Basics of Investing - Part 2 - Bonds

Let's return today to our Basics of Investing Series.

In our last installment, "Basics of Investing - Part 1", we answered the questions: "Why Invest?", "What is Stock?", "What is the stock market?" and "What is the difference between saving and investing?".  In this post, we will explain what a bond is and how bonds work.

Fundamentally, a bond is a loan to a company or government (city, state or federal).  You are the lender, or "bond holder".  The company or government agency is the "bond issuer".  A bond typically has a fixed interest rate and a maturity date.  If you hold the bond until the maturity date, you will be paid back the original loan amount plus interest.  Some types of bonds pay regular interest payments during the period you hold the bond.

There are many types of bonds.  Here are a few.

Treasury Bills, Bonds and Notes - issued by the U.S. government and are considered the safest of bonds.  Different bond types have different number of years before they mature and slightly different terms.

EE Savings Bonds are issued by the federal government and earn a fixed-rate of interest and can be redeemed after a year (though you lose three-months interest if you hold them less than five years).  They can be held up to 30 years.   They can be bought for any amount starting at $25.

I Savings Bonds are similar to EE savings bonds, except the interest rate you earn rises and falls with inflation. - Also issued by the US government.

Agency bonds are not quite as safe as Treasury issued bonds, but they are often safer than corporate bonds. They’re issued by government-sponsored companies.  They are not backed by the “full faith and credit” of the U.S. government like Treasurys.


Municipal bonds, or Munis, as they’re commonly known, are issued by states, cities and local governments to fund various projects. Municipals aren’t subject to federal taxes, and if you live where the bonds are issued, they may also be exempt from state taxes. Some municipal bonds are more credit-worthy than others, though some munis are insured. If the issuer defaults, the insurance company will have to cover the tab.


Corporate bonds are bonds issued by companies. Corporate debt can range from extremely safe to super risky.

Most investment professionals agree that bonds help to dampen out the volatility of stocks and add a measure of protection against stock losses.  Dave Ramsey disagrees.  Here is a link to a very informative video clip wherein Dave explains why he does not advocate holding bonds.   Virtually every other financial professional I follow online and 100% of the investors I have discussed this subject with has advocated some percentage of your portfolio be dedicated to some type of bonds. The list of people I have found to be at odds with Dave on this subject include Russ Carroll - Dave Ramsey's recently retired right hand man and one of the most knowledgeable financial people on the planet as far as I'm concerned.  I discussed the subject of holding bonds with Russ personally at an investment training class he taught at Financial Peace Plaza years ago.

For further reading, here are some links to really good and in-depth bond explanations. Enjoy!

• Sound Mind Investing articles on bond investing.  This is a list of very well-written and easy to understand articles.  You can delve as deeply into the subject as you want at this site.

• Wall Street Journal personal finance pages - http://guides.wsj.com/personal-finance/investing/what-is-a-bond/

Next up, in our Basics of Investing - Part 3, we will explain what a Certificate of Deposit, or CD, is.  See you then!

Jim

Danger! Stay Away!

In this installment, I'd like to take a minute to warn readers about some potential pitfalls.  Don't fall in these traps!

• Payday loans, title pawn - even with the Federal laws that were recently put in place these predatory lenders are horrible rip offs.  They can still legally charge up to 17.5% Interest on a 30-day loan amount.  That's equivalent to 210% interest per year.

• Lotto, powerball, etc. - these institutions are a tax on the poor and those who can't do math.  The odds are better that you will walk outside and have a flying pig land on your head than the odds of you winning the lottery.  The average person that plays the lottery regularly spends over $100 per month.  That much money invested wisely over a lifetime would make you very wealthy.  Stay away from gambling of any kind.  People say "I just gamble for entertainment".  If you want some entertainment, walk down the street throwing $20 bills on the ground.  Pretty soon there will be people scrambling all around you.  You'll probably cause at least one traffic jam and a heck of a lot of commotion.  Now that would be entertaining!

