500 Posts: A Time for Reflection

I knew that I was approaching 500 posts on the blog, but I didn’t notice I had past that milestone until I hit 502. It seems like a good time to pause and reflect both on the past and on the future. Those of you have been around for a while know the history of this blog. If not, here is a link to a post I wrote back in July 2010 at the 125 post marker. It seemed like a lot of writing at the time.

A Word About What is Happening Here

I saw so many people causing themselves so much avoidable pain I just had to do something to help.

It all comes down to the money equation.

Money In = Money Stored + Money Out

Pretty simple isn’t it? Over 500 articles fall under one or some combination of the three components to the equation. Some of this material contains very basic teachings. Some of these posts successfully condense complex subjects into simple metaphors. Some seem (at least to me) a bit tedious and academic in nature. Some are a bit abstract and philosophical. On rare occasions I write red faced rants aimed at some outrage or injustice.

I was fortunate enough to be raised in a family that understood how to make certain less money went out than came in. It is a joke in my family that we know how to squeeze a nickel so hard that the buffalo bellows. I was also raised with a third generation fear of debt. During a boom time when other farmers were taking on more debt to buy more land, my grandmother was convincing my grandfather to pay down the debt on the farm. She was right. My family was one of only two families in their part of the county to hold on to their farm throughout the depression. This story was told over and over again at our dinner table. In fact, at age 62 I am blessed to still hear the family stories from my parents. I was also raised by parents who believed whole heartedly in the Protestant work ethic. They might have gone a little overboard making certain that I understood the connection between work and money, but I wasn’t surprised by the world when I was finally out on my own.

I was raised to love and respect education. It is the only way I knew how to jump start the “money in” side of the equation as I moved through my life and my career. The rules have changed. Another degree is no longer a guarantee of anything for most people, other than student debt. I have spent a great deal of time in an effort to understand the rules of the new economy. I have tried to study what is working and what is not working. As I have learned I have tried to share my findings with you, my readers.

Finally, over the last ten or twelve years, I have learned a lot about the discipline of investing. A member of my family is born knowing how to squirrel away money in a bank account. I had to learn what to do with it once I had it. I have been blessed. I am thankful. Now I try to share what I have learned with others, particularly the young. The guarantees I grew up with are gone. I expected that health insurance would always come free with my job. That is no longer the case. Even though my former employer is paying two thirds of my health insurance premium, my share is my largest regular monthly expense. The guaranteed pension is a relic of the past. Saving for retirement is now your responsibility. Social Security? Well I think Social Security will remain in one form or the other no matter what happens, but expect the payments to get smaller. Expect the age for full retirement to increase.

I don’t really know all my readers. One of the disappointments I have faced as I have continued to write the blog is a lack of comments. I have found that people are just about as unlikely to share their money mistakes and problems as they are to share the intimate details of their sex lives. The only readers I am sure I have are the ones who communicate directly with me in person, by telephone, or other means of electronic communication. Some of the posts I have written were written for specific individuals facing specific problems. In some cases I know they have been read and I know the results. In other cases, I can only guess.

If you are having problems with money, I am writing this blog for you. If you want to jump to a higher level, I am writing this blog for you. If you stuck in a dead end, I am writing this blog for you. Overall, I address most but not all the components for a balanced life. Obviously this blog addresses personal finance, business, and career issues. It also touches on personal spiritual issues and how they interact with more worldly concerns. Finally, they consider your legacy. You will carry what you contribute to this world during your life into eternity. While I am writing as a Christian, I think my readers who walk other paths will understand the truth contained this passage.

1 Corinthians 3:11-15

For no one can lay any foundation other than the one already laid, which is Jesus Christ
If anyone builds on this foundation using gold, silver, costly stones, wood, hay or straw,
their work will be shown for what it is, because the Day will bring it to light. It will be revealed with fire, and the fire will test the quality of each person’s work.
If what has been built survives, the builder will receive a reward.
If it is burned up, the builder will suffer loss but yet will be saved—even though only as one escaping through the flames.

