Crackerjack Greenback Prudent Advice for a Prosperous Future

December 29, 2008

Stop Driving Through Personal Finance Fog

Filed under: Goals,The Basics — Paul Williams @ Crackerjack Greenback @ 4:00 am

Through the thick fog. by redjar on Flickr       I had to drive through some thick fog Saturday night on my way to visit some friends. I realized I hate driving in fog (especially at night). Why is it so bad? Simply because you can’t see what’s ahead of you. It’s difficult to prepare for obstacles in the road, and you can’t see the potholes until you’ve already hit them.

       Trying to manage your finances without a good plan is a lot like driving in thick fog. If you don’t have a budget and track your spending, it can be very easy to spend too much money and forget about irregular expenses. If you don’t set specific goals for yourself, you have no destination. You’ll end up wherever the road happens to take you. While that can make for an exciting road trip, it’s not really the kind of thrill you want to have in your personal finances. Without a budget and clear goals, you can’t prepare very well for the obstacles ahead and you’ll often hit some big potholes that can send your finances reeling.

       Want to improve your finances next year? Focus on the basics first. Set some clear and specific goals, and figure out a realistic budget you can stick to. Then track your spending using whatever method works best for you. (The next logical step would be to build up an emergency fund. It’ll make smooth driving of those potholes I mentioned earlier.)

       These are not exceptionally difficult steps to take, but they do require time and commitment. Dedicate yourself to setting your financial goals, making a budget, and sticking to it. And stop driving through the fog!

December 28, 2008

Personal Finance Bible Study: Contentment (Part 8 of 12) – Practical Applications

Filed under: Contentment,Personal Finance Bible Study,Personal Finance in the Bible — Paul Williams @ Crackerjack Greenback @ 4:00 am

       Last Sunday, we started talking about practical applications when we take on God’s View of the World, Money, and our lives. How should we act and what should we do when we take on God’s View and live out His will? We’re continuing that discussion today.

       Without God’s View, we tend to worry—a lot. Even after we begin to fully follow Him, we still worry. Why do we worry? Because we haven’t begun to rely on God and trust in His goodness. But in Luke 12:22-31, Jesus tells us not to worry about worldly cares:

Do Not Worry

       22 Then Jesus said to his disciples: “Therefore I tell you, do not worry about your life, what you will eat; or about your body, what you will wear. 23 Life is more than food, and the body more than clothes. 24 Consider the ravens: They do not sow or reap, they have no storeroom or barn; yet God feeds them. And how much more valuable you are than birds! 25 Who of you by worrying can add a single hour to his life? 26 Since you cannot do this very little thing, why do you worry about the rest?

       27 “Consider how the lilies grow. They do not labor or spin. Yet I tell you, not even Solomon in all his splendor was dressed like one of these. 28 If that is how God clothes the grass of the field, which is here today, and tomorrow is thrown into the fire, how much more will he clothe you, O you of little faith! 29 And do not set your heart on what you will eat or drink; do not worry about it. 30 For the pagan world runs after all such things, and your Father knows that you need them. 31 But seek his kingdom, and these things will be given to you as well.

Luke 12:22-31 (NIV)

This passage is also found in Matthew 6:25-34.

Lily by Per Ola Wiberg (Powi) on Flickr       We can spend a lot of time worrying about the what-ifs in our life. What if I lose my job? What if I get a terminal illness? What if I can’t retire? What if I die? But do we help anything by fretting over these things that may never happen? Even if they do happen, is there anything we can do to stop them from happening? In truth, there’s little good that can come from worrying, so why do it?

       Instead of worrying about all possible future disasters, we should be focused on only one thing: seeking God’s kingdom. God knows what our needs are, and He will take care of us. Once we begin to rely on God and trust in His goodness, we can allow Him to provide the things we need. But until we let God change our hearts so we can fully trust Him, we will be so preoccupied with worry that we won’t be able to seek His kingdom and see His blessings in our lives.

