4 Ways Emotions Ruin Smart Investing with Dr. Art Rainer

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That's faithandinvesting.com slash faithfi. Wealth gained hastily will dwindle, but whoever gathers little by little will increase it. Proverbs 13.11.

Hi, I'm Rob West. Patience is definitely a virtue, especially when it comes to investing, but too often we allow our emotions to rule over us. Art Rayner joins us today to discuss four ways emotions ruin smart investing. And then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance, biblical wisdom for your financial decisions. Well, it's always a pleasure to have my friend Art Rayner on the program. Art is the author of several books on biblical finance and director of the Institute for Christian Financial Health, which certifies Christian financial counselors. Art, great to have you back.

Rob, it is always an honor to join you. Art, we're talking about the ways emotions can derail wise investing, and it's really critical that people are aware of these. Wouldn't you agree? Oh, absolutely. Over and over, I've heard comments like, the market is on fire. I'm putting more money in. The market is tanking, so I'm going to take all of the money out. People make reactionary decisions as a response to momentary gains or losses in the stock market, and they are rarely smart decisions. When it comes to investing, emotions are your enemy. Allowing emotions to guide your investment decisions will most likely lead you to buy high and sell low, never creating the gains necessary to build a solid retirement fund. Yeah, and no doubt you want to buy low and sell high, so that would be the opposite of what you want to do. So let's look at four ways you've identified that emotions ruin smart investing so folks don't fall into the emotional trap.

What's first? Yeah, first, emotions are often focused on the present, not the future. Now the present matters, but usually we are so consumed with the day-to-day market volatility that we miss the big picture. We're not investing for today.

We're investing for the future. When you keep your eyes on the future, bumps in the market seem less dramatic. So limit emotional decision making by focusing on the future.

Yeah, that's great advice and perhaps turning down the noise of the world through the 24-hour news cycle might help. What's the second way that emotions ruin smart investing? Yeah, that would be allowing fear to take over, usually during a down market. When the market heads south, we are sometimes suddenly filled with fear, but making fear motivated investment decisions rarely results in a sound, thoughtful decision. We saw this in 2008. As the market plummeted, individuals pulled out of the market, swearing that they would never invest again. Of course, most of those people probably would now agree that their decision was not the best. During a down market, fear is often your worst enemy.

That's right. And as you well know, your steady contributions actually buy more shares when the market's down. You don't have to buy at the top all the time.

All right, what's next? Next, we can be overconfident during an up market. Whereas fear can hurt you during down markets, overconfidence does the same during up markets. We saw this right before the dot-com bubble burst in 2000.

We could look back on 2020 and point out something similar. Markets moving upwards can lead people to view the market as free money. Double investors who have no idea what they are doing start purchasing riskier investments. Those who were never in the market before suddenly jump in, not wanting to miss out on making an extra buck. Overconfidence fills the market and creates the opposite effect of fear. However, the result can be just as devastating.

Yeah, that makes sense. All right, we have time for one more way emotions can ruin smart investing. Yeah, it's feeling regret when you look back on past investment decisions. While regret can help us make better investment decisions moving forward, we must be careful not to overcorrect, but regret can lead us to do just that. Yeah, no doubt about it. The Bible says that saving is wise, so we need to be wise and invest for the future, but not let emotions determine our investment decisions.

All right, R, we've got just a few seconds left. Tell us about the Certified Christian Financial Counselor. Yeah, so the Certified Christian Financial Counselor helps individuals and couples get out of debt.

Create a budget, start saving for the future. And they can be found by going to ChristianFinancialHealth.com and then right up at the top, you'll see a tab that says search CERT CFC. If you click on that, you'll be able to find one in your area or find one that you can meet via video. Folks, I can't encourage you enough to reach out to a Certified Christian Financial Counselor. Again, you can do that at ChristianFinancialHealth.com. R, great to have you with us.

Thanks for having me. That's R Rainer, Director of the Institute for Christian Financial Health. Again, check them out at ChristianFinancialHealth.com, where you can find a CERT CFC.

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Find more information at KingdomAdvisors.com slash get certified. Let's have you with us today on Faith and Finance. Faith Fi 4.0 is out. You might be saying, well, I didn't know there was a Faith Fi 1.0. Faith Fi is our app. Think about it like encouragement in your stewardship journey in your pocket.