When I give away a Silver Eagle, it comes with a notebook. The recipient is instructed to write down something they have learned about money every day. If they face a problem they don’t understand, they are instructed to ask God for wisdom. One of the recipients asked me if I kept a notebook. The question caught me off guard, but I quickly realized this blog is my notebook. I am just sharing everything I have learned with you, my readers.

I am still learning. If you read all 500 posts you will notice my understanding of these subjects continues to deepen with time and experience. I don’t have all the answers, but I continue to study, every day. I even study authors with whom I have serious disagreements. Bruce Lee said it very nicely, “Absorb what is useful, discard what is useless, and add what is uniquely your own.”

Go thou and do likewise.

The Way of The Value Investor (Part III Conclusion)

The first rule of making money is, “Don’t lose what you already have.” Keep an age appropriate percentage of your money in a wide variety of relatively safe stable investments. Don’t put too much at risk at one time. This is particularly true after retirement. When you are no longer a part of the workforce, it becomes very difficult to recover from financial disasters. When you are young you can take more risks, but only after you pay off those credit cards and build up an emergency fund. “Safe” includes investment grade bonds, Treasury Bills, Government National Mortgage Association (Ginnie Mae) funds, cash (insured money market funds and the like).

For new readers, your age in bonds, cash, and CD was the old rule of thumb. Hence, at age 30 one would hold 30% in safe investments and have 70% of their holdings in stocks and stock mutual funds. The new rule of thumb is based on the fear of inflation. It recommends your age less 15% in safe holdings. Hence, at age 30 one would hold 15% in safe investments and 85% in stocks. Even the young who are playing with relatively large amounts of time and relatively small amounts of money need to keep some powder dry. When the market tanks, and it will, that money will allow you to purchase once in a decade bargains.

Value stocks with a low beta are all good bets for capital preservation. Beta is a measure of volatility that can be found on quote pages on sites like Google Finance. A beta of 1.00 means a stock is as volatile as the market. Less than 1.00 means it is more likely to be safe and boring. Greater than 1.00 means the stock moves faster than the market, both on the way up and on the way down.

The Price Earnings Growth Ratio, commonly called the PEG ratio, is the PE ratio divided by the company’s growth percentage. Let’s say a company has a PE ratio of 20 and it has been growing at 10% per year and you expect it to continue to grow at that rate. The company has a PEG of 2. The lower the PEG ratio the more likely the stock is a bargain. A PEG ratio of 1.0 is considered neutral.

Peter Lynch, the genius who managed the mighty Magellan Fund during its glory days, put a slightly different spin on this measure. He suggested adding the growth rate to the dividend payout, then dividing the result by the P/E ratio. Hence a stock with a growth rate of 7% plus a dividend of 3% divided by a P/E ratio of 15 would be 0.67. This would be pretty typical in today’s market. Peter Lynch considered under 1.0 poor, 1.5 neutral, and over 2.0 good.

As an engineer and an embittered old cynic, I have a problem with the PEG ratio as well as the more sophisticated number suggested by Peter Lynch. I am very comfortable with interpolation, the art of taking two know points on a graph and estimating the value of an unknown point between the two known points. I am not so happy with extrapolation. A trend is a trend until it is no longer a trend. The line on a graph may be linear up to some point and then take a wicked curve in the opposite direction. When I plug a number into the denominator of the PEG ratio, do I use history and extrapolate, or do I just make a guess after looking into my crystal ball? Neither option appeals to me.

Buy what you love. One of the first and best places to begin your research would be your favorite companies. What companies do you love? My wife loved Yankee Candles. I thought that scented candles were a pretty stupid idea. Any fool with a stove, a pot, some wax, and some scent could make the things. My wife assured me that Yankee Candles were different. When the company went private a couple of years later we came close to a three banger. We almost tripled our investment!

Don’t buy what you don’t understand.

