In light of the signs pointing to what some are calling the “economic crisis of a century,” an “economic Pearl Harbor,” or a “financial tsunami, including the collapse or near collapse of some of largest financial institutions in American history, I believe we all have reason now to ask: “What can I do to help solve this problem?” We believe it is time we stop looking to the federal government as the final solution and mobilize the grassroots of this nation to bring about the economic change that is desperately needed.
Here are the steps we believe will solve this crisis by each of us doing our part to fight this on a personal, local level.
The most glaring error in all the news reports, public debate, and political rhetoric is that we have yet to hear any leader make reference to our collective need to look beyond ourselves for a solution and turn to God Almighty. Yet, when we read of our political leaders identifying the root cause of this meltdown as “greed,” it is as if we have forgotten that greed and its resulting consequences are a heart problem, not a policy problem.
The Scripture teaches that money is not the solution to money problems. In fact, it says that whoever loves money never has enough, and that the love of money is the root of all kinds of evil. Money problems are heart problems and can only be solved by a change of heart initiated by repentance.
“When I shut up the heavens so that there is no rain, or command locusts to devour the land or send a plague among my people, if my people, who are called by my name, will humble themselves and pray and seek my face and turn from their wicked ways, then I will hear from heaven, and I will forgive their sin and will heal their land” (2 Chronicles 7:13-14, NIV).
We call for an emergency economic recovery plan for American citizens to begin immediately. The plan would be for every American to get his or her personal house in order as quickly as possible. Throughout our history, we have shown that when leaders have called upon and trusted in the power and capacity of the voluntary efforts of the American people, we have risen to the challenge. We are a resilient people, willing to do our part in times of crisis. When there is a call to action, we will take up the challenge with great resolve.
As followers of Christ, we should be prepared if we must endure another Great Depression. We must show the world that what holds us together is not a political system, as great as it may be; it is not capitalism, as great as it may be; nor is it even the democracy that has made this nation great. It is the living out of our motto printed on our coins: In God We Trust. The real economic recovery needed is the recovery of the biblical values we hold dear. Call it “The New American Dream – Living Within Our Means,” a concept as old as the Scripture itself. It was God who taught us to:
1. Honor God with our wealth.
2. Save but do not hoard.
3. Get out of debt.
4. Invest wisely and steadily.
Simply put, God wants us to live within our means so we can be free from all financial bondage. We call for churches, businessmen, and the educational sector to implement programs to lead the way.
Ask for the American citizens to show the way for the change we need. We have reversed the sense of order in our nation.
Support measures that create accountability for government officials to get our federal, state, and local governments fiscally responsible. How can we demand change when we reflect the same lack of self control demonstrated by the spending habits of our government?
We must lead, not wait to be led.
We encourage the business community to develop programs that help the real backbone of this culture, the work force. Reward your employees who want to get out of the financial trap they are in. Have a contest or offer assistance to help people to sell their houses, to downsize, to get rid of the gas-guzzler, or to pay off mountains of credit card debt.
As the great unwind takes place, seize the opportunity to help. Offer flexible schedules for the work-at-home parents. Have an assistance plan to avoid foreclosure for those who will live on a budget and make necessary lifestyle changes. Have a Frugal Friday where everyone brings their lunches, shares rides, and reduces wasteful spending. Give a cash prize or gift card to those who have new ideas and ways to help improve the financial health of the company or its employees. Encourage helping others in the company and reward those who take initiative to do that.
We call for a renewed purpose for neighbors and community service groups to find out how they can innovatively help those facing foreclosure in their communities. Step up and ask God for creative solutions that negate the need for a government solution. Many people simply need someone to help them see through the pressure and stress they face. Mobilize volunteers who have the capacity to coach and counsel others in their time of need.
Knock on a neighbor’s door and ask if you can be of any help. Recommend they turn to Crown where they can find a trained financial coach for free.
Ask a retired banker, stockbroker or financial planner if they will help individuals learn basic money management skills rooted in biblical principles. Invite them to speak up in churches, lunch meetings, or in a community room of your apartment complex. Look for wisdom and soak it up when you find it.
Set up assistance programs among professional associations that reward being wise with money. Make living within your means the expected culture in your groups. Pastors, doctors, lawyers, bikers, athletes, car dealers, counselors, retired people, educators, and many more all have large associations that can mobilize people to help others. Make it a goal that your association will implement a new plan to educate those who struggle with financial issues.
God warned us that we must never place our hopes in anything or anyone other than Him. Idolatry is seldom even mentioned in our culture any longer. It has become the norm to replace our dependency on God with an exalted view of education, wealth, athletic ability, travel, entertainment, or power. Hebrews 13:5-6 says, “Keep your lives free from the love of money and be content with what you have, because God has said, ‘Never will I leave you; never will I forsake you.’ So we say with confidence, ‘The Lord is my helper; I will not be afraid. What can man do to me?’ ” (NIV).
