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Biggest Financial Mistakes with Ron Blue

Faith And Finance / Rob West
The Truth Network Radio
December 31, 2024 3:00 am

Biggest Financial Mistakes with Ron Blue

Faith And Finance / Rob West

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December 31, 2024 3:00 am

Some people learn from the mistakes of others. Unfortunately, some people have to be the others.

Well, you certainly don’t want to be one of the “others” who have to learn things the hard way by making mistakes. Today, we’ll talk to Ron Blue about some of the biggest financial mistakes you want to avoid.

Ron Blue is the Co-Founder of Kingdom Advisors and the author of many books on biblical finance, most notably “Master Your Money: A Step-by-Step Plan for Experiencing Financial Contentment.”

Setting Financial Goals

Without clear financial goals, you're essentially aiming at nothing. Goals help you prioritize and manage your spending effectively. Setting goals provides direction and ensures that your spending aligns with your priorities.

Avoiding a Consumptive Lifestyle

A consumptive lifestyle involves spending significantly more than necessary, often on things that don’t build financial equity. We all face the temptation of greed—a new car or a dress. Overspending on consumable items leads to a lack of financial growth. Instead, focus on investing in things that build equity and create long-term value.

The Pitfall of Greed

Greed is often disguised in pursuing the American dream. It's a subtle but pervasive issue. Tim Keller, a well-known pastor, once pointed out that in his experience, greed is rarely confessed as a sin. We often justify our spending under the guise of higher motives, which can lead to financial mismanagement. Avoiding greed starts with creating and sticking to a budget.

The Importance of Budgeting

Many view budgeting as restrictive, but it's quite the opposite—budgeting is liberating. A budget allows for pre-planned spending, which includes saving for vacations and preparing for emergencies like car repairs or broken appliances. Planning your expenses provides financial freedom and security.

Giving: A Key to Financial Freedom

Many believe that giving should come from surplus rather than regular income. However, giving is essential for experiencing true financial freedom. It's not about the money but about your heart and willingness to trust and honor God with your finances.

By following these principles, you can achieve financial contentment and freedom. 

On Today’s Program, Rob Answers Listener Questions:
  • I'm 62, and my wife is 56. Due to market concerns, our advisor recommended shifting our portfolio to 50% stocks and 50% bonds a few years ago. We're generally more aggressive investors. Am I missing out on potential earnings by being more conservative?
  • My in-laws are about 80 years old and have some well-matured savings bonds. The last time they used some of the bonds for home upgrades, they got hit with a significant tax bill. Is there anything they can do to move the savings bonds in a way that avoids the tax impact?
  • I just turned 65 in July. I read that the age for collecting full Social Security benefits was pushed back. What is my full retirement age now? And can I still work without affecting my benefits once I reach full retirement age?
  • I'm 72 years old. Last year, I set up charitable contributions from my IRA, but the church I attend is not a 501(c)(3) organization. Does it need to be a 501(c)(3) for me to make those qualified charitable distributions from my IRA? Also, I've been working part-time. How much can I contribute to a Roth IRA this year?
Resources Mentioned:

Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.

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Through FaithFi's biblically based tools and resources, we're helping millions of Christians navigate their financial lives each week so that they can see God as their ultimate treasure. As we look ahead to the new year, we at FaithFi want to invite you to partner with us as we seek to continue equipping more good and faithful financial stewards for God's kingdom. Every donation made to FaithFi between now and the end of the year will be doubled up to $150,000 through a generous matching gift opportunity. This means your donation will have twice the impact in helping us reach more Christians with biblical financial wisdom.

You can make your year-end gift by visiting faithfi.com, that's faithfi.com, and clicking Give, that's faithfi.com slash give. Now, let's jump into the podcast. Some people learn from the mistakes of others. Unfortunately, some people have to be the others. Hi, I'm Rob West. Well, you certainly don't want to be one of the others, folks who have to learn things the hard way by making mistakes. Today, I'll talk to Ron Blue about some of the biggest financial mistakes you'll want to avoid, 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 journey. Okay, once again, financial teacher and author, and my good friend Ron Blue joins us. He's a busy guy, so it's always a treat when he takes time from his day to join us. Ron, great to have you back on the program.

