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Personal Finance From a Biblical Perspective

Build Up Your Financial Security In Uncertain Times

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[This post is written by Derek from Creating A Passive Income. His goal is to explore every single passive income source there is and evaluate their effectiveness and revenue. If you’re interested in extra income, be sure to check out his site.]

There is a common piece of advice going around between parents and students. “Go to school, find a safe, secure job with good benefits, and you’ll retire well.” Let me be the first to tell you, this advice is terrible.

In our world today, there are fewer jobs than there are people, and employee turnover is higher than ever before. If you make a mistake or if your salary exceeds what is typical for your position, you might very well be on the chopping block. You might have your college degree, but guess what, so does everyone else.

The Typical Response for Financial Security

Occasionally, things just don’t work out with employment. It might not even have been your fault. The decline of the economy, the struggling sales of your company, or a transfer of ownership could be the cause of your job displacement. Whatever the case may be, you should have a financial plan in place so that you’re protected against total bankruptcy.

Once again, there’s some common advice out there – “To protect yourself from financial devastation after a job loss, you must have an emergency fund with funds equivalent to 6 months worth of expenses.” While I do condone an emergency fund, this alone will not protect you against complete financial failure.

After all, what if you just can’t find a job until month number 8? What happens then? You load up the credit cards? I hope not. The problem with setting aside a static stash of cash is that it is not regenerative. If you keep pulling money out and no more money gets put in, it WILL run out!

Financial Security 2

photo credit: Stuart Miles

The Best From of Financial Security

In these economic times, one really has no sense of security in a typical job. I’ve seen it too many times – people proclaim that no one can do what they do and that they’re too valuable to get rid of. And then….they get the boot….

Rather than depend only on an emergency fund for that potential job loss, I suggest that you focus on two more aspects of financial security.

1)      Live well below your means

2)      Build a residual cash flow

Live Well Below Your Means

My wife and I both work and we make a point to live off only one of our incomes. That way, if one of us loses a job (it’s happened before), we’re still completely fine financially. Maybe you can’t bring your expenses down to half of what you’re used to, but make an effort to reduce them and you’ll feel much more secure in the event that a job is lost.

Build a Residual Cash Flow

Instead of having just one or two incomes, why not go for three or four? That way, if one of your jobs says “see-ya”, it won’t be that big of a deal. My wife and I both have full-time jobs, plus she does photography on the side and I earn quite a bit of money through various passive income ventures. Now this is a true set-up for financial security, wouldn’t you say?

Perhaps you’re strapped for time and cannot possibly start another venture. If this is the case, then at least have some potential income options written down. You don’t want to lose your job and have no possible income sources. This is how you deplete your emergency savings in record time and make friends with the repo men…

Have you set up an emergency fund in the event of a job loss? Have you done anything more?

article photo by cooldesign

A Lawyer Is Forced To Become A Stripper To Make Ends Meet: How Far Would You Go?

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It’s been said that desperate times calls for desperate measures, and that can definitely been seen when we face financial problems. I’ve had between 15 and 20 jobs in my life – usually working 2 jobs at any given time. Since I dropped out of college (shhh…don’t tell anyone) at the age of 18, and didn’t have any trades under my belt, I was forced to take whatever jobs came along in order to pay the bills.

I’ve done door-to-door sales (twice), delivered auto parts in my own car (without being reimbursed up to the  standard mileage rate), and I’ve even scrubbed toilets (and other things) in a hotel overnight!

For much of my adult life I’ve been broke, stuck trying to pay off debt (even to the point of trying debt consolidation), and unable to do anything about it because of a lack of education and opportunity. However, I have never been forced into a job or position that has made me feel a lack of dignity.

A few days ago I came across a story on MSNBC about a lawyer who was forced to become a topless dancer in order to make ends meet. I was fascinated to find out how she ended up in this position, and what, if anything, she could have done to change things. Here is a part of her story:

When Carla graduated 10 years ago, she thought her law degree would be a permanent ticket to a high-paying job.  But instead of selling her mind, Carla is selling her body. After student loans, debt, a layoff and unemployment battered her bank account, she now finds herself in an almost unbelievable position – dancing in a topless bar.

“Did I ever think I’d be taking my top off for rent money? No. I was in my mid-30s and had never danced before,” said Carla, who asked that we use her stage name and withhold her identity and some personal details. “As a little girl, I never thought to myself, ‘I just want to grow up and be a stripper,’ or, ‘All I ever wanted to do in life is climb in the lap of sweaty stranger and take my top off.’

“But, with our economy the way it is, especially in smaller cities … you strip or you starve,” she said.

The first thing that I was reminded of by reading this story is that it is very unwise to judge people based on their external circumstances. I’m sure that when many people see her “working”, or hear of what she does for a living, they immediately get a number of [probably wrong] ideas about her. I know that I would be shocked to meet a exotic dancer with a law degree!

