Does Christmas Time = Spending Time?

Perhaps you were one of the many brave souls that got out on Black Friday to take advantage of all the great offers available. According to the early returns it was indeed a good day for retailers with sales 7% ahead of 2010. I hope you took care of all the items on your shopping list.

But maybe you are holding out for Cyber Monday and you will shop with your computer or mobile device in the comfort of your own home. Or maybe you are like me, and you wanted to avoid the crowds and you will be shopping later in December.

Whatever the case may be for you, there is always the temptation to overspend. Here is some advice to help you avoid turning Christmas time into spending time.

  • Establish a budget. You already have a list of people that will receive presents from you. Determine how much you want to spend on each person and add the amounts. That’s your Christmas gifts budget, meaning you can’t go over that overall amount. You may also want to establish a budget for items such as Christmas decorations or entertainment (Nutcracker tickets anyone?).
  • Use cash. As we have discussed before, cash is king. Using cash will keep you from overspending, which is easier to do than when you use plastic (either a debit card or credit card).
  • Take your time. Don’t just wait until Christmas Eve to do all your shopping. Don’t try to just buy something just to get it done. Give yourself the opportunity to do some comparison shopping and find the good deals that are out there.
  • Leverage technology. In this day of smart phones, take advantage of these Top 5 Free Apps to aid you in finding deals (thanks to the Hulkowich Group for the great summary).
  • Plan for Christmas 2012. Ideally, you will be starting your Christmas sinking fund now so you have the cash ready for next year’s expenses.

These few steps will save you a lot of money, a lot of time, and they will reduce your stress levels. Focus on spending good quality time with friends and family. Don’t let the disease of more rob you of having a great Christmas season.

One last piece of advice: remember what this season is really all about. It is about celebrating how God reached out to provide for mankind’s greatest need. God knew we needed a Savior and and He gave us His Son Jesus.

If you have not had the opportunity to meet Him, there is no better time than today. He is the indescribable gift, the Prince of Peace, God with us. He is all that you will ever need in this life and the next. Let me be one of the first people to say to you: Merry Christmas.

10 But the angel said to them, “Do not be afraid; for behold, I bring you good news of great joy which will be for all the people;
11 for today in the city of David there has been born for you a Savior, who is Christ the Lord.
12 This will be a sign for you: you will find a baby wrapped in cloths and lying in a manger.”
And suddenly there appeared with the angel a multitude of the heavenly host praising God and saying,

14 “Glory to God in the highest,
And on earth peace among men with whom He is pleased.”
Luke 2:10-14 (NASB)


I Shall Not Want: A Thankful Heart

Happy Thanksgiving! Sometimes I struggle with picking the weekly topic for this blog. But given that in the United States we will celebrate the Thanksgiving Holiday this week, the topic selection was easy this time. Now, I still had to write the blog post and that took a little more doing.

I have to confess that I have not been thinking that much about giving thanks. Instead, I have been thinking more about having a few days off next week (which I need), about spending time with family, about the great food we will have (fried turkey!), and of course about football (the Cowboys are actually in contention!!!).

However, I have plenty of reasons to give thanks. I have a beautiful wife who is my best friend and a great gift from God. I have family that loves me and cares for me. I have a very good job that allows me to do something I am good at every day, to take care of my family, and it also gives me the opportunity to interact with people from all over the world on a regular basis. I am in very good health. More importantly, I have a loving heavenly Father that knows me and provided the Way for me to know Him. He delivered me from darkness and sin. In Christ, I have joy, peace, love, and the hope of eternal glory. What more could a man ask for?

And that’s the question right? What more do we need? How much is enough? Even as I help you achieve financial wellness, the temptation will always be there to want more and more. And giving into temptation will keep you from having a thankful heart. A heart that says: “I shall not want“. Be careful that you don’t look at your situation and find yourself always thinking: “I need more“. That can only lead to bitterness and frustration. You might say: “But you don’t know my situation!” And you are right, I don’t. But I do know that you can always have a thankful heart. Let me try to show you with a story from my favorite book, the Bible.