Well, as always, Rob, I look forward to it. Ron, we're talking financial mistakes, so let's be honest. I mean, you're Ron Blue, the money guy. Have you really made a financial mistake? Well, see, this is Tuesday, so I haven't made many yet this week, but I have made probably some.

I love it. You're always humble. Hey, you've written about these mistakes that you and I have both made, and let's look at a few of them today from your book, Master Your Money, a step-by-step plan for experiencing financial contentment.

By the way, if you haven't read it, it's a must-read. So, Ron, what's the first financial mistake on your list? Well, really, the first one is to establish your goals.

You know, if you aim at nothing, you're at it every time. And goals help put boundaries around your spending and put priorities in the right order around your spending. So Judy and I used to take two goal-setting weekends a year. I say used to because when we had the children, it was more important or more urgent than it is today, but goals would be the first one.

Yeah, that's really important. I know another one you mentioned, Ron, is having what you call a consumptive lifestyle. What is that, and how do we avoid it? Well, a consumptive lifestyle is really one that is significantly beyond what you really need. And I was just reading this morning in my quiet time about greed, and all of us suffer from the temptation of greed. You know, for men, maybe it's a new car. For women, perhaps it's a new dress or something. And they're not wrong, but we tend to overspend in many ways and have a consumptive lifestyle. And by consumptive, I mean you're spending it on things that are consumed, therefore they're not building any equity other than perhaps memories, but they're not building equity in your finances. So that's a biggie.

Yeah, it sure is. Ron, you mentioned greed. Just one thought on that. Do you think it's possible to attempt to redeem greed in the name of the American dream?

Oh, I do. You know, I haven't talked a lot about greed over my career, Rob, but for some reason the last couple of years I've become more and more aware of the fact that greed really is existent. Tim Keller said, I've had every sin confessed in my study with the exception of greed.

We don't tend to look at things. The motive is something other than perhaps spiritual or family or something that's more important. So not having a budget is the way to avoid that. Well, let's talk about that, because I know you say that's another one of those biggies in terms of financial mistakes.

Why is that so key? Well, people tend to think of it as something being constraining, and yet it's not. It's something that's freeing because it's pre-planned expenses. For example, I'm going to take a vacation. Am I saving for that vacation so that when it comes, I take the vacation, which is certainly okay, because it was in my budget. Do I have a budget for the emergencies that are going to occur? Car repairs, broken dishwasher, whatever it may be. I need to have the contingencies built into my thinking also to be realistic. And very few people operate off of a budget, but I say a budget is really just pre-planned spending, and it's a freeing thing to have rather than a restrictive.

Ron, just a few seconds left. You say giving is one of the mistakes that we make. Why so? Well, people tend to think of giving as giving out of surplus rather than out of income. And I think that if you don't tithe, you're not experiencing financial freedom.

And I think God wants us to tithe, not because he needs the money, but he needs your heart. Well said, Ron. We're going to have to leave it there. Thanks for stopping by. Well, thank you for having me, Rob.

That's Ron Blue. He's been our guest today. You can read a lot more in his book, Master Your Money. Your calls are next. We'll be right back. As 2025 approaches, we want to invite you to partner with us at FaithFi and equipping faithful financial stewards for the kingdom of God. Every gift made between now and December 31st will be doubled up to $150,000 through a generous matching opportunity. Your donation will have twice the impact helping us reach more Christians with biblical financial wisdom. Make your year-end gift today by visiting faithfi.com and clicking Give.

That's faithfi.com slash give. As the leading advocate for the Christian financial industry, Kingdom Advisors serves the public by promoting the integration of a biblical worldview across every aspect of the financial services industry. And we serve a growing network of thousands of Christian financial professionals, equipping and empowering them to carry biblical financial wisdom to their clients, peers, and community. For more information, visit kingdomadvisors.com.

That's kingdomadvisors.com. Great to have you with us today on Faith and Finance. This is the show dedicated to helping you be a wise and faithful steward of God's resources.

It's a high calling, folks. God owns it all. Remember, Psalm 24, one reminds us the earth is the Lord's and the fullness thereof, the world and all who dwell therein. That means everything, the cattle on a thousand hills, you and I, and everything entrusted to us belongs to God. And so once we surrender our lives to Jesus as Lord and Savior, recognizing we can never be in a right relationship with God, without the shed blood of Christ, it's not what we've done, it's what he's done on our behalf. Then it's about stewardship, managing our time and our talents and relationships and God's word, and yes, God's resources, that good gift of money that was entrusted to us so that we could provide and enjoy and give to God's, the things on God's heart, God's movement and activity in your community and around the world. You're allowed to participate in that.

