Risk, board game

You you taking a Risk with you Finances? Credit hellolapomme.

Reducing risk is a large chunk of what financial planners will do for you. They don’t just help you make money, but a good financial planner will help you mitigate the risks and pitfalls of life that are sure to happen.

What is a Financial Risk?

No, I’m not talking about the marathon board game of Risk your brother-in-law makes you play at Christmas. I’m talking about decisions that exposes you or your family to potential financial danger(s).

We all have different risk tolerances. Some of you drive 100 m.p.h. and disregard the seat belt law, while others of you drive 5 m.p.h. below any posted speed limit and have extra air bags installed–just in case.

No matter what your risk tolerances are in life, taking financial risks (especially with family) are a sad country song waiting to happen.

Risk Factory Sign

Stay away from the Risk Factory. Credit kyz.

We Don’t Know the Future.

This thing about taking financial risks is that we don’t know the future.

This might seem like a no brainer, yet you don’t know what’s around the bend. I know this is a party killing topic, yet death, divorce, disability, disease, a job layoff, or other unforeseen personal tragedy can all spell financial ruin if you’re taking on financial risks.

I have taken on financial risks at times in my life and thankfully survived without a scratch. There was a time period when I was single that I didn’t carry health insurance; I was invincible anyway. A trip to the emergency room would have lead to immediate bankruptcy or a decade of debt payments. This was an unwarranted risk.

Reduce Financial Risk

While it is impossible to shield ourselves from everything life throws at us, we can avoid taking risks with our finances.

Emergency Fund Emergency funds keep the repo man away, keep the lights on, and food on the table when hard times come. Reduce financial risks by keeping at least 3-6 months in the bank.

Health Insurance- The number one reason for bankruptcies is medically related. Living without health insurance is like a kid sticking pennies in a light socket–sooner or later they’ll get shocked.

Debt– Debt is risky. Pay off student loans, credit card debt, and over leveraged property to reduce the amount of risk in your life.

Life Insurance- We just don’t know when we’ll die and when we die our income dies too. Especially if you have a family, have term life insurance in place that will replace your income should you die.

Long Term Disability Insurance- The odds are good enough for bookies to take bets on the fact you’ll be unable to work for several months of your working life. Having long term disability can reduce this risk.

Home Owners Insurance and renters insurance protect your home and belongings from the future unknown natural disasters and theft.

Make a Will– If you have a pile of stuff or dependents–you don’t want to take risks here. Plan for your estate and the care of dependents with a written and notarized will.

Risky Investments- Reduce risk by diversifying or minimizing risky investments. All investments are by their very nature risks, yet some carry more than others. See this spectrum of investment risks. Other high risk investments include day trading or forex trading.

Final Thoughts on Reducing Financial Risk

A strong financial plan not only enables you make money, but protects your estate from unknown risks. Begin to implement the above strategies to reduce the financial risks in your life.

Have you taken a risk financially? What other ways can you reduce risk in your financial life? 

Social Security and ScriptureDid you know that a minister can opt out of Social Security under a unique provision in the Social Security code? This sounds like a dream come true and an option many in the U.S. would like to have with the current uncertainty in the program.

Young ministers have an important tax decision within their first two years of ministry. Should they opt out of social security (for ministerial income only)? This decision will have a huge impact on their earnings potential and financial future.

This question of whether clergy/minister/pastor should opt out of Social Security is a controversial issue and has possible moral and legal implications.

History of Opting Out of Social Security for Clergy

How did this exemption for clergy to opt out of SS begin? It was a series of smaller steps until the modern exemption system was now in place:

  • 1951 Non-profit workers were given the option of entering the Social Security system. This caused a debate over whether ministers were self employed or employes of the church/denomination.
  • 1955 Those ministers whose denominations classisifed them as self-employed were given the option of joining the Social Security system, providing they (not their church) paid the full self employment tax.
  • 1968 Ministers were required to enter the Social Security system providing a provision they could opt of based on religious principals in their first 2 years of ministry. This sets up the modern dilemma for young clergy members.

The Ethics of Ministers Opting Out of Social Security

When a young minister looks at this issue, the advice is varied and the ethics involved are not black and white. This is a controversial issue with both sides giving valid reasons for staying in the Social Security system or opting out.

