Our Fiscal Cliff: Its Crunch Time!

Since the November presidential elections there has been much in the news about the “fiscal cliff” that this country is facing.  In a nutshell, the so-called fiscal cliff refers to set of laws and regulations that were enacted during the early Bush administration years that are set to expire on December 31, 2012.  Basically, two things are set to happen automatically if Congress cannot agree on a new path:  first, there will be an across-the-board increase of taxes.  Second, there will be automatic cuts to government entitlement programs with defense spending and Medicare being identified most often as the target of a large portion of those cuts.

The Consequences.  The tax increases speak for its self.  If there is no action taken, there will be an increase in the amount of income taxes that you and I pay annually.  It appears imminent, one way or another, that this is going to happen.  Government has overspent its budget consistently over the past decade and at warp speed the past 4-5 years.  Somebody has to pay.  It is like a family that makes $50,000 per year who has been spending $110,000 per year over the past 10 years.  Where do you think that family would be?  It doesn’t take a Harvard economist to figure it out:  IN DEBT!  Lots of it!  And that is where the country is today.

A second consequence of the tax increases has to do with the overall economy.  If people paying more taxes to the government it means they are spending less at Walmart, Costco and every other retail/wholesale business that is patronized by John Q American.  Think about it.  Say, for example, you bring home $2000 a month.  Let’s say that you’ve been paying $400 of that money in taxes.  If taxes are increased you may now be paying, say $550 in taxes.  You still got paid the same but now $150 went to Uncle Sam.  Somebody didn’t get paid this month!  Maybe it was your mortgage, maybe it was the light bill, or maybe you’re eating less.  But the point is that money did not end up in American commerce and now the economy is weakened.  Experts fear that it may send the country back into recession and everything that goes along with it, e.g., job losses, higher unemployment, a flock to more government entitlement programs, etc.  Not good!

Speaking of unemployment, the second part of the equation is cutbacks of government jobs.  More people are going to be out of work if things are left alone.  And even worse, these cuts stand to weaken our national defense and affect those citizens who have been the major payers into this system for decades:  seniors! That’s right.  Medicare is one of the entitlement programs set to absorb its fair share of the cuts.  The ironic thing is that it is these very people, the senior citizens, who have paid into the system for 50 years!

The Upside.  If there is something positive to the fiscal cliff dilemma (assuming that Congress cannot agree on a course of action and time expires) it is that it forces the inevitable.  At some point tough choices are going to have to be made which means cutting spending and possibly increasing revenue (taxes).  Think about it.  If you are not able to pay your bills each month, what are you going to do?  Aren’t you going to look for ways to spend less and maybe take on additional work (increase revenues)?  And more importantly, isn’t that going to be a little uncomfortable to have to make those decisions? 

·       

• Turn off cable!?  Are you kidding me?!  
• I’m already tired and you want me to work another 10 hours per week
•  There goes the Christmas budget this year!
• Stay home for vacation?!
•  …and it goes on and on and on...

The truth is that this country, as well as, you and I are not going to deal with our debt problems without having to make some very difficult decisions.  That requires commitment.  Commitment to a guiding philosophy and overall thought process that is intolerant of debt.

Why are we surprised?  As the past 5-6 years have unfolded, I have been amazed at the thought process found in our nation’s leadership.  It has transcended political parties and has become a cancer to our country’s livelihood, well-being and integrity.  We have seen our credit ratings drop (a measure of how well you’re doing managing your money) and the loss of credibility across the globe.

I also find it hard to throw stones at our politicians.  They reflect what we, the American people, are thinking and the truth is that we’ve been thinking “buy now, pay later” for a long, long time.  Individually, most Americans are not much different than the country as a whole:  run up the credit cards and debt until we’ve ruined our credit, our reputations, and are held captive by our financial limitations brought about by debt.  Everything, and I mean everything, is subject to financial bondage. 

·       

• You don’t want to answer the phone during dinner time because you know it’s a creditor calling for their money,

•  you lose sleep because you’re not sure how you’re going to pay the mortgage this month,

•  Junior needs a new pair of shoes and

• you’re skipping this year’s family reunion because you haven’t paid Uncle Bob back that $2500 you borrowed last year! 