This passage comes with a warning and a promise: money will leave you; Jesus will not. Place your hopes and dreams in a temporal idol and you will have temporal hopes and dreams, but place all of your hopes in Him and He will never disappoint you.
As simple as it may sound, our nation is starved for Truth, for the security of immutable principles and policies. That Truth is found only in knowing and applying God’s Word. For the days ahead, we must anchor our souls in Truth like the comfort found in I Chronicles 29:11-12: “Everything in the heavens and earth is Yours, O Lord, and this is Your kingdom. We adore you as being in control of everything. Riches and honor come from you alone, and you are the Ruler of all mankind; Your hand controls power and might, and it is at your discretion that men are made great and given strength” (LB).
These are the seven steps that we believe will provide a lasting solution for the economic crisis we face. Anything short may postpone the pain but will not solve the root problem.
Our motivation should be to get our own house in order and prepare to serve those around us who are neither prepared nor expecting the challenges we will face. The real antidote to our economic woes lies in our heart…in our beliefs…in our values…in our faith in God.
Originally posted 3/2/11.
by The Christian Financial Planning Institute
Fear should never drive investment decisions. The smarter move is to stick with a portfolio that’s well diversified and that reflects your long-range financial goals, risk tolerance and personal circumstances.
Should you be bulletproofing your portfolio for wartime? That’s the recommendation of some “investment advisors,” and some investors are listening. But it’s not a good idea.
Fear should never drive investment decisions.
In the aftermath of September 11, military strikes in Afghanistan, the Israeli-Palestinian conflict and the threat of war with Iraq, suggestions for defensive “war” portfolios have begun to appear. While these portfolios vary, they generally follow similar investment advice: load up on defense-industry stocks, gold, and U.S. government securities. Some recommend oil stocks on the premise that a Middle East war will dramatically push up the price of oil. Others like the stocks of companies producing products that consumers will buy regardless of the circumstances: food, tobacco, medicine and so on.
One defensive war portfolio found on the Internet calls for 70 percent U.S. Treasury securities and certificates of deposit, 10 percent precious coins, 10 percent defense-industry stocks, and 5 percent each of Swiss francs and New Zealand dollars. If disaster really does strike, some would argue that this would be a sound portfolio. But one of the problems, point out others, is that this particular “war” portfolio has been recommended for the past six years—the first four of which saw record stock market growth.
According to experienced financial advisors, it’s the same principle as having a very defensive portfolio whose asset allocation mix is always braced for a market downturn. Yes, markets periodically falter, as they have the last two years, and a conservative portfolio might serve you well at that point. The problem is that we rarely can forecast a market downturn and in the meantime we miss out on the growth, which, over the long haul, has more than overcome the downturns.
Does the idea of a defensive portfolio sound familiar? Go back to the fall of 1999, when alarmists warned of the impending Y2K disaster and some panicked investors converted all their investments to cash, often with significant tax consequences and missed market returns.
Unlike the Y2K scare, terrorism is real. But war has hit Americans before, and in most cases the economy and the stock market have weathered them well. The S&P 500 was up 20 percent within one year after Pearl Harbor, for example, and the Dow climbed 20 percent two months after the start of Desert Storm.
Although most investors will maintain their current portfolios, some panic and switch from long-held asset allocations to these war portfolios. Other investors have hunkered down with a lot of cash, though other factors such as the economy, Enron and the continued whipsawing of the stock market have contributed to their nervousness.
The smarter move is to stick with a portfolio that’s well diversified and that reflects your long-range financial goals, risk tolerance and personal circumstances. You should be investing only for the long-term, such as for retirement and college, and not let potential catastrophes—whose dimensions are unknown and which could affect portfolios in unforeseen ways—dictate your portfolio’s makeup.
A disaster-driven portfolio is usually an extremely conservative one, and as a consequence, investors following them are more likely to fail to reach their financial goals because of inferior long-term returns than because of shorter market declines due to a disaster, argue most planners. Besides, they say, if a national catastrophe were to strike that truly crippled our nation—devastating terrorist attacks or a nuclear attack, for example—even a “war” portfolio would unlikely be of much value in the aftermath.
For those investors who still feel defensive about their portfolio, some financial advisors recommend tips that can help but not hobble the overall portfolio too much. One suggestion is to designate perhaps ten percent of the portfolio to a defensive position, such as U.S. Treasuries, precious metals, cash and real estate. Another is to buy certificates of deposit from financial institutions located in different geographic areas.