Here's the reality. We're stewards, so we have stewardship responsibilities and we need to be faithful in a little. We will then be entrusted with much. We also will be accountable to him. We will stand before the judgment seat someday and answer for how we managed his resources. So we want to get this right. But here's the reality is it can be a joy when we hold it loosely and we reign in our spending and live simply and work hard and give generously.

And oh, yeah, we can even deploy that capital in a way that promotes human flourishing and aligns with our values and accomplishes kingdom outcomes. That's what we want to do here on this program each day is be theologically relevant and reverent to God's word. We want to be wise. We want to be hopeful. We want to be expert in the advice we give you. So what questions do you have today in your financial life? We'd love for you to get in on the conversation today.

Our team is standing by. We've got lines open so you can call right now. That number 800-525-7000. That's 800-525-7000. All right, let's begin in Chattanooga. James will be our first caller.

Go ahead, sir. Hello, Rob. About three years ago, our producer recommended we change our mix of our qualified funds from about 90% stock and 10% bonds to about 50% bonds and 50% stock. He was worried about the market becoming maybe unstable. And I'm 62. My wife's 56. My thing I want to get your thoughts on is, are we missing out on earnings by shifting to a more conservative mix like that? I know there used to be old thinking that as you approach retirement, you're supposed to shift to more conservative.

But typically, my wife and I are fairly aggressive investors, and we have about $100,000 in liquid savings checkings and CDs that are very conservative. So just wanted to get your thoughts on that. Yeah. Well, yeah, I mean, in hindsight, we could look at what this market's done and say, wow, we missed it.

And the problem is, it's just it's really difficult. It's easy to make that determination now more challenging in the midst of the environment. And I could certainly understand the headwinds that your advisor was sensing as you all were nearing retirement and we were facing the prospect of high inflation and a likely recession. And yet, here we are, you know, with the market just, I mean, doing incredibly well this year, no one would have expected, you know, recession off the table. Trump presidency on, you know, on the horizon, Republican control of the House and the Senate, the prospects of, you know, continuation of low taxes and deregulation and some pretty growth oriented policies. On top of the fact that, you know, inflation has come down quite quickly over the balance of the year and the economy has held up, you know, the job markets held up.

And, you know, we've seen a lot of the indicators that were weakening start to turn around. And so all of that has resulted in a pretty strong market, certainly over the last few years. But even over the last four decades, I mean, just this idea that we've seen these pretty significant, you know, average annual returns is remarkable. Now, with that said, we've had a really good run here. We've got sky high valuations and we're big believers in a lot of the things that are coming that will produce some pretty strong economic growth or at least likely to produce strong economic growth for the US. But that's, you know, against a backdrop of nearly perfection that's priced into the market. So we probably need to start thinking over the next decade or two about more modest average annual returns, maybe mid single digits, five, six, seven percent, not 12, 13, 14 percent like we've been enjoying.

So with that said, where do you go from here? Well, used to be we used 100 minus your age to determine how much is inequities in the balance and bonds because people are living longer. Now we do 110 minus your age, which would put you guys basically where you're at now with a 50 50 portfolio. The only thing I would say, though, is that right there at the tail end of your question, you said, you know, listen, we've got plenty in cash.

We feel good about that. So therefore, my wife and I are comfortable being a little more aggressive. And if that's the case, then you may skew more towards stocks than you would typically do for somebody who's roughly an average of 60 years old between you and your wife. So maybe you guys are more like 70 30. The good news is that portion that's in bonds, which is 50 today, even if you were to dial that back to 40 or even 30, you know, should do well. Whereas over the last three years, it probably wouldn't have because as rates come down, that will increase in value. So where should you guys settle out? Probably somewhere between 50 and 70 percent in stocks and somewhere between 30 and 50 percent in bonds.

If you want to be more aggressive, I would say probably skew more toward the 70 30. Just as long as you acknowledge that is probably a bit more aggressive than you would typically be in this season of life. But I would just acknowledge and be ready for the fact that we're probably looking at more modest returns for the equity markets over the next 10 to 20 years, just for the reasons I mentioned. Does that all make sense, though? Yeah, it makes great sense.

