23 Aug 2008

The Importance of Tithing

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Folks, this is going to sound corny, as if I’m doing my gosh darnedest to sound like Gary North or Charley Reese. So be it: My wife and I are Christian and so we tithe, meaning we set aside 10% of our monthly income and give it to the Church. (This book gives an in-depth explanation of tithing’s Biblical origin, whether tithing on only after-tax income means you’re going to Hell, etc.)

I have noticed that without fail our monthly budgets are overflowing with money when we are tithing, and we are living paycheck to paycheck when we are not tithing. Really, I am quite confident that this statement accurately describes my household, and I bet it does yours, too.

The principle can work for secular people as well, but it doesn’t have the supernatural implications. Here, the idea is one important reason to form a budget and make long-term savings goals, is that it gives you discipline to get your finances under control. After all, you have to know how much you make each month, and how much you spend, in order to make long range forecasts. Finally, if you keep a meticulous budget like this, it will be painfully obvious to you what you are sacrificing by eating out every day, rather than brown-bagging it. Your budget shows you quite clearly that this is preventing you from taking a Vegas trip in x months. Really? Is Arby’s that much better than a deli sandwich you can make in your kitchen? Do you really need to hit Starbucks every morning?

Incidentally, this is a great illustration of my view that everything “supernatural” that God does in someone’s life, is also perfectly consistent with the laws of physics. So when you start tithing–and think, “Oh no, if things were tight before, how can I give up an additional 10% of my money off the top??”–all of a sudden your nets are overflowing with fish. And people think, “A miracle! The Lord kept His promise.”

But the atheist accountant could point out all the pragmatic and psychological reasons that the very decision to begin tithing, had on monthly inflow and outflow. Nothing magic here!

Right, and that’s how God controls everything. It’s not just miracles but also everyday life that He controls. It’s far more elegant that we can discover simple laws governing subatomic particles, and that this all yields the tremendous complex beauty of the macro world.

So if you are a believer and have been feeling guilty, start tithing. If I told you that a certain prayer would give you an extra 5% income per month, you’d say the prayer. Well I’m telling you that if you start tithing as you know you ought to, then you will get paid for it, literally.

Finally, if you are a skeptic: You understand that the above appeal didn’t really depend on belief in an omniscient Deity. So if you want to multiply your paycheck, adopt a long-term budget in Excel (or something comparable), so that you can really see how much your current behavior influences the trend of your standard of living. Now here’s the kicker: Go ahead and every month donate 10% to your favorite charity(ies). (Steve Landsburg argues it’s “rational” to concentrate your entire donation into one lump sum for the most important organization, but I disagree.)

I think that if you designate a truly altruistic use for 10% of your income, that somehow keeps you objective and you can more dispassionately assess your financial situation. It probably also makes it harder for you to just skip “doing the budget” for a few months because things are crazy at work, you caught the flu, your girlfriend dumped you, etc. But hey, if you’re just saving for your future retirement, then you’re not hurting anybody by spending recklessly in the present…

So if I’m right about that last observation, then that gives a good, secular explanation for why it’s not a burden but actually a blessing if people really think they have a duty to give 10% of their income to something much more important than their consumption.

22 Aug 2008

Don’t Pay Down Your Credit Card Balances

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In a recent LRC article, I made the case for not paying down your credit card debt. Rather, if you expect the dollar to fall (and prices to rise) fairly rapidly over the next few years, then you should let your card balances roll over, and use the freed up dollars to buy assets such as physical gold or bonds denominated in other currencies.

I recently got a 12-month, 0% APR balance transfer offer, with a 3% transfer fee. So I transferred my (regrettably sizable) credit card balances on to this new card, and will use any savings in the coming months to (a) make payments on my tab with the IRS, (b) build up my reserves of very liquid funds, and (c) buy actual gold coins that I can bury in my backyard.*

*Figuratively speaking. Please don’t Google me and come to my house with a shovel.

22 Aug 2008

Inaugural Post

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This site will be a work in progress, probably through September [2008]. I hope to offer near-daily commentary on financial news. I am an economist with a PhD from NYU, but I have been heavily influenced by the “Austrian” school of economics. I am a consultant–meaning I will take anyone’s money–but my main gig right now is being Economist for the Institute for Energy Research.

I will elaborate on my forecasts and recommendations in future posts, but if you want to get up to speed on my current economic outlook you should read my articles “A Falling Dollar, After All” (August 2007) and “The Worst Recession in 25 Years?” (October 2007). If those intrigue you, then you should plunge into my formal T-Note forecast (pdf) for a bank, delivered back in early July 2007 (before the credit crisis really hit).

In the weeks ahead, I’ll explain why I am so pessimistic about the U.S. economy for at least the next five years, but I’ll also suggest options for you to protect your personal wealth during this storm.

30 Nov -0001

Hello world!

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