Tag Archives: mortgage

Go forth and…. multiply?

Starting a new family is tough these days – financially. When considering the purchase of a home, we should apply these criteria as for undertaking any debt loan. First of all, does it make economic sense to incur a home loan? To determine this, there   are two rules to follow:

Women's Buying Power

The cost to borrow (after-tax interest) must be less than the economic benefit received (interest, yield, and/or growth in value). Rule two: there should be a guaranteed way of repayment.

Secondly, if you’re married, are both spouses free from any anxiety regarding this home loan? The principle indicates that there must be unity between the spouses. Can the home loan be undertaken with peace of mind? If you experience a lack of peace when you picture yourself taking on this home loan, do not enter into the debt.

Thirdly, ask yourself, what personal goals and values am I meeting with this home loan that can be met in no other way?

These criteria are practical, pragmatic, and biblical and should be applied unemotionally to every debt loan opportunity. The counsel to young couples who   are considering the purchase of a home or those intending to purchase a new home, is never to become so attached to the home   that they could not give it up if the debt could not be paid. Jobs are not nearly   as secure today as they were in the past. Inflation will certainly go up,   and fixed low interest rates may very well be a thing of the past.

The psychological burden of home mortgage debt is more severe than most people think,   especially if a woman whose centre of influence and security is in her home is involved. Studies have shown that having mortgage debt is a stressful factor and   that degree of stress relates to the amount of the mortgage.

The question of whether or not to pay off the mortgage, if that is an option, is really an economic, psychological decision. Economically, it may not make sense to pay off a low interest rate mortgage, even if one has the funds to do so. However,   psychologically, it may be, by far, the best course. Again, I would remind you   that finances are nothing more than a resource to accomplish other goals and objectives – they are never an end in themselves. Therefore, even if it does not make economic sense to pay off a mortgage, there may be higher priority goals and objectives that need to be met. Money then becomes merely the resource to meet those goals. The decision does not have to be always an economic one. That counsel is, of course, good for all decisions.

But we’re not just talking about having children, raising kids. How about multiplying your finances? There is an interesting phenomenon in money management that makes it seem as though money is growing on trees. It’s called  interest compounding.

Compounding is when interest is added to the principal, so that from that moment on, the interest that has been added also itself earns interest. This addition of interest to the   principal is called compounding (i.e. the interest is compounded). The principal amount, for example, may have its interest compounded every month: in this case, $100 initial principal and 1% interest per month would have a balance   of $101 at the end of the first month, $102.01 at the end of the second month, and so on.

It’s interesting to realize that this principle has its source found in His Word. Dishonest money dwindles away, but he who gathers money little by little makes it grow. Did   you catch the basic concept there? Gather money little by little, and thereby make it grow. By the way, did you know that if you invest any amount into a deposit at 6% interest, your principal amount will double in 12 years? In other words, your $20,000 will double to $40,000 in 12 years. Your $100,000 will double to $200,00 in 12 years.

That’s   precisely what compounding does. Whether you start with $100 or $1000 or $10,000 or more, the results over time invested at a reasonable rate can be phenomenal. The factors in compounding are time, amount and interest rate. But the most important key to compounding is being debt free. That’s because compounding will work against you the moment you take a loan.

As managers, we’re charged to manage His resources as efficiently and effectively as possible. The story of the talents which we read earlier, indicates that investing money wisely – and reaping the benefits financially – is a practice He encourages.

And that makes the magic of compounding a concept that’s crucial for us to understand… put to work, and it can help produce a positive cash flow.

A positive cash flow margin is also absolutely essential if you are to accomplish either long-term or short-term financial goals. Without a cash flow margin, you cannot accumulate in order to meet long-term goals. In addition, each of the four other short-term goals – tax reduction, increased giving, debt reduction, and increased living expense – can only be met by having a positive cash flow.

In order to reduce taxes, either additional expenditures must be made for such things   as increased giving, IRA’s, tax sheltered investments, and the like, or income must be reduced. Either increased deductible expenses or reduced income will result in tax reduction. However, both require that there be a positive cash flow to begin the process.