• Car lease - Smart Money magazine, Consumer Reports and Dave Ramsey all agree a car lease is the most expensive way to drive a vehicle.

• Credit Cards - Unbelievably large pitfall.  It's amazing to me after so many people's lives have been ruined by out-of-control spending and the resultant interest and late payment fees on credit cards that they are still considered a perfectly normal part of everyday life by so many.

• Television - Yes.  I said it.  One of the most effective things you can do to help you be successful with money is walk over to your television set and turn it off.  It's a statistical fact that people who watch more television spend more money.  It's because of the constant barrage of ads that we get hit with when we watch.  I believe that there might be as much or more more ad time than content nowadays.  Spending more is just one side effect of TV watching.  TV watching throws your brain and body into neutral.  Not only is it an incredible time waster, it contributes to our increasing health problems caused by lack of physical activity.  Health problems that will eventually cost you (or hard working taxpayers) lots of money.  All the health and financial side effects aside, do you really care to watch tv any more given the constant immorality displayed there?  Turn it off.  It will do you good.

Some Basic Truths about Money

Here are some basic truths I've learned about money and money management over the years.  

1. Managed money goes farther.  Unmanaged money disappears.

2. There are really only three things you can do with money:  save it, spend it or give it away

3. Financial success can be achieved in three easy steps:  live on less than you make, save for the future, don't borrow money.

4. It is commonly thought that the more money you make the better money manager you must be.  In reality, a high income earner has much more room for mistakes and sloppy living.  A low income earner has less room for mistakes and therefore must be more diligent and a better money manager.

5. Everyone wants our money.  Some out there are very good at getting it from us.  We must be alert, educated and diligent to keep our hard earned money out of other people's hands.

6.  God owns everything including us, our families, our income and our possessions.  We are not owners, we are managers of His possessions.  We save, spend and give differently when we keep that in mind.

7. In the children's story "the tortoise and the hare", the tortoise wins the race.  Likewise in investing, slow steady plodding beats get rich quick every time.

Hope this helps!

Traditional IRA vs. Roth IRA Comparison

Joe and Suzy make $56,000 per year household income ($4,667 per month)

Following Dave Ramsey’s baby steps, once Joe and Suzy are debt free other than their home mortgage and have 3-6 months emergency fund saved, they are ready to invest 15% towards retirement.  They will invest $8,400 per year.  Over 30 years, their total contribution to the retirement account is $252,000.

Using a Traditional IRA or by making pre-tax contributions to their company-sponsored 401K, Joe and Suzy can defer paying taxes on the $8,400 per year IRA contributions.  At a tax rate of 20%, the total taxes they would defer over 30 years are $50,400.  At 8% growth rate, their retirement account would grow to $951,549 which would all be subject to taxes when the money is withdrawn.  At 20%, their taxes would be: $190,316.

In a Roth IRA or Roth 401K, Joe and Suzy would pay 20% taxes on $8,400 more income per year for a total of $50,400 over 30 years.  At 8%, their retirement account would grow to $951,549, of which None is subject to taxes.  

The Roth option provides more and more advantage to Joe and Suzy as the rate of growth on their investments increases.  Further, if their tax rate increases over time, the Roth option provides more benefit when compared to the Traditional IRA.

Alternatively, as the rate of return on Joe and Suzy’s investments decreases, it lessens the advantage of the Roth IRA/Roth 401Kover the Traditional IRA/401K.  This is also true if Joe and Suzy’s tax rate goes down over time, as the favor would beshifted toward the Traditional IRA option which defers tax payments on both contributions and earnings.

Keep in mind in the above example, Joe and Susy would pay almost 4 times as much in taxes using a Traditional IRA/401K than they would if they saved using a Roth IRA/Roth 401K.  