Dave Ramsey looks at it from a financial and stewardship perspective. His main argument is that the individual, not the government can be a better steward of the money–and should thus opt out if Biblical grounds exist. His perspective does avoid the moral wording of the text that must be signed and doesn’t advise on the biblical principal on which ministers should opt out–at least not in print.

Russell Moore, Dean of Theology at Southern Baptist Seminary, gives an alternative point. He asks ministers to consider their beliefs about the public issues of insurance and if they really have a Biblical and moral conviction for this stance as a conscientious objector.

“If the ‘opt out’ provision were revoked, would you willingly go to prison rather than pay the tax? And, would your prison time be because you saw the choice as between Christianity and idolatry?”- R. Moore

Others view exists and can be found (read the comments in above mentioned articles) within certain Christian denominations and traditions. It is important to consider exempting from Social Security based on history, theology, and the tax law.—NOT on personal or political beliefs.

The wording of the modern tax form that clergy must sign has been refined in recent years and should be examined closely.

Sign on the Dotted Line: Opting Out of Social Security

The instructions for opting out of self employment are based only on religious views and not personal or political views on government or the Social Security system.

“This application must be based on your religious or conscientious opposition to the acceptance of any public insurance that makes payments for death, disability, old age, or retirement; or that makes payments for the cost of, or provides services for, medical care, including any insurance benefits established by the Social Security Act.”- form 4361 (2011)

The below is the excerpt from form 4361 (2011) that must be signed by the clergy member:

I certify that I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance (for services I perform as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care. (Public insurance includes insurance systems established by the Social Security Act.) I certify that as a duly ordained, commissioned, or licensed minister of a church or a member of a religious order not under a vow of poverty, I have informed the ordaining, commissioning, or licensing body of my church or order that I am conscientiously opposed to, or because of religious principles I am opposed to, the acceptance (for services I perform as a minister or as a member of a religious order) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care, including the benefits of any insurance system established by the Social Security Act. I certify that I have never filed Form 2031 to revoke a previous exemption from social security coverage on earnings as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner. I request to be exempted from paying self-employment tax on my earnings from services as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner, under section 1402(e) of the Internal Revenue Code. I understand that the exemption, if granted, will apply only to these earnings. Under penalties of perjury, I declare that I have examined this application and to the best of my knowledge and belief, it is true and correct.

After reading this form, I suggest praying and consulting several ministers and a tax professional who works with clergy about their view of signing form 4361 before signing.

*Note that your exemption must be approved by the IRS before the April 15th deadline and you must inform your ordaining body that you object of receiving public insurance. The minister  also only has 2 years in which to sign the form and opt out.

If you do sign and opt out of Social Security, realize your need to prepare accordingly since you won’t have access to SS retirement, SS disability, FEMA, Pell Grants, etc from the government.

Have you struggled with this issue of opting out as a clergy member? What are your thoughts about ministers opting out of Social Security? 

"Oh, Christmas Tree"

It’s not too late to save for Christmas. Credit kennymatic.

For those of you who are planners, you already have your Christmas gifts that you bought on sale last year. Perhaps you have some extra gifts from your Etsy store that you plan on giving to your friends and family? If you are like me, then you haven’t even thought about buying anyone gifts yet.

Did you know that Christmas is in 76 Days! Check out this site for an updated Christmas countdown clock.

If you were smart, you’ve been socking away some extra cash for the gifts that you’ll be needing to buy soon. Don’t forget those parties too! Spouses remember to sit down and have a Christmas Budget Party Meeting to decide on gifts and how much you’ll blow–I mean spend.

December is a month that many blow their budget and are tempted to use credit cards. Budget and stick to it; you’ll survive the lure of buying eveyone you know gifts they won’t appreciate nor remember.

If you haven’t you still have time to save some loot or start crocheting that hat for your niece. Here are some ideas to save for those Holiday gifts.

1) Give up your coffee till Christmas $3 x 68 days= $204

2) Work 1 night a week for 4 hours till Christmas or pick up a Saturday shift.

3) Could you work overtime at your job?

4) Ah who needs to buy gifts anyway? Just buy a box of crayons and some construction paper and write everyone a heart felt card….they’ll probably remember that more anyway.

5) Try one of these zillions of ideas on how to make money.