Now here’s the really surprising part…we knew better!  Yes, we were warned!  Didn’t Paul say to “owe no man nothing but to love him” (Romans 13:8)?  Did Proverbs 22:7 not warn us that “the borrower is slave to the lender”?  In Pillar 2 (see 12 Pillars & a Prayer), Deuteronomy 28, did Moses not tell the Hebrew nation that they would “borrow from no one, but lend to many nations”?  It is hypocritical for us to bash Washington when we are likewise guilty.  While we do not let our politicians off the hook for their insatiable desires to spend money that they do not have, at an individual level, we must hold ourselves accountable for our financial appetites and habits.  Let the record show we were given a blueprint for this thing.  Once again, we must acknowledge that God knew better than us.  The 12 Pillars & a Prayer are not just a cutesy little title for a book; they form a solid foundation for living life in abundance and getting our financial house in order.

In that sense, we are all at our own personal financial cliff.  What will it be?  Will we make the right decisions that will break the bonds of financial oppression?  It all starts with one quality decision:  will I do it my way or yield to One whose wisdom is far beyond mine?  He says, “think debt free!”…will we listen?

Until we talk again, sorry for being a little long winded today…

Dr. Russ

When Opportunity Appears, Be Quick to Act...There's a Blessing at Stake!

Today's blog is a confession.  I missed it yesterday!  I was standing in line at a Chinese restaurant behind an elderly man who was trying to pay his bill.  He seemed somewhat disoriented and appeared to be trying to pay with a food stamp card perhaps considering it a debit card.  In any event, the card was repetitively declined.  Standing there somewhat confused and dismayed, the man at the register finally told him to "catch it next time you are in".  Seemingly embarrassed, the elderly man and his granddaughter looked at each other in puzzlement as they walked out of the restaurant.  

And then it happened.  There was a tug at my heart to pay the bill.  For a brief moment there was a tension like Howie Mandel asking for "Deal or No Deal!"  I foolishly didn't take the deal.  And the truth is, I knew it right away!  And then this morning my devotions come of out of II Corinthians 9 (Pillar 10 in my book 12 Pillars and a Prayer) and I realize all the more that I missed a golden opportunity to bless someone as I have been blessed.  Freely,  unconditionally, without strings or examination of motives…just bless for no apparent reason.  Oh, I justified my actions by convincing myself that the old man knew what he was doing andthat he was simply hoodooing the restaurant.  But the truth is, it didn't matter what his intentions were and I had no business judging or questioning that (see Pillar 8 in 12 Pillars & a Prayer).  God's Spirit was knocking on my heart's doorstep and what was I going to do?  

I had to repent.  I've prayed for the past few years that the truth of Pillar 10, specifically, "that a man give what he has determined in his heart to give" would be etched into my character.  I have prayed that the word "giver" and "Russell Thomas" be synonymous.  That when my family and friends think of me they say, "oh, he's a giver".  As I sat in the quietness of my study in the early morning hours repenting of my callousness, God's Spirit began to share two major truths.

First, the scene in the Chinese restaurant was a perfect example of “and while we were yet sinners, Christ died” (Romans 5:6-8). He didn't look at us and try to figure our motives and intents.  Had He done so, He would never have demonstrated His love on the cross: for surely He would have concluded that we were not worthy of such kindness.  Jesus didn’t wait to die until we were in good position to receive it.  No, quite the contrary.  He seized the moment and simply paid the bill for us!  He gave regardless, in fact knowing that our motives and behavior where not where they needed to be.  He was not concerned that we may be hoodooing the restaurant.

The second truth and the real message here, concerns issues of the heart.  We think, “don’t commit murder”: God thinks "when you hate it is one and the same".  We think, “don’t commit adultery”: God thinks, "when you look with strong desire to have something that is forbidden that it is one and the same".  We think, “10% in the plate on Sunday morning": God thinks, "determine in your heart not what you will give.  When you ignore a brother in need perhaps its time for a heart examination (Look at Matthew 25:36)".