But ultimately the best defense is a well-diversified portfolio that over time will perform satisfactorily regardless of the circumstances. A portfolio that holds foreign stocks and foreign bonds, for example, which many financial advisors recommend under normal circumstances, could help blunt the effects of damage to the United States.
This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Royce Alan Burns, CFP, ChFC, CLU, Financial Advisor of [with] Wachovia Securities, Inc., member NYSE and SIPC, and a broker/dealer member in good standing of the FPA.
Global/International investing involves risks not typically associated with US investing, including currency fluctuations, political instability, uncertain economic conditions and different accounting standards.
Wachovia Securities is the trade name under which Wachovia Corporation provides brokerage services through two registered broker-dealers: Wachovia Securities, Inc., member NYSE/SIPC, and Wachovia Securities Financial Network, Inc., member NASD/SIPC. Each broker-dealer is a separate non-bank affiliate of Wachovia Corporation. 6/02
Originally posted 2/20/2011
by Austin Pryor for Sound Mind Investing
What does it cost to buy mutual funds? That depends on how you buy them…whether you go to them or they come to you. Mutual funds earn their profits by the management fees they charge, which are based on the amount of money they are responsible for investing. The more investors’ money they manage, the more they make. Naturally, they want to attract as many customers as possible.
So-called “load” funds get new customers by having a sales force of stockbrokers, financial planners, and insurance professionals sell their funds for them. These funds charge a sales fee, which is added on top of the fund’s net asset value. This markup cost can run as high as 8.5 percent on every dollar you invest. The load applies to all purchases you make in the fund, not just the first time; some load funds even charge to reinvest your dividends for you (which I think is going a bit far). In return, the salesperson comes up with recommendations as to which funds might be best suited for your goals and completes all the paperwork to get your account opened. The load is the way the salesperson is rewarded for opening and servicing new accounts. If you would never get around to doing the research needed to select funds that are right for you, the salesperson provides an important service by doing this work for you and motivating you to action.
“No-load” funds, on the other hand, have chosen to deal directly with investors. They don’t have a sales force to represent them—they believe plenty of investors are willing to do their own research and paperwork in order to save on the sales load. They don’t come to you; you go to them. Of course, they make it as easy as possible through their advertising, 800 numbers, and customer service departments. Since they don’t have salespeople to pay, they don’t charge the load (thus the name “no-load”). By showing some initiative, you can save the 5–8.5 percent load that is commonly charged. That means all the money you put into your fund account goes to work for you. I recommend you limit your investment shopping to no-load funds. You can learn all you need to know in the SMI newsletter to select the funds that are right for you, and you’ll save thousands of dollars in loads over the years.
In addition to the sales commissions involved when investing in load funds, there are also the ongoing operating expenses that are charged by all mutual funds, whether load or no-load. These are the costs of owning mutual funds over the long haul.
1. First, there are the costs associated with making the investing decisions. This means paying for an experienced portfolio manager as well as a staff of financial analysts to help with all the research, and is by far the largest of the operating expenses.
2. Second, there’s a lot of administrative overhead involved in having a large office, staff, and equipment.
3. Third, there’s the cost of having a bank maintain the shareholder accounts and safeguard all the money and securities which are constantly coming and going.
4. Fourth, there are the costs of presenting regular reports to shareholders, as well as for legal and auditing services.
In addition to all the operating expenses, over 70 percent of all stock funds also charge some of their marketing expenses to shareholders. These expenses are referred to as “12b-1” fees because of the SEC ruling that permits them, and the money from them can only be used to advertise and sell the fund to prospective investors.
Collectively, operating and marketing expenses cost shareholders in the average stock fund around $15 annually for every $1,000 of account value. The way this is commonly stated is that the average fund’s “expense ratio” is 1.5 percent. These operating and marketing expenses are not taken out of your account all at once. Rather, in a manner that is invisible to the shareholder, they are charged daily against the fund’s net asset value. The price you see in the newspaper has already had that day’s share of the costs deducted.
When you see fund rankings in financial newspapers and magazines, these expenses have already been deducted; that is, the effects of each fund’s annual expenses have been taken into account. That is not usually the case, however, with respect to any sales commissions a fund might charge. Unless the article specifically states to the contrary, sales loads are typically not taken into account when fund performance rankings are compiled. Therefore, the return you would actually receive would need to be adjusted downward by the amount of the sales load.
To keep track of the mountain of data generated by the mutual fund industry, I subscribe to a pretty neat service offered by Morningstar, the leader among organizations that monitor the investment performance of mutual funds. For $1,125 a year, I receive a computer CD each month that is packed with the equivalent of several thousand pages of data. The current one has information on 6,053 mutual funds (or 15,986 if you count different classes of shares of the same fund!).