That's right. It goes on your smartphone and it's there to bring you encouragement and hope to give you access to the best content in biblical finance, a community where you can post a question, get an answer, but also our money management tools and in particular right now, we always need a budget, but that point is made so much clearer in the midst of high inflation when a basket of groceries is up 21%, the same basket of groceries over the last three and a half years and we're feeling it in our insurance and homeowners premiums and everything's higher. I just got my property tax estimate from the county this week. It's about 20% higher than it was last year.

I mean, prices are up across the board. How do you stay on track and live within God's provision and still accomplish your goals, which requires that you live on less than you earn so you have something called margin to fund those goals? Well, it requires that you have a spending plan and I find the very best way to manage that spending plan is not to put it on paper and stick it in a drawer, but actually have a system to control the flow of money in and out. Larry Burkett, the late Larry Burkett, would often teach about what he called the envelope system and at the time he used physical envelopes. Well, our team over years and the work continues every day with a team of developers built a digital envelope system inside the Faithfi app and the brand new expression of that is Faithfi 4.0 with a beautiful new interface, a refreshing new design, a lot of new features, but it will allow you to securely connect to each of your institutions, download your transactions automatically, and they will automatically be categorized into each of your envelopes, both income and spending related envelopes. So at any point during the month, this is what Julie and I do with our budget. You can see exactly what's left in each envelope so you can make course corrections along the way. Don't just wait to the end of the month and look back and say, yeah, we missed that and oh yeah, we went over there. No, we want to know what's going on throughout the month so you can make changes.

Maybe you're going to move money from one envelope to another or maybe you're going to stop eating out because you've gone beyond what you have in that particular envelope until the next paycheck comes in. Well, that's what you can do in the Faithfi app. If you want to download it today, again, a brand new version out this week and our users are loving it.

You can just head straight to your app store, Google Play or Apple and search for Faithfi or you can go to our website, that's faithfi.com and just click on app at the top of the page. All right, we're ready to dive into your questions today. It looks like we have two lines open, 800-525-7000. You can call right now. Let's begin in West Virginia. Phil, you'll be our first caller, sir. Go ahead.

Yes, sir. I have left a job last August and I have like 100,000 in a 401k and of course the new job I have has a pension and a 401k and I'm just trying to figure out what's the best option for that money to leave it there or move it to the new job or put it in an IRA. Yeah, it's a great question, Phil and you're right, I would do something. Probably my least favorite option for you would be to leave it right where it is just because often when you separate from your employer, the fees actually go up a little bit and it's just one more account to keep track of and you're limited in your investment options inside that 401k. So during your working years, I like the idea of you rolling it into your new employer's 401k if they'll allow it. Not all employers accept rollovers from a previous employer's plan, so you'd have to check with your HR department or plan administrator, but if they do, I kind of like that option because then everything's in one place.

It's one account to keep track of. You can make sure the investments are allocated appropriately for your age and risk tolerance and then you just have to decide, okay, what investments inside this new plan are going to be most consistent with my goals and my values and so forth, whether that's a life cycle fund and by the way, if you're going to use one of those, I would tend to select a target date that's a little bit further out from your actual intended retirement date just because I find that those tend to be on the more conservative end and with folks living longer these days, I think we need to keep a little higher allocation to stocks even in that retirement season of life to outpace inflation. But all that being said, I think that would be my first choice. Apart from that, I would roll it to an IRA. Now, how much do you have in that old 401k roughly? $100,000. All right.

Yeah. So, I mean, you're right around that number where you could hire an advisor to manage that for you if you decided to roll it out. I mean, typically $75,000 is the minimum. Some advisors are at $100,000, others are at $250,000 or $500,000 before they will take it on. But you certainly should be able to find a certified kingdom advisor that could manage that for you if you wanted that. The other option is to manage it yourself. If you go that route into the IRA, you'd want to decide your approach to managing the money before, because if you're hiring an advisor, you wouldn't want to open the IRA, you'd want to let them do that and then roll it in.

And if you're going to manage it yourself, then you could proceed at opening that with Fidelity or Schwab or wherever you're going to allow that to land. But does that make sense to you, Phil? Yes, sir.

Yeah, it definitely does. Okay. Any follow up questions on that?

