debt. First, you can apply for a consolidation loan. This is usually an unsecured, personal loan that you use to pay off all of your debt. The main benefit here is – hopefully – a lower interest rate, and only having to worry about making one payment each month.

The second way to consolidate your debt is to move all of your debt onto a single credit card. If you can find a card that has a balance transfer offer – such as 0% for the next year – then this can be a great move. Usually, you will have to pay a fee in order to process a balance transfer – just make sure that this fee is less than the money you plan to save by the reduced interest rate.

Refinance Your Car Loan

Many people only think of refinancing a mortgage when faced with low interest rates. However, with the price of a new car easily exceeding $30,000, you can save thousands of dollars by refinancing your car loan!

I would make the same recommendation to pay it off early. Refinance the loan in order to have a lower mandatory monthly payment, but continue to pay the same amount that you are paying today. If this amount is going directly toward the principle of the loan, you will finish paying it off much faster!

Make Prepayments To Secure A Lower Purchase Price

There are a number of financial agreements which we enter into, that will allow us to pay a reduced price if we pay the bill in full up front. The most common charge that I can think of which fits this description is car insurance. Most companies charge a fee for breaking your premium up into monthly payments; thus giving you a discount for paying the full charge up front.

Sometimes landlords will be willing to give you a discount on your rent if you pay up front. The discount may increase as you add more months to your initial payment. Paying your rent a year in advance can lead to real savings.

The same is true for many other arrangements where there is an option to pay over a long period of time versus paying the entire amount due in the beginning of the agreement.

You may be thinking to yourself, “I can make prepayments at any time! This has nothing to do with interest rates”. However, the reason why this is tied to low interest rates is because you have less incentive to put out $15 – $20,000 all at once, if rates are high.

If you can earn a high interest rate by putting your cash in a savings account or CD, then you will not be inclined to pay your rent a year in advance, unless the savings in rent are more than what you would earn in interest. Therefore, low interest rates make it financially feasible to make prepayments in order to secure a reduction in your purchase price!

photo by jscreationzs

A Few Questions About Low Interest Rates

Do you take advantage of low interest rates to reduce your debt payments?
Have you ever taken out a consolidation loan?
Do you feel more justified in living above your means (borrowing money to pay for expenses) in a low interest rate environment?

8 Things You Can Do With Your Tax Refund

By // by Khaleef Crumbley

Many people will be receiving (or have already received) a tax refund in the near future. Most people that I know plan to blow it on something that will not provide a benefit for their lives. Instead of wasting your refund and regretting your decision, try one of these 8 tips!

What To Do With Your Tax Refund

Start An Emergency Fund

Probably the most common characteristic of a financially stable household (besides the idea of living within their means) is an emergency fund. The point of this emergency fund so you can have money stashed away when something unexpected comes up.

If you are not financially prepared for emergencies, then you may be forced to rely on high-interest credit cards, or tap into your retirement savings in order to get by.

Pay Down Debt

Another great use of your tax refund is to pay off debt. This may seem like a boring option (especially when compared to how most people use their tax refund), but it will automatically earn a rate of return that is equal to the interest rate on your debt.

For instance, if you pay off a credit card that had an interest rate of 20%, then that is equivalent to earning 20% on an investment!

If you use it to pay off/down an installment loan (such as a mortgage or car loan), then you may have to specify that your extra payment should be applied to the principal.

Consider Paying Infrequent Expenses

Many times it can be difficult to remember those expenses which only come once or twice each year. Instead of being taken by surprise and sent scrambling for extra cash at the last minute, either pay or put aside money for these expenses using your tax refund.

Some of these can include your car insurance premium, a maintenance fee on a timeshare (don’t get me started on this one) or other property, roadside assistance fee, and any other types of subscriptions.

Save For Retirement

You can easily fund a retirement account, such as an IRA with your tax refund. If you have more than the current IRA contribution limits, then you can fully fund your account while taking advantage of one of these other options.

If for some reason you are not reaching the 401k contribution limits at work, you can use this extra money as a way to increase what you currently contribute. Of course, you can’t add outside money into a 401k; however, if you fall short of the contribution limit due to other expenses, you can use your tax refund to pay those other expenses and increase the amount that goes into your 401k!