Much of this dramatic growth is attributable to a feeding frenzy on the part of investors. The public’s appetite for investing has been huge, and fund organizations have responded in fine capitalistic fashion by meeting the demands of the marketplace. A considerable number of the new funds, however, aren’t really “new” at all. They’re old load funds trying to look more like no-loads by creating new “classes” of shares. If you study the offerings of load fund organizations these days, you’ll often find they offer three primary ways of investing in the same fund.
* Class “A” shares. This is the traditional load fund arrangement where you pay a sales charge to the broker or financial planner who introduced you to the fund, and this charge is deducted from your investment at the time you make it. Whereas this used to run 8.5 percent, competitive pressures from the no-loads have taken their toll. The most common front-end load is now 5.75 percent, and some stock fund loads are as low as 3 percent. In addition to this one-time sales charge, you also pay the on-going annual operating expenses which are common to all mutual funds.
* Class “B” shares. These shares move the load from the front-end to the back-end, where it gradually diminishes the longer you hold your shares. A typical arrangement might call for you to pay a 5 percent load if you sell your shares during the first year, a 4 percent load if you sell during the second year, and so on until you pay no load at all if you hold on for five years or more. Your broker still receives a sales commission, but it comes from the fund organization rather than immediately from your account. How does the fund recoup this money? By adding it to the fund’s annual expenses, which makes them higher than they otherwise would be. So (surprise!) you’re the one who ultimately pays; you just do it a little every day rather than all at once up front. After six to ten years, some fund organizations will automatically convert your Class “B” shares to Class “A” shares (which pay lower—that is, normal—annual expenses) on the basis that by then you’ll have “paid your dues.” Other organizations aren’t so fair-minded and continue to gouge you indefinitely. I would not recommend you buy Class “B” shares.
* Class “C” shares. At first glance, these seem the most like no-load funds. They usually have no front-end loads (although some charge 1 percent up front), and the deferred load, a relatively small 1 percent, usually applies only to redemptions made during the first year you own your shares. The selling broker typically gets a 1 percent up-front commission for selling Class “C” fund shares as well as an on-going quarterly payment which is built into the fund’s expense charge and continues for as long as you own your shares.
If you must buy load funds, those following our Upgrading strategy should only consider Class “C” shares. You can see that, under similar market conditions, they maintain a profit lead over Class “A” shares for the first nine years. This is due to the front load paid at the time of purchase; it takes many years to overcome this initial cost. If you hold them long enough (10 years or more), Class “A” shares eventually catch up due to their lower annual expenses, but Upgraders will never hold their stock funds for a decade.
Two kinds of no-load funds are also included for comparison purposes. One group charges 12b-1 fees. The other group, for competitive reasons, elects not to charge 12b-1 fees in order to keep the expenses to shareholders down. (Note that 12b-1 fees are already included in a fund’s expense ratio and its published performance results—and therefore also reflected in SMI’s momentum score calculation for each fund. In other words, you don’t need to worry about 12b-1 marketing fees on top of the regular operating expenses because the expense ratio includes them all.) As the table makes clear, no-load fund investors enjoy the best of both worlds—no sales charges going in or coming out, and low annual expenses for as long as you stay.
SMI’s monthly Fund Performance Rankings show whether a fund is no-load, charges a front load, or charges a back load. The information is the latest available from Morningstar, and refers to the fees charged when funds are bought directly from the fund organization. Different fees, or no fees at all, may apply when a fund is purchased through a discount broker’s fund supermarket or a 401(k) plan.
© Sound Mind Investing
Published since 1990, Sound Mind Investing is America’s best-selling financial newsletter written from a biblical perspective.
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Originally posted 2/20/2011
Most Christians in America receive the majority of their spiritual teaching from their pastors and spiritual leaders in their churches. Although some ministers don’t consider teaching on stewardship necessary for spiritual development, the Bible says otherwise. Since the subject of money, possessions, and management is addressed in the Bible more than any other subject except the subject of love, it seems quite obvious that God felt that financial stewardship training is very much an integral part of a well-rounded spiritual education.
When we recognize that God owns everything and all blessings come from Him, our role as managers, or stewards, becomes evident. We also see the multitude of blessings for which we can be thankful.
Therefore, money is not our possession; it is God’s possession. We are merely stewards, or managers. He allots different amounts to us, based on His plan and purpose for our lives, and we will be held accountable for the way we manage allotments distributed to us.
When ministers view themselves as managers and not owners, they’ll look at every other aspect of their lives the same way and will be able to more effectively project that truth to those whom God has placed under their spiritual care.
After emphasizing the fact that God owns it all and that we are merely stewards of His possessions, the next most important biblical principle regarding financial stewardship that ministers should present is the principle of the blessings of tithing.