Basics of Investing - Part 1

What is Investing?
Investing is to purchase an asset with the expectation of capital appreciation, dividends, and/or interest earnings.  Investments can be made in anything that appreciates over time such as real estate, antique cars, coins, art, etc.

We will focus on securities - debt (bonds), equities (stocks), but not derivatives (options).

What are stocks?

One share of stock represents a fractional ownership in a company.  The value a share of stock has is based on the value of the company and the number of outstanding shares.

Stock is bought and sold privately and/or publicly, in a stock exchange.  In the US, the NASDAQ or NYSE.

To purchase or sell on an exchange, you must go through a broker with a seat on the exchange.  Online trading software makes this easy and relatively inexpensive.

Investors can invest in individual stocks by purchasing shares in companies they believe will increase in value over time.  Alternatively, investors can invest broadly in the U.S. and foreign markets using mutual funds.

The Stock Market
As shown in the chart below, the U.S. stock market is generally increasing in value when viewed over a period of many years.

However, when viewed on a short term basis such as a day, a month or a year, the stock market can be seen to fluctuate up and down.  No surprise.

The point I would like to make at this time is that investing should be considered a long term endeavor.  Short term investing, such as day trading is risky business and very few succeed at it.






Savings vs. Investments

Saving
Generally, less than five years is saving.  Use savings accounts, CDs, money market accounts, piggy banks, etc. for saving.  For savings, our goal is to preserve our money.







Investing
Five years or more is investing.  My favorite investment vehicles are stocks, mutual funds and/or real estate.   When investing, our goal is growth.

Why Invest?
We harness the power of investing to achieve goals not possible with savings vehicles.  Consider the following chart.

18-Year College Savings vs. Investments Example

In the chart above, we assume a $120 per month contribution for 18 years and an average annual market growth rate of 8%.  The blue shaded area represents the savings growth over the 18 years which would come to roughly $30,000.  Look at the orange shaded area, which represents the investment growth.  Over time, the investment begins to significantly overshadow the savings growth.  That's the power of investing in the market.

Next up:  In "Basics of Investing - Part 2", we'll begin to cover a new types of investment vehicle: bonds.

See you soon!

How to Get Out of Debt

In this fifth entry in our Financial Freedom series, we will discuss how to get out of debt.

• First things first.  So that we don't fall back into debt while we're trying to pay it off, first we have to start with an Emergency Fund.

• Next, we need to get and stay on a budget (see Annual and Monthly Budgeting)

• Now.  Let me have your undivided attention for just one second.  Yes you.   Thank you.  Now pay close attention.  This is very important.   Stop borrowing money. You'll never pay off your debt if you keep signing up for more.

• To get out of debt we need to apply focused intensity.  Shut off all discretionary services and expenses.  Someone mowing your lawn and washing your car?  If so, do those things for yourself at least until you get the consumer debt paid off.   Paying for expensive cable TV service?  Cut it out temporarily.  Nowadays, a cheap antennae will get you several HD quality channels in most areas.  Make that work for a while.    Eating out a lot?  Nip it in the bud.  The idea is to free up as much income as possible so that you can pay off your debt rapidly.

• Temporarily, stop retirement and all other savings and investments outside of your emergency fund.  If you have debt other than your house, there's no better place for you to invest than in your own debt.

Use Dave Ramsey's Debt Snowball Method
The Debt Snowball is a technique for paying off debts from smallest to largest balance, not based on interest rate.  Paying debts off from smallest to largest balance allows you to get a quick win when you knock out a small debt and free up cash to apply to the payoff of the larger ones.

Your debt payments are the snowball.  They start smaller, but when a debt is paid off, the payment that you were making on that debt is added to any extra cash you have and applied to the next larger debt.  Thus, as the snowball rolls downhill, it gets larger.  Here's the steps...

1. List debts in order of smallest to largest balance

2. Each month, prepare your monthly budget paying only the minimum required payments to each creditor.

3. Pay every extra dollar you can scrape up on the debt with the smallest balance

4. When the smallest debt is paid off, use the payment you were making on it to pay extra on the next largest debt in subsequent months.

