Saturday, July 21, 2012

Tithing and Debt

Leonardo da Vinci Christ Carrying the Cross via Wikimedia Commons

A good way to center any discussion is to think about the Cross.  Jesus willingly went to the cross and suffered a horrible death (Matthew 26:53-54) (Hebrews 10:14).  He did this to offer a us a way to God that was unreachable through our own effort (Romans 3:23-24). Our salvation is a total act of grace and this should fill us with total joy and peace (Ephesians 2:8) (1 Peter 1:8).  Gratitude always trumps guilt as a motivator.

If you call yourself a Christ follower and are not tithing, then you have been stealing from God (Malachi 3:9). This sounds harsh, but there are real consequences for wrong living.  I'm not trying to guilt you into tithing, I just want you to see the reality of what is happening.  Sometimes as Christians we just need to do the right thing even though every fiber of our soul is saying we shouldn't.

The average family has almost $7000 in credit card debt.  Most families in debt tend to not tithe.  If you have no income then there is no need to tithe.  If you have income (even welfare) then you can tithe.  Most people have sufficient income to work their way out of debt, with a serious cost cutting plan.  

I believe that the tithe should be paid before any other debts are paid.   I know this sounds crazy, but if you can't live on 90% then you probably can't live on 100%. Tithing while in debt takes great faith, so you must trust God in this, because this will feel highly illogical. 

 If in debt, the concept of tithing sounds irresponsible, but you need to pay back God first what He has given you.  God wants you to test Him in this (Malachi 3:9-11).  This is the logic of the world: When I get out of debt, then I will tithe.  God’s logic is different, because He can work miracles and if you are in debt, you can use some miracles in your life.  Trust Him by obeying Him.  Remember, the logical side of things doesn’t always apply to issues of faith.  God is able to sustain you, bless you, and allow you move towards fiscal sanity.
Here is an odd mystery: obedience to God takes strength of character that comes from God (Matthew 6:9-13).  When you tithe in the face of debt, God rewards your obedience. One of the fruits of the Spirit that comes to Christians in obedience is self-control.  Self-control will allow you resist those urges to spend on things of short term value, thereby improving your financial state.  Another two amazing fruits of the Spirit are peace and joy.  When fulfilled by God, you will not experience the urge to spend as much because you will be satisfied with what you have.  In fact you will be grateful.  Gratefulness is one of the most powerful motivators in life. 
There is disagreement among some as to what qualifies as debt-free.  In my opinion, being debt-free doesn’t mean a lack of bills.  It also doesn’t mean an absence of loan payments.  For some things (cars, houses) you will need a loan, this is good debt, so don’t assume that all loans are evil.   Debt is a trap that God wants to release you from.  Trust him to set you free, but God does not promise that you will win the lottery. You need God's strength to radically downsize your spending and get out of debt.  Obey God and you will have access to this strength (Galatians 5:16).   

Look to the Cross, understand what you have, feel the warmth of God's love and then go do what He says.

Tuesday, July 17, 2012

Blowing Your Mind!!

Last week I talked about how a house actually costs less than an apartment, and now I am going to blow your mind.  Ready?  What happens in year 31 after your house is paid off? 

For the home owner, something amazing has happened in year 31.  They own their home, free and clear!  They now hold something of amazing value.  The other thing is that $16,000 each year is now freed up for whatever you want because you are no longer paying your mortgage.  For the renter, they face yet another year of rent increases AND they hold nothing of any real value.  It never stops!  In this case the rich do get richer and the poor do get poorer. 

But wait!  There’s more:  Once you have gotten yourself into a house you will eventually notice that it gets easier to make the payment. Over time, inflation renders money less valuable and this is a good thing for a homeowner because inflation increases your pay over time, but your mortgage is a fixed cost that does not change (assuming a fixed-rate loan).  All of these factors over time combine to make your home payment a smaller and smaller portion of your total costs.  This feels good.  

 Go check out and type in your address.  If you live in an apartment, find a block with single family houses.  You can see how much each person on your block paid for their house.  Most houses in the suburbs are built in large groups utilizing a few floor plans to minimize costs. My house has five exact replicas on my block.  They all were priced identically initially, but over time various owners have come and gone.  In one of those identical houses is a fellow who has his house paid off, while I have another 20 years to go!  He paid far less and his payment was far less than mine is now.  That’s ok for me because I’m 40 and at 60 my house will be paid off!  This is about the time my kids will need me to be helping with college tuitions and weddings, but I will no longer be paying a mortgage.

As a young adult these future things will be easier if you make small sacrifices now.  Spend less than you earn and save up for a house.  Yes the housing market can be crazy, but I'm not trying to sell you on a get rich quick scheme.  If you buy a house THAT YOU CAN AFFORD and stay put, you will soon be paying less than the average renter. Eventually you will have no monthly payment for your housing and you will hold something of immense value.

Friday, July 13, 2012

Buying a House

 As a young adult it may seem that buying a house is a long, far-off dream; but I want you to see why buying a house is key to your economic success.  Once you see the importance of buying a house,  then you are more likely to watch your spending now and begin saving money. 