Tithing should come from our hearts. In the Old Testament, the Jews were giving as much as 23 percent of their income in tithes and offerings. How much more should we who have the knowledge of Christ give in obedience and submission to Him?
The principle of tithing is centered on the fact that God is looking for the right attitude in a person’s giving. If there is not willingness to give back to the Lord a portion of what He has entrusted, then giving tithes upon tithes would not make a difference.
Tithing is not meant to be done with a spirit of fear. God is not waiting for His children to make mistakes so He can punish them. Tithing is for our benefit. God wants to show Himself mighty in the lives of His children, give them the ability to become debt-free, have their needs met in the most unexpected ways, and receive things that are exceeding abundantly beyond all [they could] ask or think. That’s the purpose for tithing!
Once ministers have taught the principles of the blessings of tithing, they need to continue. So often ministers stop with teaching on tithing and go no further. However, God owns the remaining 90 percent of His children’s income, just like He owns the initial 10 percent, which we identify as the tithe. So, because He also owns the remaining 90 percent, God’s people must be taught every aspect of stewardship.
This teaching would include praying about each financial decision, consulting a spouse or other trusted family member or friend, giving to missions and other offerings, giving to charitable organizations, special offerings such as youth trips or building programs, faith promises versus pledges, bookkeeping and accounting, budgeting, getting out of debt, staying out of debt, borrowing, lending, mortgages, usury, cosigning, school loans, income taxes, retirement, investing, collecting past due debts, charging interest, and other subjects addressed in God’s Word regarding financial stewardship.
Along with financial stewardship pastors also may want to include in their teachings being good stewards of time, talents and gifts, and prayer and Bible study.
Even though Christians in America receive a more diversified array of spiritual teachings than the rest of the Christian world combined, teachings in the area of financial stewardship is probably more lacking than any other subject now being taught in the church. Yet, if ministers are to submit to the fulfillment of the Great Commission as commanded by Jesus, they must teach all that Jesus taught and emphasize that He lived as our perfect example.
Originally Posted February 9, 2011
In recent years, we’ve witnessed the world shifting like sand beneath our feet. We’ve been asking ourselves, “What’s happened to us?” “Is it ever going back to the way it used to be?” “What kind of adjustments do we need to make to prepare for the future?” People all around the world are experiencing a new level of insecurity. The things they placed their hope and confidence in have disappointed them. There is now a sense of fear, restlessness, and anxiety lingering just beneath the surface.
You may be asking yourself, “Where is the leader who’s going to show us the way out of this?” “Are we ever going back to the day when we had rising home equity values?” “Are we ever going back to the day when we could put our money into institutions or companies and trust them to operate with integrity?” “Will there be a time when the banks will not fail, when my job may not be going away or my hours cut back?” “Can I go to college, get a degree, and know that I’ll have a secure career path for the rest of my life?” Because of the dramatic changes, you now have an opportunity to adjust to a new reality.
Crown Financial Ministries wants to journey with you to make those adjustments. You can discover how to live in this world, facing the day-to-day challenges but also experiencing peace, joy, and contentment no matter what may happen in the future. The difference is discovering how to navigate the epic battle between Man’s Economy and God’s Economy.
In Man’s Economy, the basic premise is that your purposes, goals, significance, self-worth, ambition, and life energy are wrapped up in having money. In Man’s Economy, you want to make as much as you can, as quickly as you can, to retire as soon as you can, and enjoy a life of leisure as long as you can.
You’ve been told that if you have enough money, you can live free of fear and anxiety— comfortably insulated from what’s going on around you. In Man’s Economy, you place your hope in your net worth, assets, and ability to generate income. Money is the master of Man’s Economy.
In God’s Economy, you can be prepared for the future no matter what it may be. You now have the opportunity, by God’s grace, to reset your thinking, to be transformed, not conformed to the world (Romans 12:2). Learning to live in God’s Economy begins by understanding that His economy is made up of the divine integration of the mystery of His lordship, your stewardship, and your generosity.
When those things come together, you are transformed out of Man’s Economy by the renewing of your mind. You are transformed out of the cultural pressure and grip of this world, the battle that wants to take you captive to the traps of the world. God is the Master of His economy. When God is Lord, He is the object of your life. The Bible says in Matthew 6:33 to seek first His kingdom and His righteousness. Use your energy to seek His kingdom first. In God’s Economy, He is Lord of all and you seek Him as the object of your life energy, your purpose, your goals, your ambition, your significance.
The world will always be dynamic and changing and unstable, but God is constant. His constant nature is expressed in Hebrews 13:5, “Keep your lives free from the love of money [in other words, keep your life free from buying into the lies of Man’s Economy] and be content with what you have [whether a lot or a little]” (NIV).
