A Miracle Visitor Shows Up

The Pilgrims’ first winter after arriving at Plymouth was a tragic one – about half of the original 102 adventurers died from exposure, scurvy and outbreaks of contagious disease.  When spring came, the survivors, weakened by illness and malnutrition, experienced an astonishing miracle: a visit from an Abenaki Indian who greeted them in English. Several days later, he returned with Squanto, an English speaking Native American, who taught the Pilgrims how to cultivate corn, extract sap from maple trees, catch fish in the rivers and avoid poisonous plants.

In November, 1621, after their first successful corn harvest, the Pilgrims and their Native American allies celebrated a three day festival together. Many consider this festival as the origin of our modern day Thanksgiving holiday.

But this story is about more than the beginning of an annual holiday.

•  It is about giving.  When Squanto discovered strangers in need, he met those needs.  Squanto’s example should inspire us to likewise help the needy people we encounter.

• It is about resilience.  In spite of losing half of their number that first winter, the Pilgrims persevered. They learned the ways of the new land, adapted to those ways and began to rebound.  When the bottom drops out from our own lives, we need to remember those Pilgrims.  We CAN bounce back.

• It is about miracles.  Governor William Bradford declared that Squanto was “a special instrument sent by God for their good.“  I like to think of it as a miracle.  Could you use an occasional miracle?  I know I could.

• It is about thanksgiving.  In spite of their hardships, the Pilgrims found reasons to be thankful.  We would do well to seek reasons for thankfulness instead of dwelling on our disappointments.

If we can develop such a thankful spirit, our lives and the lives we encounter will be better for it.

I wish each of you a great Thanksgiving!

Yes, Personal Finance by the Book is now two years old.  Like many bloggers, I entered into this adventure with little concept of what I was getting into.  I knew it would be a “lot of work”, but that phrase carries little meaning until it is experienced.   My biggest surprise, however,  has been all I have received from my blog.

Here are a few of those blessings

• Blogging friends

Understand that I am not a chatty guy.  I seldom post a status on Facebook; I do little text messaging and I don’t write many letters or emails.   This being said, I am not an introvert…I love visiting people face to face.   I suppose you could call me an online introvert…a very strange attribute for a blogger, and one that makes my new found blogging friends all the more amazing.  I have encountered many talented and gracious people…fellow bloggers who give of themselves and ask little in return…who inspire me, encourage me and challenge me.    And, in spite of my social reluctance, I am proud to claim some of these as friends.  If my entire blogging experience was to end tomorrow,  these friends make it all worthwhile.

• Readers

My blogging goal is to serve my readers by giving them tools which lead to both financial and spiritual well being.  Therefore, when I hear from a reader such as this one, “Absolutely true post! This is one way the Holy Spirit has showed me in the past to operate my finances and it’s such a blessing. Thank you for the encouragement!” , I feel a satisfaction that inspires me to not only continue my course, but to strive for improvement as I do.

• Money

No, not much.  But starting a blog that brings extra funds into our household is always a good thing.

What’s New?

• The long haul approach

About midway through this second year, I realized that blogging was becoming my master.  Being a guy who depends on structure as a method of self discipline, I had become overly anal about my posting schedule.  Result?  The entire process had transitioned from fun to work.  Was I suffering burn out?  Probably… I realized that I had to either make some major changes or quit blogging altogether.   Obviously I didn’t quit, but I cut back on my posting schedule, hired a staff writer, decided not to take the whole thing so seriously and see if I could start having fun again.  How is it going?  Pretty well.  I am once again having fun.  And, although my Alexa rating and Google PR have both suffered, my traffic is continuing to sloooowly inch upward.  Hopefully, I have found a long haul approach.

• A Staff Writer

Tim Fratacelli,  who runs Faith and Finance, began writing a weekly staff post for me in January of this year.  I am sure that you, like me, enjoy Tim’s upbeat and practical approach to helping us better manage our money the way God wants us to.  Thank you Tim!

