Tuesday, May 31, 2005

Thoughts on Stewardship

The best source for advice on money is the Word. Here are some things I found on how to be a good steward:

We are instructed to see our relationship with money to be one of stewardship where we must be trustworthy. It tells us this in 1 Corinthians 4:1-2. This scripture speaks of ministers of the Word, but uses a term applied to those who were entrusted with wealthy estates. As we are entrusted with God’s gifts to us, whether they are skills, knowledge, or money, we are expected to be good stewards (1 Peter 4:10). Matthew 20:1-16 is the parable of the laborers in the vineyard (or sometimes “the parable of the unjust steward”. It depends on how you want to interpret it.) It seems unfair that the steward paid workers the same regardless of how much time they worked. However, a steward who is not faithful in his duties will be dismissed quickly (Luke 16:1-13). He did pay fairly according to individual agreements. For examples that explain good and bad stewardship, see Luke 19:11-27 or the Parable of the Pounds and Matthew 25:14-30 the Parable of the Talents. Also see Matthew 21:33-46 for the Parable of the Wicked Husbandmen and Luke 12:42-48.

I think when you read these scriptures you’ll see why giving simply for the sake of giving isn’t what a good steward does. A good steward gives using good judgment. While it is important to have compassion on the poor, those who are lazy and unwilling to help themselves are not going to be good stewards of what you give them, (2 Thessalonians 3:10) and it would be wrong to endorse or support their laziness. This is because of the law given in Genesis 3:19. There are always those who are not able, but it is the willingness that is important.

NOTE: Please look up the scriptural references for yourself. I am simply commenting on them to seek relevance.

Thursday, May 26, 2005

One Nation Under Lawyers

Lending agreements are the most onerous contracts you can find at the consumer level. Most consumers don’t understand anything in their agreement beyond the annual percentage rate, the amount borrowed, and the payment schedule. They still sign the agreements without consulting an attorney because attorneys are too expensive for it to be practical. It seems ridiculous to hire an attorney to interpret the numerous pages of credit card disclosures, agreement, and amendments. Even then the consumer may not even comprehend the explanation. As a result, people rely on peer experiences, and dismiss all the legal jargon as insignificant as long as they make their payments. They essentially make agreements they can’t keep, and don’t know it. People who do read the agreements pretend to understand them, and maybe even think they do. But even attorneys struggle with the hidden agendas found between the carefully crafted words. What happens too often is that this sets the stage for you to be dragged into court over a disagreement. The only ones who win in all this are the attorneys who corrupted the system to begin with by corrupting it. (See The Fraternity)

In Acts 25:11 Paul appealed to Caesar knowing that a trial by Festus would not be impartial. He exercised a right of his as a Roman citizen. Paul never attacked the Jews who were accusing him, a principle that guides us in avoiding counter lawsuits. He was seeking the truth. We should only seek to clear our name and reputation, and present the truth. If you are a godly man or woman and are falsely accused, you can’t be intimidated. However, in the case of being sued by a credit card company, when you can’t pay the bill, the truth is you do owe the money. Your only argument is to ask for mercy, and if the credit card company is not willing to settle with what you have to settle with, let the judge see the truth of the situation. You will most likely end up with a judgment against you anyway. You may even get advice from the judge to take a look at bankruptcy. That may be the only way to settle with unforgiving lenders that insist on depriving you of basic needs and extract their "pound of flesh" (highly recommended movie)

The only way to avoid this situation is not to fall prey to the credit card company’s traps to begin with, and avoid them like the plague. They will lead you to destroy your good name and character, without you realizing what is happening until it is too late.

Wednesday, May 25, 2005

It's Not How Much You Make

When I had to consider finding a "job" in 2001 after closing down my business, I was faced with the reality of making a fraction of what I made as a business owner. My business had $6 million a year in revenue, and provided a nice six-figure salary for my family. Afterwards, with both my wife and I looking at our likely income levels, would make less even when we both went to work. If that wasn't enough, my saleable skills were primarily in management, especially after the computer training business market was severely depressed, my other skills from the business. For quite a while there really were no management jobs, and computer training jobs were being cut back. I simply couldn't find work. I was either over qualified, or in the wrong industry.

This eventually forced me into taking a close look at the economic realities that existed. How do we "downsize" our lifestyle to live within my wife's sales income? She had much greater potential for bringing in money than I did in this market. In time, she'd be able to get close to where we were in our business, income-wise, than me. When I started cutting the budget, I realized we were already operating pretty efficiently, and there wasn't much room to cut. That was actually bad news. It mean't our "necessities" were too high. That is when I realized that the middle-class families in my area are stretched beyond their means due to housing costs. Our mortgage payment was almost 50% of our lean budget. It seemed prudent to consider selling. My wife wouldn't have it. Our son was in a good school and we couldn't move him. When I read Elizabeth Warren's book The Two Income Trap, it confirmed my findings.

So where was my solution? I started looking at how much we were saving by my staying home. To get a good handle on this I picked up a book by Linda Kelley titled, Two Incomes and Still Broke?. It detailed the costs of a second job in the family, including the income tax effect. I was surprised at what I found. I would have to exceed my realistic potential starting salary by a wide margin to just pay the costs of the second job. That means I would most likely be losing money if I took on a job. What impacted me the most was that about 60% of my salary would be eaten up in payroll taxes, before I even could start paying for the job related expenses I would incur. I decided it would be better to stay home and be a full-time dad. I'm glad I did. So instead, I am moonlighting by writing books and doing ministry work.

The rules have changed. The economics of running a home are not as simple as they used to be for our parents. A second income isn't always better. Focusing on how much is leftover after taxes and basic needs are met is the key. I highly recommend Linda Kelley's book.