Paul understood the principle.  In Pillar 10, II Corinthians 9, Paul doesn’t say to give 10%.  Rather, he reminds us of an importantfinancial and life principle: give in abundance and it will come back in abundance.  Be stingy and stingy will come back to you.  But the real measuring stick is this:  “…as each man determines in his heart”.  Bingo!  Giving is not a number.  Its not a percentage.  It is an issue of the heart.  

Do you want to be rich?  Give richly.  Do you desire abundance in your life?  Give abundantly.  It begins with a heart examination.  What have you determined in your heart?  Will you be an abundant giver or play by the numbers?  Just like me, opportunity to test your heart will present itself.   You can bet your sweet calculator that the next time I'll remember to let my heart guide.  How about you?

The Wisdom of Mortgages

I am absolutely sold on the idea of debt-free living.  While I have been slowly turning my personal financial Titantic around, I realize more and more every week how most of us here in America have so insulated ourselves from the reality of money for “self gratification” that is based on entitlement thinking.  I guess another possible explanation is that we have been duped and bought into rotten ideas about money that keep us a slave to our finances.  While completing my tax returns recently, I had a revelation about this stuff.  I believe it is one of the biggest areas where we’ve been both duped and held captive by our huge spending appetites.  Its called a mortgage!  Let me explain.

Most of us have mortgages.  Our parents had mortgages and some of our grandparents did, but beyond that, generations prior were not as prone to have mortgages.  But our generation, the infamous Baby Boomers, grew up with the idea of a mortgage as a given line item in the budget…that is, if they have a budget.  The point is, most of us Baby Boomers have just accepted the idea of a mortgage and we’ve passed that notion on to our children.

Now, I want to challenge the wisdom of mortgages.  First of all, let us consider that 50 years ago most mortgage companies required at least 10% down in order to qualify for the loan.  This was not only for the protection of the lender, but also the borrower.  The 10% cushion served to absorb some of the loss should the market dip or completely tank.  The recent real estate market crash saw about a 20% to 30% decline in property values.  So, if you had a house that you bought for $200,000 in 2006 say, then when the market bottomed your property was worth $160,000.  If you did not have that 10% cushion then you lost $40,000 of value and are now in a “negative equity” situation, i.e., you owe a lot more on your house than it can now be sold for.  This is exactly what has happened in the last 4 years only most did not have the 10% cushion as they borrowed at 100%.  There was no 10% cushion and the response of many was to walk away from their homes and simply allow the property to go into foreclosure. This is a decision that has numerous long range implications for the homeowner and disastrous implications for the country’s economy.

What is amazing about this whole mortgage thing is how we have justified having one.  The most common comment you hear about mortgages concerns so-called tax benefits.  This is supposed to make the borrower feel good about being $200K in debt and paying about the same in interest across the life of the loan.  But here’s my revelation:  Let’s say you are in the 5^th year of a 30 year mortgage.  Roughly 75% of your monthly payment is interest.  So on that $200,000 loan, you’re paying about $1200 a month, of which $900 is interest.  Over the course of a year, that means you are paying about $10,000 of interest or a total of $14,400 in house payments. 

Now here’s those tax benefits:  You get to subtract that $10,000 of interest from your income.  So say you make $60,000 per year.  With the $10K deduction, you will now be taxed on $50K vs. the $60K this year.  Now, according to my CPA a general rule of thumb is that for every $1,000 of deductions, you will pay about $100 less in taxes.  So that means that you will pay about $1,000 less in tax this year.  Nice little tax break until you consider that you paid $14,000 on a mortgage!  What if you didn’t have a mortgage?  Well then you paid Uncle Sam and the IRS the $1,000.  Which would you rather pay…$14,000 or $1,000?!

This is kind of a no brainer, right?!  It doesn’t make any sense does it?  So if you have a choice do you want the mortgage or no?  And yet we’ve bought into the idea that a mortgage is such a tremendous tax break!  No it is not!  Yes, if we have a mortgage it is one of the few advantages, but let’s face it, compared to not having a mortgage it’s a pretty puny break!