5. Repeat steps 2 - 4 until all your debts except the house are paid off.  Most families can do this in 1 or 2 years.   Wouldn't it be awesome if you did too?!

For an example, see this site.  Also, try Dave Ramsey's Debt Snowball tool.



That's it!  See that wasn't hard was it?

Next up in this series, Basics of Investing.  See you soon!

Monthly Budgeting

This is the fourth entry in the financial freedom series.  The topic for today is monthly budgeting.  The main concepts to remember about monthly budgeting are.

• A monthly budget is not complicated.  Its nothing more than a plan for how you will spend your income for the upcoming month

• Alternatively, we could have a semi-monthly or bi-weekly plan to better align our budget with our pay schedule

• Write it down – no computers, spreadsheets, web sites, smart phones, iPads, software and/or other misc. electronic gadgets until later, please.

• Make it a Priority!  Your budget can't work if you don't have one

Here are some specific steps to take when creating your budget.

Please note step number 3.  The reason we want income minus expenses to equal zero is so that we know we have planned what we will do with every dollar of income.   Here is an example.

Notice that income is a positive number on the budget and expenses are negative.  When we add them all up, we should get income - expenses = 0.  

Also notice the Blow Money category!  This category should handle your entertainment and miscellaneous small purchases and other expenses. 

I hope you didn't miss the Giving,  Annual Budget and Emergency Fund savings categories above from previous postings.

Next time we'll discuss "How to Get Out of Debt".  See you then!

Annual Budgeting

As the third entry in the financial freedom series, let's walk through how to create and live on a budget.

No political intent here.
Simply trying to be
a little humorous.
I'm actually a fan.

The main thing to keep in mind about a budget is that it is NOT a straight jacket.  A budget actually enables us to make the most of our income.  A budget is simply planning ahead to decide how we are going to spend our income.  That's why a budget is better known as a spending plan.

A budget also:

• Increases predictability in household finances.  
• Lessens the number of surprises.
• A budget helps us get in control of our finances instead of them controlling us.

The result is more peace and harmony at home.










Now, lets get down to the nuts and bolts of how we do budgeting.  As you know, some expenses occur every month.  Other expenses occur at various times throughout the year.  Therefore, we need to do Monthly and Annual budgets.

Annual Budgeting
Use an escrow account approach for expenses that are predictable, but not monthly.  Start with a calendar and list all the known expenses you will have for the year.  Record an estimate of the amount of each expense and the dates when the money will be spent.  Here are some examples of common expenses that belong in your annual budget.

I'll bet you can think of several more not listed here.  See what these expenses all have in common?

• They do not happen every month
• They are predictable in terms of when they will happen.  In fact, you can put them on the calendar
• They are (for the most part) discretionary in terms of how much you spend

Dave Ramsey calls this type of expenses Lump Sum Expenses.  See his page on this subject here.  You can also print off a free form from this page for managing Lump Sum Savings.

Example Annual Budget Sheet

Here's an example of a spreadsheet that can be used to help capture and track our annual budget items.  You certainly don't have to use a spreadsheet for your annual budget, but I have found it useful as opposed to a pencil and a notepad because changes can be made quickly and easily.  

Here's the steps to creating your own annual budget.

1. List all the known irregular expenses you will have for the upcoming year as a line item on the annual budget sheet.  Refer to the examples above.  Remember not to list monthly expenses or expenses you are not sure whether or not they will actually occur.  Record an estimate of the amount of each expense and the dates when the money will be spent.
2. Add the whole year's worth of projected expenses up.  In the example above, the annual total is $3,175.
3. Divide the annual total by twelve.  This is the amount you will need to save each month for annual budget items.  In the above example, $265 per month will need to be set aside in order for the family to have the money they need for the expenses when they occur throughout the year.