Without a positive cash flow, increased giving is not an option. Once there is a positive   cash flow, however, and it is used to increase giving, that decision results in   decreased taxes because charitable contributions are deductible. There are many people who plan all of their tax reduction through giving. However, they had to have a cash flow margin to begin the process.

Obviously, if you want to reduce your debt principle payments, you must have the excess cash to do so. If you are “going in the hole” by overspending, then there is no way to get out of debt until you generate a positive cash flow. After debt retirement that extra amount can be used to reduce debt further, which in turn increases the cash flow.

The first key to riding any financial crisis is to be debt free. The only absolute way to become debt-free, in the first place, is to have a financial   plan prepared at the beginning of each year that does not allow for the use of debt, and that you will stick to through self-discipline.

The major problem most people face is how to get out of the debt that they are already   in. there are only two ways to get out of debt after making the decision to avoid the use of debt: Examine the assets you have to see which ones could be sold in order to reduce debt; and in the absence of assets to sell to eliminate debt, set up a repayment schedule and strictly adhere to it.

To learn more, you can  download the Financial Freedom Small Groups kit.

Long term investment: Gold vs. property

Appearing on CNBC, former Congressman Ron Paul warned that if the US continues on its current course, the dollar will collapse, and gold will literally be priceless.

“Eventually, if we’re not careful, it will go to infinity, because the dollar will collapse totally,” Paul said on CNBC.com’s Futures Now.

“As long as we have excessive spending, and excessive computerized money, we are going to see gold go up,” Paul urged, noting that as the value of the dollar is destroyed, everything measured against dollars will increase in value.

Paul added that recent drops in gold prices do not factor into the long term outlook. Apparently, he is not alone. Peter Schiff is the icon of a gold bug.

Schiff, 50, isn’t fazed that gold is heading for its first annual price drop in 13 years, or that Goldman Sachs Group Inc. has called it a “slam-dunk sell.” He predicts bullion will reverse its 21 percent year-to-date decline and probably surge 52 percent to reach a record $2,000 an ounce within a year.

That’s just the beginning: Before President Barack Obama leaves office in 2017 the U.S. will default, the dollar will collapse, hyperinflation will strike and gold will skyrocket, he says.

“I’m waiting for the dollar crash, I’m waiting for the real crisis to hit that I know will benefit gold,” Schiff said Oct. 18 over lunch of spinach-and-beet salad and stewed rabbit in the sun room after the radio show. “The longer it takes, the longer I have to wait for that payday. But the longer it takes, the bigger that payday is going to be.”

To hold interest rates low, the Fed will have to keep buying bonds, which means printing more dollars, Schiff said. Foreign countries use them to buy U.S. bonds — in effect lending the U.S. more money to pay back what’s already owed. Governments such as China eventually will balk, Schiff said.

“The minute China tells America, ‘I want my money back, I don’t want to loan it you again, just give me the money,’ then we default,” Schiff said on the radio. “The sooner the Chinese do this the sooner we can start fixing our economy, because the longer they wait, the bigger our problems get.”

Renowned gold expert Jim Sinclair says financial calamity is just around the corner for America.  Sinclair contends, “We are facing the annihilation of currency.  We are facing the shift of America as the leading and most influential nation of the world to some form of banana republic. . . . If it wasn’t for food stamps, we would be facing long lines of people waiting for free food.”  For gold, everything hinges on the U.S. dollar, and Sinclair says, “I think the dollar gets hammered.  I believe we are headed for hyperinflation.”  One of the many black swans, according to Sinclair, is the possible abandonment of the U.S. dollar by Saudi Arabia.  If Saudi Arabia stopped selling oil only in U.S. dollars, what would that do to the buying power of the buck?  Sinclair says gasoline would be “$10 a gallon very soon, without a doubt.”

Sinclair predicts retirement funds and bank deposits are going to be taken by the government.  How much of your money could you lose?  Sinclair says, “In Cyprus, it was a total of 83%. . . . Cypress is the blueprint, and it’s what we are going to experience here in the United States.”  Jim Sinclair, who has just accepted the position as Chairman of the Advisory Board for the establishment of the Singapore Gold Exchange, says, “The exchange will trade physical gold only and not future gold. . . . You have to make delivery.”  Meaning, there will be no naked short selling or manipulation of this new market.  Sinclair says, “This will emancipate gold from the paper price.”  How high will gold go?  Sinclair predicts, by 2016, “Gold will be $3,200 to $3,500 an ounce.”  By 2020, Sinclair predicts, “Emancipated gold will be $50,000 per ounce.” 