Tuesday, May 24, 2005

Borrowing for Business Ventures

When I was in business school, I was taught that borrowing is necessary. Now I know that nothing could be further from the truth. In the early years of our country, borrowing for business ventures was rare. When the idea of lending by the goldsmiths started, we began a slow desensitizing to the dangers of debt. Today investors look for a key number in a business called a "Return on Investment" or ROI. It is calculated by the amount of their investment divided into the profit. ( Annual Profit/Investment= ROI). If you use less investment capital and more debt, you can boost this ratio by making the amount of the investment smaller.

What is the effect of this boost in ROI through borrowing? It artificially inflates the apparent success of the business. You can look at other business ratios and uncover this scheme, but in today's business environment it is hard to compete for investment capital without the use of debt, because of this artificial boost. Investors expect a certain amount of debt, unless they are unusually conservative.

This is why debt is called "leverage" in business schools. It is a principle that has inflated the prices of homes, because they are almost always purchased with a loan. Credit cards have the same effect on consumer prices. When consumers spend more, which credit cards encourage, the economy looks healthy. Credit cards have artificially inflated the apparent health of our economy, and we are starting to feel the effects with the high levels of bankruptcies. Actual bankruptcies will drop significantly after this year, because it will be harder to file, not because people are doing better financially in general. Our economy has become a house of cards, literally. The question is, are you contributing to the problem, or are you solving the problem? The Federal Reserve's stated mission is to provide the nation with a safer, more flexible, and more stable monetary and financial system, and to that end they have failed if you compare their performance with pre-Federal Reserve conditions. That is because a fiat currency does not provide stability, it provides the policy makers power to print money when they need it, at the expense of their citizens. Fiat currency is unsecured debt, plain and simple. It is the Federal Government's credit card.

You can write your senators or house representatives and voice your opinion. Do so regularly. File complaints about bank's abusive fees and interest rates at the OCC and the Federal Reserve Board.

Saturday, May 21, 2005

Debt - Help Yourself Get Out of It 3

In my last two posts, I talked about a plan to get out of debt. This time I'll conclude.

  1. Don't Borrow Again. This may seem like an obvious concept, but what happens the majority of the time is that people feel the tremendous freedom of getting out of debt, and then let credit card balances creep up again. Cut up your credit cards and never use them again. I can't emphasize that enough. Have a credit card slicing party. I heard someone talk about melting them in your oven. Then send them back to the credit card company and insist that they never send you advertisements again. You might be saying that is not practical for you because your job requires travel and that requires credit cards. Hogwash!! In a previous post I talked about a fairly recent development that allows you an alternative that can limit your risk of overspending with a credit card. See that post by going here for the post titled "Alternative to the Credit Card". Hebrews13:5 tells us to be content with what we have. We don't need to have a credit card and we don't need debt in any form. If you can hear what Jesus said about being content with your pay in Luke 3:14, you won't need them at all.
  2. Negotiate with Your Creditors. I'm not suggesting that you attempt to pay as little of your debt as possible. I am saying that you should negotiate away the interest you are being charged. If you are in trouble, credit cards will be charging you interest in the 20% to 35% range. That is simply a cement block tied to your feet. If you let it continue, you may never get out of debt. Communicate your plan with the creditors and tell them what you can pay. Explain to them that if they continue to charge interest that you will never get out, and you don't want to file for bankruptcy (if that is true, of course). Ask them to stop the interest and allow you to pay off the debt. You might be thinking, and they will surely argue, that they must make money or they would go out of business. But I say, you have already paid significant interest. Add it up over the life of your account, and give them that number. Then ask them how much is enough? You have probably already paid back the original loan and are paying interest on interest. This is worth the effort because Proverbs 16:7 tells us you can turn your enemies into friends by following the ways of the Lord. Commit to the new payment plan once you have come to an agreement. Get it in writing so the creditor doesn't conveniently forget their agreement and alter it. Believe me, it happens. These days, if the agreement isn't in writing, it doesn't exist.
  3. Stay On Course with Your Plan. Remind yourself of Galatians 6:9 regularly. God will reward your persistence and discipline. It won't be easy, but remember that life is a test. If you prove yourself trustworthy to be a good steward of God's resources, you will be trusted with it. God will take care of your needs, but you must trust Him.

This is just one possible plan. You have to do what works for you, but whatever you do you must stick with it. Everyone's situation is unique and that is why no single plan sold in the myriad of financial planning books on the market will necessarily work for you. You must seek advice, become financially literate yourself, and study the scripture. Once you learn what is means to be a good steward, this problem will be overcome because you will know how to handle challenges with money. You will no longer be lead into financial slavery again.

Friday, May 20, 2005

Debt - Help Yourself Get Out of It 2

Last time I covered the first three steps for a plan to get out of debt. This time I'll cover three more:

  1. Start selling things. We all accumulate a lot of clutter. You may not realize this, but there is money in that clutter. You may also have some valuable items that you don't really need. It is far better for you to sell these items than for your creditors to seize them and sell them for pennies on the dollar. Some of your more valuable items might be costing you in insurance premiums, storage space, or to maintain it. You might also have an expensive car. You could sell the car and get a smaller one that will save you on maintenance and insurance costs, not to mention fuel. The same goes for your house. If you can't bring yourself to sell items, because they mean too much to you, be aware that you may have identified a problem. You may be making that item an idol. Ezekiel 20:7 tells us to get rid of idols. It is easy to set up a seller's account on eBay, and there are a lot of buyers. If you don't think you can do it yourself, hire someone who is skilled at selling on eBay. If you have a lot of books, try selling them on Amazon.com. It doesn't cost anything, and couldn't be simpler. If the books aren't worth anything, or won't sell, give them to a charity and take a tax deduction for them. This will free up cash to pay off debts. In fact, selling a car or a house might raise enough cash to make you debt free instantly.
  2. Seek Counsel. In Proverbs 21:5 it tells us that it is good to use planning as a tool to build prosperity. That is what we are doing here, creating a plan. You would never get out of debt if you didn't commit to doing it and had a plan of action. In some cases, you may want to find a financial planner to assist you, but if you are essentially poor you probably can't afford it. However, it is always wise to seek counsel. Psalm 1:1,2 tells us to choose that person wisely. They should be a person who is an expert in finances but also that person should be godly - 2 Samuel 16:20-23. The ultimate source of counsel is the scripture - Joshua 1:8. The purpose for seeking this counselor out is to help you see where you can improve your stewardship with money, and to help you come up with ways to pay your debts off. They can give you guidance in working out a negotiation for a repayment schedule that makes sense, and that you can stick with.
  3. Accelerate Your Efforts. Once you have a plan in place, look for ways to accelerate it. This is to focus your mind in on solving the problem. If it becomes a focus, it is more likely to be successful ahead of schedule. In Luke 18:27 tells us that we can accomplish anything if we are operating in God's will for us. Getting free of the slavery of debt is His will. Ask for His help. You find money by spending less and applying it to debt service ahead of schedule greatly accelerates it's elimination. After paying off one account, apply that payment to the next account on top of what you are already paying. Elizabeth Warren, Author of the book "All Your Worth" suggests that we should limit our budget for necessities to 50% of our net income, then we have the other 50% available to save and for what we want. It creates a nice margin of safety too for bad times. Look at her book for the details of how to do this to help you accelerate your results.

The rest of the plan, next time...

Thursday, May 19, 2005

Debt - Help Yourself Get Out of It

Here is one plan that could get you out of debt:

  1. Make the commitment to get out. Decide that you are going to persevere and do what it takes. James 1:12 tells us we will be rewarded for it.
  2. Set priorities according to your values, and put your money toward what you value most first. This doesn't mean that you decide to become materialistic and buy all kinds of things. What this means is that you pay yourself first. Remember that God provides for you. He gives you the talents to be productive. Once you have provided for your basic NEEDS (food, clothing, and shelter) then put some away in savings. Putting 10% of it into savings is a good guideline. First for emergencies, up to 6 months or a year of expenses, then for years that you may not be able to be productive. Then tithe or give to the poor. Give to God. It is His money to start with, He simply entrusted it to you. (Matthew 25:14-30) He instructs us to use it to endear others to us with money so that when we have none, we might get help from them. (Luke 16:9)
  3. Do an inventory of what you have and what you owe. Proverbs 18:13 tells us that we can't make decisions without knowing the facts first. One of the best helps I have found to do this is a book titled Smart Couples Finish Rich, it works if you're single too, by the way. He has wonderful simple methods of establishing a financial recordkeeping system so you have all the information you need at your fingertips, and can take this inventory quickly. Another book for this is The Automatic Millionaire.

More tomorrow....

Wednesday, May 18, 2005

Get Rich Quick!

There is one thing for certain. If you are considering an MLM, Multilevel Marketing, or Network Marketing business, or if you are considering a money making idea that requires little effort and promises fast cash, you are probably trying to get out of debt or you're headed into debt.

In Proverbs 21:5 it says, "The plans of the diligent lead surely to advantage, but everyone who is hasty comes surely to poverty." Being in a hurry to acquire wealth is just as futile as procrastination and laziness. Don't be fooled into putting good money, that the Lord has provided for you, into a scheme that makes promises of quick wealth.

This is also true for hopes of winning the lottery, or waiting for Ed McMahon to show up on your door step after diligently filling out the sweepstakes entries. The odds of getting killed in a car accident, or getting the flesh-eating bacteria are better. This akin to gambling. Gambling is also a way to hope for a windfall of wealth. Many people here in Orange County go to Las Vegas, a.k.a. Lost Wages, in hopes of a jackpot. However, in Ecclesiastes 5:7 it says that dreaming is foolish if it isn't followed up with action.

You may feel like it is impossible to get out of debt, but nothing is impossible with God. You have to trust God and make a commitment to making changes. The bankruptcy laws have recently changed to make it more difficult to get a fresh start, but that shouldn't matter because you can find a way if you trust God. Avoiding bankruptcy allows you to keep your integrity. It isn't easy, because it is going to require persistence (James 1:3,4) to get through the trial. You have to ask God what it is He is trying to teach you. Learn the lesson as fast as you can, to get through this time. Your perseverance will be rewarded (James 1:12). Create a plan and stick with it. I'll give you a suggested plan next time.

Tuesday, May 17, 2005

Forgetting the History of Economic Blunders

In the depression era, Congress responded to the economic collapse by forbidding financial institutions to engage in both wholesale and retail banking. This was to keep financial services conglomerates who offered insurance, brokerage, underwriting, credit cards, and retail banking services from forming. One of the problems during the onset of the depression was the speculative investments banks made that put retail bank deposits at risk.

Well, it seems Congress has forgotten the lesson. In 1999 they passed the Financial Services Modernization Act (FSMA), H.R.-10, which was also referred to as the Gramm-Leach-Bliley Act. It promised lower-priced financial services. Instead of that, we got higher prices. It also unraveled the protections of the 1933 Glass-Steagall Act that prevented retail banks from getting involved in investment banking.

Today Citigroup, a result of a merger between Citicorp and Travelers, offers brokerage services through Salomon Smith Barney, mutual funds through Primerica Financial (an MLM), property and casualty services through Travelers Property Casualty, real estate services through Citicorp Real Estate, and retirment products through Travelers Life and Annuity. This re-emergence of the conglomerate bank is threatening consumer privacy, since banks tend to have little respect for privacy. They share customer information across all these companies, and are aggressively lobbying against privacy laws. This information is the cornerstone of their marketing strategies. It also results in customers getting rejected for insurance, for example, because of information from an account in another part of the conglomerate.

