Titus II Lesson -- January 18th

A Biblical Response to 2008
“Financial”


Review
When I first began working on this presentation, my frame of reference was “backward.” That is, I was looking back at the challenges introduced by the large number of births in this class, a new church schedule, the election of a new Congress and President, and a softening economy. I wanted to share what biblical principles were applicable and/or relevant in 2008.

That all changed as the months of September and October gave birth to the months of November and December. No matter how much I tried, I could not “ignore” what was happening in front of my eyes. For the week of September 15th, according to the Boston Consulting Group, “marked the end of America’s Depression-era financial system.” The very financial services landscape changed irrevocably and virtually overnight. Even though the financial system was at the center of this turmoil, the ramifications will inevitably travel throughout the broader economy. Thus, I could not ignore modifying my frame of reference. It had to also include a “forward” look.

To assist you in this period of unprecedented change, I want to look “backward” and “forward.” I want to comment on what biblical truths were most applicable in 2008 and which biblical truths should be elements of our response to 2008. Last week we considered six spiritual elements of a biblical response to 2008 – sovereignty, stewardship, generosity, contentment, community, and service. This week I want to consider the “financial” realm. I want to consider how to financially respond in a biblical manner to 2008.

The Environment That Necessitates A Biblical Response -- Financial
Before we consider a biblical response to the financial uncertainty of 2009, let us take a closer look at the environment that will necessitate such a response. As tough as 2008 was, there are many reasons to believe that the overall U.S. economy will get much worse in 2009.

1. Tight Credit
At the heart of this recession is the problem of tight credit. This problem began with the banking debacle in 2008 and it has now spread to the small business person and the consumer. Credit for working lines of capital, construction loans, houses, and autos are drying up. Small business owners with solid credit are finding that lenders are raising asset-to-loan requirements – if they can find a lender to loan! Credit card companies are cutting credit limits and, in some cases, raising interest rates, partly because they fear more consumers will default as financial stress spreads. "We haven't hit bottom yet in terms of credit card companies trying to protect themselves," says Justin McHenry, president of IndexCreditCards.com. Even if the Federal Reserve continues to hold down interest rates, McHenry says credit card companies will continue to raise rates and cut credit limits through much of 2009.[1] This “drying up” of consumer credit is based on the real concern of whether the consumer can manage his current debt load. That load is so large that it rules out much future spending (signaling sharp declines for most retail businesses). In other words, easy credit to fuel consumer spending has all but disappeared.

2. Unemployment
As small businesses are blocked from borrowing and as consumer spending declines, the unemployment rate will spike up sharply. Recent announcements by Motorola, Neiman-Marcus, and Citigroup are just the first wave of announcements. It is going to get even nastier out there. Not so nasty that your great-grandparents will quit telling those Great Depression stories, but nasty nonetheless. For a while, economists thought we might luck out and get away with a downturn no worse than the 1990-91 recession. That one lasted eight months, with back-to-back quarters of negative GDP growth of 2.9 percent and 2 percent. Unemployment rose from 5.2 percent to 7.8 percent. But now it looks as if the 1981-82 downturn is the better comparison. That downturn lasted 16 months, had several quarters where the economy shrank 3 percent or more, and saw unemployment rise as high as 10.8 percent.[2]

3. Worker Pay[3]
If unemployment were not bad enough, another stage of this downturn will likely revolve around the worst slump in worker pay since — you knew this was coming — the Great Depression. This slump in worker pay won’t be anywhere near as bad as the one during the Depression, but it also won’t be like anything the country has experienced in a long time. Income for the median household — the one in the dead middle of the income distribution scale — will probably be lower in 2010 than it was, amazingly enough, a full decade earlier. That hasn’t happened since the 1930’s. Already, median pay today is slightly lower than it was in 2000, and by 2010, could end up more than 5 percent lower than its old peak. According to Nariman Behravesh, the chief economist of Global Insight (a research and forecasting firm): “The biggest hit will be in 2009 and it probably won’t be until 2011 until we see any kind of pay gains.”