No, sir. The only thing that my new employer, if they do allow their 401k is managed by T-rope price. I don't know with them if I have much control trying to find areas that I want to allocate my money that lines up with my Christian values, you know, I don't know if you have much experience in knowing if that's normally with that particular company, if that's a, you know, we could have money based places to put your money. It's a great question, Phil.

And my, I don't know the answer to that. I would not be surprised if they have little to no options in the faith based investing space. Now, if they have something called a brokerage window, which is increasingly found in these 401ks, that essentially allows you through your current plan administrators 401k to go out on the open market and buy investments outside of their menu, that could be an option. Otherwise you'd want to look and see and you could go to our website at faithfi.com, click on the show and see among our sponsors like Guidestone and Eventide and One Ascent and the others if any of those fun families are on the platform.

If not, that could be a reason why you'd want to go out to an IRA. And when you search for a CK, make sure you choose one that offers faith based investing at faithfi.com. Let's go to Lakeland, Florida. Hi, Susan. How can I help? Hi, um, I'm wanting to assign a power of attorney. But unfortunately, I don't have a family member that I can ask, what do you recommend? Yeah, so if you don't have a trusted family member or friend, Susan, to appoint as your power of attorney, you can hire a professional to serve in that role. Typical options for that would be an elder law attorney or an estate planning attorney that can be appointed as power of attorney for finances and legal matters.

There will be a cost to that. But you might start with the person that drafted your will or other estate related documents. It could be a financial advisor that's willing to serve in that capacity. There are also care managers with either, you know, nursing homes or a social work background that can serve as a power of attorney for health care directives. And so, you know, this would be a geriatric care manager. But it's not unusual for an elder law attorney to act as both the financial and the health care power of attorney.

And so I would, perhaps if you're looking for someone and you don't have that friend or family member that the Lord has called to your mind to serve in that role, then I would reach out to a certified kingdom advisor in your area on our website at faithfi.com and then ask for a referral to an estate planning attorney who shares your values as a believer. And then, you know, perhaps you put somebody in that position in more of a corporate role. Does that make sense though? Yes, it sure does. Yeah, thank you. Thank you.

Free state. All right. Thank you. You're welcome, Susan. May the Lord bless you. Back with more questions right after this.

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That's faithandinvesting.com. It's great to have you with us today on Faith and Finance for taking your calls and questions today. We're going to head back to the phones we've got. It looks like just three lines open, 800-525-7000.

Let's go to Chicago. Hi, Christine. Yes. I wanted to say thank you for your program. I have a question, I have a trust in a will and I need to do some updates and I went to an attorney and a lot of the language is difficult to understand sometimes if you're not an attorney but when they were finalizing things, they put themselves down as a trust protector and I'm not sure exactly what that is and not sure if I should move forward with them making the amendments because they didn't really explain what that was and they just put themselves on as trust protectors. They're firm. Yeah.

Very good. Well, here's what I would say. First of all, I'm not an attorney and so I think asking that question to the estate planning attorney to get them to explain that to you would be important but what I will tell you Christine is that it's not uncommon so this is basically just the overseer of the actions of the trustee. Now, why would you want that? Well, this is going to reduce the possibility that a trustee, the person you named in the trust to carry out the trust at the appointed times if you're incapacitated or at your death and so forth, it's going to reduce the possibility that that trustee would not live up to their fiduciary duties, the responsibility they have to carry out the objectives of the trust.

What could that look like? Well, in a drastic sense, it could prevent embezzlement. So if somebody were to fraudulently take advantage of the situation, if the trustee withheld distributions from beneficiaries, if they misuse the trust assets or neglected to manage the trust, that's where the trust protector could then step in and say, wait a minute, you're not doing things the way that they should be done or you haven't released funds as you were supposed to, you need to get that done. So think about them as just kind of another layer of protection. Now, in the same way that you would want that trustee to be a trusted individual that you know and to be in high regard and to have the ability to carry out kind of administrative functions and be financially literate, you would want to make sure that the trust protector is also somebody that's trusted that would be the overseer. But I don't have any issue with you having a trust protector.

And I would say if you want to know whether it's necessary or even required, you could talk to the attorney in greater detail. Does that make sense though? Yes, it does. And I appreciate that insight. Thank you. Okay, thank you for calling, Christine. I'm delighted to hear that you're getting your estate in order and we can help you further along the way. Don't hesitate to reach out.