When you are content with what you have, you can rest in the promise found in the remainder of that verse: “Never will I leave you; never will I forsake you.” The Lord is telling you that in Man’s Economy, you are vulnerable; everything can leave and forsake you, except for Him. When you understand God’s lordship, your role and purpose as a steward becomes clear. You define success by whether or not you are faithful with what you have. In Man’s Economy, you define success by how much you have. The scorecard for success in Man’s Economy is how much you can accumulate.
God does not measure success by accumulation. In His economy, if you are faithful with little, you will be entrusted with much. You will be entrusted with “true riches” (Luke 16:11 NIV). Success in God’s Economy is faithfulness as a steward of whatever you have been given. All are welcome into that economy. There is no discrimination whether you have much or little.
When God is the first priority and the object of your life, you will be faithful to Him, steward whatever you have, and learn to be generous on every occasion. You will start to believe and practice the principle that it is better to give than to receive. In Man’s Economy it is better to receive, hoard, and have a big line of credit. These are all things the world says are required to have success and significance. In God’s Economy, He says it is better to be a giver.
When you understand the truths of God’s Economy and are transformed by what you believe, your behavior follows suit. You begin to apply the practical truths of handling money God’s way. You then experience the visible joy of being unique and distinct from the rest of the world. These distinctions become your testimony and visual message that there is a difference between having God integrated into all of your finances and trusting in yourself only. You will display joy on your face and peace in your heart when everyone else is wondering, “Where is our hope?” The fleeting hopes of this world will transfer into the eternal hope of Christ.
Are you different from your next-door neighbor in what you believe about money and how you steward it and how generous you are? Have your neighbors witnessed the difference in you? Living in God’s Economy keeps you from being trapped, worried, and grieving over something very temporal. Your joy becomes the attractive aroma of Christ. As you seize this opportunity, you can reset to discover God’s Economy. Man’s Economy will seek to influence and control you as long as you’re on this earth, but it will no longer have dominion over you.
You do have a leader and His name is Christ; He is unchanging; His principles work. They are valid and time tested, and they hold up in every storm. We have the privilege of sharing that with the world. It can change our cities, our nation, and the entire world if we apply the truth, model it, and live it out.
We encourage you to move away from defining your life by the standards of Man’s Economy and to become an ambassador for Christ in this generation. Our transformation will help to bring about the revival that our nation desperately needs, regardless of the circumstances we may face.
This article first appeared in the October 2009 edition of Money Matters, the Crown newsletter.
Originally posted 2/8/11.
by Austin Pryor for Sound Mind Investing
We all would like great health and physical fitness, but only people with self-discipline achieve such goals. Other areas of life are the same way. Invest time, commitment, and sacrifice in your marriage or dating relationship, and it grows stronger by the month. Replace that with neglect and making decisions just to please yourself, and the relationship weakens. The same is true of your career and a host of other of life’s activities. Since Sound Mind Investing is an investment newsletter, I hasten to include your financial affairs on my list. They also need time, commitment, and sacrifice in order to be healthy and grow. Are you in shape financially?
Before you begin your stock and bond market investing, you need to achieve a certain level of financial fitness. It’s like those exhortations to see your doctor for a physical exam before launching out on a new exercise program. Think of it as practicing financial aerobics. As you read more SMI content, you’ll learn why I strongly recommend getting debt-free (Level 1) and building a savings reserve (Level 2) as your first two priorities. Once this foundation is laid, you can then begin using your monthly surplus to venture out into the higher risk areas of mutual fund investing (Level 3 and the Getting Started portfolios). When your portfolio reaches $25,000, it’s time to add more safety through further diversification (Level 4 and SMI’s model portfolios).
Rely on God’s wisdom and resources to see you through. SMI takes its name from 2 Timothy 1:7: “For God has not given us the spirit of fear, but of power, and of love, and of a sound mind.”
Will this be the year your good intentions lead to determined action?
Regardless of the Level at which You’re Working, You’re Still an “Investor”
Many readers seem to feel that the ranks of investors are limited to only those people who own a lot of stocks, bonds, real estate, and so on. That’s far too narrow a definition. Scripture makes it clear that each of us is a steward of God’s resources to some degree. That means we all have to make management decisions. At its most basic, investing is making management decisions to give up the use of something now in order to have more of something later. Thus, every spending decision is an investing decision.
For example, if you decide to use your Christmas bonus to pay down your car loan (as you might at Level 1) rather than take a weekend ski trip, that’s an investing decision. Or, if you add some of your monthly surplus to your contingency fund (as you might at Level 2) rather than treat yourself to some new clothes, that’s also an investing decision. The question isn’t whether you have investing responsibilities—of course you do. Rather, the question is: How diligently are you carrying out the God-given responsibilities of stewardship you already have?