What is next?

I am undoubtedly a disappointment to those of you who are great goal setters, but right now I refraining from establishing any clearly defined goals (traffic, income, etc).   After experiencing a bout with burnout, my goal is simply to continue to provide a service as long as I believe that service is needed and as long as I am having fun providing it.  I will monitor that status in six months.  Hopefully, if all goes well, I will be celebrating my third birthday next year.

Thank you!

Fellow bloggers and faithful readers: I thank you for your support and encouragement over these past two years.  The fact that you take the time to read my ramblings never ceases to amaze and inspire me.  You are appreciated more than you will ever know.  Thank you!

Consumer debt in America has skyrocketed. According to the U.S. Treasury, consumer debt has jumped from $355 billion in 1980 to a staggering $2.4 trillion in 2010.  With credit cards as one of the biggest culprits of America’s spending spree, it’s easy to see how we’ve fostered a society that thinks it’s OK to spend money they don’t have.

Don’t get me wrong. I use credit cards and I think there is a time and place for most things. For me, having the ability to automate my bills to my credit card and to make one simple payment is convenient. It’s also nice to see a few reward dollars come my way every few months.

The problem with credit cards is that they:

- Can encourage you to spend money you don’t have

If you’re not disciplined, it’s really easy to fool yourself into feeling better about buying stuff on credit. It’s the instant reward mentality and the thought that you can pay for it when the money comes.

- Look like a false emergency fund

Nope, your credit card is not an emergency fund. Sure, some use it for emergency items when they can’t access their emergency fund, but you shouldn’t use it as a substitute.

- Ruin your credit faster than you can say “debit or credit”

So you’ve opened a few store credit cards. So what right? The more you open, the more it dings your credit score. Even more, your chances of missing a payment on one of those cards get higher with every new card you throw into the mix – and you definitely don’t want to mess up your credit with missed payments.

Solutions to Spending Money You Don’t Have

- Use Cash (Envelope System)

I know it’s been said time and time again, but it really works. You can really control overspending and stop spending money you don’t have when you set aside cash to pay for things like groceries, eating out, entertainment, gas, and other expenses.

- Stick To A Budget

If you haven’t read Joe’s series on budgeting, you should take some time to look it over. It really highlights the why and how of establishing a budget. If you don’t track where your money is going, how will you know if you’re overspending? A budget really is the right way to go.

- Manage Your Account/Budget Online

You don’t have to manually track your budget with a pen and paper each week/month. There are great tools that can help you to manage your money online. Sites like mint.com, mvelopes.com, and neobudget.com can make budgeting simple. If you’re married, it’s a great way to put the finances out in the open and it helps keep you accountable with your spending.

The bottom line:

Spending more than you make is a losing game, but you can fix it if you’re committed.

To really drive the message home, here’s a skit that SNL did a while back about spending money you do not have.

What advice do you have to avoid spending money you do not have?

Tim is a personal finance writer at Faith and Finance a Christian financial help blog that provides financial insights for individuals, businesses, and churches. Outside of finance, Tim enjoys spending time with his wife, playing the saxophone, reading economics books, and a good game of RISK or Catan. Find him on Twitter and Facebook and subscribe to the Faith and Finance RSS feed.

The kids love the VBS craft time!

Monday morning

Friday afternoon

Me, with my buddy Juan Pablo

Pastor Desiderio with his family. He prayed with us throughout the week and wept with us when we left.

Our buddy "Jesus" - pronounced Hay-soose - an aspiring musician?

Ten of us left Southern Illinois at 6 AM on Saturday, February 19, headed for Reynosa, Mexico in an untested 14 passenger bus we purchased so we could give it away.  We arrived at San Antonio, TX around 9:30 PM with tired backsides and thankful hearts…our untested bus had passed with flying colors!  The next day we drove on to Reynosa and ate a great supper at the Cornerstone camp owned by Vamonos Ministries.   a camp we had helped build in previous years and which was our home base for the week.  Did we eat great Mexican food all week long?  Absolutely!  Did we have some great salsa with every meal?  You bet.  Did I gain a couple of pounds?  Uhhh.  Yep.