Let's go to North Carolina. Hi, Victoria. Thanks for calling. Go ahead.

Hi. I have a quick question. So I'm in sales and I had some very slow months, January, February, March and May, and I have a sale coming up in June, I'll be paid in two weeks. Now, my question to you is, I had to borrow money from family members, mother, brother and some friends to pay mortgage and bills for my family. So when I get paid, I would just have enough to pay people what I owe them and get caught up. But if I tithe, I'll be having to borrow money again till my next paycheck. So what is the right thing to do? I want to honor God with my finances, but if something happened to me and I would have passed away or be in the hospital, I would owe people money and then my kids would be affected. I feel so embarrassed.

What is the right thing? Yeah. Well, I appreciate that, Victoria. And obviously what we need to work toward is getting your lifestyle expending, right sized so that we can live on. And I realize being in sales with kind of varying incomes and commissions and so forth is challenging. So I'm not minimizing that. I think the idea, the big picture is, and I'll get to your specific question in a moment, is to look back maybe over the last 12 months and say, okay, given the seasonality of my business and the ebbs and flows of when I receive income, what is a conservative monthly amount that I can build my budget on? And can I reign in spending to that number? And I realize that's harder now than ever with an inflation and groceries are up 20% everything's more expensive.

I get that. But could I reign my spending in for a conservative average? And then in the months that are higher, I put money into savings and the months that are lower, I pull out of savings, but I kind of put myself on a salary. So I'm getting a consistent amount every month and it smooths it out over a 12 month period. Second thing is you've got to have a control mechanism and that's where maybe the faith via app could help you in terms of having an envelope system and a plan for that. And so I would really take a hard look at that. And also we really need an emergency fund.

And I realize this is easier said than done, but once we get past this current kind of situation, we need to start even just $25 a month going into savings. So you've got something to fall back on when the unexpected comes. Now with regard to paying back debt and giving both are priorities in scripture. And so one is not better than another.

We just want to have our heart posture, right? Which you clearly said, I want to honor the Lord with his resources. That's great. Should you make good on your debts? Absolutely. Should you give to the Lord?

Absolutely. How do you work that out in the midst of your current reality? Well, what I would say is don't ever stop that giving muscle. So I would continue to give as unto the Lord cheerfully and as an act of worship, not an obligation, but you know, do something every month. And I would do it even systematically, a percentage based gift, but maybe today you're not at 10%. Maybe you're just giving something to continue to give as unto the Lord.

So we don't have to stop and then restart. But maybe you are prioritizing right now when you're about to get this larger sales check, getting those debts paid back or at least paid down and continuing to give at the same time. But maybe it's not at the level you'd like to be and will be once you get beyond kind of this current crisis, if you will, of being underwater. Does that make sense?

Yes, completely. And I need to change some things so I'm not in this situation again. Like you said, have savings, you know, plan better, make better decisions. So thank you. Absolutely. And let me just say, Victoria, don't be hard on yourself and we've all been in this situation and it can be difficult and this is a difficult season with inflation where it is and you've got a challenging situation just in terms of being on a sales commissionable job. I realize that can be really difficult, but you can get through this.

And by the way, if you could use some help in getting all that set up, I'd be happy to cover the cost of a certified Christian financial counselor working with you to put that budget in place. Would that be something you'd like to take advantage of? Yes. Thank you so much. Okay. I'd be happy to.

Well, listen, let's do this, Victoria. You stay on the line. We'll get your information. I'll get a certified Christian financial counselor in touch with you. They'll work with you remotely just to get that budget set up, help you get everything in order.

They'll pay for it. It's just our gift to you and let's see if we can get you pointed in the right direction here. Hey, God bless you. Thanks for calling today.

The Lord sees your heart's desire to honor him. I'm confident of that. That's going to do it for us. Let me say a big thanks to my team today.

Certainly couldn't do this without them. Handling our phones today was Adam Suddath, producing and engineering today. Mr. Devon Patrick and providing me with great research today and just helping navigate the program is Jim Henry, my partner in crime here on faith and finance. Thanks to you for being along with us today and we'll look forward to having you back tomorrow. God bless you. Bye bye. This is provided by Faith Buy and listeners like you.