These developments are bad for consumers. Actions these banks take can cause significant market swings in the economy and in the stock market. They don't seem to think it is necessary to lend responsibly, evidenced by their credit card practices, so there is no reason to think they will manage their other services responsibly. Thomas Jefferson once said, "The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens every accumulating." Credit cards are becoming a threat to our personal liberties.

Write your congressman and voice your opinion about banking deregulation and the assault on your privacy. You can write your congressman at the House and the Senate. When you feel you've been mistreated by a bank or credit card company, file a complaint with the Office of the Comptroller of the Currency. Things won't change if you don't fight back. The Senate Committee on Banking, Housing, and Urban Affairs is having a hearing today on credit card industry practices. See more information here and look for video here. One thing about these hearings I would like to note is that the credit card issuers are denying that "Universal Default" is practiced by their company. MBNAs Honorable Louis Freeh, Senior Vice Chairman and General Counsel has specifically and clearly denied that MBNA uses Universal Default yet there is this complaint on the consumer affairs website. Is there a penalty for perjury when testifying before congress?

Monday, May 16, 2005

Biblical Debt Help for Yourself

The first thing you can do to help yourself get out of debt is to live on cash, and cut up your credit cards. Credit cards encourage excessive spending, they are specifically designed for that purpose. It is a proven fact that people spend significantly more using a credit card. Even when you pay off your credit card each month, you are still in danger and you still spend more due to the convenience of it. Proverbs 3:27,28 tells us not to withhold our payments on debt (incurred at the time of purchase) if we have the cash to pay it now. That is putting your payment off into the future. You are incurring debt.

You can't live on credit. It shows you are not content with what God has provided you. 1 Timothy 6:8 tells us what is enough. Hebrews 13:5 tells us that we should be content with what God provides. It is better to have little wealth and be serving God's purpose for our lives, than to be wealthy without living our God given purpose (Psalm 37:16). Wealth provides a false sense of security. (Proverbs 27:7)

Proverbs 27:1 tells us that when we use credit to purchase things, we make a bold presumption of what the future holds. In fact anytime we borrow money we do that. We take away our flexibility to follow God's direction, and become slaves to paying our creditors instead. You simply can't serve both masters. So the first step to giving yourself "debt help" is to live on cash.

Dave Ramsey has a great system for doing this. You might check out his book "Financial Peace" which helps you with a system for living on cash. This is probably a difficult step for many, since you have too much debt and are playing the "credit card shuffle", or have a mortgage that stretches you too thin. However, it can be done, and takes discipline and patience. When you get your spending priorities striaght, it can reduce a lot of stress. You have to make decisions to "downsize" your spending, and find ways to increase your income. The easiest way to downsize spending is to sell things that can be used to pay off loans, including your house and moving into a smaller, less expensive, place to get your housing expenses in line with your income level. It can be a quite liberating experience!

Saturday, May 14, 2005

Financial Literacy and Credit Card Debt

The Consumer Literacy Consortium asked 1,000 people financial questions, to find out how financially literate the average American is. The average score was 53%. That would be a failing score in school. The scoring was pretty even across the board except the affluent and college educated scored about 10% higher than the poor and uneducated. Not much difference. Go here to see how you score.

Credit card companies are taking advantage of this and blaming the victims by saying they had a choice, and no one forced them to open an account. They are right, but the problem is no one is holding them accountable for lending responsibly. Citibank is known for being agressive at marketing to high school and college students, though many credit card companies are guilty. They don't even require the parents to cosign, yet they are more than willing to go after the parents when the teenager defaults. Parents pay out of embarassment, and no one questions the credit card company's tactics. (67% of undergraduate students in college had credit card accounts in 1996 according to a study by Claritas, Inc. ) They will even go so far as to sue the parents. This was revealed in a congressional hearing before the Committee on Banking, Finance, and Urban Affairs on March 10th 1994. Still nothing has been done about it.

In Robert Manning's book, Credit Card Nation, on page 160, he describes a student who committed suicide after getting deep in debt on credit cards. He was a National Merit finalist and a liberal arts "letters" major. He wanted to go to law school, was working two jobs, went to counseling, and moved to a less expensive school. He still couldn't keep up. He had 12 credit cards when he died. After he died, the credit card companies called the parents to collect, and blamed the parents for not holding him responsible for his debts. The parents had left two messages for one collector about his death certificate and got a return call insisting that the parents pay the debt. Chase and other credit card companies still mail preapproved credit card applications is the teenager's name to their home, even while years later the collectors still call.

These are not companies you can do business with and maintain a good reputation. It is wise to heed the warning in Habakkuk 2:6-7 where it warns us against creditors. It is wise to stay away from credit cards and any other form of debt. I think the volume of complaints speak for themselves.

Here are just a few I found in a fast search on consumer sites:
See some complaints against Citibank here and here and here
See some complaints against MBNA here and here and here
Capital One here and here and here
First USA here and here and here and here

Go here for information about why and where you can complain. If you don't hold them accountable, by staying quiet we tell congress that what they are doing is okay. Credit card companies are slipping through new laws in amendments that take away our privacy rights, reduce our rights as debtors in the collection process, and increase their profits through sneaky contractual tactics. What you don't know WILL hurt you! Make an effort to become financially literate.

Friday, May 13, 2005

How To Eliminate Your Debt

I do post a lot about why it is bad to use credit cards and debt. You might wonder why there isn't more about getting out of trouble if you are already in it. There are a lot of websites and other resources that claim to be able to help you, and you certainly need the help. I have been in trouble myself since my business failure in 2001, and found it impossible to catch up. Yet I still get credit card (requires Adobe Reader) solicitations in the mail.