Not a project

If I could emphasize one point, it is this: we did not go to Mexico to do a project.  I hate the sound of that phrase.  Why?  Because “doing a project” implies that the people themselves are projects.   I don’t know about you, but when I think of myself as someone else’s project, I feel a bit less than human.  This being said, I realize I am splitting hairs and that one can do a project without thinking of the people as such.  Still, I like to think of going to Mexico as a way to partner with my friends in building God’s kingdom.  Yes, we built some cement block walls, but the real focus of the trip was to cement the relationships we have cultivated over the years.  Besides building walls, we helped run a daily Vacation Bible School, shared meals with Pastor Desiderio and his family, refreshed other friendships and made new friends.  Whereas those walls we built will someday collapse, I like to think of these friendships as extending into eternity.

Why a wall?

The wall was indeed a project.  It is needed because Pastor Desiderio’s church is landlocked; it cannot grow horizontally and is therefore limited to growing vertically.   Thus the second level.  Since our last trip, the church has removed the truss roof, formed and poured support columns, beams and a new ceiling to the lower level, which is also the floor for the second story.   Although none of us had ever laid cement blocks, we learned and worked like crazy all week long.  Some tied reinforcement, some carried cement bags, sand, aggregate and water up to the second floor (in 5 gallon buckets).  Some mixed the grout and others built the walls.  Even in February, it was over 95 degrees some days.  I emptied my 20 ounce water jug several times a day and kept myself lathered up with sun screen.  I also slept good.

What about the bus?

We found the 1996 14 passenger bus on E-bay, only to discover that, amazingly, it was located in our tiny Southern Illinois town.  After meeting with the owner and explaining what we planned to do with it, she agreed to remove it from the auction and sell to us for only $3,000.  We drove it to Mexico not knowing exactly what plans God had for it, but trusting that someone could put it to good use.  We were right: through our friends at Vamonos, we found a pastor who feeds 20 to 30 children breakfast every morning and then gives them a ride to school…in his pick up truck.  When pastor Valente saw this bus, he was moved to tears.  He told us that he had been praying for transportation for eleven years and that on this day, his prayers were answered.  By the way, in case you are wondering, we flew home.

Was it dangerous?

We trust the people “on the ground” to tell us candidly if the area is dangerous.  Hugo and Sylvia, who live there and drive the same routes we took daily, reported no signs of danger in that area for the past two years.  Is this credible?  Yes.  Two years ago, when some drug activity was happening in this area, they advised us not to come.  They also realize that they could lose credibility (and future American work teams) if we run into dangerous situations after they give us a green light.   As in any US city, some areas should be avoided while others are much safer.  Yes, we could have put ourselves in harm’s way if we had gone to the “wrong part of town” at the wrong time of the day, so we limited our travels to daytime on safe routes.  This being said, we never felt the slightest fear.  I honestly believe that, with these precautions, we were just as safe as we are in the States.

Continuity

Our church has been sending teams to the Reynosa area for around 15 years now, always working with George and Jan Waterman, founders of Vamonos Ministries.  Please take a minute to click the link in order to see the camp that we helped build and which serves as our base when we are in country.  George and Jan, although still involved with Vamonos, have turned the ministry over to Hugo and Syliva Gonzalez, who live in Reynosa.  This long term partnership has created a continuity that helps us feel like we are not only a part of Vamonos, but a part of the local churches we serve.  On our next trip, for example, we will see the progress on Desiderio’s church building and also visit Valente to see how his church (and the bus) is doing.  I emphasize these ongoing relationships because, if you are considering short term mission trips, you may want to likewise develop such connections.

Knowing the people, the history and the community not only makes me feel connected to these people I love so much, but motivates me to return again and again.