Note that the annual budget works just like the escrow account associated with a typical mortgage loan.  In most mortgage loan situations, the homeowner's mortgage payment includes the loan repayment amount plus an extra amount equal to 1/12th of the annual homeowner's insurance premium and property taxes.  The mortgage company takes the extra amount paid by the homeowner each month and saves it until the insurance premiums and tax payments are due.  This is exactly the same as how the annual budget works except it is you setting aside the funds and spending the money when it is appropriate to do so, not your mortgage company.

I recommend keeping your annual budget funds in a separate account from all other household funds.  In other words, keep it simple and easy to keep track of.  Don't mix these funds up with money that has any other purpose.  E.g. Don't put your Emergency Fund money in the same account as your Annual Budget money.

If you would like to have a fully functional electronic copy of the example annual budget spreadsheet above emailed to you, send a request to jim.sweatt@gmail.com.  Please indicate in your email whether you would prefer to receive your spreadsheet in Excel (Windows) format or Numbers (iOS or MacOs) format.

Next up in this series, Monthly Budgeting.

So What's the Problem with Debt?

As the second installment in this series on the steps to financial freedom, I would like to discuss the subject of debt.  Specifically, I want to put the focus on the problems that debt brings into our lives.

So what's the problem with debt?









Debt allows us to get things quicker than we would be able to otherwise, right?  That's got to be a good thing!  I mean, young adults can go to college when neither they nor their parents have any money.  We can lean on our credit cards to help us make ends meet when there is more month left at the end of the money.  We can always drive a new car without having to sacrifice (ouch!  pain!) to save for it.  These all sound like good things!  What's the deal?

One problem is that when we go in debt, we trade a lot of our future for a little of our now.  A nice vacation funded by debt lasts a week, but the debt obligation for that vacation may last for months or even years into the future.

Interest payments drain the purchasing power from our paycheck.  Whenever we borrow money, we pay back more than we would have if we had paid cash.  For example, we thought we got a great buy in that car we bought for $14,000 with a book value of $15,000.  However, we really took a beating because we bought it on credit.  After interest payments, we really paid $16,000.

Debt repayment obligations cause lost opportunities.  This is a huge!  Being loaded down with debt payments locks up our future income such that we can't take advantage of opportunities when they arise.  Here are some hypothetical examples.

• some great investment property becomes available at a killer deal
• that dream home we've always wanted goes up for sale
• there is a wonderful young couple in our church who wants to adopt but needs help with travel expenses
• An elderly widow in our neighborhood is struggling to pay her utility bills

If we are shackled with debt payments, we have to say "Bummer. Can't do that right now."  These opportunities and others just like them will fly right by.  Instead of the joy we could have had, we'll only be left with regret.

Debt brings unnecessary RISK into your life.  We always assume our income is going to stay the same as it is now or get better.  We rarely consider what would happen if we had a negative event like a layoff, unexpected illness or injury, etc.  I'm convinced that most of the time people would decide against going into debt if they spent a few minutes thinking about the potential down side.

And lastly, "the borrower is slave to the lender" (Proverbs: 22:7).  Debt places us in the role of servant to a master other than God.  It takes our focus off of Him.  Debt is a huge distraction and God wants our undivided attention.  He does not want us to have other masters.  Anyone who has ever been overwhelmed with debt payments will testify to the fact that it is more difficult to worship God while we have the anxiety, pain and frustration in our life that comes with living paycheck to paycheck (or worse).

Next up in this series:  "Annual Budgeting".

The Amazing Emergency Fund

In a recent post, I covered tithing, which I consider to be step 0 on the road to financial peace.  In the next, several posts, I plan to cover the remainder of the steps as follows.