Why is this so fact so important for many of you in this audience? Many of you are counting on your pay increasing this year as your expenses increase related to children. Rather, each of you needs to be prepared to see your income either remain flat or possibly decrease. Many companies will eliminate pay raises in 2009 as a means of keeping a larger number of people employed. Some will even approach the staff (like Fedex) and ask for pay decreases. This expectation of lower income in 2009 will be particularly true if you lose your job. You can almost be assured that the pay for your next job will be less than your current job.

4. Loan Defaults
The next domino to fall (in this rather simplistic view of the economy) will be in the area of loan defaults. Increasing unemployment, tight credit, and falling worker pay makes it likely that there will be an even further acceleration of defaults on mortgages, credit cards, auto loans, and second mortgages. These defaults will place even greater downward pressure on employment and business profitability.

5. Asset Values
Increasing unemployment, tight credit, and increasing mortgage loan defaults will inevitably result in a decline in housing values. The value of homes, after going up sharply for almost two decades, is in the midst of a correction that could take down prices by as much as 40% before the resetting is done. For example: home prices in 20 major U.S. cities dropped 2.2% in October from the prior month, and have fallen a record 18% from the previous year, according to the Case-Shiller home price index published by Standard & Poor's. Prices have fallen in all 20 cities compared with last month and a year ago, and 14 of the 20 metro areas showed record rates of annual declines. For the original 10-city index, prices fell a record 19.1% in the previous 12 months.

The value of corporate assets will also move down with equal rapidity. Write-downs of assets and write-offs of goodwill could hit levels not seen in years. Corporations in the airline, retail, auto, and newspaper industries will have to revalue property which has been undermined by eroding fundamentals.

6. Government Revenues
The declining asset values will greatly diminish government revenues. City, county, and state governments (particularly in Texas) which depend on property taxes, will be forced to raise taxes or cut back on government services. Either solution will have a tendency to further exacerbate the recession.

7. Weakening Big Picture
In summary, all of these factors are contributing to a weakening “big picture.” There have been two quarters so far during the recession where the economy has gotten smaller, each time by less than 1 percent. Those days are over. Jason Trennert of Strategas Research says: "We are currently forecasting a 4 percent decline in real GDP in the fourth quarter, placing it among the worst quarters for economic growth in the postwar period. The first three months of next year could be just as bad. And even once the economy begins to grow again, the overhang from the credit crisis will probably crimp significant growth until 2010 (at the earliest).”[4]

The Elements of a Biblical Response -- Financial
Some of you are thinking: “I come to church to worship and be uplifted. That recap of the current financial picture is depressing.” While that may be true, as believers, we must be prepared to serve our Lord even in the midst of such a financial crisis. If this picture is true (or even directionally true), how does one respond biblically to such a financial environment? While magic bullets are difficult to come by, a biblical response to this financial crisis is rather straight-forward.

1. Get Debt-Free
The first financial element of a biblical response is to renew your resolve to get out of debt. Debt is a condition that exists when 1) there is insufficient collateral pledged to secure a loan or when 2) the equity and/or sales price of the asset is less than the amount owed on the asset. The two most common examples of debt are co-signing a loan (standing as surety) when you have insufficient collateral to pay off the loan and owing more money for an asset than it is worth (e.g., a mortgage that is greater than the underlying asset). Many of you in this room are in debt because you have college loans with no pledged collateral and/or home and auto loans that you could not pay if you had to “fire sale” the underlying asset.

