Tag Archives: Debt

Sound Mind Investing

You may have noticed (but probably not) that there’s one “ad” on this blog to a company named “Sound Mind Investing”. It’s been there for a few years now and one that, despite my general disdain for ads, it’s one that I feel very good about having on this site. Some of you may know from various Facebook statuses or my previous posts on this blog that Sound Mind Investing (SMI) changed my life many years ago. It helped me get my financial house in order, and taught me how to give, save and spend appropriately and without any guilt. I love SMI and what they stand for so rather than just a passive ad on the side, I wanted to write a little more about them and how you can benefit from their services too.

Take a look at their mission statement:

Sound Mind Investing exists to help individuals understand and apply Biblically-based principles for making spending and investing decisions in order that:

  • their future financial security would be strengthened, and
  • their giving to worldwide missionary efforts for the cause of Christ would accelerate.
In other words, we want to help you have more so you can give more.

I have been a faithful subscriber to their newsletter since 2008 and my only regret was not discovering them sooner. As a subscriber to their monthly newsletter, SMI gives their monthly investment suggestions and I simply follow them. Not every pick has been a winner. I recall my first year with them and I lost something to the tune of 24% of my portfolio (but the Dow and S&P 500 lost an average of 38% for comparison). But I never panicked and was actually very excited about that because I had 40 some years for that investment to bounce back and because I believed and was taught the principle of “dollar cost averaging” through their handbook.

Which brings me to the other offering that SMI provides that I have found to be invaluable in every way: the SMI Handbook. Being new to finances back in my early twenties, I picked this book up off a recommendation from a friend and decided to go cover to cover in a week. (Something I don’t actually recommend.) I was young and hungry, so I devoured it, learning everything from how to save to mutual funds, to the differences between stocks and bonds, from asset allocations to understanding mortgages. Whenever I show people the book, they immediately get intimidated. Not going to lie, it is a thick read with lots and lots of pages. What I try to remind people and encourage them is to treat this as a textbook and handbook, not a novel to be read straight through. From time to time I still pick the book off from my bookshelf to scan a few sections to brush up on topics that I need or want a refresher for.

But what good is a financial newsletter recommendation without some facts? So just how good have their picks been? Since I started investing and following their picks in 2008, I have seen my portfolio grow 33% overall. But more importantly for me and TJ is that our financial house is in order and we have NEVER fought about money during our marriage. Never. We have no debt (minus a mortgage). No car payments. No student loans. We have an emergency fund. We are saving for “retirement” so that we can be self funded ministers of the Gospel in our latter years. We have college savings for our children so that they can graduate from college without the burden of debt. But the best part of all? Our giving has increased every year too. Yes, we have been able to save more but the best thing for us has been enabling ourselves to give more to the causes that we are passionate about.

For anyone who is interested in subscribing, I would highly recommend you do the web option for $9.95/month. You get the digital version of their newsletter via email AND you get full access to their website with other helpful articles and readings over various financial topics. The print only version is $79/annually and the dual version (which gets you both the printed newsletters and web access) is $79/annually plus $4.95/month.

Would you like your financial house in order? Would you like to be worry free about the future and your “retirement years? Would you like to increase and give to all the places where God is asking you to?

If you answered “yes” to the previous questions, why not give SMI a try?

Mind Over Money

The more I dive into personal finances, the more I realize that it doesn’t have much to do with numbers, graphs, cash flow or even percentages. In fact, the more I study and read about it the more I’m learning that personal finances has more to do with the human psychological reaction to money than the numbers themselves. Everybody that can add and subtract will tell you that if you had $100, you should either spend $100 or less than that. If you are aiming to save for something, then spending less than $100 would be the solution. But despite the knowledge and understanding of mathematics, the majority of Americans today spend more than they earn and continue to do so at an alarming rate. Why? Rational thinking is somehow skewed when money is involved and we have extreme psychological reactions to the idea of money.