Tip #6: WIN-win

Have you ever felt trapped during a negotiation?  You shouldn’t feel that way at all.  If you’re trying to find the best deal, you need to be prepared to negotiate like a pro – and I’m confident you can if you remember these tips.

You’ll notice that this list doesn’t start with the tip to “simply ask.” I’m assuming you already have the guts to ask and really are searching for the best deal that you can get.  While these tips may not be the best for negotiating every situation, they can really work for situations like buying a car, a home, or even on smaller things like furniture or garage sale adventures.

1. Create Awkward Silence

If you’re looking to make the seller cave in price, use the silence treatment for your benefit.  Talking too much can put you in a place you may regret.  You can’t take back your words, so being cautious about what you say will give you an edge in the negotiation.

If you’ve made a statement about your offer, leave it at that and just be quiet.  Let the other party talk and if there is silence, embrace its awkwardness.  Let the other party concede in price in order to break the minutes of silence.

Proverbs 17:28 – Even a fool is thought wise if he keeps silent, and discerning if he holds his tongue.

2. Use Facts For Your Rebuttals

Lying won’t get you ahead in life, neither will stretching the truth.  If you prepare by researching average prices, historical sale numbers, or competitor deals, you can be confident when you make a rebuttal.

Being honest will not only sharpen your ability to use facts incisively, it will also demonstrate to others that you can be trusted.  This will work in your favor for future negotiations, not to mention the fact that we’re called to be truthful as followers of Christ.

3. Know Your BATNA

BATNA is sort for Best Alternative To a Negotiated Agreement.  It means that you should always know what you have if you were to walk away from the negotiation.

For example – if you’re negotiating for a car and don’t want to pay over $9,500 your BATNA might be to drive your current car.

If you know that a friend will sell you a computer for $300 and you can’t negotiate someone below $400 for a computer, you can walk away knowing your BATNA is the deal with your friend.

If you do not set a BATNA, you might fall prey to feeling trapped and make a decision that isn’t in your best interest.

4. Understand the Hierarchy

Nothing is more frustrating in a negotiation than to work through a middleman who reports to the decision maker.  Try your best to find out who that decision maker is and work directly with them if possible.

I remember negotiating for a car and having the representative constantly leave the table to ask his manager if an offer could be approved.  For all I know, he was just going to the back and getting more coffee, so it became frustrating.  Finally the sales manager came out and we negotiated further, allowing us to get to the agreed price quicker.

5. Multiple Offers of Equal Benefit

This strategy works best when you have a few things on the table to negotiate.  Instead of offering one option at a time, take a moment to package the items into a few groups.  The key is to make a few options available that are equally beneficial to you.  This puts the pressure on the other party to choose one of the offers – it doesn’t guarantee they’ll accept it, but you have a better chance to get one of the deals you’re suggesting.

Here’s an example of multiple offers of equal benefit when negotiating for a car:

Your goal is to pay $9,500 for the car. The ‘add-ons’ have a value of $500 to you, so by offering these three options at once, you are essentially paying $9,500 for the car but may get add-ons that you anticipated to get anyway. The key is to give them all at once – try to make the seller choose an option.

Option A: $10,000 + Dealer Tints Windows + 2 Years of Free Oil Changes
Option B: $9,500 + No Tint or Oil Changes
Option C: $10,000 + Remote Start + 6 Month Extended Warranty

*These options, of course, are for example only. Your offers will probably vary, but the principle is the same.

6. Create a WIN-win

You’ve heard this used over and over, but I’m offering a different perspective to the overused phrase.  If you look carefully, there’s a big WIN and a little win.  Your goal is to end up on the big WIN side and create a little win for the other person.

Ending the negotiation with the other person feeling duped or cheated isn’t good for either party.   Generally, you won’t even get the sale if it doesn’t benefit both parties, but making the other person feel like they’re benefiting from the deal will keep you on good terms with them in case you need to do more business in the future.

What are some of the challenges you’ve faced when negotiating?  Do you think these tips will help you next time?