       Does this mean we shouldn’t plan ahead for anything, or that we shouldn’t save for emergencies? Not at all. But it does mean that we shouldn’t be so worried about the cares of this life that we’re prevented from fully pursuing God’s kingdom. We should be so intently focused on serving God and serving others that our worldly needs rarely cross our minds.

       Once we fully trust in God’s providence, we can begin to see that we have nothing to fear in this life. There are no worries to concern ourselves with when we’re fully resting in the Father’s arms.

       5 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.” 6 So we say with confidence,
   “The Lord is my helper; I will not be afraid.
   What can man do to me?”

Hebrews 13:5-6 (NIV)

       God has promised that He will never leave or forsake us. He is always there to help us, and He always will be. We may not always understand how He’s working in our lives, and we may not see Him when He’s by our side. But He has promised that He will always take care of us. With a promise like that from the Creator of the entire universe, what do we really have to fear? What can we possibly worry about? God is in charge, and He’s taking care of everything for us.

       So how do we use this practically? Realize that once you fully submit yourself to God and His will for your life, He will take care of all your needs. Plan for what you know (like retirement and random emergencies). Take control of the things you can actually control (like your spending and attitude, not the economy or the government). And leave the rest to God. If you belong to God, what can happen to you in this life that can ruin you forever? Even death has no power, because once you die you’ll be with God for eternity. The presence of God is the only thing we need ever concern ourselves with in this life.

Want to read the entire Bible study series on Contentment? Download your free copy of Contentment Is Wealth: A Bible Study on Contentment now!

December 27, 2008

The Benefits of Premarital Counseling

Filed under: Marriage — Paul Williams @ Crackerjack Greenback @ 4:00 am

       My fiancée, Michelle, and I are going through premarital counseling sessions with the pastor who will conduct our wedding ceremony and his wife. We’ve got 5 sessions left (1 already completed) and I thought I’d share some of my thoughts about why premarital counseling is a good idea. There are many benefits, and I’m sure I won’t cover them all. But here are at least some of the benefits of premarital counseling.

Setting Expectations

Bride & Groom Donuts by Manassas Cakery on Flickr       Will you have children? If so, how many? Will both of you work or just one? Where will you live? Who will be in charge of which chores? How much personal time will you give each other? Some of these questions may seem like they can wait until later, and many couples don’t discuss these things until after the wedding. It’s good to thoroughly discuss your expectations as early as possible before you’re actually married so you can prepare for what lies ahead. By talking about these things early on, you avoid the problem of misunderstandings and misconceptions later on.

Compatibility

2 Peas in a Pod by Manassas Cakery on Flickr       Sure you’re in love, and you feel like you’re on top of the world after your engagement. But it’s highly unlikely that you and your future spouse are completely compatible in every aspect of your personalities, habits, viewpoints, and goals. Premarital counseling helps you identify the areas where you may be incompatible. Once you bring these issues to light, you can discuss them deeper and determine if there are any deal breakers. While it may not be fun, calling the wedding off now is much easier and better than a divorce in a few years.

Communication

Wisdom of Trees by lepiaf.geo on Flickr       Good communication is essential to a successful marriage. (I’d say it’s right up there with love. 😉 ) During premarital counseling, you’ll learn a little more about one another’s communication styles and discuss methods for effective communication. These techniques will greatly improve your chances of having good communication during marriage and your happiness as well.

Conflict Resolution

       Related to the communication issue is conflict resolution. When problems arise, and they will, how will you work together to solve them? How will you deal with each other when you have a heated argument? Premarital counseling will teach you ways to successfully resolve conflicts and help you set ground rules that you both agree to before any problems arise.

Intimacy

Bride & Groom Kiss by jonathanb1989 on Flickr       If you and your spouse have saved yourselves for marriage, you’ll want to understand each other’s intimacy expectations and comfort levels prior to your wedding night. It may be an awkward conversation to have with a premarital counselor, but again, setting expectations is key. Even if you have had sex before marriage, it’s important to discuss your expectations during marriage. Hopefully, you would have already discussed any past relationships, but if not this would be the time to bring them up. Skeletons in the closet can create disastrous problems in your marriage. Your pride is not worth the possibility of ruining an otherwise happy marriage.

