Monthly Archives: November 2013

Wealthiest by Definition, Poorest by Default

How did the United States, the world’s richest and wealthiest nation, closed down its government and come to the brink of a catastrophic default on its debt that could send shockwaves through the fragile world economy? Relax. The worst is yet to come.

US DEBT shot up to reach more than 100 per cent of gross domestic, Treasury figures showed. The new borrowing took total public debt to US$17 trillion, and putting it in a league with highly indebted countries like Greece and Spain.

Public debt subject to the official debt limit – a slightly tighter definition – was US$17 trillion, rising from the previous official cap of US$14.29 trillion a year earlier. Treasury had used extraordinary measures to hold under the cap, while politicians battled over it and over   addressing the country’s bloating deficit. The official limit was hiked US$400 billion and will be increased in stages over the next 18 months.

Looking at these statistics, it is not hard to see why debt generates so much news and discussions. The average American family devotes at least 25 percent, some as much as 50 percent, of its spendable income to paying outstanding debts. And that’s during sound economic growth. In financially difficult times, indebtedness can imperil our survival. Unfortunately, indebtedness has become a pillar of America’s financial framework. Both nationally and domestically. Greed will bring about global financial disaster – on a Biblical scale.

Dire economic downturns — including the worst since the Great Depression of   the 1930s — giant tax cuts, costly wars in Iraq and Afghanistan, and a pricey new health program all helped sour Washington’s fiscal picture. Or, as President Barack Obama put it literally in a speech  “For the last decade, we’ve spent more money than we took in.” Nervous Americans are bombarding their financial advisers with questions about what to   do if the U.S. government defaults on its debt. Although we do not expect the stalemate to result in a temporary default, we now see a more than 50% chance that US sovereign debt will be downgraded by the rating agencies in the coming months. How will America pay its debt? Eventually, the US government will shut down. It’s a matter of when, not if.

When this happens, it will send shock waves across the U.S. economy and the world that will hit consumers and businesses, both struggling through a weak global economic recovery. The debt ceiling debate already is weighing on the economy. The bankers says credit is an important part of your financial identity. the more credit you have, the better your lifestyle can be. “Anything is within your grasp if you can simply get the payments low enough.” Nothing can be further than the truth.

The Bible discourages debt, individually and nationally, because debt presumes upon the future – and on God. If you are concerned about economic uncertainty, the last thing you want to do is to take anything about the future for granted. In fact, debt is a curse. If you go into debt, you are obligated to repay – yet you take on that obligation without knowing for certain whether you will be able to repay or not. Second, debt may deny Him an opportunity to work.

If the financial forecast calls for difficult times ahead, you should work to get rid of all debt. To do otherwise is to presume on the future.

Can USA continue to meet its financial obligations. No way. Ratings agencies have warned the country to reduce its debt-to-GDP ratio quickly   or facing losing its coveted AAA debt rating. That is just the tip of the iceberg. The runaway debt is beyond hope. The entire nation will eventually go over the fiscal cliff. What matters now is: Can  you continue to meet your financial obligations – car payments, credit card bills, housing instalment loans, and the like – if you lost your job? If there is hyperinflation? If the dollar collapses? We now have to view debt through the window of possibly one of the greatest financial crisis since the Great Depression. We have to find answers that will enable you to approach debt with a proper perspective.

Debt is not something that seems to really bother buyers in good times. Yet borrowing money has its price – and it is a cost far greater than you realize. Anytime you use credit to borrow money, you pre-commit your future income. The effects of such obligations can range from simple inconvenience to financial devastation. Many are now paying that price today.

There are two simple principles to keep in mind if you want to work to strengthen your financial position. First, you must increase your financial flexibility, and second, you must reduce your financial constraints. If borrowing money limits financial flexibility, the absence of debt makes for a lifestyle of financial freedom and opportunity. With no, or even low, financial pre-commitments, you will be at liberty to pursue your goals and desires.

The freedom from the financial obligations of debt can spell all the difference in how effectively personal resources can be used by God. Getting rid of any debt, whether it is large home mortgage or a relatively small credit card balance, is a guaranteed profitable investment.

How to get out of debt? Whether your  debt is due to unwise overspending or an unexpected calamity, one thing is certain: Getting out of debt is always harder than getting in. The most effective way to get out of debt is to cut your spending. Establish a realistic repayment plan and discipline yourself to follow it. Beware of over-ambition. Once your strategy is in place, all you need is the  self-discipline to make it work.