So what would it take for us to get rid of our mortgages?  I think 3 things:

1. Firm commitment and belief that it is doable.  We cannot waffle on this issue.  We must be firmly persuaded that living life without a mortgage not only is a goal worthy of consideration, but that it becomes a priority to eliminate as a line item in the budget.  We cannot accept the flimsy reasons for which we go into debt, particularly on a house.  Most of us have a mortgage and when we think of getting rid of it the task seems impossible.  What’s funny is that when I look back I see plenty of missed opportunities to pay off my mortgage, only to engage in momentary life amenities instead.  “Where there’s a will there’s a way” the saying goes.  If we believe that we can eliminate our mortgage and commit ourselves to being debt free without it, life will have a way of bringing the opportunities to do so.
2. Fixate on being debt free.  Don’t accept anything but debt free in your thinking.  Pillar 2 (12 Pillars and a Prayer) says that as God’s people we will “borrow from no one and lend to many nations”.  What if we began to incorporate that into our thinking?  It is revolutionary and will absolutely change the way we live and make decisions.
3. A plan!  Sit down and list out all of your bills.  I agree with those who suggest to focus on paying off the smaller bills first.  It does 2 things: psychologically, it gives you energy and momentum to begin working on some of the other bills and its one less guy who is calling you at supper time!  The plan should include how much you will pay on each bill each month and when you expect to pay off each bill.  These are just quick suggestions and you may have a better idea.  But the point is, make a plan in writing and work it diligently!

How then should we think about money, wealth, success and prosperity?

12 Pillars and a Prayer is about money.  Its also about whether not its ok to be wealthy.  Yet again, 12 Pillars is a way to think about all the aspects of wealth and God's blessings (including material) on our life.  I have often found that the church tends to polarize itself around this issue.  On one hand, there are the prosperity teachers whose major tenet is to "name it and claim it".  While this philosophy initially glitters and hops, it often becomes the seed of considerable discouragement and even resentment.  After all, if you name and claim it and it doesn't happen you don't have a lot of wiggle room to explain it.  You've either got to say the philosophy is wrong and dismiss all notions that God may want us to enjoy wealth, success and/or money, or be mad at God for not giving you what you wanted.

One the other hand, we've got those locked into poverty thinking.  If I had to guess, I would say this thinking is much more pervasive in the church and is much more destructive.  Poverty thinking says that to have money somehow obstructs our ability to know and have a healthy relationship with God.  Poverty thinking denies a man or woman his/her dreams and screams at us to "Stay in the box!  Its not safe anywhere else!"  Those locked into poverty thinking may allow themselves "reasonable" dreams, but never believe that those big dreams, those ones you think about when you think about "what would I do with the money if I won the lottery", could come true or are even permitted.  And when the possibilities of something greater present, those stuck in poverty thinking quickly retreat to their structured, safe schedules never allowing themselves to tap into that creative side of God that He has placed in each one of us.  Thousands of untold inventions, companies, medical breakthroughs and technological magic have never happened because of poverty thinking.  

Unfortunately, poverty thinking is also deeply embedded and supported by religiosity or a religious spirit that squelches any attempt to break out of the status quo and pursue Godly vision and use God-given talents.   Poverty thinking says the good is ok, but great is too much and moves you away from God.  Poverty thinking is supported by such scriptures as "its harder for a rich man to get into heaven than to pass through the eye of a needle".  But what's the context of these words?  How does this jive with centuries of Jewish thought based on Torah law that says part of the covenant God established with Abraham and was echoed through Moses, includes financial and material blessing (see Pillar 2, Deuteronomy 28).  These promises and covenant was played out in the lives of many biblical heroes (think Solomon, David, Abraham, Isaac, Jacob, and on the list goes)?  In my opinion, a poverty mindset is much harder to deal with because of its subtleties and its shiny religious coat.  But make no mistake about it.  Poverty thinking chokes the life out everyone it touches and prevents an individual from reaching their God-given potential.