Long-term Goals

       Another major area to discuss is your long-term goals. What are your career prospects and how will this affect your marriage? When do you want to retire? How do you envision your lifestyle together? What are your most important goals? By discussing these questions prior to marriage, you can avoid finding out that your goals are not aligned at all. Most couples will have discussed these things before setting a wedding date, but they’re still important enough to cover once more.

What Does Premarital Counseling Have to Do with Personal Finance?

       One major area of discussion is finances. You’ll talk about responsibilities and budgeting as well as any other financial issues that may be pertinent. Other topics may include your financial history, freedom to purchase items without your spouse’s approval, and your financial views. Preparing for your finances before marriage will help alleviate stress about money—one of the main causes of divorce. It will also help set you up for a successful financial future, since a budget and financial compatibility will form a strong foundation for finances in your marriage.

       Additionally, research has shown that premarital counseling reduces the chance of divorce by 30%. Divorce can wreak havoc on your emotions and your finances, so any steps you can take to avoid it are good financial moves indeed. While premarital counseling can’t guarantee you won’t end up getting a divorce, the training in communication and conflict resolution and the discussion of expectations, compatibility, intimacy, goals, and finances will definitely help you deal with some of the main causes of divorce.

The Bride and Groom by Clav on Flickr       I highly recommend all couples go through premarital counseling before the wedding. If you’re going to spend so much time planning for your wedding day, it makes sense to take a little time to plan for your marriage—hopefully the rest of your lives!

December 26, 2008

How to Overcome Depression When You’re Laid Off

Filed under: Laid Off — Paul Williams @ Crackerjack Greenback @ 4:00 am

       I was laid off on December 3, 2008. I wasn’t really expecting it, and it hit me pretty hard at first. However, I found ways to deal with the oncoming depression quickly and have managed to keep a positive attitude so far even though my job prospects are bleak right now. You can read more about my experience being laid off by checking out the ‘Laid Off’ category and reading the first post in my “Laid Off” series.

       But today’s post is not about me. It’s about ways you can overcome depression if you’ve been laid off. These are some things that have worked for me as well as some other suggestions I haven’t tried yet. I hope they’ll help you overcome or avoid depression while you’re laid off as well.

Pray & Talk

       The most comforting thing I’ve found while I’ve been laid off is praying to God. By praying and giving control to God, we can get His peace and protection for our hearts and minds.

       6 Don’t worry about anything; instead, pray about everything. Tell God what you need, and thank him for all he has done. 7 Then you will experience God’s peace, which exceeds anything we can understand. His peace will guard your hearts and minds as you live in Christ Jesus.

Philippians 4:6-7 (NLT)

       Spend time with God in prayer and commune with other believers at church. You will be lifted up and encouraged—a powerful way to fight depression. Spend time with supportive family and friends as well, especially if you’re not a Christian. Talk to them about your feelings and ask them for encouragement. Getting your emotions out in the open will help you deal with them much better, which leads us to the next suggestion.

Manage Your Emotions

       Although being laid off can feel much more stressful than past situations, you can still use the methods that previously worked for you to deal with the stress you’re under now. Consider some of the ways you’ve successfully dealt with stress before and try to use those ideas now. Another suggestion is to start a journal as it can help you clear your mind and calmly reflect on your situation.

View Your Layoff As an Opportunity

       Though it might have felt like the floor dropped out from underneath you, getting laid off is not the end of the world. Look at it as an opportunity to make a major change in your career—possibly finding a better job, changing careers completely, or starting your own business. Take time to assess your interests, values, and strengths, and work to align your next move with your passions. If you can’t do exactly what you’d like, use this time to plan how you will reach your goals in the future.