In the days of the divided Jewish kingdom, the Northern kingdom of Israel was at war with the Arameans. The people of Israel were under siege and without access to food. They were in desperate need and ready to die. God’s prophet Elisha had promised deliverance but as usual the people did not believe God. And here is where my heroes for the story come through. There were 4 leprous men that were seating at the city gate in Jerusalem. These men, already excluded from society because of their condition, decided to take their chances and go to the camp of the Arameans to beg for food and mercy. In their eyes, they were already dead anyway. When they arrived at that camp, they realized that God had indeed delivered them again. During the night He caused the Arameans to flee, leaving all of their provisions behind. For these four men, their first reaction was a normal one. They took items and food for themselves and hid them. They did that a couple of times until they realized their mistake. They realized that they needed to share the good news of deliverance and the provisions with the rest of the people. It was indeed a time of rejoicing for everyone (see 2 Kings 7). What are the Thanksgiving lessons from this story?

  • God will always come through and will provide for His people. Even when we lack the faith to believe Him. He is the Great Provider (Gen 22:14).
  • Regardless of your current situation, you can always see God’s hand in your life and be thankful. He is the Good Shepherd (Psalms 23:1).
  • Understanding that you have enough will lead you to share with others who are in need. The result of a thankful heart is a lifestyle of generosity.

So I do trust that you enjoy this great Thanksgiving holiday. Get some rest and enjoy the time with your loved ones. For sure, I hope you will have plenty of great food for everyone. And in all of this, think of someone who needs to share in your blessings. Someone needs a word of encouragement, a bag of groceries, a helpful hand to accomplish a task. They are all around us and they all need good news. Make sure you are involved in the process of sharing the many blessings of God. Happy Thanksgiving!

6 But godliness actually is a means of great gain when accompanied by contentment.
7 For we have brought nothing into the world, so we cannot take anything out of it either.
8 If we have food and covering, with these we shall be content.

I Timothy 6:6-8 (NASB)

Savings: The Long Term View (Part II)

Last week we began our two week series on saving for long term goals by looking at saving for college expenses. You can read that post here. Today we will turn our attention to the subject of saving for retirement.

When it comes to retirement savings the conversation might be difficult for you for a number of reasons:

  • You might think it’s really complicated. It’s really not.
  • You might think it’s too late for you, so why bother starting now. Let me remind you that there is no time like today.
  • You might think that you will take your chances with Social Security. Really?

So what I will attempt to do in this post is cover the basics of retirement savings. However, let’s get something out of the way first: it is up to you.

  • It is not the government’s responsibility to take care of you after your working days. Even if it was their job, they are completely incapable of doing it right. It is your job.
  • Your company will not take care of you after your working days. The days of the pension plan after 30 years of service are almost gone. They might provide you with programs to help you plan for retirement, but it is your job to take advantage of those opportunities.

When should I start saving for retirement?

  • Ideally, you want to start as soon as possible once you begin working. The sooner the better.
  • However, you need to make sure that: you have paid-off all of your consumer debt (everything but the mortgage) and that you have an emergency fund of 3 to 6 months of expenses.
  • Note: as part of your financial plan, you should save for retirement and college expenses simultaneously.

How much should I save for retirement?

Where should I direct the savings?

  • I recommend a good mix of growth stock mutual funds with the following mix:
    • 25% in Growth (Mid Cap)
    • 25% in Growth & Income (Large Cap)
    • 25% Aggressive Growth (Small Cap)
    • 25% International
  • Look for mutual funds with a good track record (5 years or longer) and returns that average at least 12%. They are out there!
  • Avoid investing in single stocks. If you want to invest in your company’s stock, it should be no more than 5-10% of your retirement investment portfolio.