So while the church polarizes itself around these 2 extreme positions, how then shall we think about money and wealth and prosperity? Six years ago I found what I believe to be a biblical philosophy or way to think about money.  It was the 12 Pillars and a Prayer.  It literally was a divine download and has changed my life completely.  I have been living this now for 6 years and have seen new measures of peace, progress bringing my finances under control and a richness to my relationships that I did not previously experience.  While most people know how to add and subtract, balance a checkbook and understand the basics of money (i.e, its wise to spend less money than you make), most of us run into problems with our thinking about money.  Most of us lost out when we spent money we did't have to try to achieve something we really didn't need.  Most of us have gotten ourselves in trouble when we mismanage money for emotional reasons that somehow made us feel better at the time but ended up tying a noose around our necks!  So the question is not "Does God really want us to prosper financially?" but rather, "How then do we think about money, wealth, success and prosperity?"

I tackle these questions in my latest book, 12 Pillars and a Prayer and I look forward to discussing these issues on our 12 Pillars and a Prayer blog site each Friday throughout the year.  As always, we invite your thoughts, comments and feedback.  See you next week!

Pillars built on fault lines aren’t very stable!

I am excited to begin writing this blog about money.  Perhaps there is no hotter issue that we face in this country and in our lives that cause more stress and strain than money.  This country's debt problems are mind boggling and to the average American citizen, the numbers are so astronomical that we tend to just dismiss the entire crisis is if it does not matter or effect us.

But make no mistake about it.  It does effect us!  Our country's debt problems and economic woes are only a reflection of what most of us are experiencing in our personal finances.  Several years ago this country issued bailouts to some of the biggest industries in the world:  the auto makers and mortgages lenders.  But where did the money come from for the bailouts?  Some of it came from you and I, John Q tax payer, while the rest was borrowed money!  Get that, borrow money to pay off bad debt on other borrowed money!  But before we get too judgmental, how many of us have done the same thing?  For example, a credit card gets maxed out and another offers to transfer the balance at a reduced rate or call up a friend or family member to borrow money to pay a credit card.  Borrow money to pay on borrowed money (see the excerpt below from my book 12 Pillars and a Prayer).  The result is Fool's Gold designed to make us feel better for a season but makes no real progress on the real problem:  our thinking about money is messed up and our money management is out of control.

This blog, named for my recently released book by the same name (12 Pillars and a Prayer) is dedicated to getting our thinking right about money.  It is designed to be practical, real and founded on Biblical teaching about money, wealth, success and prosperity.  I've been living these 12 Pillars for almost 7 years now.  They have permeated my entire life and guide my thinking about money.  They are powerful passages from the Bible that when applied to all areas of my finances, have led the way for me to become completely debt free.  No, I'm not there quite yet, but I'm on the right path to obtain debt free living in the very near future.  The entire process didn't start with getting a better paying job or eating peanut butter every meal for a year.  It came by changing the way I thought about money.  Now that I am no longer swimming in a pool of debt, it is my desire to see others overcome their economic bondage and live debt free.  To do so changes our world.  I begin this journey of sharing the 12 Pillars with others by asking a simple question:  How would your life be different if you had no debt?  What would change in your relationships?  Would life suddenly become more rich and full, as you no longer were slave to the creditors?  Would you be in a better position to help others?  And what about your own desires to spend?  What if you had a better handle on why you spend money you don't have and in the process remain a slave to debt?

All of these questions will be discussed in this blog.  Each week I will post to the blog either stories that from my own life or from the lives of others (names will be changed to protect their identities).  We will begin this blogging journey with a story from 12 Pillars and a Prayer.  This is a true story that illustrates just how far our thinking becomes when the financial pressure begins to mount.  I hope you enjoy and encourage each of you to comment or contact us and share your story!  You contact us at askdrt@simplesolutions4.com or leave your comments directly on the blog site.

Pillars built on fault lines aren’t very stable!

…owe no man nothing but to love him..!

Romans 13:8

I

t was 15 years ago when I traveled to a conference with a friend and coworker.  Let’s call him Ron.  I listened carefully as he began to lament his financial woes.  I was completely caught off guard by what he told me. 

Ron was a sharp looking young man, bright and came from a nice family.  He had just finished his medical school training at a prestigious private university and was waiting to hear from residency programs.  He had published some of his work in a peer reviewed medical journal.  Ron seemed to have it all going for him.  I assumed him to be of reasonably sound mind and emotionally stable.