I have tried debt consolidation with mortgage loans (scroll down to "Mortgaging the Future"), only to find that I can now barely make my mortgage payments.

I have tried the debt elimination programs because the business charges to my credit card accounts were legal but without my consent (yes they can do that), only to find the programs were not what was promised. I desperately needed a legal position to fight the credit card company's unfair treatment.

I have looked into debt counseling, only to find the vast majority of the programs are scams. (I wonder how congress will handle this problem, now that they have mandated counseling before bankruptcy.) I hope they won't push consumers into becoming fraud victims. For many of the non-profits, they are funded by credit card companies who pressure counselors to steer consumers away from bankruptcy even if it is appropriate, and encourage long term payment plans that don't solve consumer financial problems, and often make them worse.

I have considered bankruptcy, only to find I have to file Chapter 7 or find myself becoming a statistic of Chapter 13 (75% currently fall out of bankruptcy protection from default, a direct result of court mandated payments that are too difficult to maintain for 3 to 5 years. The new law recently passed will probably increase failures close to 100% with tougher repayment standards.) Chapter 7 would be too harsh on my family, and it just isn't appropriate.

I have tried negotiating, and found credit card companies unforgiving and litigious. Look here for their latest move to push people already on the edge into financial ruin. Citibank would not accept less than 80% of the balance in settlement, the alternative was litigation. With increased collection power given to credit card companies in the new bankruptcy law, they will find it more profitable to pursue litigation in the future.

So there isn't much for me to recommend, except try to settle. If that doesn't work, beg for mercy. If that doesn't work, let them sue you, then file a response denying all claims and wait. If they follow through, file bankruptcy chapter 7, but do it before October (requires Adobe Reader) this year. Get a fresh start and never use another credit card, and stop using debt. Write your congressman and senators as well as the Office of the Comptroller of the Currency, and complain about lending abuse. Educate yourself on the corruption in Washington. Put simply, debt is a trap. It has snared both our government and it's citizens.

Sorry I don't have any easy answers. All these companies selling solutions to debt, are just capitalizing on your misfortune. Even the non-profits are frequently fraudulent. Subprime mortgage lenders are notorious for abusing consumers. You also get targeted for every MLM and business opportunity scam out there, promising to solve your debt problems. The problem is that if it sounds too good to be true it probably is. Take that advice from someone who has tried them all, and only made my situation worse. My wife will vouch for that. There is no easy solution. So the only sure thing you can do is change your attitude toward money. That's what I am doing. Learn what the scriptures teach about money. That is what I am trying to deliver on this blog and in the book I am writing. Just the TRUTH as I have found it.

Thursday, May 12, 2005

Bankers and the New World Order

The New World Order. This is a topic that gets a lot of conspiracy theorists going. They talk about the Order of Illumnati, the UN/World Bank/IMF, Bilderberger, the Council on Foreign Relations, and the Trilateral Commission. All these groups are alledgedly working together to take over with a one world government. It is also thought that the Federal Reserve Bank is moving in this direction, by preparing Americans through indebtedness. Credit cards are part of their strategy. The recent "Real ID" amendment in the military spending bill just passed in Congress may be another piece.

Well, they might be right, and they might be wrong. There is no way to know for sure. There seems to be a lot of circumstantial evidence. However, I think concentrating on the alleged conspiracy, we should be paying more attention to what scripture tells us about these issues.
Arnold Fruchtenbaum, a New York University Seminary Ph.D, and reknowned expert in scripture, has a book that speaks about the end times. In this book we see the prophecies that have been fulfilled that point to the end times, and he also talks about the ones yet to be fulfilled. One of those yet to be fulfilled is a One World Government. So the conspiracy theorists could be identifying some of the specifics that are leading to the One World Government. However, that won't come until another prophecy is fulfilled - A Russian invasion of Israel. Russia invaded Afghanistan and failed, so this does sound feasible. Russia will be defeated, according to scripture(Ezekiel 38:1-39:16). Then the One World Government will come (Daniel 7:23-24)

If you are a Christian, this could be a good reason to avoid credit cards, and be prepared on how you will respond to the Real ID card (a National ID card or the beast?). If only for your own protection. It at least deserves some scriptural study. How can you resist government actions that violate your religious beliefs if you are in debt? That debt can be used to force you to comply or suffer serious consequences. It is far better to be debt free and able to express your beliefs without being under economic duress.

Wednesday, May 11, 2005

Debt Elimination Programs

There has been a lot of email traffic selling debt elimination that isn't consolidation, bankruptcy, or negotiation. It is a dispute process.

In the mid 90s, these programs began to grow in popularity. They would hire their customers as agents to sell the service, with the promise that they would make a lot of money helping other people get out of debt. The barrier to the program is the upfront fee of a few thousand dollars, depending on the amount of debt you wanted to eliminate. What you were really purchasing was an educational set of audio CDs and ongoing email support as you followed their system for elimination.

The programs varied in many ways, in fact some were probably teaching illegal activity, such as using offshore accounts to avoid income tax. Some of them were smart enough to avoid the illegal aspects. The process would go something like this. The first step was usually to dispute the debt by sending a letter that cited their belief that the lender had created new money based on their signature on the loan application and did so without disclosing that fact to the borrower. It would go on to claim the borrower was entitled to the money created. The creditor would usually respond with a letter indicating that the dispute is frivolous, and their subsequent collection actions are allowed under federal law. They may cite a case to back their claim along with federal code that the dispute is frivolous, and the matter is closed. The debt is due as agreed in the loan agreement. As a matter of law, the bank would be correct.