Are these people right? Are they giving good advice? Maybe, but there’s just one problem. You can’t eat gold. In fact, gold is only used to hold the value that will be lost by the dollar.

What about property? Well, what about it? Perhaps, owning rural or agricultural producing property may be one of the best ways to survive and prosper during this period. Don’t forget, a total collapse will not just bring misery, it will bring anarchy, riots, and looting.

While such an event is bound to wreak havoc throughout the world and cause an economic depression that will be written about in future history books, there are a few things that people will still need to survive at the most basic level: water, energy and food.

In that sense, agriculture is depression proof… even for the type of super-depression the world is expecting.

To add to the bullish case for agriculture is pure demographics. The world population has gone up nearly 700% in the last century.  That is a lot of new mouths to feed, literally. That is really the only chart you need to see to make the case for rural or agriculture as a solid investment.

Farmland the world over is outpacing other real estate properties. For instance, in the United Kingdom, farmland is outpacing the price of prime central London property for the first time in 16 years.  Predictions submit that the average price of an acre could soon hit a new record soon there. And that is in the decaying United Kingdom.

But, all over the world, there is not much arable land on the market. People simply aren’t selling.  Owners hold onto arable land as a long-term investment, like precious metals.

After all, God did not promise Abraham gold. But He promised him land. For him and his descendants. The gold simply followed.

Before you take a housing loan

In the word mortgage, the mort- is from the Latin word mori (via old French “mort”) for death and -gage is from the sense of that word meaning a pledge to forfeit something of value if a debt is not repaid. So mortgage is literally a  “death pledge”.

For many decades, we have come to believe that owning a home is a God-given right. We are expected to begin our married life with a home, without realising it took our parents a lifetime to save for. Incidentally, during the last forty-five to fifty years, and especially the years 1960 to 1980, a home purchased with a fixed interest rate was the safest and surest way to build personal net worth and equity.

Beginning in 1983, however, the “rules of the game” changed; inflation slowed down and interest rates went up – a direct reversal of these two factors from the previous twenty years. It has taken a while for our society to recognize this, and even longer, as yet, accepted it.

When considering the purchase of a home, we should apply the same three criteria as for undertaking any debt. However, the economic criteria are very difficult to nail down in today’s economic environment. Even in the period 1960 to 1980, there was not a guaranteed way to pay the debt except for returning the home back to the lending institution.

Jobs are not nearly as secure today as they were in the past. Inflation is certainly not a sure thing, and fixed low interest rates may very well be a thing of the past.

The psychological burden of home mortgage debt is more severe than most people think, especially if a woman whose centre of influence and security is in her home is involved. Studies have shown that having mortgage debt is a stressful factor and that degree of stress relates to the amount of the mortgage.

When considering the purchase of a home, we should apply these three criteria as for undertaking any debt loan.

First of all, does it make economic sense to incur a home loan? To determine this, there are two rules to follow:

The cost to borrow (after-tax interest) must be less than the economic benefit received (interest, yield, and/or growth in value). Rule two: there should be a guaranteed way of repayment.

Secondly, if you’re married, are both spouses free from any anxiety regarding this home loan? The principle indicates that there must be unity between the spouses. Can the home loan be undertaken with peace of mind? If you experience a lack of peace when you picture yourself taking on this home loan, do not enter into the debt.

Thirdly, ask yourself, what personal goals and values am I meeting with this home loan that can be met in no other way?

These criteria are practical, pragmatic, and biblical and should be applied unemotionally to every debt loan opportunity. The counsel to young couples who   are considering the purchase of a home or those intending to purchase a new home, is never to become so attached to the home that they could not give it up if the debt could not be paid.

The question of whether or not to pay off the mortgage, if that is an option, is really an economic, psychological decision. Economically, it may not make sense to pay off a low interest rate mortgage, even if one has the funds to do so. However, psychologically, it may be, by far, the best course. Again, I would remind you   that finances are nothing more than a resource to accomplish other goals and objectives – they are never an end in themselves. Therefore, even if it does not make economic sense to pay off a mortgage, there may be higher priority goals and objectives that need to be met. Money then becomes merely the resource to meet those goals. The decision does not have to be always an economic one. That counsel is, of course, good for all decisions.