• The Amazing Emergency Fund
• Annual and Monthly Budgeting
• The Debt Snowball
• Investing for College and Retirement. This will be a topic requiring several posts, including
• Basics of investing - What is Investing, Why Invest?, When Should You Begin Investing? 
• Investment Vehicles - What are CDs, Stocks, Bonds, Annuities, Cash Value Life Insurance, Mutual Funds, Index Funds?  How do they work?  When should I use them?
• Investment Strategies - Market Timing, Day Trading, Momentum Trading, Dollar Cost Averaging, Buy and Hold.  What are they?  How do they work?
• Retirement Plans - How much do I need?, 401K, Roth 401K, Traditional IRA, Roth IRA, 403B, etc.
• College Plans - Coverdale Education Savings Accounts, 529s, etc.
• Mortgages - Types of Mortgages, Mortgage Guidelines, Reverse Mortgages, When to begin paying off your mortgage early.
• Giving

Hopefully you are looking forward to some of these future posts.  Let's get started!

The Amazing Emergency Fund

The Emergency Fund is your backstop against the unknown things that life throws at you.  Sometimes literally.  Remember when that truck slung a rock up off the highway and cracked your windshield?  Yes, that's what I'm talking about.  The purpose of an emergency fund is to keep you from falling back into debt when a negative financial event happens in your life.

Whereas tithing is step 0, the Emergency Fund is step 1 in building a solid financial foundation in your household.  Start with $1000 ($500 if you make $15,000 per year or less).  Later, after you're out of debt except for the house, we will increase it to 3-6 months expenses.

That's a lot of money.  How can I save it?  Make it a priority!  Its amazing how resourceful we can be when we want to be.  Could you save $1,000 quickly if someone offered you an otherwise all-expenses paid dream trip for a month in Bora Bora?  Of course you could!  Have a yard sale.  Sell something on eBay.  Work some extra hours.  Cut off the cable.  In a nutshell, do whatever you have to do.  This is an important thing to do for your family.


Keep your emergency fund in a separate account.  Don't mix it in with any other money you have.  You want your emergency fund to be readily available if you have an emergency, but Hands Off! for any other purpose. 

What is an emergency?  Here's my definition:  "an emergency is something that happens that affects a necessity of life, i.e. food, shelter, transportation, that cannot be overcome without otherwise going into debt.  Examples of emergencies:  tire blowout, unexpected illness, job layoff, air conditioner/heater quits working.  Get my drift?  This list does not include vacations, eating out, Christmas presents, or clothing purchases.  That was purposeful. Those things are all wants, not needs.

The beginnings of true Financial Peace.  I think you will find, as my wife and I did, that once you have an emergency fund in place, you can rest easier at night.  That's a great start towards true financial peace.

Why can’t a credit card or equity line be my emergency fund?  The short answer is this.  The last thing you want to do when you face a crisis in life is go into (more) debt.  That puts you behind the 8-ball, vulnerable and ready for a sucker punch from the next emergency.  Its crazy how problems tend to come one after another in times of financial weakness.  If you go into debt because the transmission in your wife's car blew up, you can almost plan for a leaky roof.  Its weird that it happens that way, but it does.

Well, that's all for today.  I hope you will jump right in and get that emergency fund saved if you haven't already.  One very important thing to do is agree with your spouse that you will not touch your emergency fund unless there is a true emergency.  Hold each other accountable on this!

Next up in this series:  "So What's the Problem with Debt?".  See you soon!

Easy Three-Step Plan to Financial Success

Here it is.  An easy, 3-step outline to household finance success.

1. Live on less than you make
2. Don't borrow money (except for a house)
3. Save for future wants and needs

Sounds easy, huh?  Well it might sound easy, but for many of us the execution of this little 3-step plan can be as elusive and difficult as scaling Mt. Fuji. 

"Why?" you ask.  "It looks pretty simple to me" (yes I heard you).  Well, the plan IS simple from a mathematical standpoint.  Addition and subtraction is all that's needed for the most part.  Some planning is required, but the hard part of successful money management is self discipline.  Ouch.  That sounds like it could be painful.  And at first, yes it is (a little).  Later though, the planning and discipline brings about a result of financial peace, which is super-sweet.