This post was included in 50 Blog Posts That Will Make You a Better Negotiator

According to the Social Investment Forum, socially responsible investing (SRI) makes up over 12% of all U.S. invested funds. SRI mutual funds screen out investments in companies that are harmful to individuals, the community or the environment. With over 250 SRI mutual funds available, it’s easy to see how popular of a choice it is for investors.

An even smaller niche of investing is called MRI – morally responsible investing. As it sounds, these investments screen out companies that support morally questionable areas like pornography, gambling, tobacco, abortion, alcohol, and anti-family entertainment. The question is – should Christians use faith-based mutual funds over other investments?

Am I Part Owner of a Questionable Company?

When you invest in a mutual fund, you are an investor in multiple (even hundreds) of companies. Owning shares of a company (through mutual funds) makes you part owner of the company and a participant in the profits and losses of that company.

For example: If you invest in a mutual fund that is a heavy supporter of the pornography industry, does that mean you are a part owner of these pornography companies. By the definition of owning stock, then yes.

Does That Mean I Need To Stop Investing in Mutual Funds?

No, of course not. Also, before I say anything more about screened mutual funds, please note that I am not suggesting that you go 100% screened.

Should you stop shopping at Wal-Mart because they sell tobacco? Not me – you’ll still see me there.

Should you stop watching ABC because Disney owns it and is a supporter of gay rights? I won’t – no way I’ll stop watching Shark Tank.

The fact is that we cannot control every situation we’re in and weed out every hint of immoral business from every transaction we make. Does that mean we should stop trying to avoid immoral investments – of course not. I don’t make donations to support abortion agencies – and with a little research, I can tell if my mutual fund investment is supportive of major abortion associations.

Are Screened Investments Right For Me?

• If your convictions are such that investing in an unscreened mutual fund makes you cringe at what you are directly supporting, then a screened mutual fund may be appropriate for you.
• If you are happy with the returns of the screened funds and believe in what you’re supporting (or not supporting), they might be right for you.
• If you’re ok with the potential of higher than average mutual fund fees because of the added ‘benefit’ of screening, then you might consider making screened investments a part of your portfolio.

Will I Sacrifice Performance and Returns?

This is definitely a good question and one that might vary from fund to fund. On average, screened investments perform similarly to their non-screened counterparts. The best way to compare is to find a similarly diversified mutual fund and compare it to the performance of an index like the S&P 500.

If you are interested in finding screened mutual funds, explore a few of the most common faith-based investments available:

The Timothy Plan
Ave Maria Mutual Funds
Faith Shares
Steward Mutual Funds
Eventide Funds
MMA Praxis

The Bottom Line

I don’t have a definitive answer for every Christian out there. Your convictions might be different from mine, and you may feel that supporting a certain industry isn’t all that bad – like alcohol for example.

I’ve used screened investments and have been happy with the performance as well as knowing that my funds weren’t supporting those questionable industries. You might be different and feel that the screening option isn’t something to consider.

So what do you think? Should Christians make an effort to screen out questionable companies from their investments or is it a moot point?

Tim is a personal finance writer at Faith and Finance a Christian financial help blog that provides financial insights for individuals, businesses, and churches. Outside of finance, Tim enjoys spending time with his wife, playing the saxophone, reading economics books, and a good game of RISK or Catan. Find him on Twitter and Facebook and subscribe to the Faith and Finance RSS feed.

“Well, it is time to go eat a frog”, my wife bemoaned recently as she was cleaning up the breakfast dishes.  She was, of course, referring to the old adage,  “If you eat a frog the first thing in the morning, the rest of your day will be better.”

What was her frog? Going to the bank and to the police department to deal with having her identity stolen.

Let’s rewind a couple of weeks.

After opening her December bank statement, Jan plopped it on my desk.  “Do you have any idea what this $123.28 charge to Ebay’s Half.com is?”

“Well, no.” I replied, examining the statement, “But the purchase was made on December 10, so I am guessing it was for a Christmas present.”