One of the most successful investors of the 20th century, John Templeton observed, “If you don’t understand what you’re investing in – don’t invest!” This advice will save you from an enormous amount of pain. I consider it the prime directive of investment. Yes, you will miss a few opportunities, but sometimes the certainty of not losing money is more important than the chance to make money. The art of investing, unlike the game of baseball allows you to wait for your pitch; you are never out on called strikes in investing. Warren Buffett observed, “The problem when you’re a money manager is that your fans keep yelling, “Swing you bum.”

The Way of The Value Investor (Part II P/E Ratio)

After identifying a righteous sustainable dividend in quality well managed company, look at the Price Earnings Ratio (P/E). This number represents the price of a share of stock divided by the earnings per share. For example if a share of stock costs $50.00 and the earnings per share is $2.50, this stock has a P/E of 20. All things being equal (they never are equal) a lower P/E ratio indicates the possibility of better value. Historically across the market 16.0 seems to be about average. Robert J. Shiller is famous for applying P/E to the entire market. The Shiller P/E index is a pretty good indicator of the future value of an average stock purchased in the market today. Under 16 it will be relatively easy to find bargains. Currently, the Shiller P/E ratio is 19.75, high but not dangerously high. History indicates that if the Shiller P/E ratio goes over 25, the market is heading for a fall. In early 2009 the Shiller P/E index dropped below 15 at such levels a blind monkey can pick winning stocks.

The key to using the P/E ratio is to help locate sustainable high dividends. Over the last 50 years, the number one best single stock you could own has been the cigarette manufacturing company the Altria Group (MO). Because of the fear of law suits, high taxes, and government regulations these stocks have been persistently undervalued. For the same reasons cigarette companies have been generous with their investors. They would rather see their shareholders get their profits than passing the loot to governments and lawyers. History indicates that these fears were somewhat unfounded. Government really doesn’t want to stop smoking. They would lose all that tax revenue. Money lost to the lawyers can be passed on to today’s smokers. Finally, it is a big world out there and American cigarettes are still the gold standard for coughin’ nails. Today MO has a P/E ratio of 14.40. It pays a dividend of 5.17%. Try and find that kind of return on a bond or CD. It has a payout ratio of 80.0. That’s a little scary, but as I mentioned, they are generous with their investors. For the record, I do not own MO. My wife does not wish to be a merchant of death. I respect her wishes. She does own a very small amount of a cigarette company in her managed IRA. However, if you won’t tell her, I won’t tell her. Also, “ethical” investing is impossible if you have anything in mutual funds. There is no telling what you have somewhere in that stew of 200 or more companies.

Patience in investment, as in life, is a virtue. Don’t think in terms of annual or quarterly return on your investment. Look at the long term. Buy cheap and hold. Think like a catfish. Sit on the bottom and wait. Something tasty will show up.

Your brain is wired to sell when your losses are at their greatest and buy when a market is nearing its peak. Your brain is wrong. Lord Nathan Mayer Rothschild (yes, he was one of those Rothschilds) observed, "Buy to the roar of cannon, sell to the sound of trumpets.” It was sound advice during the Napoleonic Wars and it is sound advice today.

The Way of The Value Investor (Part I Dividends)

Personally, I recommend beginning your investment portfolio in a diversified, age appropriate mix of low cost index funds. Normally, this process would start in tax favored retirement accounts such as 401 (k), 403 (b), traditional IRAs, and Roth IRAs. Once you have that foundation in place, consider the way of the value investor. The definitive text on this subject is The Intelligent Investor by Benjamin Graham.

The value investor attempts to buy (and occasionally sell) stocks just as he would make any other purchase, the highest possible quality at the lowest possible price. Almost all products follow an S shaped price performance curve. Consider: You can purchase a car that can go 60 mph for $300. You can purchase a car that can go 100 mph for maybe $6,000 or $7,000. If you want to drive on the Interstate at 160 mph, be prepared to part with over $60,000. If you want a car that is capable of 200 mph, you will need more than $300,000. What is your top speed on that morning commute, 80 mph while passing a truck on the Interstate? How much did you pay for 350 hp under the hood? How often will you actually need to use that kind of power?