The most wildly prominent personal finance expert, Dave Ramsey is proof of that. I’ve been studying Dave Ramsey for the past year and by and large, I agree with much of what he has to say. Where I tend to disagree are his reasons behind saving money (building wealth) and I believe he over exaggerates his numbers (12% return on investment in the market every year is high by most standards). I have nothing against wealth, but Dave Ramsey pushes that you could be a multimillionaire by the time you retire – a bit too much for my tastes. But his biggest critics will overwhelmingly point out that the most successful technique that he teaches, the Debt Snowball, is not the best way to get out of debt. Their argument points to the fact that paying off your highest interest debt first will prove to the more financially prudent choice and save you the most money in the end whereas the Debt Snowball method pushes you to pay off your debts from smallest to biggest, regardless of your interest rate.

What’s funny about these “critics” is that hardly any of them have two best selling books, a national syndicated radio show or even somebody who knows their name. Even though the Debt Snowball will cost you some extra dollars to get out of debt, it has been proven time and time again that, in the end, people are out of debt period. The reason for its success lies in the fact that it plays on the human emotion. When you see that annoying little gas card paid off, something changes inside of you. Psychologically, you now believe you can get yourself over this mountain of debt and never return to it ever again because you got a small win on your side. It’s the same reason why coaches camp out on “small victories” or on any positives that they can. They understand that the psyche of the team will determine the success and failure for the season ahead. Humans, as shocking as it may seem, are not rational beings.

I got into credit card debt back in college because I was not rational. I spent some time today thinking through my behavior and emotions as I began charging everything to my Visa despite knowing full well that I had no way of paying for it when my bill came. Why did I spend so much? Because I felt powerful and successful being able to pull out a Platinum Card and buy anything my heart desired. (Who on earth gives a college student with no job a platinum card anyway?) As I think back, I now realize that I was put in a very difficult situation to begin with. First, I had very little financial literacy and knowledge. Second, I surrounded myself with fairly affluent buddies. Third, I watched a lot of TV. The third one is in the discussion because it acted as my outlet to the “world”. I was heavily exposed to advertising and to products that they spun from a “want” to a “need” which I could not resist.

For the longest time I didn’t think advertising worked on me, and that was as foolish as me saying that I can save myself from my sins (sans the blasphemy). Then, I thought back to the time when TJ and I were just newly married and had moved into our little apartment in Austin and I realized our year there was the time when I had the least desire for material possessions. We had no TV, so I wasn’t exposed to any advertising. Any TV I did watch, was at a buddy’s house on DVR, so we’d just skip through commercials. My web browser (Firefox) is set to where all ads are blocked. I haven’t seen an ad on the internet for so long that I forgot how annoying those pop up ads used to be. I’ve never even seen an ad on Facebook, ever. And everyone tells me they are everywhere!

You can argue that we had very little money at that time so we couldn’t spend anything; however, I had very little money when I was in college but I still spent anyway. Recently TJ has been into the couponing game. Every Sunday she picks up a copy of the paper and proceeds to search for the good coupons that we can use and discards the rest. I’ve been picking through the ads, seeing if there are any good deals on items that we could need. And guess what? My desire to purchase who knows what, increased! Now, I have my eye on netbooks, TVs and gadgets for the house. All of that is ridiculous seeing I have  perfectly good laptop, a good TV and I never really need gadgets anyway. I asked TJ tonight to make sure I stop looking through the paper ads again.

I got myself out of credit card debt not because I finally understood how the interest was killing me. I got out of there because I was tired of living with the shame and guilt of it. I got out of there because I had mentally decided that I was going to live a more simpler lifestyle and within my means. I got out of there because I was convicted of my wastefulness and my carelessness with Kingdom resources. All those reasons started first with God, then me making an emotional and mental decision to never go down that path again. Personal finance is not just understanding numbers and being good at math. In fact, it has more to do with the understanding of the human psyche than anything else.