There is a nice loophole in Regulation Z that allows the creditor to make the determination if an account dispute is frivolous. This is like letting the fox watch the chicken coup. It makes it very difficult for the customer when they have a dispute that the creditor doesn’t want to acknowledge. That leeway, coupled with their ability to allow charges to your account without your knowledge or express consent, is frustrating to say the least. As a result, this method of debt elimination was eventually doomed as credit card companies began to take the dispute seriously and aggressively pursue the account holder for collection.

It is also doomed because these account holders agreed to the credit card company's one sided terms that gave them permission to do what they do. Proverbs 22:7 says that the debtor is a slave to the lender, and Psalm 37:21 makes it clear that you must pay your debts. It is better to simply avoid debt.

Banksters or Gangsters?

Most of us have let ourselves get caught up in the slavery of working to pay off debts. This is a direct result of the creation of a central bank to manage a fiat currency, and our participation in that system by using debt as a financial tool. As I mentioned before, the Federal Reserve Bank is a private corporation. One of the first questions that come to mind is who owns the stock of that corporation?

The major shareholders, who hold Class "A" Stock are:
1. Rothschild: London and Berlin
2. Lazard Brothers: Paris
3. Israel Seiff: Italy
4. Kuhn-Loeb Company: Germany
5. Warburg: Hamburg, Amsterdam, The Netherlands
6. Lehman Brothers: New York
7. Goldman and Sachs: New York
8. Rockefeller: New York

The rest of the stock is owned by the member commercial banks. These major stockholders effectively control the medium of exchange in the U.S., throughtheir influence on the Federal Reserve System. They are all extremely wealthy.

Source: "Economic Solutions" by Peter Kershaw

Tuesday, May 10, 2005

Life is a Test

When you realize that life is just a test of our trustworthiness, as it says in Luke 16:10, you realize why God hasn't given some of us more responsibility. If we defraud others in small matters, we will do the same in larger matters. When you meet someone and you see a small justification of a dishonest act, whatever it may be, you realize that you can't trust that person with an important matter. If we want more responsibility we should follow the example in Matthew 25:14-29.

This principle also applies to using what God has already given us. It is God's money, not ours as it says in Psalms 24:1. If we use it as a down payment on something we really want, and plan on being able to make the payments, we assume that God is going to continue to provide for us to make those payments. In reality, we have given God the message He hasn't given us enough and we needed to borrow because He didn't provide what we needed. That might be true if we borrowed to buy food, clothing, or shelter. If we had to do that, God had a specific purpose for that, and we would be wise to seek a loan from a wealthy friend that is interest free. We would still avoid credit cards or other predatory lenders. However, we usually borrow because we want a new car, or large screen TV, based on payment affordability. That is behavior that leads to poverty.

The point is to use what God has given you, wisely. If you perservere, you will be rewarded for proving your trustworthiness. James 1:12.

Monday, May 09, 2005

Debt Myths

There is a lot of thinking being passed around as "common sense" that iscompletely wrong. It is all part of our indoctrination into being a "good"consumer and spending more. Just because something is repeated a lot does not make it true. , a pretty common sense guy, busts those mythsin his book "The Total Money Makeover."

One myth is that debt gives poor people economic opportunity, so making credit available to them is important. While that is partly based in truth. It is used to justify lending to a risky group at high interest rates and fees. These days, the poor are dragged into courts and stripped of everything to pay a debt, after a predatory lender has provided them with "economic opportunity". It happens to middle-class families as well. (Deuteronomy 28:12,13) Borrowing is a curse, and so is not being able to pay it back. (Psalm 37:21)

Another myth is that we have an obligation to help family members or friends if they need a loan. The truth is that these kinds of loans can ruin relationshipsthat would have otherwise been fine. When you loan to someone, you make them your servant, and they become your slave. A better way to do this is make interest free loans, but if they are unable to pay - forgive the loan. However, it is imperative that you use good judgement when lending. Unless they need the loan for food, clothing, or shelter, you probably aren't helping them. They also need to show indications that they have a plan in place to pay the loan back, and be more productive in the future. This goes for providing personal guarantees on loans for them as well. If you do that, you'd better be ready to pay the loan yourself. (Proverbs 22:7; Hebrews 13:5; Proverbs 6:1-5)

A common myth is that you will always need to borrow to buy a car. Wrong! You can buy a reliable one used for cash, and drive it for many years. Some people are attracted to the tax advantages of leasing. The truth is that is the most expensive way to buy a car, even after tax benefits. (1 Timothy 6:6,8)

The worst myth out there is that credit cards can help you build good credit. In reality those pieces of plastic are fraught with legal and financial traps that can ruin you.You don't even have to make late payments for that to happen. Habakkuk 1:4 shows us an example of not taking our commitments seriously. Credit card agreements make it nearly impossible to prevent default on your commitment, since you don't have direct control over the terms of default, that can change without your knowledge if the change of terms is lost in the mail.

Sunday, May 08, 2005

The Hazards of Borrowing

There are too many to list here, but let me focus on some basics that lead to the many other hazards.

1. When you borrow it obstructs your ability to do what God wants you to do with your life, or your business. You may not even know the opportunities you miss because you borrow, but when you do it causes you to divide your commitments between serving God and delivering on your promise to a lender. (Matthew 6:24)

2. Taking out a loan to solve a financial problem delays the inevitable decision you must make to reduce your expenses, no matter how difficult. We take out the loan hoping things will get better than they ever have been, so we can pay off the loan and keep up with other expenses. (Proverbs 22:3)

3. Borrowing adds unecessary stress. (Proverbs 14:12) The constant unforgiving payment schedule of debt payments force you to work hard every day to make sure you have the means to meet them. It wears you down. The more you borrow, the greater the pressure. If something happens that prevents you from meeting your commitment, you fail. God doesn't intend for you to borrow, He provides for your needs - and that doesn't include loan payments.