Always start with quality. Look for the “wide moat.” How difficult would it be for someone to start a business in competition with the stock under consideration? A wide moat is an economic advantage that is very difficult to overcome. Imagine building a new railroad to compete with the Union Pacific Railroad out in California. That is a wide moat. Coca Cola (KO) is an obvious example. They have the most valuable trade name on the planet. Dasani, Coca Cola’s bottled water, is a popular brand in India, because people trust their products. A wide moat is not limited to large companies. I once met a man who owned a small company that produces specialty products for use in deep oil wells. In his colorful Texas vernacular he informed me patents weren’t worth a damn. His goal is to produce the highest possible quality then sell for a price that is so low, no one will dare compete with his products.

Next, look for a righteous dividend. “Righteous” will vary from industry to industry and will depend on the size and age of the company. Be careful to compare apples to apples and oranges to oranges. Buy things that pay you to own them. Try to avoid wasting money on things that cost to own. This is one of the key principles to building wealth. Consider: A smart phone might cost $500 plus $100 a month. What do you really do with that thing? If you use it as an important tool in running your business, more power to you. If you use it to surf the web and update your facebook page while at work, consider a better way. Verizon (VZ) pays a 4.19% dividend and offers some possibility of future capital gains. At 4.19% without any capital gains a $500 initial purchase of VZ shares plus a $100 a month over ten years will amount to $15,620.58. Can you live with a less expensive phone? Can you invest the difference? Hopefully, dividends will be the number one source of your income in retirement. Studies have shown that over half of your total investment returns will come from dividends.

Yield, the return on your dividend, consists of two parts the price of a share of stock and the dividend per share. If a share of stock costs $50.00 and the dividend is $2.50 per share, the yield is equal to 5%. That money is paid out to you. Every quarter (usually) the company deposits an amount equal to the number of shares you own multiplied by the quarterly dividend into your brokerage account. That money belongs to you. You can take that money off the table if you need the income or you can chose to automatically reinvest that money in more shares of the same stock without any brokerage fees. This is called DRIP (Dividend Re Investment Program) investing. It is a simple potent way to put the power of compound interest to work for you.

There is another component to determining what constitutes a “righteous” dividend. Is it sustainable? If you are lucky enough to buy an undervalued stock paying, let’s say a 3% dividend, and it doubles in price; you are effectively receiving a 6% dividend. The first quarter of 2009 was a perfect opportunity for this kind of bargain hunting. However, bottom fishing is not without its risks. Sometimes that stock is undervalued for good reasons and that juicy dividend is not sustainable. Watch the cash flow. Dividends should not be consuming too much of a company’s profit. The dividend payout ratio is the amount of money distributed to the shareholders divided by total earnings. If a company paid out $1 Billion in dividends from total profits of $4 Billon, the payout ratio would be 25%. Various rules of thumb have been proposed to define a sustainable dividend. If the payout is over 60% you are in a danger zone. Such a stock might be a “value trap.” If you choose to buy such shares, understand the risk. Between 40% and 60% watch not only the number, but the direction of that number over time. If a dividend payout ratio is 50% and climbing that is not a good thing. If it is 50% and falling it is probably a better deal. Under 40% you are probably OK. Again, an acceptable number varies from industry to industry. Be sure to compare a potential investment to its peers.

A good place for the value investor to start his search would be with a list of Dividend Aristocrats. These stocks have increased their dividends every year for at least 25 consecutive years. Once a company makes it on to this list, it is going to try to remain on the list. Even for a company that is not a dividend aristocrat, cutting dividends is a sign of weakness that often results in bloodshed on executive row. These are the stocks you can ALMOST buy and forget. Sometimes they are called widow and orphan stocks. Dividend aristocrats are good candidates for your core equity holdings. Unfortunately nothing is perfect. GE was a dividend aristocrat until it wasn’t. I took a beat down on that one. Various advisors would also include regulated utilities, consumer staples, and other “wide moat” companies as possible candidates for your core equity holdings.