Stick to a Schedule

       Laying in bed all day is definitely not going to help you avoid depression. Try to stick to your regular schedule even though you’re laid off. Get up when you normally would have, take a shower and get ready, and use your “working hours” to search for your new job and plan your next move. Make lists and plan your job hunting activities each day. This will help keep your mind occupied and focused on what you need to do next.

Exercise, Eat Well, and Get Enough Sleep

       A healthy body is key to overcoming depression or preventing it altogether. Make time in your schedule to exercise. Psychology Today explains why exercise is so important in the quote below.

       Exercise is an important adjunct to any therapy. Exercise directly alters levels of neurohormones involved in circuits of emotion. It calms the hyperactivity of the nervous system and improves function of the brain’s emotion-sensing network. It also improves the ability of the body to tolerate stress. What’s more, it changes people’s perception of themselves, providing a sense of personal mastery and positive self-regard. It also reduces negative thinking.

       However, just telling a distressed person to exercise is futile, as depression destroys initiative. The best thing a loved one can do is to simply announce: “Let’s go for a walk.” Then accompany the person out the door.

From Psychology Today’s “How to Fight Depression and Anxiety

       If you don’t have the initiative to exercise on your own, find a partner to exercise with you and keep you accountable. Take time to eat healthy meals as well. By cooking at home, you can save a lot of money and eat much healthier than you can in most restaurants. Finally, be sure you get an adequate amount of sleep each night so you’re fully rested and ready for the next day.

Remember to Laugh

       While this may be the hardest suggestion, laughing really does help to improve your mood. Spend time with happy people and friends who make you laugh. Laughter has some great benefits, especially when it comes to dealing with stress. If you need some help loosening up, read these tips on WikiHow about how to be playful.

December 25, 2008

Merry Christmas!

Filed under: Random Stuff — Paul Williams @ Crackerjack Greenback @ 4:00 am

Kingdom of God by Nick Kulas on Flickr

December 24, 2008

Personal Finance in the Bible: Proverbs 21:17

Filed under: Contentment,Personal Finance in the Bible — Paul Williams @ Crackerjack Greenback @ 4:00 am

Bible with Cross Shadow by knowhimonline on Flickr       This week’s Personal Finance Bible Scripture comes from Proverbs 21:17.

     17 Those who love pleasure become poor;
     those who love wine and luxury will never be rich.

Proverbs 21:17 (NLT)

       Think the Bible doesn’t have relevant financial advice? Consider that verse one more time. Personal finance experts generally agree that avoiding hard work and buying things you can’t really afford will never lead to financial success. (And by afford I mean that you can still cover all your necessary expenses and save for all of your goals after purchasing your luxury item.) Even though this little bit of wisdom seems like it should be common sense, God wanted to emphasize it in Proverbs as well. I’m guessing it must be pretty important! 😉

       It’s not that God doesn’t want us to have any enjoyment in this life. You really have to look closer at what that verse says. If you love pleasure and luxury, you’re probably not putting God first in your life. As I’ve discussed many times before, God wants your heart and if your heart belongs to something else then you can’t serve Him. It’s fine to enjoy the good things in life, but make sure you have a wise (God’s) definition of the “good” things in life and make sure you put God above all else. That’s the only way you can truly be rich.

December 22, 2008

Comparison of the Diversified Portfolios

Filed under: Diversified Portfolios,Investing,Retirement Planning — Paul Williams @ Crackerjack Greenback @ 2:52 pm

       In the last post of my series on a closer look at a diversified portfolio, reader Nick asked if I could do a summary post comparing all the portfolios. I’m quite happy to oblige as it was something I was hoping to do anyway.

       First, let’s look at the historical performance and risk of all the portfolios. The chart below shows the average (arithmetic mean) return and standard deviation (a measure of risk) for each of the portfolios starting with the 100% Stock portfolio down to the 0% Stock (100% Bond) portfolio. The data used was from the time period of 1927 to 2007.

Historical Return and Volatility of Portfolios - Small

       We can clearly see that as you have a higher percentage in stocks your return goes up—but so does your risk. This is called the risk vs. return trade-off. A higher return generally means higher risk is involved, and lower risk generally means you’re going to get a lower return.