Larry Burkett has a good book titled Business By The Book for business owners who are often sucked into the myth that it is a requirement to borrow, and personally guarantee business loans.He also discusses other business issues in his book. This book completely changed my perspective on running a business. I wish I had read it before my business died. I might have survived.

Saturday, May 07, 2005

Is Borrowing Unscriptural?

There are some who teach this. And it may seem that I am making the same case. However, that isn't entirely the case. I don't believe the scriptures prohibit borrowing all together. It is foolish in most cases, but there are times when it is acceptable.

It is important to realize that it can result in the destruction of a marriage, ruined lives, ruined businesses, and an undermined economy. When we borrow we assume that the future is predictable, and that we will continue to have income to service the debt. In James 4:13, this is identified as a characteristic of worldliness. It shows a lack of trust in God.

The basic principles to follow when you must borrow are:
1. Avoid it whenever possible. We operate under the assumption today that it is necessary to buy a car or a home, however, in earlier generations these items were paid for with cash. It is a recent development that everyone assumes they will borrow to buy these things.

2. Avoid signing personal guarantees. Proverbs 6:1-3 tells us this. Even if it is for a close friend, or for your business, it is as if you borrowed the money yourself, and you'd better be prepared to pay it.

3. Avoid taking out long term loans. Mortgage loans are the most common. What is the likelihood something will go wrong and render you unable to meet your payment schedule? With business cycles lasting about 10 years, it is inevitable. When you do borrow, it is wise to pay it off quickly.

4. Always have collateral that can be used to satisfy the loan. This is so that if things do go bad for you, you can always pay the loan by selling the collateral. It is difficult to do that with a home, because it uproots your family, and is the reason you must pay it off as fast as possible. Your car depreciates in value, so your loan had better be much less than the purchase price. You will need to be ready at any time to sell the items quickly. These two items don't sell well in bad economic times, so you must consider these kinds of loans very carefully.

The bottom line is that borrowing was originally an act of charity. It was done without interest, unless you were lending to a foreigner, and it was shameful to have needed a loan. It is intended for the poor. Today borrowing is a way of getting what we want before we can afford it. It gives us a false sense of wealth, and it drives up the prices of items that are typically purchased with loans.

Friday, May 06, 2005

Shared Experiences

I hope that I don't sound preachy in my posts. I am trying to share from personal experience. I learned a lot from losing a business, more than I learned in business school or when my business was thriving. I learned some tough lessons about how money really works, and how the "common sense" most of us follow today is based on misinformation. If you are a business student, or a small business owner, you should take my experience as a warning. Things are not as they seem. What you are being taught, or have come to believe is true, may not be true.

My aim is to present the results of my research to you humbly, as a different picture emerges from that research. It has been shocking and humbling to learn how money really works. It has made me realize how accurate scripture really is, even on the subject of money.

Thanks for visiting!

Thursday, May 05, 2005

Macroeconomics of Debt

Gradually, the easing of credit availability to buy a home has had an effect of bidding up prices. When more people are competing in the market to buy homes, prices go up. The problem is that when people are allowed to allocate a higher portion of their income to mortgage payments, they have less to spend on other needs and wants. Housing is a need, but when it is excess of 25% of your income it begins to put you at risk of default if something goes wrong. What are the chances that something will go wrong in the next 30 years?

As more middle class families have been stretched thin, there are more two-income families. This is to help meet those higher costs. Families today are carrying more debt than ever, and that is why both parents must work. The mortgage becomes an albatross. Then when one of the parents loses a job, gets sick, or dies, it causes a financial disaster. This is detailed in a book by Elizabeth Warren, a Harvard Law Professor who has done extensive research on what causes bankruptcies. The book is called, "The Two-Income Trap".

The lesson? We need to recognize what we can afford in housing and other basic needs. The use of debt has a way of making us feel wealthier than we really are. When you make purchases that you must finance, it means you didn't have the money to buy it. You feel richer once you have possession of the item, but it has strings attached. To be good stewards of what God has given us, we need to know our limitations and avoid borrowing. Doing so will give us the resources to get through the bad times without falling into bankruptcy.

Even Alan Greenspan Recognizes It

On February 23rd in 2000, the U.S. Federal Reserve Board Chairman Alan Greenspan testified before the U.S. Senate Banking Committee. In his testimony, he mentioned that credit card solicitations were getting out of hand. "Children, dogs, cats, and moose are getting credit cards."

Robert Manning, in his book Credit Card Nation" mentions an example. "3-year old Alessandra Scalise's parents listed her occupation as "preschooler" and stated that she was applying for a credit card to buy toys. The preapproved application from Charter One Bank - which was sent in Alessandra's name to the family residence - was approved - even without a Social Security Number, no listed income, and no other relevant financial information. Furthermore, Ali's card came with a credit limit of $5,000 - more than her parents' card." (pg. 344 no.23)

Irresponsible lending does not justify reforming bankruptcy laws, as Congress has done in April this year. It has contributed to an explosion of bankruptcies, which Congress has apparently agreed with the authors of the bill (the credit card companies) that it is the consumers who are abusing the law not the credit card companies.

If consumers learn the truth about this, and begin to demand fair treatment, the abuses will come to light. Remember, voters' votes put our representatives in office. Voters must use that power to counter the money buying votes on legislation. That is what "personal responsibility" is about.

Wednesday, May 04, 2005

The Jekyll Island Secret

How many of us really know what the Federal Reserve System is? The story isn't told on the Federal Reserve website, in fact they'd prefer not to discuss it. There is a truth-in-advertising problem with the name. It isn't part of the federal government as many mistakenly believe, there are no reserves being held by the organization, and Federal Reserve Banks are not banks at all. It is a privately held corporation founded by a group of powerful men from great financial institutions at the private resort of J.P. Morgan on Jekyll Island off the coast of Georgia.