Here are some common mistakes to avoid:

  • Never invest in something you do not understand well enough to explain it to someone else. Seek help from a good investment advisor with a heart of a teacher.
  • Never take money out of these investments before age 59 1/2. You’ll be hit with high penalties and taxes.
  • Never borrow from your 401(k). Any interest you might “pay yourself”, will be less than what you would have earned if you left the money alone in the good investment vehicle. Plus, if you lose your job before paying-off the loan, you will have to complete the repayment within 60 days. Otherwise the loan will be considered an early withdrawal subject to taxes and penalties.
  • Never invest purely for tax savings purposes.

And finally, here are some good reminders:

  • Always roll your 401(k) balance into a traditional IRA or your Roth IRA if you change jobs.
  • Always build wealth slowly. Keep it simple.
  • Always keep your investments diversified. Diversification reduces risk (Ecclesiastes 11:2).

One final note: Despite being the most affluent generation the world has ever seen, 54% of Americans have saved less than $25,000 for retirement. It does not have to be this way for you. You can take action today. But again, it is up to you.

 “Most people have the will to win, few have the will to prepare to win.”
Bobby Knight

Savings: The Long Term View (Part I)

Over the next two weeks we will turn our attention to the subject of saving money for long term goals. As you get your finances under control (living on a budget, paying-off consumer debt, having a full emergency fund), you also need to start paying attention to the future.

Two of the most critical areas for long term savings are retirement and college expenses. We will focus on savings for college expenses this week and next week we will focus on retirement.

As parents, we are compelled to take care of our kids in every possible way. For most of us, that includes covering the expenses of a college education. Education is critical to success in the market place and typically college graduates tend to have more options for employment.

So the question is not: should you pay for your children’s college costs; the question is how to best accomplish that goal without putting your future or the future of your kids in jeopardy.

Unfortunately, like with everything else around finances, the lack of preparation leads us to believe that there is only one way to pay for college: by using debt in the form student loan.

Let me share some statistics with you that will help us put the consequences of this belief in perspective:

  • The price for room and board at schools has doubled since 1982 and tuition has gone up 439% in the same period.
  • Outstanding college loans now total over $1 trillion, an amount that recently exceeded the amount of credit card debt in the US.
  • Student loan debt has increased 511% since 1999. Students now graduate with an average debt of $24K, an amount that has grown over 50% in the past decade.
  • More than 45% of students do not graduate so they are left with the debt and no degree to show for it.
  • Since 2008, 85% of college graduates have been moving back in with parents after they graduate.

In addition to these staggering numbers, there are larger implications of getting deep in student loan debt. This type of debt can not be eliminated through bankruptcy. The decision to go in debt at 18 can follow you for years to come.

You know what else happens to you when you have a large amount of student loan debt? You lose career options. You need to stay employed at any job you can get so you can make those payments. If you think a better option is for parents to take out student loans on behalf of their children, that simply transfers the risk to the parents.

They might be in a better position to pay the debt back, but the debt could hamper their ability to save for retirement and achieve other financial goals. Certainly, there has to be a better way than debt and that is through savings.

The best option for college savings is the Education Savings Account (ESA) also known as the “Education IRA”.

  • You can save up to $2,000 per year per child and get this: it grows tax free!!!!
  • Above the ESA, you can use 529 type plans. Focus on those that leave you in control of the funds. Morningstar has done the research on the best and worst of these 529 plans. This article looks at the 10 least and most expensive of the options.
  • After this, you can move to an UTMA/UGMA plan. This stands for “Uniform Transfer/Gift to Minors Act“.  The account is listed in the child’s name and a custodian is named (parent or grandparent). The custodian is the manager of the account until the child turns 21. At age 21 (Age 18 for UGMA), control of the account goes to the child.

The great Zig Ziglar has said that “If you do the things you need to do when you need to do them, then someday you can do the things you want to do when you want to do them.

In our topic today this means that you have to start saving now so you can prepare for the day when you need to cover those college expenses.

Already started? Great for you and keep going! Not started yet? Don’t delay any longer, the time is now. Start today!!!

“No discipline seems pleasant at the time, but painful. Later on however, it produces a harvest of righteousness and peace for those who have been trained by it.”
Hebrews 12:11 (NIV)