Ultimately, it all boils down to 3 simple rules in financial planning: First, spend less than you earn. Second, avoid the use of debt. And lastly, save up for financial uncertainties.

The Bible does show many ways to overcome any financial crisis. Many of these principles are laid out in our successful course, the Scriptural Financial Freedom series. To learn more, you can  download the Small Groups kit from our Store.

Getting ready for yet another worldwide financial meltdown

Housing crisis. Credit-rating cuts. Sequestration. Debt ceiling. Government shutdown. Is the  worst over? Or is there a BIG one coming? Seems like financial recessions are becoming like birth pangs. Mass layoffs, inflation, savings wiped out, homes lost. People around the world, traders or not, are certainly wondering about what the future holds. One thing is certain about the economy, there will always be uncertainties. Here are a few financial principles that helps to ease the pain – and maybe beat it.

First thing you got to do is get out of debt. Debt and lifestyle go hand in hand in American society. When you use debt to fund a consumptive lifestyle, not only do you have the consumptive lifestyle   working against you financially, but you also have the additional burden of debt   working against you financially. A passage in Deuteronomy actually implies that getting into debt is a curse. Whereas to be blessed is to be free from debt. Read chapter 28:12, and you’ll get the picture.

Avoiding the use of debt is incredibly difficult because the promotion of credit card use has made credit so easy to obtain and the temptation to use credit or debt so overwhelmingly difficult to resist. Credit card companies are spending hundreds of billions of dollars to entice each of us to spend and to use credit with cards that make spending “easier”, and those amounts are a pittance when compared to additional advertising dollars of retailers. Lending institutions do not want people to pay their credit card debts each month   because of the 18% to 24% interest that is earned on that credit card debt.

As sure as the sun rises, there will be another credit crisis. How do we know? It’s because the entire financial fiat system is based on credit! When is it coming? No doubt, there are plenty of warnings, both in the secular and Christian circles. If you were to read the book of Revelations, there’s one thing that you’ll realise: things are going to get worse. If you are a mother, you’ll understand the meaning of birth pangs mentioned in Matthew. It just gonna get meaner and faster.

For centuries, many investors have slept comfortably in the knowledge that if they diversify their assets wisely among stocks, bonds, commodities and cash, they will do well enough over the long term. But is this a universal principle, or a man-made strategy?

The recent boom and bust of the global economy over the last decade, from which many portfolios are still creeping up, not   only left investors questioning their strategy for risk, but helped shine  the   spotlight on the importance of diversifying.

A little known statement tucked away in a little known part of scripture unveils that this is indeed a universal strategy for long-term investing. “Divide   your portion to seven, or even eight, for you do not know what misfortune may   occur on the earth.” says Eccl   11:2.

Have you heard of stories about people earning millions and you thought they had it all made, when suddenly they are declared bankrupt? And you wonder to yourself   “what happen?”. A typical mistake is to dump all your money into an investment and then when it sours up, you lose everything. Failure to diversify.

There are those who mock diversification and almost treating this concept with contempt.   But what does the Bible say? Ecclesiastes 11:2. Diversify.

Diversification is spreading your money among many difference types of investment. When you do   this, you lower your overall risk. There are many ways to diversify. You can diversify   by spreading your assets, diversify with different investment styles, diversify   by geography, and so on and so forth. I will go into some details.

Diversification by assets can be in the form of stocks, real estate, bonds, cash, and even precious   metal like gold and silver. However, diversification does not mean you jump into   it blindly. Do your research first. Diversification by investment styles can be in the form of value-driven investment, market orientated   investment, and small capitalization investment.

Real estate represents an investment that can benefit from geographical diversification.   International investments comprise another asset class that could and should be   invested geographically. Emerging markets may offer excellent growth potential.

Bottom Line

According to a banker in the banking industry, a person who uses his or her credit card for convenience sake and pays the debt off each month is known as a “deadbeat”. So the first step is the get out of debt. Secondly, no matter how to budget your finances, remember to diversify. That because calamities and misfortunes can occur on the earth anytime.

The Bible does show many ways to overcome any financial crisis. Many of these principles are laid out in our successful course, the Scriptural Financial Freedom series. To learn more, you can  download the Small Groups kit.