What does Scripture say about debt? While the New Testament is largely silent about debt, the Old Testament has a lot to say about debt. As we look at some of these passages, just keep in mind that we need to be careful to distinguish between precepts (absolute rules) and principles (guiding wisdom).
· Under Deuteronomic Law, Israel was to never be a debtor nation. In Deuteronomy 28 we learn that Israel was obedient if they did not borrow from other nations. In the section on cursings, one of the curses was that Israel would be a borrower or a “tail” of alien nations. That is, one of the curses was that Israel would be a debtor. What does this teach us? It teaches us that being in debt to an outsider was evidenced of being cursed (negative).
· Proverbs 22:7 likens being in debt to being a slave. The term “slave” should not be taken literally. According to OT Law, a man could sell himself or his children into slavery (Ex. 21:2-7; Neh. 5:5). Thus, slavery was more a temporary state than an actual birthright. Yet, God has appointed one to rule and one to submit. And in this verse, the Scriptures liken a borrower or a debtor to a slave. That is because a borrower ends up in the same state as a slave. He is controlled by another.
· Proverbs 6:1-5 (as well as Proverbs 11:15/20:16/27:13) make a plea to avoid standing as surety for one outside the family. In fact, in verse 3, going to “grovel” and being willing to “lose face” is nothing in comparison to the danger of standing as surety. Nothing should stop us from doing everything we can, as quickly as we can, to deliver ourselves from being in a position of surety (for one outside the family).

What does this review of biblical passages mean for us today?
· Debt is not a sin. Nevertheless, it should be avoided.
· Borrowing is discouraged and, in fact, every biblical reference to borrowing is negative.
· When you borrow, you promise to pay. In fact, you have an absolute obligation to re-pay (Ecclesiastes 4:5-6).
· Finally, no one who is financially bound can be spiritually free. It is impossible to up and move, sell your home, downsize your home, change careers if you are in financial bondage. If you want to be free to serve God as He calls you, you must be free financially. This is because financial bondage inevitably leads to spiritual bondage.

Least you are not yet convinced of the danger of debt, Crown Financial Ministries (www.crown.org) lists eight (8) additional biblical reasons why debt needs to be treated with extreme caution:

· Debt presumes on the future
When people commit themselves to payments over a period of time, they are presuming that there will be no pay reductions, no loss of job, and no unexpected expenses. That is an improbable assumption since Prov. 27:1 states: “Do not boast about tomorrow,For you do not know what a day may bring forth.” How prophetic is this passage in light of what might be happening in 2009?
· Debt lowers future standards of living
Money that is borrowed today must be repaid over time along with interest, which means that those things purchased with credit will cost more “tomorrow” than they did today.
· Debt focuses on façade decisions rather than real life decisions
Debt encourages people to make decisions based on whether they can afford a monthly payment, rather than whether they can afford the total cost (purchase price, operational expenses, and finance charges) of the item.
· Debt leaves people at the mercy of the power of compound interest
If consumers pay the minimum monthly payment on a $1,000 debt at 19.8 percent rate of interest and never charge anything else on that account, it will take eight (8) years to pay back the $1,000 and they will pay $2,023 for the privilege of charging $1,000.
· Debt could delay God’s plan
Debt provides instant gratification, at the expense of financial freedom, rather than waiting on God’s provision.
· Debt clouds the line that separates wants, desires, needs
Debt allows desires to become wants and wants to become needs.
· Debt encourages impulse buying and overspending
Unrestricted debt assumption and credit cards have provided the means to immediately buy beyond the means to repay, without sacrificing needs and necessities.
· Debt stifles resourcefulness
In a society that lives by the premise of “I want, what I want, when I want it,” the need to be resourceful – mending clothing, resoling shoes, and changing oil – in order to save money is no longer relevant.

2. Save for Future Needs
The second financial element of a biblical response to 2008 – after getting out of debt -- is to save for future needs. The Bible encourages the believer to save. In Proverbs (6:6-8; 20:4; 21:20), we learn that the wise and diligent save while the sluggard and foolish do not. The first (and best) goal is to build an emergency savings fund. Most financial experts will tell you to build a 6 month emergency savings fund. That is, you need to have liquid funds equal to 6 months of living expenses easily accessible. Having built up an emergency fund, the believer should next invest their surplus and diversify for safety. (Note: Though the Bible is clear about saving, it is somewhat silent on the subject of investing. One passage that appears to speak about the concept of investing is Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”)

3. Live on a Budget
The third financial element of a biblical response to 2008 is to live on a budget. We learn in Proverbs 27:23-27 that the wise owner knows the condition of his flock/herd. That is, the wise know the status of their “assets” and the source of their “income.” They use their assets/income to meet anticipated needs and expenses. Implicit in this Proverb is the encouragement to plan/budget. It is not possible to provide for future needs unless one plans and budgets. We also learn in Luke 14:28-30 that the wise/prudent count the cost and compare it to their available funds prior to building. They match available funds to anticipated expenses. In short, the wise budget. The un-wise do not.