Ugly Debt

There are certain subjects that I shouldn’t have to know about or cover in this blog. I doubt that anyone reading this will ever or has ever been victimized by this blight, but perhaps the day may come when you can help another avoid the trap of payday loans.

Personally, I think payday loans and title loans should be illegal. You see the neon signs on the wrong side of town offering check cashing services, money orders, and loans to the poor, the ignorant, and the desperate, essentially banking services for those without banks. The people operating these businesses claim that they are providing assistance to a community in need of access to basic financial services. They are sucking blood from the poor and from their impoverished communities. The Bible explicitly states that the people who run such businesses are in the Lord’s gun sights.

Proverbs 22: 22, 23

Do not exploit the poor because they are poor and do not crush the needy in court.
For the Lord will take up their case and will exact life for life.

A typical charge for a two week payday loan is $15 per $100 loaned. That works out to an annual percentage rate of 3,686%! Credit cards that charge 23% are generally considered usurious.

The people that are placing themselves under such horrific burdens are generally using the money to cover normal everyday living expenses. They don’t know any better and they do not believe they have any alternatives. However, if they didn’t understand the concepts of budgeting or saving for a rainy day, they will learn the discipline of saving their money, but for the benefit of a predatory lender. Fortunately, in this country there are limits to what these people can do to collect from their victims. In some countries, like India, these kinds of loans can lead to a lifetime of legal slavery.

Title loans are a step up from payday loans. They require that the victim own clear title to a car. Using the vehicle as collateral rather than granting an unsecured loan, the title loan company then offers a loan that can range from $100 for two weeks up to 50% of the Kelly Blue Book value of the car. Interest rates on these loans can range from 36% APR to 400% APR depending on the jurisdiction. Frequently they require a balloon payment at the end of the loan. If the debtor can not make the final payment, no problem, the store front loan company will cheerfully continue to bleed their victim. Really, I don’t think they want the car. They want a debt slave. However, sometimes the victim also loses their car.

Public schools should be teaching the basics of financial literacy. Children, no matter the socio-economic class of their parents, should understand the basics of saving for a goal and the concept of an emergency fund. If you ever have an opportunity to steer someone away from this kind of victimization, go ahead; light a candle in the darkness. If payday loan companies can not be outlawed, they should at least be tightly controlled by state and Federal regulation.

Oh, by the way, just because you have access to the mainstream banking system doesn’t mean that you can not become a victim of predatory lending practices. Check out these numbers from Wikipedia!

$100 bounced check with $54 NSF/merchant fees = 1,409% APR
$100 credit card balance with a $37 late fee = 965% APR
$100 utility bill with $46 late/reconnect fees = 1,203% APR

The Way of the Elf (Technical Analysis)

Poker is not a game of chance. It is a discipline that involves the use of probability theory, logic and psychology; strategic thinking, bluffing, and reading the opponent. Yes, even the best players can’t win if they don’t get the cards, but the same faces seem to have a way of appearing over and over again at final tables of the big tournaments. Although poker is a game popular with millions, very few people will ever earn a living as poker players. To most it will become an occasional distraction. They will lose or make a few bucks playing with their drinking buddies. Even in those games, I expect the winners and losers are pretty much the same people from week to week.

Technical analysis is a method of predicting the movement of stock prices by studying past market data including opening prices, closing prices, daily highs and lows, market volume, as well as historical averages and derivatives calculated from this data using various mathematical formulas.

Let me be honest. I am not a trader. When I buy a stock, I do so with the expectation of keeping it forever. Of course, if a stock gets so high I can’t sleep at night or it drops and doesn’t come back, I will sell it. However, trading is not what I do. There are people who make their living studying and practicing the discipline of technical analysis. In fact, the hedge funds that were at least partly to blame for the crash of 2008, applied the principles of technical analysis to what is termed high frequency trading. They used sophisticated computer programs that analyze real time trading data looking for anomalies that signal large scale movements such as those made by mutual or pension funds. Their computers then execute orders faster than the human players in the market can possibly respond. These programs are the result of decades of research and millions of dollars invested in programming and hardware. They really work; at least most of the time. When they fail, it is spectacular. It isn’t illegal, but don’t think for a minute the little $3,000 technical analysis program running on your PC will ever be able to compete with great investment banks or even the major hedge funds.