“You know I keep meticulous records.” Jan replied. “For one thing, I don’t have any record of this as a Christmas gift. For another, I didn’t make any Christmas purchases from my business account. It just doesn’t make sense.”

“I suppose you will have to do some research, starting with calling that 800 number on the statement.”

Jan groaned as she walked away. “I have better things to do today than make a bunch of phone calls.”

But she made that phone call. Here is the sequence of how this unraveled:

January 3: The phone call, of course, took Janice to an automated response. A computerized female voice told her that she needed to fax the following information to Half.com in order to initiate an investigation: driver’s license, debit card info, bank statement and email address.  She complied.

January 5: Jan received an email from Half.com stating that the $123.28 charge was for “Anatomy and Physiology: Kenneth S. Saladin (Hardcover 2009)”.

The email also stated, and I quote:

“If you do not recognize these charges and feel that they are unauthorized then we would suggest contacting your banking institution to dispute the charges with them to get your money back, they should have a procedure to follow in this situation.

Half.com also recommends contacting your local law enforcement if you would like them to do an investigation.

At this time we cannot provide you with anymore information in regards to these unauthorized charges. If law enforcement wishes to communicate with Half.com, please have them write to  stopfraud@ebay.com.”

January 6: Eating the frog…Jan made an appointment at the bank and I tagged along, partly to give moral support and partly because I could see the seeds of a blog post. Things actually went well. Jan had to complete a very simple complaint form, but the bank immediately refunded the questioned charge as a “temporary provisional credit” pending further investigation of her complaint. Having a copy of the letter from Half.com was very helpful in establishing credibility. Of course we checked to see if other charges had been made (they hadn’t). Jan also cancelled the debit card and applied for a new one.

January 6: We then drove to the police station to file a complaint. We gave the officer a copy of the bank statement and the letter from Half.com. Although he didn’t give us much hope that he could find the criminal, he assured us that he would follow up and keep us posted. He also told us (as did the bank) that these things are very common.

What have we learned from our Identity Theft experience?

• That Identity Theft can and does happen.

• That dealing with a local small town bank is nice. We were glad that we could sit down and talk to a real person who was able to handle our concerns.

• That we need to consider identity theft protection.

• That some frogs are not as bad as expected. Again, dealing with a local bank really helped. We probably didn’t spend more than an hour total with the bank and the police.

• We need online banking in order to be able to monitor our accounts more closely. Yes, technology lag is a downside of small town banking, but ours recently offered online banking and we signed up.

• Some crooks only steal a little. We are still puzzled that this thief, after one successful purchase on Jan’s debit card, didn’t try for more.

• Seldom used accounts are vulnerable. Jan hardly ever uses this account, which made the purchase even more noticeable.

• That the security freeze we had previously placed with all three credit reporting agencies, while giving us some identity theft protection, is not foolproof.

Readers: Have you ever had your identity stolen? How much hassle did you have getting your money back? What steps did you take to prevent future theft?  Any tips for us?

I want to thank Craig Ford at Money Help for Christians for tabulating a ranking of the Best Money Blogs from 2010.  Of course, as Craig points out, the word “best” is quite subjective, so there is no foolproof way to absolutely determine which blogs are “best”.

Craig based his findings on how well various blogs succeeded in being selected for the Best of Money Carnivals throughout 2010.  I suggest you skip on over to “21 Best Money Blogs of 2010 / The Scientific Method” to read the exact methodology Craig used.

How well did Personal Finance by the Book do?   Number 4.  I am genuinely humbled and honored to be included with all of these great sites.  Here are the rankings from Craig’s post:

They signed the Compact before leaving board

At first glance, today’s post has little to do with personal finance. However, if adventure, conviction, faith, resilience and God’s providence affect your financial well being, perhaps it does. At any rate, if you are interested in reading of how an extraordinary series of events led to America’s first Thanksgiving, stick around.