Save For A Large Purchase

If you are looking to purchase a car (learn how to save money on car costs), new laptop, vacation, or any other large purchase, this may be your chance. Instead of going into debt to buy the item, you can use your tax refund.

Even if the amount of your refund isn’t enough for you to purchase the item outright, it can greatly reduce the time it will take to save up for it. You can also pad the account with bonuses, raises, and future tax refunds.

Give

Giving is a very important part of any financial plan – especially for a Christian (we are commanded to give). I know many people who have a strong desire to give, but are not able because things are too tight for them financially.

If you are in a situation like this, a large tax refund can provide you with the perfect opportunity to give. There are plenty of organizations that are looking for donations in order to fulfill their mission such as, your local church, a missionary, food banks and homeless shelters, and any other charity that is fighting for a worthy (to you) cause, and has proven to be reliable!

Start A “Blessing Fund”

One of the things that my wife and I want to do (once we are out of debt) is to establish a savings account that will only be for the purpose of providing financial blessings to others. By having a separate account for this, we never have to worry about depleting our emergency fund or any other “dedicated” savings when we come across someone in need.

If you have a desire to help people out at various times, but don’t always have the means when these times come up, use your tax refund to start a “blessing fund”.

Spend Your Tax Refund

I’ve talked before about celebrating small victories during your financial journey. Use some or all of your tax refund and do something that you have wanted to do, but couldn’t. Maybe go out to a fancy restaurant, or buy a New iPad or some clothes!

No matter what you choose to buy, use all or a part of your tax refund to treat yourself. Then take the rest and put it toward your highest financial priority. This way, you can celebrate achieving a financial milestone, without diverting funds away from your current plan.

Reader Questions

Did you receive a tax refund this year? If so, how did you spend/save it?
Do you purposely have excess taxes withheld during the year so you can have a large refund?
Do you regret how you’ve spent a previous tax refund, bonus, or other “windfall”?

Three Important Services of an Asset Management Firm

By // by Ron White

A successful man or woman gets to the point where they realize they do not have the time to manage their investments, but without asset management, a lot of hard work can disappear due to losses on your investments.

If you have reached the point in your career where you have this problem, you need to hire the services of a wealth management firm. You may already have some assistance with your investments, such as those found with a stock broker or an investment firm, but wealth management goes far beyond picking stocks.

Three Important Services of an Asset Management Firm

A Comprehensive Approach To Wealth Management

A wealth management firm will look at the portfolio of your total assets and not just your investments in stocks. Equally important, is that a comprehensive approach includes taxes as well as return on investments. When investing, there are always tax implications that go far beyond income taxes. You can easily calculate your income tax if you sell an asset, but there are many ways to reduce your taxes on the sale of an asset.

There are also smart ways to invest your money that incorporate tax credits and deductions into the equation for a maximum return on investment. Combining tax knowledge and investment skills open up areas of wealth management that goes far beyond what you can do yourself or what a typical investment broker for stocks and bonds can do.

Municipal Bonds

These are tax-free bonds, but they are not without risk. When purchased with knowledge, experience and good research, they represent an outstanding investment. It is often tempting to simply look at the tax-free aspect of these bonds and attempt to buy them yourself, but without buying the right bonds, the tax-free element may not be worth the effort.

You need a wealth management firm to select the right municipalities to invest in, because in today’s economic environment, cities can go bankrupt. Along with the security of the bond, you want to also maximize your return. Combining an interest rate, with the tax advantages is best done by those who understand bond investments and also have the skills of a tax accountant.

Personalized Service

Because all of your assets are being managed, wealth management becomes personalized. Not only is there a strong interest in what you want to achieve financially, but your total portfolio of assets will be designed to reflect your personality and preferences. If there are certain types of assets you do not want to purchase, for whatever reason, these assets will not become a part of your portfolio.

With a wealth management firm, your asset portfolio will reflect who you are, not only as an investor, but as an individual. Common investment brokers do not approach this level of personalized service.

Wealth management is something that will benefit you and your loved ones for the rest of your life, and with the proper estate planning, a wealth management firm will benefit your loved ones long after you have passed away. Selecting a wealth management firm is not something that should be done quickly or without contemplation.

This type of firm must have the experience and skills to take a comprehensive approach to your entire asset portfolio. There are several firms that have these characteristics.