It is a prime example of how laws are passed in our country today, because their goals would never meet the approval of voters, or Congress, they had to promise their proposal would address the prevailing concerns. All the while, the real goal was quite the opposite. The real goals were to stop the growing competition from the nation's newer banks; adopt a system to create money from nothing (fiat currency); control all the reserves of all banks; get the taxpayer to pick up the bill for any losses; and convince Congress it's purpose was to protect the public. The goals that are given to the public are not it's true goals, and the Federal Reserve has failed miserably at them. The real goals were accomplished, and the effort has been an astounding success.

The result of their plan created at Jekyll Island resulted in the Federal Reserve Act of 1913 which created a public/private partnership in a central bank, passed on the presumption that it would stabilize the economy. Instead it has created an inflation monster that will eventually overtake us. Failure is inevitable. In the meantime those who run the system obtain the ultimate power over the country. This is detailed in a book titled "The Creature from Jekyll Island." The author suggests a solution, but the only real solution is to learn how to be a good steward and keep your faith in the Lord steadfast. 1 John 2:17

Tuesday, May 03, 2005

Advice From Warren Buffet

Warren Buffet the quintessential investor and head of the insurance company Berkshire Hathaway, Inc, usually tops the list of the Forbes Richest People in the world. He and Bill Gates jockey for top position. If anybody knows how to make money, this guy does.

So what is his advice? A tip on a hot stock? A tip on likely takeover targets? How to profit in real estate? No. None of these. His advice is to cut up your credit cards. This is what he told an assembly of Nebraska high school students. He said, "My advice for you is if you can't afford it, don't buy it... You can't make progress in your financial life borrowing credit at 18% to 20%." He advised to have a small savings when they start out on their own instead.

My OCC Complaint

In an earlier post, I told you that I had filed a complaint with the OCC. The complaint is based on the fact that I wanted to see my account agreement (the contract) before I signed it. Credit card applications have a series of disclosures, required by law, to make you aware of the "pertinent" terms. What most people may not realize is that signing the application is creating a contract based on the disclosures as well as an unseen agreement that will come with the card.

I received a call this morning from MBNA, the subject of the complaint. The gentleman I spoke with had reviewed my complaint and wanted to have a personal conversation with me. The explanation was essentially that their contractual terms vary depending on which of the thousands of programs they have is used, and what the results of the credit report are. It is too difficult to provide an agreement for each individual applicant until the account is opened.

This explanation sounds good, but falls short. I don't think there is any explanation for expecting consumers to take "personal responsibility" for their commitments and then convincing them to commit to a contract they have yet to read. Sure the "pertinent" terms are in the disclosure, but who decides what is pertinent? Folks, it is simply wrong to sign a contract before you read and understand it. MBNA expects you to open an account, which goes on your credit report (inquiry and open account), before you get to see the contract you signed. The credit card company also gets all your personal financial information in their database. It doesn't matter how difficult it is, MBNA should simplify and make the transaction more reasonable, if they are going to hold cardholders to a high standard of "personal responsibility."

I still am waiting for the explanation from the OCC. He informed me that I would receive a letter from the OCC with the explanation he gave me. I'll keep you posted.

Monday, May 02, 2005

Training Up Good Consumers

Banks and Credit Card companies have gone to great lengths through the years to convince us how indispensable debt is as a part of our financial planning. They have also worked hard at selling us convenience, and how it can make our lives better. We know what they are telling us isn't true, yet we follow them anyway. Why do wealthy people use credit cards, and carry balances on them? There is a cognitive disconnect between rational financial decisions, and what we actually do. This is a result of many years of influence of John Maynard Keynes, the British economist that taught supply side economics and discouraged saving. Our government is now hooked on this idea - spend, spend, spend. It is good for the economy, and we have listened.

This is certainly an outgrowth of the idea of using a fiat currency, a system that has always resulted in runaway inflation and failure of the monetary system. It is a system that relies on debt.

We were trained to be good consumers from a young age. Take a game by Milton Bradley, for instance. This game, called Mall Madness for players 9 years and up, promotes going to the mall and spending your money as fast as possible. The first one to get back to the parking lot with their items wins. How do they get their money? By inserting a credit card into the bank slot. No need to go to work, get an increase in your allowance. Just rely on the endless availability of money from the credit card. This game has been primarily marketed to girls, which socializes them to be the consumers. In a day when middle class families can't survive without both parents working, this is a recipe for disaster.

Banks Target Risky Customers

It is a well documented fact that Credit Card companies target risky borrowers because they make up more than 75% of their profits and that is why they refused to allow amendments to the recently passed bankruptcy bill that would protect innocent people in bankruptcy. They know that 50% of bankruptcies are caused by medical problems and another 40% on top of that are caused through no fault of the borrower. A total of 90%. They make their money on people who default, and have no social conscience about it. That is why they seek out these borrowers and push them over the edge so they can profit from it.

The same goes for subprime mortgage loans. Research shows it.Take your unsecured credit card debt and turn it into a secured loan against your home. This puts a basic need at increased risk of loss. Not all subprime loans are predatory, but most are. The subprime lending industry targets low income African Americans who recieve 2.4 times as many subprime loans as low income Caucasions. Hispanics receive twice as many. Subprime lending in Southern states is 1.5 times as the rest of the country. Almost 40% of female borrowers got high cost loans from subprime lenders, as opposed to one-third of men. The elderly are three times as likely to have a high interest subprime loan as someone under 35. Rural areas are often considered high risk, and are targets of subprime lenders as well.