How does one live on a budget? First and foremost, you must understand all sources of income and expense (fixed and variable). Second, you must build a budget that ensures lower expenses to income received. I suggest living at 75% of your current income. Third, you must have a means for measuring your adherence to the budget. Finally, you must be disciplines enough to live on a budget.

4. Seek Neither Poverty or Wealth
The fourth financial element of a biblical response to 2008 is to seek neither poverty nor wealth.
At first glance, the Bible seems to teach that wealth is wrong for Christians. But a comprehensive look at the relevant biblical passages quickly reveals that a biblical viewe of wealth is more complex. First, wealth itself is not condemned (Gen. 13:2; 42:10) and it is seen as evidence of God's blessing (Deut. 8; 28; Prov. 22:2; Ecc. 5:19). Second, when wealthy people in the Bible were condemned, they were condemned for th emeans by which their riches were obtained, not for the riches themselves (Amos 4;11; 5:11; Micah 6:1). third, the Scriptures teach that christians should be concerned about the effect wealth can have on our lives. We read in Proverbs 30:8-9 and Hosea 13:6 that wealth often tempts us to forget about God. For example, wealthy believers may no longer look to God for their provision because they can meet their basic needs. Moreover, Proverbs 28:11 and Jeremiah 9:23 warn that wealth often leads to pride and arrogance. So the bible does not condemn those who are wealthy. But it does warn us that if God blesses us with wealth, we must keep our priorities straight and guard against the seductive effects of wealth.

It is also commonly believed that the Bible praises those who are poor. But a clsoer look at the Scriptures would lead one to a slightly different conclusion. While the Scriptures would oppose those who cause poverty through oppression and fraud (e.g., Prov. 14:31; 22:7; 28:15), poverty is also caused by:

• misfortune, persecution, or judgment (Job 1:12-19; Ps. 109:16; Isa. 47:9; Lam. 5:3)
• laziness, neglect, or gluttony (Proverbs 10;4; 13:4; 19:15; 20:13; 23:21)
• a culture of poverty -- Proverbs 10:15 says: "The ruin of the poor is their poverty."

So the Bible does not praise those who are poor. In fact, it often condemns the behavior that leads to poverty. But it does warn us if God blesses us with wealth, we are not to oppress or defraud the poor.

How does this apply to us? In 2008, many in this class found themselves to be wealthy (I would argue that we are all wealthy in relative terms). As such, you were obligated (according to Proverbs) to be generous. While you might know that there is a blessing which will reward kindness or generosity to the poor, you need to remember that this blessing in Proverbs is combined with a warning (Prov. 28:27; 22:9; 28:8; 19:17; 14:21; 14:31) to those who ignore or are unconcerned with the plight of the poor.

There were others in this class who “sought” to be wealthy in 2008. How many of you were successful? Where did that goal get you? Are any of you in debt up to your eyeballs because of that goal? I expect that most of those who sought to be wealthy last year were largely disappointed the results.

In 2009, we must seek to be neither wealthy nor poor. We are to seek what Proverbs 30:7-9 advises: “Two things I asked of You, Do not refuse me before I die: Keep deception and lies far from me,Give me neither poverty nor riches; Feed me with the food that is my portion, That I not be full and deny You and say, "Who is the LORD? Or that I not be in want and steal, And profane the name of my God.” Seeking neither wealth nor poverty is the fourth financial element of a biblical response to 2008.