I want to show you something amazing.   Below is a comparison of a $900 apartment with a $270,000 house.  (Note for older adults: These numbers reflect Southern California rates, as the market rebounds these numbers will be much higher) I want you to see how rent prices per month go up each year, while the mortgage payment is fixed over the course of the loan.

We will now take a look at the same comparison by year.  Notice the total amount that you will have paid at the end of 30 years.  You will have paid more than the loan amount of $270,000 because you have to pay interest.  It is a lot of money.  The interest does add up, so that is why you need to be reasonably sure that you can afford the payments and want to stay in this house for a long time. 

If you have to sell before the value of the house appreciates significantly, you will have to literally pay money to sell the house because of the interest payments that you will pay to get out of the house.  I made an assumption that you will get a fixed-rate loan, because this type of loan will help keep you from a similar fate that is facing many stressed homeowners. This is something you need to learn out of the housing crash that we have witnessed.  

 A variable-rate home loan allows you to get into a house at a much lower cost, but it carries more risk that could get you in trouble.  The idea of a variable rate loan is that the bank charges you a low interest initially and raises it later.  Before the housing crash, the pitch they were making was that the house was rising in value so fast that it didn’t matter; you could just get further loans based upon the value of the house.  People were buying houses they could not afford and were banking on unrealistic rises in housing prices.   

When your home is worth more than you owe on the loan it is called equity.  Equity is nice, but in reality, it is worthless until you sell the house.  Since you need to live somewhere, the house you purchase next will eat up much of this equity.  If you downsize to something smaller, or move to a less expensive area, you can walk away with a lot of cash in your pocket.  In retirement, it typically does not matter where you live, because your kids are grown up and you do not need to be tied to a location for a job. 

            Do you see it?  You will pay almost twice as much over thirty years for an apartment.  I’ll bet you thought that apartments cost less, because that is where the poor people live.  You are right, poor people do live in apartments, but they cost more.  The reason why poor people do not buy houses and save a lot of money is that it takes a significant amount of money up front to get into a house and the mortgage payment will usually be initially higher than the average apartment rental.  You will need to save 20% of the house price (in this case $54,000) to get approved for the loan.  This is why poor people can’t get into a house.  The up front commitment is too big.  If you save aggressively you can get there.  

Friday, July 6, 2012

Celebrate Failure

I have one failed business under my belt, and while upsetting, I learned a lot from it.  Those lessons are being put into practice in my newest venture as an author.  When I first started teaching, I went through the usual round of substituting and being laid off as a new teacher.  Once after being laid off, I didn’t get rehired right away.  
Photo by Bill Nicholls

 Now I’m fairly responsible, so I launched immediately into an aggressive job hunt.  My family was depending on me and I couldn’t sit around and wait on a job that might not be there for me.  Seeing that nothing was coming and we were temporarily doing ok financially, I decided to upgrade my fairly useless history degree with a masters degree in business administration.  I was convinced that there were no opportunities in teaching and decided to cast my lot with the business world.  

I developed a two-track plan to create a business while looking for a position with a company.  Ironically, I was offered a teaching position at the end of that very summer.  While teaching, I took night classes to complete my master’s degree the following year because it would lead to an immediate pay raise, and it would provide some semblance of a lay-off back-up plan.  

A requirement of the degree was that I had to develop a business plan for a new business.  That summer I decided to pass on working at the San Diego Fair to try my new business idea.  It was a failure and it was upsetting.  I did; however, get a clear look at my interests and abilities by attempting this business.  I got a better look at what I enjoyed doing and what I really don’t want to do as a career.  At the time I was not sure what practical experience I had learned from that experiment, but I now believe it all had a purpose in my life.  

You also will travel down similar “dead ends” but it may be preparation for something greater, so don’t freak out when things don’t make sense.  Uncertainty is one of the hallmarks of a concept called faith.  Faith is trusting in something that is intangible or unseen.  When you walk with God, you must trust that He has your best interests at heart even when things are going horribly (Romans 8:28).  If you don’t trust Him, you won’t stick your neck out.  

Writing represents a new chapter of my summer life as an author so it is new, exciting and scary.  I don’t know if this will be successful, but what I do know is that God loves me and even if this becomes a failure it will mean something in God’s overall plan for me. 

I have put many hours into all this new venture and success is not guaranteed, but risks need to be taken or I'll stagnate. You should have a similar outlook towards taking risks. 

(Proverbs 3:5-6). 

As you trust God (a risk) with more and more of your life, you will be led into some uncomfortable things that may not succeed outwardly.  Sometimes success is not something you will see this side of heaven. Failure is a good teacher, so be ready to stop and contemplate the lessons in the failure.  In the same way that successes are not readily evident, there will sometimes be no apparent lesson to be drawn from a failure.  This is the mystery of God.  Sometimes bad things happen and there is no clear explanation why.  All we can do is press into Him for the strength to get through that difficulty.  Celebrate failure even though it stinks.

This post is one in a series of posts with the blog chain.  This month's theme is Celebrate.  Please check out some very talented writing by clicking on the links along the right side of this website.  If you are a Christian writer, this website offers a wealth of advice and support on your journey as a writer.