The Four Levels are the heart of the SMI philosophy. Their primary benefit is that they offer a framework for setting priorities on how to spend your monthly surplus. If you have consumer debt outstanding (Level 1) or lack a sufficient contingency fund (Level 2), I believe it’s best to apply your surplus in those areas. However, that doesn’t mean you are free from making important investment decisions in connection with stock, bond, and money market securities.
If you have an IRA, you’ve got the responsibility for managing it. Or perhaps you have a pension plan at work, like a Keogh, SEP-IRA, or 401(k), where you are allowed to make decisions as to how your share is invested. These retirement investments represent money that was set aside in the past, and although you may not be adding to them at present, you still must decide how best to invest the money that’s already there.
To one degree or another, you will do a better job of making these decisions if you have a basic understanding of the investment markets. Even if you’re still at the first two levels, you can use this time productively to build your understanding of investing principles by studying the lessons presented in the Level 3 and Level 4 columns. Then, when you have larger amounts to manage in the future, you won’t need a crash course—your knowledge and confidence levels will be up to the task!
Adapted from Jumpstart to Successful Investing by Austin Pryor. © 2001 Sound Mind Investing. SMI web members and print subscribers receive this 20 page bonus report in their Welcome package of materials. Click here to learn more about a Web Membership from Sound Mind Investing.
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Originally posted 1/2/2011
The American public generally has high expectations of religious organizations and churches. For the most part, donors and attendees recognize that enormous needs exist that the church is called upon to meet, and they usually want to respond adequately to help the church meet those needs. However, they also want to be assured that the funds they give, many times sacrificially, are being used effectively and that the church is actively involved in ministering in a way that is pleasing to the Lord. So, there can be no acceptable alternative to financial accountability.
Financial accountability is based on the principle of financial stewardship. A steward is one who occupies the position of manager of the owner’s possessions. He or she is required to exercise responsible care over funds and assets entrusted to him or her.
Few stewards attain the position of honor and trustworthiness without submitting to a system of accountability, a system where clear explanations of all financial activity are detailed, recorded, and reported to donors, constituents, and/or attendees.
Because American tax laws provide special tax treatment of churches and religious organizations, churches are being, at the very least, deficient if not deceptive if they don’t fully disclose all financial actions and transactions.
Several organizations provide leadership and counsel in the area of financial accountability for churches and Christian nonprofit organizations. The Evangelical Council for Financial Accountability (ECFA) has established standards to regulate proper systems of accounting, board operations, disclosure of finances, and fair treatment of donors.
The importance of a church having an active board cannot be over emphasized.
Whereas neglect of financial accountability by a church board can lead to suspicion and mistrust, active involvement protects the integrity of the church, its leadership, and its objectives and ensures adherence of policies mandated by the board.
A church board should meet at least semiannually but preferably monthly. Meetings should be more than listening to the pastor’s or board chairperson’s reports and rubberstamping his or her recommendations.
ECFA recommends a church board of no less than five people, none of whom are staff members and/or department heads (except for the senior pastor who is generally recognized as a member in standing of the church board and all church committees, departments, and ministries) or related to each other by blood or marriage.
The actions of the church board should be recorded in detail by written minutes. The minutes are then to be signed and dated by the board secretary and distributed to all members within a week after the meeting concludes. These minutes should be read at the next board meeting and approved as read or as corrected by the board. The actions, responsibilities, authority, and functions of the church board can be greatly diversified from church to church.
In general, all church boards are responsible for approval and revision of church administrative and/or legislative policy; serving as the church’s administrator of financial accountability; authorizing an annual independent audit of the church’s financial actions and transactions; authorizing the church’s operating budget; authorizing any major church acquisitions (property, equipment, assets); and reviewing, revising, and/or authorizing the senior pastor’s compensation package.
Day after day, thousands of church employees and staff personnel work tirelessly and selflessly to fulfill the church’s obligations as established by Jesus, only to find many within the community casting suspicions on them due to the highly publicized mismanagement and deceptions of a few.
By establishing and submitting to a system of financial accountability, pastors, staff members, and churches can eliminate unnecessary suspicion of financial mismanagement and mistrust.
Originally Posted January 2, 2011
Originally posted at Christian Post July 29, 2016.
Dear Chuck,
I’ve read your book The Worst Financial Mistakes in the Bible, and heard you speak when you visited my church in Brazil. I’ve come across a situation that made me wonder what you and the Bible might think of Multi-level Marketing (MLM or network marketing). Several friends have approached me with opportunities, but so far I have declined. My wife and I have read about it a lot more since we were first approached. We’ve even read Robert Kiyosaki’s The Business of the 21st Century where he recommends MLM, but what do you think? I really would appreciate any advice you can provide.