       The average return doesn’t really tell us much as we’ll probably never actually get the average return in any given year. Investment returns fluctuate, so it’s nice to see the range of returns we would have experienced in each portfolio. This next chart shows exactly that. For each portfolio, I’ve charted the highest, average, and lowest return over the 1927-2007 time period.

Portfolio Return Ranges (One Year) - Small

       Again, that’s all fine and dandy but it still doesn’t tell us much. When we invest, we generally don’t have a one year time frame so we shouldn’t be looking at single year returns. Most of the goals we invest for have time frames of 5, 15, or 30+ years. What we really want to know is how our returns will look over those time periods. How likely is our portfolio to lose money over 5, 15, or 30 years? What’s the lowest return the portfolio has experienced over a 30 year period? Those are the questions we should really be asking.

       To answer those types of questions, we have to look at things a little differently. For starters, we can’t use the average return over a 30 year period to figure out what the portfolio would have done. Because investment returns compound and vary each year, we have to use the geometric mean (click to learn more). This is also called an annualized return. It basically means that your return over a given time period would be like getting the annualized return every year—except that never actually happens in reality because investment returns vary from year to year.

       For example, an annualized return of 10% over a 5 year period means that $1,000 would have grown to $1,610.51. But your actual returns could have been very different. One 5 year period might have returns of 9%, -15%, 8%, 16%, and 39% while another 5 year period might have returns of 14%, 12%, -5%, 8%, and 23%. The average return for these periods was 11.4% and 10.4%, respectively, but you still would have ended up with about $1,610.51 in both of those 5 year periods.

       To really see the effect that time has on reducing our risk of losing money, we’ll have to keep the scale on the charts the same. So each chart has a highest return of 100% and a lowest return of -60%, even though none of the results actually go to those extremes. Let’s look again at the chart for the one year periods, then I’ll show you the 5 year, 15 year, and 30 year charts without interruption so you can really compare them all.

Portfolio Return Ranges (One Year) - Small

Portfolio Return Ranges (Five Year) - Small

Portfolio Return Ranges (Fifteen Year) - Small

Portfolio Return Ranges (Thirty Year) - Smalll

       Wow, that last chart is really bunched up isn’t it? What does that tell us? The longer we leave our money invested, the more likely it is we’ll get a result closer to the average. If you’re invested heavily in stocks, it also means that you’re more likely to get much higher than average returns as well. This is why you should be invested in a 100% Stock portfolio if you have more than 20-25 years until retirement, and it’s why you should probably have at least 70-80% in stocks until you actually do retire. By leaving most of your money in stocks for a long time, you increase your chances of getting the high returns you need while decreasing your chances of getting very low returns (for the entire time period your money is invested). Yes, you’ll have more volatility, but that won’t matter if your portfolio has grown large enough to exceed your needs.

       So do you want to see what those returns were like over the 30 year periods? The chart below is zoomed in with a better scale so you can really see the results.

Portfolio Return Ranges (Thirty Year) Zoomed In - Small

       Look closely at the data for that 100% Stock portfolio. The worst annualized return you would have had over a 30 year period was about 8.5%. Even if you invested just as the Great Depression was getting underway, you still would have made 8.5% a year over 30 years. That’s pretty amazing, and it’s exactly why we need to block out the noise from the financial media. Ignore the short term, invest in index funds, and go about living your life and enjoying your family and friends instead of watching the stock market all the time!

December 21, 2008

Personal Finance Bible Study: Contentment (Part 7 of 12) – Practical Applications

Filed under: Contentment,Personal Finance Bible Study,Personal Finance in the Bible — Paul Williams @ Crackerjack Greenback @ 4:00 am

       Last Sunday, we finished looking at God’s View of the World, Money, and our lives so we can start to focus on serving Him instead of serving Money. Today we’re going to start talking about practical applications. How should we act and what should we do when we take on God’s View and live out His will?