Any other ideas of Christmas budget, Holiday jobs, or Christmas gifts?

Have you ever heard of using the envelope system to budget? Envelope budgeting is an old technique that is coming back in fashion faster than big glasses and flannel shirts.

What is it? Budgeting with envelopes is simple. Certain categories you’ll designate to pay only with cash. You put that cash in an envelope each month and when the money is gone–its gone, no more spending for that category.

Why use Envelopes for Budgeting?

  • You’ll spend less money if you use cash. People who use credit or debit cards have higher spending rates? Why? It is due to a slight feeling of pain when you use cash. It’s true, try plunking down $100 cash for your next grocery bill.
  • Savings. We have an envelope for a future trip to San Francisco. When it fills up, we go!
  • If you constantly overspend in certain categories, this will help you curtail that spending.
  • If you get paid in cash or tips this system will give that cash somewhere to go, besides buying pizza. It will focus your money and you’ll think that you’ve got a raise.

Envelope System Video by 

Budget with Envelopes

1. Determine what categories you’ll spend “cash only” for. Common categories are groceries, eating out, blow money, entertainment, clothing, and gas. TIP: Don’t try to start too many envelopes at once, but incorporate a few each month as you get the hang of it.

2. When you budget add up the total you’ll need each month to fill all your envelopes. This may take a few months before you’re a pro and some months will require more cash than others.

3. Make envelopes for each category and fill them up with cash- Write a check to yourself or withdraw it from the bank. Some categories may be large like groceries and you’ll need to fill them twice a month or as you are paid.

4. Keep a ledger of on each envelope of when money is deposited and spent. This will help you track your cash and know how much you’ll need each month.

5. When the envelope is empty, STOP SPENDING! You made a budget, now stick to it. Don’t borrow from other envelopes or add more cash. You’ll have to say no until next when you get more cash in that envelope.

6. If you have extra cash, then it stays put and rolls over to the next month.

Some people also like the idea of ‘virtual envelopes‘, but I find that having cold hard cash in your hands is the best way to curtail my spending.

Using this system doesn’t work for everyone. If you stay with it through the learning curve, you’ll start saving money by spending less. My wife and I started out with about 8-10 envelopes ourselves, but at the moment we only use 4.

Action: Try using the envelope system and let me know how it goes in the comments. 

(Photo by BillRhodesPhoto)

[This is part of my How to Budget Like a Pro blog series]

Radar detection

Can you detect free stuff? Credit Ѕolo.

I’m a sucker for free stuff and have learned to spot a good freebie. Remember “Radar” (Corporal Radar O’Reilly) from M.A.S.H. that could hear the helicopters before they arrived? I’d love to have this skill for anything free.

I’d call it my freedar.

The art of free isn’t difficult to develop, yet like any skill takes time to hone to freedar status. I’ll share some places to help you on your journey of free stuff.

Where to Find Free Stuff Online

Let’s go hunting for free loot! Free is all around the interwebs just waiting to be found.

Giveaways – There are thousands of sites that offer giveaways and raffles. Your odds of winning vary on the contest, but if you do win–heck it’s free!

Do a quick search for #contest, #free, #giveaway on Twitter or do a Google search for the past week. Here is a list to get you started:

Craigs list- Craigslist is like the wild wild west, you never know what you’re getting in to, but you really can get free unwanted items if you’re willing to go pick them up.

Free Cycle – We had friend get mounds of free kids stuff from Free Cycle. It’s not only for taking, but giving away too!

Free Stuff Offline too!

Life does happen offline. I know it’s hard to imagine. Here’s a few ideas for free stuff in the land of flesh and blood.

Yard Sales- A lot of garage sales will have a free box, will give their stuff away at the end of the day, or even just set it on the sidewalk at night–ripe for the picking.

Dumpster Diving– Who knows what you’ll find? And it’s all free (Legality is up to your city). There are even dumpster diving meetup groups to show you the ropes.

More Help to Find Free Stuff

All You Have to do is Ask on Daily Money Shot

How to Win Cash and Prizes and Free Stuff from Bible Money Matters

Free Swag– a Squidoo Page

6 Ways to Win Free Stuff from Blog Giveaways by Wise Bread

Do you love free stuff? Where do you get your swag? Come on share your secrets below.