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.

Debt for breakfast

Yet another close call. Nervous Americans are bombarding their financial advisers with questions about what to do if the U.S. government eventually defaults on its debt some time in the future. The US has already lost its prestigious triple A credit rating for the first time in its history, a situation that could trigger chaos in the global markets and have a catastrophic impact on global economic growth in the working. The threat of another downgrade looms. Will it eventually default one day?

When this happens, it will send shock waves across the U.S. economy that will hit consumers and businesses, both struggling through a weak global economic recovery. The debt ceiling issue already is weighing on the economy, and will continue to have an impact for future financial decisions. Businesses around the globe will fold as the number one consumer in the world no longer has buying power.

The world says credit is an important part of your financial identity the more credit cards you have, the better your lifestyle can be. Anything is within your grasp if you can simply get the payments low enough.

The Bible discourages debt because it 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.

Debt has two primary dangers.

First, debt always presumes upon the future. 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. For instance, if Ron Blue had funded the start-up of his financial planning practice the “normal” way through a line of credit, he’s convinced he would have prevented Him from providing the necessary funds – as He miraculously did!

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.

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.

The nightmare of The American dream

While the economy may be seeing some signs of trouble, personal debt is stressing out a lot of Americans – according to a recent poll. In fact, according to the new Associated Press poll, about half of all  Americans say they suffer from debt-related stress. With the nation’s unemployment at 10%, many Americans say it’s tough to find work to pay off their credit cards and other bills.

Restaurants and shopping can burn a hole in your pocket. Spending is an expensive business for the average American. Movies, dinner dates, gifts etc. etc. These   are costly items. Try creative ways to limit your spending. Watching the stars.   Buying a cheap meal to the seaside or bring along a candlestick goes a long way in keeping your budget healthy.

Needless to say, the Bible discourages debt because it 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.

Debt has two primary dangers.

First, debt always presumes upon the future. 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. You may enter a relationship in debt!

Second, debt may deny Him an opportunity to work. If you are already in debt before starting a relationship, it becomes very difficult to move on.

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 – and that of your future spouse. When considering the purchase of a home, we should apply these three criteria as for undertaking any debt loan.

First   of all, does it make economic sense to incur a home loan? To determine this, there are two rules to follow:

The cost to borrow (after-tax interest) must be less than the economic benefit   received (interest, yield, and/or growth in value). Rule two: there should be a guaranteed way of repayment.

Secondly,   if you’re married, are both spouses free from any anxiety regarding this home loan? The principle indicates   that there must be unity between the spouses. Can the home loan be undertaken with peace of mind? If you experience   a lack of peace when you picture yourself taking on this home loan,  do not enter   into the debt.

Thirdly,   ask yourself, what personal goals and values am I meeting with this home loan   that can be met in no other way?

These criteria are practical, pragmatic, and biblical and should be applied   unemotionally to every debt loan opportunity. The counsel to young couples who are considering the purchase of a home or those intending to purchase a new home, is never to become so attached to the home   that they could not give it up if the debt could not be paid. Jobs are not nearly   as secure today as they were in the past. Inflation will certainly go up, and fixed low interest rates may very well be a thing of the past.

The psychological burden of home mortgage debt is more severe than most people think, especially if a woman whose centre of influence and security is in her home is   involved. Studies have shown that having mortgage debt is a stressful factor and   that degree of stress relates to the amount of the mortgage.

The question of whether or not to pay off the mortgage, if that is an option, is really   an economic, psychological decision. Economically, it may not make sense to pay off a low interest rate mortgage, even if one has the funds to do so. However,   psychologically, it may be, by far, the best course. Again, I would remind you   that finances are nothing more than a resource to accomplish other goals and objectives – they are never an end in themselves. Therefore, even if it does not make economic   sense to pay off a mortgage, there may be higher priority goals and objectives   that need to be met. Money then becomes merely the resource to meet those goals. The decision does not have to be always an economic one. That counsel is, of course,   good for all decisions.

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.