The Journeyers and Their Compact

Those 102 adventurers (a strange mix of religious separatists and treasure seekers), after sailing across the ocean, missed their planned destination and therefore agreed to establish a village at Plymouth in Massachusetts. Before disembarking their ship, they signed the Mayflower Compact. Well, only 41 of them actually signed it. The body of this document declares,

“Having undertaken, for the Glory of God and advancement of the Christian Faith and Honour of our King and Country, a Voyage to plant the First Colony in the Northern Parts of Virginia, do by these presents solemnly and mutually in the presence of God and one of another, Covenant and Combine ourselves together into a Civil Body Politic, for our better ordering and preservation and furtherance of the ends aforesaid; and by virtue hereof to enact, constitute and frame such just and equal Laws, Ordinances, Acts, Constitutions and Offices, from time to time, as shall be thought most meet and convenient for the general good of the Colony, unto which we promise all due submission and obedience.”

Pestilence

After pledging to advance the Christian Faith in this New World, about half of our intrepid travelers died from exposure, scurvy and outbreaks of contagious disease during that first brutal winter. At that point, had I been one of that group, I might have had serious misgivings about the wisdom of this mission. I might also have been questioning my faith.

A Miracle Visitor Shows Up

A Miracle Visitor

When spring came, the survivors, weakened by illness and malnutrition, experienced an astonishing miracle: a visit from an Abenaki Indian who greeted them in English. Several days later, he returned with Squanto, an English speaking Native American, who taught the Pilgrims how to cultivate corn, extract sap from maple trees, catch fish in the rivers and avoid poisonous plants.

In November, 1621, after their first successful corn harvest, the Pilgrims and their Native American allies celebrated a three day festival together. Many consider this festival as the origin of our modern day Thanksgiving holiday.

But this story is about more than the beginning of an annual holiday. It is about:

Conviction

What would it take for you to leave everything you have ever known to launch out on a venture that offered tons of risk and no guarantees of success? The Pilgrims believed so strongly about freedom of religion that they were willing to take that risk. I wish I had that sort of conviction.

Faith

As evidenced in the Mayflower Compact, they clearly stated their goals: to give glory to God and advance the Christian faith.

Resilience

After losing half of their number that first winter, they never gave up. They learned the ways of the new land, adapted to those ways and began to rebound.

Providence

“Providence” is sometimes defined as “God’s foreseeing protection and care of his creatures”. Unless one wants to believe the arrival of Squanto was total coincidence, Providence was an obvious factor. Consider:

• They missed their destination. Or…did they? Had they been where they planned to be, their connection with Squanto might never have happened.

• Squanto spoke English. How he learned English is another story, but what are the chances that an English speaking Native American would show up?

• Squanto’s timing was perfect. Had he come during the winter, he might have been vulnerable to the diseases which killed so many of the original group. Instead, he came in the spring: the season for planting.
• Governor William Bradford declared that Squanto was “a special instrument sent by God for their good.“

Even with a corn harvest, I am amazed at how these early settlers could muster up the ability to be thankful. Yet they did. I hope this re-telling of our first Thanksgiving story will challenge you to realize that God is providentially working in your life, through good times and not so good.

Like the Pilgrims of old, we have much to be thankful about.

2010 is the big year for Roth Conversions. The $100,000 adjusted gross income threshold is gone forever,  allowing anyone at any income level to convert their traditional IRAs to Roths.   Also, for this year and this year only, Congress has made the conversion not so painful; you are allowed to report  half of the conversion amount on your 2011 tax return and the other half the following year.

Roth Conversion Rules Create Confusion

As may be expected, new tax rules come fraught with confusion. Yes, the new rules are straightforward enough, but the application brings on questions and misunderstandings. Although my research for this post revealed many myths, these five are the ones I consider most prevalent.

Myth 1: This is the only year you get the opportunity to spread Roth conversion taxes over more than one year.

