Archive for May, 2007

Security in financial decisions

May 31, 2007

I’m a risk-taker. I’m also a numbers nut, so often times I am drawn to the financial solution which generates or saves the most money (the optimal solution).

Recently, however, I’ve been considering the value of safety and security when making financial decisions. Here’s an example of my old reasoning: would I rather pay a loan down quickly in chunks or save for future expenses and slowly work down the loan? Well, the ambitious side of me wants to work hard, eat rice, and put every ounce of money towards paying off the loan within a year or a few months, savings nothing or little for a rainy day. Now I’m seeing the lack of balance in that argument.

Whenever considering budgets, it’s important to think slowly. A steady diet of paying off bills and saving for the future is a far superior mentality to the one into which I often fall. Build a strategy that prevents that worst case scenario (losing your house, losing your car, not paying bills on time). If you haven’t thought about it yet, let me tell you that insurance is a losing bet. You’re wagering that you won’t have an accident, but if you do, they’ll cover it (or most of it). But, it’s not a break-even gamble – they add a little extra to run their business and make a profit. So, should we stop buying insurance? No, of course not. Sure, we lose a little in the long-run, but we prevent that rare total loss event from ever occurring.

Here’s another, more simplistic example. You’re on Deal or No Deal. There are two briefcases left: one contains the million dollars, and the other contains one penny. The creepy guy in the booth offers you $300,000. Should you take it? Mathematically, you shouldn’t, because the pay-off from moving forward is $500,000 on average. You win half the time; you lose half the time. But, consider it from a security stand-point. If you take the bribe, you get $300,000 and change your life. If you don’t take it, you win half the time and change your life, and you lose half the time and don’t change your life. By taking the bribe, you change your life 100% of the time. I hope this illustration is transferable enough to your monthly budget. The point is to make decisions that guarantee financial success and prevent that total loss situation.

Make sure you have found a prayed-over peace for where your money is going. If the unexpected happened, do you feel confident in your ability to recover and keep pressing forward? Are you setting yourself up for success even if it means sacrificing a little of that optimal/ideal wealth? Be encouraged by what God has entrusted to you, and rejoice in both paying bills and growing savings.

Back in Whitehall

May 30, 2007

I haven’t lived in Whitehall really for the past four years. I spent the Summer after my freshman year working here at the local Panera, but I haven’t been home for more than two weeks since.

Sorry for not posting in a while. I’m glad to see that WordPress is now over 1 million blogs. Go team!

I’m doing my usual web-design-ish work at my Dad’s office. This is great, because I can talk to him throughout the day. I also get to have an office to contain my work life. I’m excited to spend so much time with my Dad. We’ve changed so much in the past five years; we need to get reacquainted.

I miss Emily already. It’s going to be a long long LONG Summer in this respect.

I’ve been thinking about carving a chess set this Summer with my Dad’s tools. This might be another hair-brained scheme that will disappear after a few weeks, but I’m optimistic as usual.

SPENCE AND BETH ARE MARRIED! Congratulations! What a beautiful wedding, too.

Call me an alumn!

May 21, 2007

Take that Penn State. I finally beat you.

With the degree in hand and all the loose ends tied, I’m feeling good. The Eberly College of Science like most hosts its commencement ceremony in the BJC. I never questioned the hoods and robes before, but now I know where it all came from. I felt like I was in a Harry Potter film.

And, the big surprise of the weekend…graduation gifts!!! Having not graduated last year and sort of forgetting how big a deal it is, I completely forgot about them; I didn’t really feel like they were necessary. What an unexpected surprise, and I will certainly need to pray over it as most of it was money. It will probably go to upcoming expenses (wedding/car/furniture) or towards paying down some of my loans early. Sorry if this is too much information or I’ve been rambling about this, but I just feel shocked and blessed by this windfall.

Looking ahead: buying a home

May 18, 2007

Recently I’ve been thinking about real estate from an investment stand-point. Our first home is probably two or three years away, but I can’t help but think about it now. Thinking about it now, though, will probably help us plan our savings and investments for these upcoming years. Basically, I’m wondering what emphasis should be put on our first house as an investment and what emphasis should be put on mutual fund investments and the like? I hope to explore this further and share my findings.

As a start I found this, which tries to compare real estate investments to stock market investments. It admits this comparison is practically impossible to make, because real estate transactions aren’t centralized like those of the stock market. Also, tax breaks on real estate and the simple ability to live in your home rent free also cannot be fully taken into account.

What does this article say to me (and mean to us)? …take this with a grain of salt, because I’m no expert.

When you buy your first home, consider that a long-term safe investment. Real estate historically has dropped at most 5% in any one year, while a notable stock market decrease could sink your investment 20%. And, apart from raising a family and having a place to call your home, you receive dividends in the form of free rent every month by owning a home.