Friends in Brazil
Dear Friends,
Greetings from America, and thank you for reaching out with such a great question. The answer is complex and my honest answer runs the risk of offending some people, but in my experience, not all MLM opportunities are created equal, and that comes directly from the U.S. Government. In fact, I find many of the MLM opportunities very troubling.
Consider this: according to the Federal Trade Commission:
“In multilevel or network marketing, individuals sell products to the public — often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit. Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s probably not. It could be a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money. If you’re considering buying into a multilevel marketing plan, get the details.”
Many people are engaged in MLM businesses these days, selling everything from cosmetics, health boosters, books, home décor, clothes, candles, hand bags and almost every kind of product you can imagine. And I know that I am not the only one whose family has been invited to home parties of all kinds to look over the products or recruited to join a sales team network.
Trying to build a network of people under you, who pay to join the team and pay you a percentage of their sales is what can make such businesses a pyramid scheme, but not in all cases. The warning sign is when the person at the top is primarily getting a percentage of the fees paid by new members who join, while the people at the bottom pay to play for the hope of future team members who will join. That is illegal and frankly immoral because eventually there are no new people who can enter, and so many receive no benefit. This is more of a recruiting model than a true sales model.
When the top earners make their money primarily by sponsoring new people who buy overpriced products, without any sort of requirement for retail sales, it can also lead to a high failure rate. High failure rates can lead to a lot of people losing a lot of money. When MLM’s operate with a bad mix of owners, product and reward systems, the financial impact can be tremendous. Bottom line: If you find a company with a product you love, it’s a good sign. Just be sure the sales culture is a healthy one.
Are the friends who are trying to recruit you being honest about what they sell and how they make money? The Crown team and I discussed our various experiences when we had each been approached to join MLM networks.
One of our staff and her husband had been invited to a party, only to find that it was a training session for the business and they were not allowed to leave until it was over – a virtual kidnapping, she joked. Everyone had at least one story to tell about being lied to about the nature of a business they had been asked to join, including one whose family member was ostracized and attacked viciously on social media when expressing doubt about the health benefits of a product, so much so that the post on social media had to be shut down.
Years ago, I was invited to a friend’s home for dinner. He said he wanted to “offer me a job, working for his company.” He was a successful homebuilder and lived in a beautiful neighborhood. Following our nice dinner, he and his wife aggressively recruited me to join his multi-level marketing network. I felt he deceived me to get me to come to his home. I lost trust in his sincerity and integrity.
If a person is lying in their sales pitch, it’s a problem. One of my concerns with MLM business models is that too often, that seems to be integral in how new people are brought into a room.
There are subtle ways to lie as well, such as pretending to be interested in a friendship with someone and seeking them out only until they either join your team or have given a firm no. Clearly, in sales, a pleasant demeanor is important, but some network marketing companies try to teach people how to draw others in by faking a desire for friendship.
The Bible says they will know we are Christians by our love – and that love should be genuine and not ended if a sale is not in the works.
To me, you can tell something about the quality of the business and the character of a person when you say no. Every sales person knows the law of large numbers – the fact that to make a sale, you make a lot of calls, hearing many no’s before that important yes.
I don’t fault anyone for making the recruitment pitch. A person who invites you to consider their products or join their team may have the best of intentions and a great item for sale. But if you are not interested, hopefully they also have the grace and maturity to move on without anger, without ending the friendship.
Have you looked into what others report about a product or company? There are good MLM companies and bad ones. Are they members of the DSA (Direct Selling Association)? Do your due diligence and look into what is said about any company you are thinking of joining, any products you are thinking of selling and any person you are thinking of working with or for, and be very skeptical about rosy projections of huge income potential. All companies are required to provide an income disclosure statement that shows the income earned by members of their organization at the various levels. Those who enter an MLM business because they love the product and enjoy the association do fine. Those who enter to build a business with income potential need to realize that just like any business it is very difficult and can require years of hard work. If you enter thinking this is a “get rich quick” idea you will be disappointed. The Bible warns against being motivated by or eager to “get rich”. You should only consider joining if you like the people and can sincerely sell the product to the public.
It is easy to spend money and generally hard to make it, and frankly, the Bible makes that clear, noting in Proverbs 13:11, “Dishonest money dwindles away, but whoever gathers money little by little makes it grow.”
I would also encourage you to take a free MoneyLife Indicator assessment to better understand your attitudes toward money and how you use it, and to compare that with what God recommends in scripture. When our goals are to use resources as God commands and to give an honest day’s work, an MLM business could be a good thing. But take your time and do your homework before saying yes.