While it is true that 2010 is your one and only shot at spreading this years conversion taxes over two years, there is no reason why you can’t systematically convert a portion of your regular IRA over any number of years. For example, you could convert $300,000 of traditional IRA to a Roth in six years at $50,000 per year…and pay the taxes on $50,000 each of those six years.

Myth 2: After you convert, you can’t touch your money for five years.

Although you cannot withdraw EARNINGS from a Roth until it has been open for five or more years, your actual contributions are available tax free and penalty free at any time. Your converted amounts can also be accessed tax free at any time, but not without penalty unless you are older than 59 ½.

The IRS considers withdrawals in this order:

• First money withdrawn is from contributions.

• Once all contributions are gone, further withdrawals are from conversions.

• Once all contributions and conversions have been withdrawn, any further withdrawals are from earnings.

Theoretically, you could convert $50,000 today and withdraw it tomorrow tax free and penalty free (if you are over 59 ½ years old.)

Myth 3: You can’t spread the tax bill over three years by reporting part of a conversion in 2010 and the rest in 2011 and 2012.

The law gives two options for conversion:
Option A: Convert in 2010 and pay 100% of the taxes on their 2010 return.
Option B: Convert in 2010 and pay 50% of the taxes on both the 2011 and 2012 returns.

A married couple, each with their own IRA, could spread the taxes over three years if one spouse selects Option A while the other spouse selects Option B. In effect, this married couple would be spreading the conversion taxes over three years.

Myth 4: A Roth IRA conversion is irreversible.

Simply not true. Should you convert in 2010, you have until October 15, 2011 to change your mind. Why would you want to “unconvert”? One possibility is that you won’t have the funds at your disposal to pay those taxes. Another is that your projected retirement income will put you in a lower bracket upon retirement. Also, if your account has lost value, undoing the conversion would allow you to prevent paying taxes on money that has disappeared.

Reversing the Roth conversion is called “recharacterization”.

Myth 5: You can’t win if you pay the conversion tax with IRA money.

Nearly all financial advisers recommend paying the conversion tax bill with outside money. Doing so indirectly puts more funds into the Roth and maintains the size of the nest egg.   But is it impossible to win by using IRA money to pay the conversion tax?

First, you would need to be over 59 ½ to avoid the 10% early withdrawal penalty on the portion used to pay taxes. Secondly, however, the actual taxes paid are going to be the same either way IF you are paying same effective income tax percentage at time of withdrawal as when the conversion is made.

Kiplinger gives the following example:

“Let’s say you convert a $100,000 IRA and use $28,000 of the nest egg to pay taxes on the switch. (This assumes you’re at least age 59 1/2 so you’re not hit with the 10% early-withdrawal penalty on the funds not converted.) If the account earns 6% a year, it will hold $128,941 ten years down the road. It’s all yours. If you don’t convert, your $100,000 IRA would grow to $179,084. But if you’re still in the 28% bracket, 28% of the money is Uncle Sam’s. Peel off his share and you have the same $128,941. (This example ignores state income taxes, but if state tax rates don’t change, neither would the outcome.)”

Therefore, if taxes were a wash, other advantages of the Roth IRA over conventional IRA (tax free withdrawals upon retirement, no RMD at age 70 ½, a “hedge” against future tax increases and a tax-free inheritance for your heirs) could justify using IRA money to pay the conversion taxes.

Some great articles that helped with my research for this post:

7 Things to Know About the 2010 Roth IRA Conversion Rules at Good Financial Cents

Roth IRA Withdrawal Rules at Cash Money Life

What You Need to Know About Roth Conversions at Redeeming Riches

Are New Roth IRA Conversion Rules Meant to be a Short Term Fix for Government? at 20′s Money

7 Myths About Roth IRA Conversions

10 Rules of the Road for 2010 Roth Conversions A great quiz on Roth Conversions

2010: Roth Conversions for Everyone

Should You Convert to a Roth IRA?

Readers: Are you taking advantage of the 2010 Roth conversion rules?   Are you planning to convert to Roth in the future?   What is your strategy?