5. Balance[5]
The fifth financial element of a biblical response to 2008 is balance. The amount of time you have to work is largely a function of whether your vocation is a variable-time or a fixed-time job.
· In a variable-time job you do not punch a time clock. In a fixed-time job you typically punch a time clock.
· In a variable-time job you have fluctuating work hours. In a fixed-time job you typically work an 8-to-5 schedule.
· In a variable-time job there is always more to do than can be done in a reasonable day, so the pressure to spend more time at the job always exists. The salesperson, accountant, manager, teacher, and programmer are examples of those having variable-time vocations. On the other hand, a fixed-time job neither requires nor expects much involvement beyond the time spent in the office or shop. The factory worker, secretary, nurse, and grocery clerk are examples of those having fixed-time vocations.
· The variable-time professions typically generate the most income. These individuals have a challenge, however, that fixed-time workers do not have. They have to constantly guard against overworking. The salesman can always make one more sale, the doctor can always see one more patient, and the accountant can always reconcile one more statement. On the other hand, fixed-time professions provide those individuals with plenty of time but they face financial pressures because of lower income. The point is that the vocations that tend to generate the greater incomes also tend to exert the greatest pressure on the person’s time. The vocations that put the least stress on the person’s time tend to produce less income and put more stress on the financial side.

For years, in the employer/employee wars, the employee has had the upper hand. An individual with institutional knowledge, solid skills, and seniority could demand higher wages, flexible work hours, or improved benefits. An individual who desired to balance work/life stood a good chance of achieving his/her goal. In 2008, this goal became more elusive. Why? The downturn in the economy is transferring the upper hand back to the employer.

In 2009, the goal of balancing work/life will be severely challenged. Requests for higher wages and better benefits will be replaced with employer requests for longer hours, more responsibility, smaller (if any) raises, and working several jobs at the same time. In 2009 we need:

· Find a vocation that we enjoy and are equipped for then live within the income it provides. It is your responsibility to work hard and well at what God has called and equipped you to do (see Col. 3:23), realizing that the income you generate is no surprise to Him. Remember the biblical principle of sovereignty. He sovereignly ordains your income level through your employer or through the clients and sales He allows you to have in your business if you are self-employed.
· Be aware of the different time demands of your family’s different stages. If you are in one vocation and are considering switching to another, be careful to evaluate the impact of the change on your time. If the children are young, you may be better off waiting a few more years until they are teenagers to make the switch. Or if they are teenagers, you may want to wait until they graduate. I know this concept of slowly climbing or getting off the ladder is a difficult one, especially given the ego of man. My encouragement, however, is that you be mindful of what really counts for eternity.
· Only change vocations to better fulfill your purpose and maximize your time flexibility, not to make more money. This is not to say that you should not change vocations, only to caution you to weigh the cost. It may be that you would be better off waiting and earning less income at the old job until your children are at an age where a job change wouldn’t be so disruptive to them in taking you away from them.
· If you are in a variable-time job, set your time parameters and do what you can do, then trust God to do what you cannot do. If you are a salesperson, specify a reasonable number of hours you are going to devote to your work. Set an amount that will allow you to provide for your family’s needs, and work hard during those hours; but when those hours are up, stop working and spend time with your family.
· If you are in a fixed-time job be particularly careful to live on a budget. Your ability to make additional income is more limited. You want to avoid having to take a second job to “make ends meet.”

Balancing work and life (however difficult) is the seventh element of a biblical response to 2008.

6. Take Advantage of Bad Times[6]
The sixth (and final) financial element to a biblical response to 2008 is to take advantage (exploit) of the opportunities these bad times will create. There comes a time when you stop “surviving” and shift to “thriving.” It's an ill wind that doesn't blow some good, and you need to make the most of the opportunities that are out there.