Real estate, however, averages only a 6-7% appreciation per year, which is large enough to beat inflation, but doesn’t quite compare to the average 8-10% conservative experts say the market has been returning. The article above actually compares real estate and the stock market over the past 25 years, and while “home sale prices increased 247%[,]…the S&P 500 shot up more than 1,000%.”

So, if the stock market outperforms real estate in this way, should you buy real estate besides your home as an investment? Hopefully we’ll explore this question together in future posts.

Noah found favor in the eyes of the LORD

May 14, 2007

I’ve been learning a lot about the relationship part of relating to God. A few weeks ago I actually felt like we were talking back and forth by the way He orchestrated songs, tv shows,…just about everything, to tell me what He wanted to teach me. He rocked me.

Check this out: Genesis 6:6

The LORD was grieved that he had made man on the earth, and his heart was filled with pain.

Sometimes I picture God not as a friend or father that I can hurt but as a line that I am either on the right or wrong side of. It’s amazing that He speaks into our lives and cares deeply about how we think and act. Right before the flood, God was grieved by His creation, but something pretty remarkable happened: Genesis 6:8

But Noah found favor in the eyes of the LORD.

Noah’s actions and desires found favor in His eyes. He wasn’t perfect, but “was a righteous man, blameless among the people of his time, and he walked with God.” God really is a compassionate friend to us and delights in our victories.

Personality Test

May 14, 2007

I just took the Jung Typology Test as part of our pre-marriage counseling. I’m an ENFJ (Extraverted-22, Intuitive-25, Feeling-38, Judging-11) known as the Teacher. The personality portraits described me very well, too. ENFJ’s see the big picture and think abstractly. They often serve others while ignoring themselves to do so. ENFJ’s also are hurt easily by less sensitive people (while I hate to admit it, this describes me – I can probably knock you out, though, so I don’t really feel that girly).

Psychology is fun!

Crazy idea

May 12, 2007

This Summer I’ll be living with my Dad back home. I’ll basically be working with him in his office (doing my web-design stuff there) and hanging out with friends and family. I’ll be making trips, of course, to see Emily, and I’d like to visit the VA/MD/NJ folks at least once over the three months.

I got a crazy idea the other day: somehow earn an extra $1,000 over the Summer.

This is completely arbitrary, and I have no idea how I’m going to do it, but I later realized that $1,000 is often recommended as an initial emergency fund savings for people getting out of debt. So, I wonder how hard it is to raise the extra money (ok, it’s not completely the same, because it’s not coming out of my paycheck at all).

The creative juices are flowing, and I think I’m going to make a $1,000 Super Savings Spectacular to put on this blog.

Compound Interest

May 9, 2007

Compound interest definitely should excite the finance neophyte (good word, huh?). I would highly recommend checking out the Lazy Man and Money blog as he’s an excellent teacher. Right now he’s in the middle of his Compound Interest Week, so each day he’ll post a new section on a different aspect of compound interest.

Today he posted on online high-yield savings accounts. As he notes today, when considering the decaying affect of inflation, these accounts don’t do much to grow your wealth (the ING orange savings account only grows your deposits approximately 1.4% per year in purchasing power). But, I would say it’s almost essential to put your short-term savings in one of these accounts, because they are secure, return a guaranteed percentage back to you, and are liquid enough to pull for emergencies.

So, keep about $1000 in your checking for dire emergencies, but after that keep all other short-term savings in a high-yield savings account to preserve that wealth whether it be your three-month emergency savings, savings for upcoming holiday gifts, or savings for slightly bigger ticket items such as TVs (even bigger ticket items would probably fall into long-term savings and should be put into mutual funds or similar types of investments).

Prayer for my Dad

May 9, 2007

Father God,

Prepare my Dad’s heart. Make this upcoming Summer a blessing to him. Awaken inside him something that yearns for You. Reveal Yourself in beautiful ways, and show him that You love him through everything.

Prepare me. Strengthen me, show me the opportunities You have created, and embolden me. Allow me to both teach and listen.

I know You have something powerful planned for this Summer. Help me to discover it and to move with it.

Thank You for Your blessings; daily You give abundantly to me, I’ve noticed. Lamentations 3:23.

Amen

PVCC Youth Retreat

May 5, 2007

Tim called me on Thursday about leading worship with him today. I had a blast. Worship was good, but hanging out with his kids was hilarious. I love that age, and I feel like all I want to do is talk to them, because whatever they’re going through, I’ve gone through an amplified version at college, and I just HAVE to share my wisdom with them (say what you want as whether I actually have wisdom to share or not, but that’s how I feel). No point with this post, I’m just pumped up.