Most of the people who attempt to practice technical analysis are frequently called day traders. They are not investors (those who buy for long term gains) or traders (those who buy and sell for short term gains). They are gamblers. They buy and sell on hunches, instinct, and emotion. They tend to end up in bankruptcy court.

If you decide that you want to try your hand at technical analysis, decide in advance how much are you willing to lose in this experiment? Set that amount and no more aside and account for it (including all brokerage fees) in an Excel spread sheet.

Become an expert. Decide what you are going to trade, a particular stock, stocks from a particular area, an individual commodity or something similar. Learn all you can about that stock, its price history and absorb all the fundamental research you can find. Yes, just like all value investors are aware of technical analysis techniques, all traders need to understand the underlying fundamentals of their stock. Consider, Bank of America. Its price is extremely sensitive to public perception, changes in accounting rules, law suits, and major moves by powers like Warren Buffet. Even as you buy and sell on price movements, you still need to understand what is driving these changes.

Once you have decided on an area of specialization, take a few months to play the game with “practice money.” This is good advice for any novice investor who wishes to make their first move from a balanced portfolio of low cost index funds and conservative dividend stocks to more exotic, risky investments like precious metals, technology stocks, small cap pharmaceuticals, covered calls and the like.

Before you make a buy using real money, write down something coherent in your Excel spreadsheet explaining why you are making that buy. Recording your logic for further study is an important part of the learning process. It will help you build your decision making model and then constantly refine it.

Likewise, when you sell a stock, write down why you sold it and study the results.

Successful traders recommend setting price targets and using stop loss orders as a further discipline that will take emotion out of the decision making process. Emotion is always the enemy of successful investing. It will cause you to buy at market peaks and sell at market bottoms, exactly what you should not be doing.

Here is how the process works. At the time you put in your order to buy a stock at market price. Set a stop loss limit. What this limit might be is up to the individual investor. Some people recommend 10% as a maximum acceptable loss in any given trade. The stop loss order will trigger a sale if the price drops to your predetermined number. Do this on the day you purchase the stock and never, ever, for any reason change it to a lower number. If you lose 10%, so be it. Learn from your mistake, take the tax loss, and move on. If your stock goes up in value, reset the stop loss number to reflect that increase. That way you will never lose more than 10% of the current value of your investment.

Some traders take it a step further. They will set a price target on the same day they buy the stock. I remember one author thought that if one of his trades went up by 25%, he should take his winnings and look for a new opportunity.

As you make your trades, always entering them into to your spread sheet calculating the gains or losses, you will watch your starting number (the maximum you are willing to lose) increase or decrease. If you lose all your money, you are obviously not a trader. If the process makes you excessively nervous, you are not a trader. If your stake increases and you find the adrenaline rush of buying and selling is better than sex (just kidding) you are a trader.

Also, remember if any given investment is small, say 1% or 2% of your total portfolio, even a bad loss in that particular stock won’t kill you.

P.S. The title? The practitioners of technical analysis are frequently termed "elves" in the financial press.

Money Questions

I just read an interesting article entitled “Why Warren Buffet and Sam Walton Got Rich, and You Won’t” by John Maxfield. In a nutshell, the most successful people really aren’t all that interested in money. At most it is a way of measuring success. Sort of like a kid playing a video game. Yea, he wants a good score, but mastery of the game is the real driving force.

Warren Buffet is famous for driving around in an old car and still living in a house that cost $40,000 when he bought it decades ago. Sam Walton is quoted as saying, “Money has never meant that much to me, not even in the sense of keeping score.”

It is about the game; not the score.

Richard Russell, author of the Dow Theory Letters, differentiates between rich men and poor men.