I am sure that many of us have been in desperate financial positions – or we may still be in them now. How far would you be willing to go if you lost your job and had no income? Before you answer that, consider how Carla went from respectable work to doing something that causes shame:

After graduation, she worked for nine years putting her degree to use, but she had entered the crowded legal profession at the wrong time. When she was laid off in 2009, she couldn’t find work.

“At first, I worked as a waitress, and a cashier in gas station,” she said.

As her prospects grew dim, she went back to school to earn a master’s degree, hoping to bolster her credentials. But her financial aid came in lower than expected, her credit was battered and she struggled to find part-time work in her new town to keep her afloat.

I’m sure that many of you can imagine going through this type of downward progression. She first got a couple of low-paying jobs, and then tried to go back to school. When that didn’t work out as she planned, she tried to find another low-paying job – but wasn’t able to find anything:

“I went around to see if could get a job as cocktail waitress, but there was not a single retail or waitress job.  No one was hiring, except for the topless places,” she said.  “It was an act of desperation.”

She started out serving drinks as a waitress, but moved quickly to dancing “because that’s where the money is, and that’s what I needed.”

This wasn’t someone who just took the “easy” way out; this is someone who tried many options before ending up where she is now. The article didn’t say if she tried other options than what is listed, such as becoming a part of the contingent workforce, applying for social welfare programs, or even living with friends. In order to choose a “profession” as demeaning and as looked down upon as stripping, I would hope that she looked into these other measures first.

I am not sure what her situation looked like before she was laid off, but here are a couple of things that you can do to help soften the blow if/when this happens to you.

How To Prepare For Financial Hardships

  • Have a Large Emergency Fund – Try to have between 9 months and a year of living expenses in a high-yield savings account.
  • Pay off Debt – It is much easier to adjust your living expenses than debt payments.
  • Have a Financial Contingency Plan – Whether it’s an old profession or side job, have a way to earn money that’s not connected to your current full time job. Also know what expenses you can easily cut and what services you can do without (it may be wise to just cut them now and build up your emergency fund, pay off debt, or save for retirement)!
  • Have a Support System – Know who you can count on in an emergency. You may need to consider taking loans from family or staying with loved ones; it’s good to know ahead of time, who you can rely upon.
  • Consider What You Can Sell – This doesn’t mean that you should start holding garage sales tomorrow, but it is important to have a discussion with your family members and decide what items can go if you fall upon hard times. It will be much easier to make this plan now, rather than when you are all under the stress of a financial hardship!

How Far Would You Go?

Looking at her situation made me wonder how far many of us would go in order to make ends meet. What would be the first steps you would take if you lost your job and ran through your savings?

Would you go back to school and live off of student loans until you graduate? Would you sell most of your possessions and live with a friend or family member?

Of course, I am not considering anything illegal or immoral, because that wouldn’t be appropriate for this discussion. However, I would like to hear from you on this issue.

What things would you do before you would be willing to swallow your pride and take a “demeaning” job, move back in with your parents/kids, or give up certain luxuries that you foolishly consider to be needs?

photo by Pat Shannahan for msnbc.com

The Article Was Featured In The Following Carnival(s):

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No More Checks For Social Security Benefits

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I’ve been waiting for this day to come for a long time (actually, it came a few months ago)! Effective May 1, 2011, applicants filing for Social Security and Supplemental Security Income (SSI) benefit payments must choose either direct deposit or the Direct Express® debit card. There will be no option to receive your Social Security benefits by check.

This means that the Social Security Administration will not have to bear the cost of printing, mailing, and replacing checks for beneficiaries and recipients. Those that were already receiving their benefits by check before May 1, 2011, will have until March 1, 2013 to switch to direct deposit or the Direct Express® debit card.

How To Receive Your Social Security Benefits Through Direct Deposit

Since you no longer have an option to receive your Social Security benefits via a live check, there isn’t much for you to do. If you already have a bank account, you can set up direct deposit of your Supplemental Security Income or Social Security benefit payments through your bank.

You can also call the Social Security at 1-800-772-1213. Just have your bank information and Social Security number available when you call, and they can set things up for you. Since there are more stringent regulations on when a creditor can garnish Social Security benefits, those who avoided direct deposit as a means to ‘hide’ their benefits, should no longer have to do so.

Are There Any Exceptions To Receiving Your Social Security Benefits Electronically?

Those who are 90 years of age or older may still choose to receive paper checks. This also goes for those who are able to document a disability.

In my mind, these are the people who would benefit from electronic payments the most – they may have trouble getting to a bank to cash their checks, and then trying to buy things in person with cash.

What Is The Direct Express MasterCard?

If you are set to receive Social Security benefits, and you do not enter direct deposit information, your benefits will be paid through the Direct Express Debit MasterCard instead of by a paper check. The card is just what it sounds like, a debit card that you can use wherever MasterCard is accepted.

Your monthly benefits will be deposited onto your debit card, instead of deposited into your bank account. You will receive a personal identification number (PIN), that will allow you to withdraw cash from an ATM or merchant who provides cash back.

You are allowed one free cash withdrawal per deposit at ATMs in the Direct Express network. Also, you are able to make free withdrawals at the teller window at any MasterCard member bank (most banks).