· Energize your career. Don't just worry about keeping your job—make it better. Lean times present an opportunity for niche employees to put other skills to work and rebuild their reputations as go-to multitaskers. Employees should actively try to pick up the work of their departed peers. Also, volunteering to take on new responsibilities can pave the way for a negotiation in six to eight months, when an employee can prove that the job has evolved and is now worth more on the market. A new outlook and approach like this will help you hold on to your current job or pave the way to your new career.
· Refinance your home. Recent Federal Reserve announcements intended to ease the financial crisis have sharply reduced 30-year fixed mortgage rates, to 5.5 percent at the start of the week vs. 6.2 percent just two weeks earlier, according to HSH Associates. "Recession equals lower Treasury rates, which equals lower mortgage rates, which equals a great opportunity to refinance," says Mike Larson, a real estate analyst at Weiss Research.
· Look for the next great stock investments. Not only can you pretty much count on this year being one of lousy economic growth, you can for sure count on Barack Obama being president. And there are a few stocks out there that could get a boost from an Obama administration, including Chesapeake Energy (natural gas) and AeroVironment (aerial vehicles for Afghanistan). Also, keep an eye out for "growthy" (high earnings growth) small stocks, especially techs, which often are the first ones to rise when a new economic expansion nears. Hey, the recession can't last forever, right?
· Forget about keeping up with the Joneses. Since almost everyone's budgets are strained right now, cutting back is en vogue. Pollster John Zogby has found that a growing segment of the population has become more focused on spiritual fulfillment than on material success. Similarly, futurist Faith Popcorn's research shows that the concept of "frugality" has taken hold among families, with parents increasingly teaching their children to reconsider how much they consume and whether they could do with less. The "new frugality" movement, as she calls it, will usher in a new set of values for the next generation, she says.
· Negotiate almost everything. From credit cards to clothes, companies are open to making deals as they struggle to keep customers. "If you're a good customer, [credit card companies] may be more apt to negotiate your rate because they don't want to lose you," says McHenry of IndexCreditCards.com. At farmers markets and clothing boutiques, simply asking, "Can I get a discount?" can lead to a lower price. Paying with cash increases the chances of making a deal because it allows retailers to avoid credit card transaction fees.

Practical Application
In closing, I want to address five questions that are likely swirling about in some of your heads this morning:

1. How do you reconcile two different approaches to spending money?
The question can only be answered if the “big three” have been met. That is, if you have not: 1) eliminated all debt, 2) built up an emergency fund, and 3) implemented a disciplined investment strategy – any discussions about discretionary spending is off base. Having discussions about what furniture to buy, what to spend on a birthday party, or purchasing a new van should only be considered after these three priorities are addressed.

2. If I prioritize debt elimination, creation of an emergency fund, and a disciplined investment plan – there will be insufficient funds for ______ (e.g., private school, ballet classes, a new car, a trip to Hawaii, etc.). What do I do?
God in His sovereignty has answered your question with – “not now.” If you believe that these three objectives have priority, you must choose to go without until which time He provides the desired income necessary to support these “wants.”

3. Should I keep my stock in the stock market or pull it out and put it in CD’s?
I am not licensed to give financial advice. With that said, most financial advisors would direct you to stay invested in the stock market if your investment horizon is five years or greater.

4. We have insufficient income to achieve all three of these objectives (debt elimination, creation of an emergency fund, an investment plan), what do I do?
You must either increase your income (a 2nd job, a job change, etc.), eliminate some of you discretionary expenses, downsize your housing needs (sell home), or allow your vehicles to age (drive older vehicles longer).

5. How does my tithe (or charitable giving) figure into this discussion?
It is assumed that your “tithe” or planned giving is taken off the top. That is, the budget process looks something like this:
· Income – giving = Subtotal1
· Subtotal1 – debt elimination – emergency fund – investments = Subtotal2
· Subtotal2 – living expenses = Surplus

[1] Kimberly Palmer, James Pethokoukis, Luke Mullins, Your 2009 Recession Survival Guide: Here's how to weather the downturn and take advantage of the tough times in 2009
[2] Kimberly Palmer, James Pethokoukis, Luke Mullins, Your 2009 Recession Survival Guide: Here's how to weather the downturn and take advantage of the tough times in 2009
[3] David Leonhardt, Next Victim of Turmoil May Be Your Salary

[4] Kimberly Palmer, James Pethokoukis, Luke Mullins, Your 2009 Recession Survival Guide: Here's how to weather the downturn and take advantage of the tough times in 2009
[5] Russ Crosson, A Life Well Spent. The actual text is borrowed from an excerpt of Chapter Six, “A New Understanding of Work”, published in the March, 2004 edition of Sound Mind Investing.

[6] Kimberly Palmer, James Pethokoukis, Luke Mullins, Your 2009 Recession Survival Guide: Here's how to weather the downturn and take advantage of the tough times in 2009