“I don’t know how we’re going to pay our bills,” Ron told me as he gazed out of the passenger side window at the vibrantly colored western North Carolina Mountains.  It was late fall and the iridescent mountains captured the majesty and radiance of God’s creative nature.  Ron, on the other hand, was anything but radiant as he proceeded to tell me about his financial woes.

“We owe over $40,000 in credit card debt alone!” he confessed at one point.  “We are months behind on our car payment and the bank is threatening to repossess any day.

 “Sally is about to divorce me and will hardly speak to me.  Our sex life is non-existent, and I haven’t had a good’s night’s sleep in months.” Ron’s countenance sank to despairing lows as he continued to share the gory details of his shipwrecked finances. 

The more Ron talked the worse it got.  It became obvious that he was totally demoralized.  In spite of the successes he was enjoying in his career, Ron saw himself as a complete failure and inept leader in his home.  His self-esteem was completely shot.  Attempts to regroup himself were met with poignant reminders of his failures either from a hostile bill collector or his wife, who was obviously crushed by his clandestine spending habits.  And to top it all off, Ron lamented that if his medical school found out they would not graduate him because of an ethical standard agreement he signed when he enrolled in school.  While I had never heard of such a thing, apparently the contract required students to remain financially solvent throughout their education.  Ron’s anxiety was over-the-top.  His peace was thrown out the fiduciary window.  And he saw no way out other than bankruptcy which would most certainly end his promising medical career. 

            As Ron and I discussed his situation, I learned more about how he came to be in such dire straits.  Initially, he had received an offer to receive a credit card.  It had a low spending limit that he quickly maxed out with a purchase or two.  He made a few payments and the next thing he knows the company upped his credit limit.  The process repeated itself several times until his spending limit was up to $10,000! 

Next, while barely making his minimum payments, Ron was offered another credit card with a balance transfer option that offered lower interest rates.  “That makes sense.  I’ll get a lower interest rate and pay this mess off much quicker,” he thought to himself.  So off he went, with a plan.  He transferred the balance but somehow derailed from the plan and failed to shut down the first account.  He then used the first account again and the next thing he knows, he’s maxed out two cards!  Then the process repeats itself a couple more times until he now has six credit cards, all maxed out!  At this point no one is offering him credit and the nightmare begins.  Exit freedom and joy; enter bondage and anxiety.

Let’s just stop for a second and think about Ron’s logic for a minute.  Ron is trying to use borrowed money to pay off debt!  Sounds crazy, right?  But wait a minute.  This logic is immensely popular in today’s world.  The logic strikes a current day chord.   Many of the country’s stimulus package plans and bailouts are based on the same logic!  It goes like this: let’s borrow money to pay on bad debts that people can’t afford pay in the first place!  Huh!!!?

I have to admit that as I heard Ron’s story I wondered exactly how someone could wake up one day with over $40,000 of credit card debt. At that point of my life, I’d not had so much as a single late on my credit report.  I found myself struggling to be non-judgmental and not become condescending in tone.  But, as I would later learn, Ron’s story is not all that uncommon.  “What goes around comes around” as the saying goes. Perhaps my numbers weren’t as high but they didn’t have to be and neither does yours.  If you can’t pay your bills you can’t pay your bills.  You have become a slave to your finances.  The tail is wagging the dog and your life is reduced to chasing the almighty dollar.  Your true wealth is threatened and your life is now an uncomfortable, paralyzed existence.  It’s not what you wanted; certainly it’s not what God wanted for you, but here you are now firmly entrenched in the world of S&B …slavery and bondage!  Slave to your lender; bound to your debt.  Your credit rating is slipping and your world is changing as you insidiously lose your freedoms.  You no longer get the best interest rates and your cell phone company wants a large deposit before they’ll open an account.  Good sleep is hard to come by and it’s hard to look into the mirror, much less the eyes of your spouse, and muster up a good feeling about yourself! 

                                                                    excerpt  from 12 Pillars and a Prayer by M.Russell Thomas, PhD