       The scripture today comes from Luke 6:20-38, and we’ll be looking at it in three parts. The first part we’ll look at is Luke 6:20-26:

The Beatitudes

   20 Looking at his disciples, he said:
   “Blessed are you who are poor,
   for yours is the kingdom of God.
   21 Blessed are you who hunger now,
   for you will be satisfied.
   Blessed are you who weep now,
   for you will laugh.
   22 Blessed are you when men hate you,
   when they exclude you and insult you
   and reject your name as evil, because of the Son of Man.

   23 “Rejoice in that day and leap for joy, because great is your reward in heaven. For that is how their fathers treated the prophets.
   24 “But woe to you who are rich,
   for you have already received your comfort.
   25 Woe to you who are well fed now,
   for you will go hungry.
   Woe to you who laugh now,
   for you will mourn and weep.
   26 Woe to you when all men speak well of you,
   for that is how their fathers treated the false prophets.

Luke 6:20-26 (NIV)

       God doesn’t want us worried about our situation in this life. Even if we’re poor, hungry, and hated by men, we have an eternal reward in Heaven. Once we start keeping that in the front of our minds, we can see that we really are blessed, apart from our outward condition, and we are to be envied among men. Wealth and happiness in this life are only temporary rewards. If we focus on having those things in this life instead of being true to God, then we’ll have already received our reward.

       So what’s the practical application here? Stop worrying about your wealth, pantry, and reputation as men view those things, and instead focus on being rich in good works, full of God’s Word, and true to God’s will.

       The next part we’ll look at is from Luke 6:27-36:

Love for Enemies

       27 “But I tell you who hear me: Love your enemies, do good to those who hate you, 28 bless those who curse you, pray for those who mistreat you. 29 If someone strikes you on one cheek, turn to him the other also. If someone takes your cloak, do not stop him from taking your tunic. 30 Give to everyone who asks you, and if anyone takes what belongs to you, do not demand it back. 31 Do to others as you would have them do to you.

       32 “If you love those who love you, what credit is that to you? Even ‘sinners’ love those who love them. 33 And if you do good to those who are good to you, what credit is that to you? Even ‘sinners’ do that. 34 And if you lend to those from whom you expect repayment, what credit is that to you? Even ‘sinners’ lend to ‘sinners,’ expecting to be repaid in full. 35 But love your enemies, do good to them, and lend to them without expecting to get anything back. Then your reward will be great, and you will be sons of the Most High, because he is kind to the ungrateful and wicked. 36 Be merciful, just as your Father is merciful.

Luke 6:27-36 (NIV)

       While this section has very little to do with personal finance (apart from giving), it does show us just how different our lives will be if we take on God’s View of the World, Money, and our lives. Jesus is telling us here that instead of being focused on wealth and plenty in this life we should live out these few instructions. I think Jesus is showing us that contentment acted out in life ends up focused more on doing good and showing love than earning money and gaining wealth. I’ll let you contemplate how this applies to your own life, but it’s a good example of what actions and thoughts should replace our desire and efforts for wealth.

       Finally, we’ll look at Luke 6:37-38:

Judging Others

       37 “Do not judge, and you will not be judged. Do not condemn, and you will not be condemned. Forgive, and you will be forgiven. 38 Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.”

Luke 6:37-38 (NIV)

       Jesus tells us we’ll be greatly rewarded if we follow His teaching. Many take this to mean material rewards (a.k.a. the Prosperity Gospel), but I’m fairly certain Jesus is speaking in terms of spiritual and eternal rewards. If we are truly content and focused on God’s ways, are we going to care about being greatly rewarded in this life? Not at all—we’ll realize we already have a great reward in Heaven with Jesus. But think of the great reward we could have in this life if everyone took Jesus’ teaching to heart and lived it out. Can you imagine the peace, calm, and happiness we would all have if this happened? Now that would be a great blessing indeed!

Want to read the entire Bible study series on Contentment? Download your free copy of Contentment Is Wealth: A Bible Study on Contentment now!

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