You can even sign up for low balance alerts by phone, email, or text message. Unfortunately, if you wish to receive regular monthly statements, you will have to pay $0.75 per month. Although, you are able to view the last 90 days of activity online (which may be enough for most people).

There are other fees associated with the card, which you can find here.

The Bottom Line Regarding Electronic Social Security Benefits

According to the Social Security Administration, 85% of those receiving benefits do so electronically. Therefore, this new regulation will have no effect on the majority of beneficiaries.

I wasn’t able to find an estimate regarding the amount of money that will be saved by moving everyone to electronic payments, but with only 15% of recipients receiving paper checks, the numbers can’t be that great. This isn’t going to be the move that saves Social Security!

As with any of the social welfare programs, there is a real danger of it not being around in it’s current form in the not-to-distant future. Therefore, it is imperative that we take full advantage of the IRA contribution limits, 401k contribution limits, and a 401k employer match, while there is still time.

The decision on how to receive these payments is a major issue for those with no other forms of income. For others who still have time, we need to do everything we can to avoid depending on Social Security benefits to fully support us in retirement! For those who believe that they have run out of time, here are a few late retirement planning tips to help you catch up.

photo by DonkeyHotey

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The Treasury Department’s New Regulation To Protect Social Security Benefits

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Recently, the United States Treasury Department put a new rule into place that seeks to protect those the garnishment of Social Security benefits. When you are collecting, and depending on, Social Security benefits, it can be extremely difficult to deal with debt collectors. To then have your bank garnish your Social Security benefits, can put you in a position where you have very few options.

According to an article on Market Watch:

Before the new rule, when debt collectors pursuing an unpaid debt secured a court-ordered garnishment, the bank often would simply freeze the money in the debtor’s account, whether or not it included federal payments, such as Social Security benefits, said Margot Saunders, an attorney with the National Consumer Law Center.

The easiest thing for a bank to do in this instance is to freeze the entire account, regardless of the source of the deposits. The problem with that type of response, is that it can leave the recipient – oftentimes an elderly person – with no way to pay for basic living expenses.

There are actually rules and exemptions in place, which govern when and how a debt collector can garnish Social Security benefits, but as Saunders points out, “It’s very, very difficult for an elderly person to step through the hoops that are required for exemptions… In the meantime, while they’re going through that process, they have no money.”

Having all of your money frozen at once can lead to financial disaster for someone in a social welfare program.

A New Rule For Banks Ordered To Garnish Social Security Benefits

In an effort to help beneficiaries avoid undue hardship, the Treasury Department will now require banks to verify whether the money in the accounts came from an automatic deposit of federal benefits (including Social Security). If so, the bank is required to leave two months’ worth of federal benefits in the account untouched, so that they can be used to cover living expenses.

However, if the benefits were deposited more than two months in the past, or if they were deposited by check (no matter how recent), then the bank is free to freeze the entire account. The recipient will then have to follow the normal procedure for claiming an exemption in their state.

You may not think that there are a lot of people who are affected by this, but the National Consumer Law Center says otherwise:

NCLC estimates that more than 1 million federal-payment recipients annually had their benefits garnished in a bank account. That estimate is based on “the number of complaints and concerns we get from lawyers around the country,” Saunders said. She said legal-aid lawyers cite such garnishment as among the most significant consumer problems, second only to mortgage-related issues.

This new rule will be a welcome relief to many who were already struggling to make ends meet, and pay off debt at the same time. Whether they be dealing with student loan repayments, credit card debt, or medical debt, they will now be given a little bit of breathing room while they consider their options.

Garnishment Of Your Social Security Benefits By The Government

Keep in mind that this new law only governs court orders directed at banks (after the benefits have been paid). It is still possible to have money withheld from your payments at the Federal level, before you receive a disbursement.

According to the Social Security Administration, here are a few common circumstances in which the Federal government can garnish Social Security benefits:

  • To enforce child support or alimony obligations under Section 459 of the Social Security Act;
  • Internal Revenue Service (IRS) can levy against benefits to collect unpaid Federal taxes according to Section 6334(c) of the Internal Revenue Code;
  • IRS can collect taxes due by levying up to 15 percent of a monthly benefit until the debt is paid;
  • IRS allows beneficiaries to have a portion of their check withheld to satisfy a current year Federal income tax liability according to Section 3402 (P) of the Internal Revenue Code;
  • Other Federal agencies can collect money from benefits to pay a non-tax debt owed to that agency according to the Debt Collection Act of 1996 (Public Law 104-134); and
  • Under the Mandatory Victim Restitution Act, certain civil penalties provide the right to garnish benefits under 18 USC 3613.

This list looks similar to the circumstances in which your tax refund can be garnished. This is why it is so important to take care of all debt before you retire, and never become a cosigner for a loan.

It is much easier to deal with these issues when you have a lot of options, instead of waiting until bankruptcy and debt are all that you have in front of you.

photo by DonkeyHotey

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