Close your eyes and dream with me.  You're sitting on the porch swing with your spouse drinking tea and you have no debt other than the house, the bills are all paid and you have money in the bank in case there's an emergency.  You have saved for Christmas and a nice vacation.  Likewise, college and retirement savings are on track.  You are tithing at your local church and you are able to give generously when you see a need a feel led to do so.  Life is good, is it not?

Now open your eyes and lets get back to reality.  The 3-step plan above really is the road map to the dream life.  However, executing the plan requires us to turn off the TV once in a while and do some planning.  We have to make and live on a budget and then tell ourselves "NO" sometimes.  Most of us don't like to do that.  I know I don't.  Those of us that are married have to sit down and communicate with our spouse regularly and reach agreement on our plans.  This means listening to each other and practicing some unselfish give and take.  Couples have to work as a team and be accountable to each other to stick to their budget.  All this requires a good bit of time and effort the first time you do them.  After a while, it gets easier.  If you have the persistence to continue to make a plan and follow it over time, your dream can become your reality.

Just to be clear, though, I'm not talking about living like you're in a straight jacket - having no life and no fun and eating dried
beans every meal (although a little self-denial might do some of us good).  I'm talking about being diligent, working together with our spouses, planning ahead and exercising reasonable restraint in our lives so that we can live more happily and avoid the frustration, anxiety and pain that inevitably comes with sloppy, lazy or non-existent household money management.

For more detailed, practical instructions on how to manage your household finances, I highly recommend that you attend Dave Ramsey's Financial Peace University.  Its the most effective way to learn household money management available.  Dave presents the material in 9 easy-to-understand lessons on DVD.  You can attend a class at a local church (click here to find a class near you) or take the class online.  Couples should definitely go through the class together.

I hope this helps!  Leave me some comments down below!   What topics would you like for me to write on in the future?

The Incredible Tithe

Tithing.  It's a very clear and tangible way we can say "I trust you God".   So awesome how He uses tithing to bring about a change in our hearts from selfishness and an "I'm in control" attitude to daily dependency on Him, contentment, and generosity.  To be sure, God doesn't need our money.  Tithing is for us.

I've known couples who were having great difficulties making ends meet until they prayed together and agreed to begin tithing.  First fruits off the top.  After that, they always had enough.  It happens again and again.  Only God can do that.

A Tithe is a Tenth 

The Hebrew word "maasar" used in the original Bible texts literally means "a tenth part" and is translated to the English word "tithe" in the Bibles we read.  The words "tithe" and "tenth" are synonymous.

I've heard the arguments about the tithe being part of the Old Testament Law and therefore doesn't apply to us anymore.  That's not quite right.  In fact, tithing is pre-mosaic law, it's in mosaic law, and even mentioned multiple times in the New Testament.  Once by Jesus Himself  (See Gen. 14:18-20, Gen. 28:22, Lev. 27:30, Matt. 23:23, Hebrews 7:4).

Robbing God

Malachi 3:8-10 “Will a man rob God? Yet you are robbing Me! But you say , ‘How have we robbed You?’ In tithes and offerings . You are cursed with a curse, for you are robbing Me, the whole nation of you!  Bring the whole tithe into the storehouse, so that there may be food in My house, ...

God's Promise

Malachi 3:10 ... and test Me now in this ,” says the LORD of hosts , “if I will not open for you the windows of heaven and pour out for you a blessing until it overflows . 11 Then I will rebuke the devourer for you, so that it will not destroy the fruits of the ground; nor will your vine in the field cast its grapes,” says the LORD of hosts. 12 “ All the nations will call you blessed, for you shall be a delightful land ,” says the LORD of hosts .

Wow.  Now that's a blessing I want for me and my family.  Are you tithing to your local church?  If not, I hope that you will discuss it with your spouse and pray about it.  I believe the road to true financial peace begins with the tithe.  It did for my family.