“In the investment world the wealthy investor has one major advantage over the little guy, the stock market amateur and the neophyte trader. The advantage that the wealthy investor enjoys is that HE DOESN'T NEED THE MARKETS. I can't begin to tell you what a difference that makes, both in one's mental attitude and in the way one actually handles one's money.”

“The wealthy investor doesn't need the markets, because he already has all the income he needs. He has money coming in via bonds, T-bills, money market funds, stocks and real estate. In other words, the wealthy investor never feels pressured to "make money" in the market.”

“But what about the little guy? This fellow always feels pressured to "make money." And in return he's always pressuring the market to "do something" for him. But sadly, the market isn't interested. When the little guy isn't buying stocks offering 1% or 2% yields, he's off to Las Vegas or Atlantic City trying to beat the house at roulette. Or he's spending 20 bucks a week on lottery tickets, or he's "investing" in some crackpot scheme that his neighbor told him about (in strictest confidence, of course).”

Does money control you or do you control it?

Who is in charge? Do you tell your money where to go and how to behave or does it control you? Many people just spend money without thought or plan until their mandatory monthly expenditures approach or exceed their take home pay. When this happens, the money in your life has just transitioned from under your control to in control of you. Think about it, your money now controls you. You can no longer go and come as you please. You must work to earn money that already has a designated purpose. For all intents and purposes you are a slave.

Proverbs 22:7
The rich rule over the poor, and the borrower is slave to the lender.

There is hope. The goal is freedom. You can gain control of money just as you can gain control of any problem in your life. Finding the solution will take some effort and some time, but the end result is freedom, the ability to live your life as you desire.

Is money your friend or your enemy?

Like it or not, you have a relationship with money. Is it a good relationship? Is it healthy? Does your money encourage and support your goals or is it an impediment to what you truly want to become. As your salary increases over time did access to more money give you an opportunity to indulge your lusts and vices or did it turn you towards freedom and light.

Do you hate money?

Do you think that money is evil; something that is out to destroy you? Is it likely that such a belief would help you or hinder you as you move through this vale of tears? When you sit down at the end of the day to balance your checking account if you use a debit card for everything or at the end of the month if you use a combination of cash and paper checks, what emotion do you feel. We are warned in scripture that the love of money is the root of all evil. However, a hatred of money is no more constructive than an unhealthy love of money. In the end it is only money, a tool that can create good or evil in your life. Learn how to use it in healthy productive pursuits. It will be a blessing. Learn how to give it away. In the end it isn’t yours anyway. You can’t take it with you is an old truth. However, you can leave a legacy of blessings for others that will last long after you go the reward that really matters--in eternity.

Do you fear money?

Put a dollar bill on a table. Look at it. Rub it between your fingers. How does it feel? Does it make a noise when you crumple it up? Does it have a smell? Maybe it kind of smells like your wallet? What is it? Really, money is a measure of energy. You had to expend energy to get that piece of paper, mental energy, emotional energy, time, physical labor are all contained in that little piece of paper. It is a piece of your life. You expended energy. Now you hold in your hand a bit of potential energy. You control it. After you pay your taxes, you get to decide how to use it. There is nothing to fear. It is your money. You are in control. Think about that every time you touch a piece of currency; every time you write a check; every time you swipe the plastic; remind yourself, “This is my money. It is a measure of how I choose to expend the energy of my life.” Watch your fears dissipate, vanishing like mist in sunlight.

Do you lust after money?

Remember that ultimately your treasure is in heaven. Of course we work, not only for the basic necessities of life, but for the pleasures that make life worth living. When you have saved enough money to pay for your midlife crisis car, more power to you; enjoy the fruits of your labor. Just remember you have not been blessed just to see how many possessions and experiences you can accumulate before you die. Share your blessings with others. This isn’t limited to money. In fact money is only the first step in a long journey that ends in a heart that is open to others even when that proves a very costly and painful gift.

A link to a famous short letter on investing by one of the masters, Richard Russell.

Rich Man Poor Man