First of all, what is justification? What does it mean? Well, it is a legal term, a term used in a court room. To be justified is to be declared just or righteous. Justification isn't becoming just or righteous, it is a declaration of that state. Jesus was said to be "justified in the Spirit". I think we'll all agree He didn't become just or righteous, He always was. But, He was declared so.
We are declared righteous by the great Judge of the universe, Almighty God. Paul calls this justification by grace or by His blood. This is the justification Paul mentions in Romans 8:30 (whom he called, he also justified...). So, in an absolute, eternal sense we've been declared just or righteous before God. Though we are sinful man, breakers of the law, clothed in the filthy rags of our own righteousness, we are declared to be righteous by God. Wow! What an amazing thing that is!
The confusion happens when we keep reading the bible and we see two more phrases - justification by faith and by works. The key to understanding this is to understand that the word by here tells us that grace, faith, or works (depending on the particular phrase) is the means of that justification. So Paul says I'm justified by grace. Then he says I could be justified by faith. Ok, so which is it, grace or faith? Something unmerited or something I do. Further confusion occurs when I read James and see him saying I could be justified by works. Hang on now, is it grace, faith, or works? The answer is all 3. How? Well, these phrases must be describing separate events, separate justifications.
Notice that Pauls tells Titus, "that being justified by his grace, we should be made heirs according to the hope of eternal life." Ok, so justification by grace yields eternal life. Paul tells the Romans, "therefore being justified by faith, we have peace with God through our Lord Jesus Christ." Ok, so justification by faith yields a timely blessing, peace with God (notice God doesn't have peace with us through this, but rather through the cross). Now justification by works, says James, proves justification by faith, so it appears it has a timely blessing too.
I must come to the conclusion that all 3 events happen in separate courtrooms. Justification by grace, according to what we've read, takes place in the eternal courtroom of God with absolute, eternal consequences. Justification by faith has timely consequences and appears to happen in our conscious, thus when justified here I have peace with God. Jusification by works seems to play out in front of others, thus when justified by works others can see my faith at work and know I'm one of God's and give Him all the glory.
You may object to this, but look at one of the two key examples Paul gives of justification by faith. Abraham, in Genesis 15:6, is said then to be justified by faith. Now, if that means that was the moment he was saved eternally, we have some problems. You see, Abraham has been walking after God for years now with a stronger faith that most of us have displayed in our lives thus far. I mean, the man was told when over 70 years old, to leave his homeland, his family, and his father's house, and go to a place the Lord would later reveal to him. Hebrews says he obeyed by faith and went not knowing where he was going. That's strong faith. All along the way he is erecting altars and worshipping God. You're going to have a hard time arguing that this man wasn't already eternally saved. Find me someone in a perishing condition doing these things.
Now, this may sound odd, but it really shouldn't. Isn't the bible replete with exhortations of obedience that render blessings to us right here in time? Aren't disciples exhorted to have faith in Christ? It just makes sense. God has saved us eternally, but He also saves us in time from many things, one of them being despair. God is truly good to us, giving us faith to believe in Him and have hope of eternal life, leading us to having peace in time. Aren't there benefits to believing God today, tomorrow, and so forth? Of course.