Besides what we have with our fiduciary, we still have our own individual 401ks, which those two accounts are still shifted pretty aggressive. OK, OK. So those have done well, right? They have, yes.

Yeah. OK, very good. Well, I think you're on the right track here. So perhaps you talk to your adviser and say, listen, for the reasons we've talked about before, big cash balances and your willingness to be a little bit more aggressive. I think we'd like to start to move a little bit more heavily toward stocks. I wouldn't go more than 70 percent if it were me.

And even that is a bit more aggressive than you would likely want to be in this season of life. But if you're OK with a little volatility and just recognize valuations are pretty rich right now, then you certainly could start to add to that stock position. But I wouldn't second guess yourself and jump out if we get into a temporary downturn here, even a prolonged downturn.

Whatever you do, be willing to stick with it for the long haul. James, thanks for your call and your kind remarks about the program. Let's go to Chicago. Hi, Frank. Go ahead. Hi, how are you?

I'm doing well, sir. Thank you for your call. I'm calling on behalf of my in-laws. They're about 80 and they have some savings bonds that are well matured. And the last time they used some of them to do some upgrades around the house when they did their taxes, they got hit with quite a bit.

So is there anything they can do to like laterally move any of them? No, unfortunately, you're not able to go directly from the savings bond into an IRA or a Roth IRA. So what they would need to do is they can, you know, if they want to transfer ownership, they could gift them, you know, to someone else. If they want to simply put the money into the IRA because they're looking to reduce their overall taxes, they'd have to redeem them first, which they would do if they're electronic at treasurydirect.gov, if they're paper, they'd probably want to do that through their financial institution, perhaps their bank, even though fewer of them these days, you know, are willing to do that.

You would typically want to have an established relationship. The only application there is they're going to have to recognize that when they redeem these, that interest will be credited and it will be taxable. But then they could turn around and make that contribution to an IRA so long as they have earned income.

And then that would reduce their federal taxes. I've got to hit a break, but let's talk more off the air. We'll be right back. We'll be right back. But there's still time to end the nightmare for another little girl.

Rescue her now at IndiaPartners.org slash faith. Thanks for tuning in today to faith and finance. You can call right now with your financial questions, that number 800-525-7000 again, that's 800-525-7000. Well, we're just under $90,000 away. We were at $150,000. So we're just under $90,000 away from completing our listener support goal for the year. And the good news is that some generous donors here at faith by have come alongside us to say as money comes in, we're going to double every gift until you reach your goal. So as you make that gift of any size, and we'll need small gifts and medium sized gift, and we'll need several large gifts of two and three and $5,000. Every one of those will be doubled and all of that money used to equip more people to be wise and faithful stewards of the show has been a blessing to you. We'd invite you to be a supporter. Again, just go to faith by.com, click give.

And if you could give before the end of the year, we'd certainly be grateful. Let's head back to the phones. We're going to go out to Austin, Texas. Maria, you'll be next up. Go ahead. Hi, Rob. Thanks for taking my call. Real quick. I just turned 65 in July and I read an article that the age was pushed back for collecting Social Security.

So now I'm confused. I don't know when is my full retirement age. And when I can, am I still able to work so that it wouldn't affect my benefits? Yeah, what is what year were you born? July.

Which year? 59. 59. So your full retirement age would be 66 and 10 months. And so as long as you get to that point of full retirement age, which I would recommend you do anyway, so you get your full benefit and you don't take a reduction, you can earn as much as you want and your benefits will not be reduced in any way, shape or form. Now, if you were to take it prior to that, depending on whether it's the year of or, you know, further back than that, you would have a limit on what you could earn and then they'd reduce your benefits. You'd eventually get that back in the form of a higher check, but it would reduce your benefits temporarily. But if you wait until that 66 years and 10 months threshold, then you can earn as much as you want.

Okay. And when do I need to let them know? Because I'm still working now and I have medical insurance.

When do I let them know that I'm going to start using Medicare? Ah, okay. Well, with Medicare, you have from the now, will you still be covered under your employer's plan? No, I'm going to I'm going to let that go when I hit full retirement. Okay. Yeah. So if you let that go, then you have to sign up.

I believe you've got three you can sign up three months before and up to three months after you turning 65 in order to avoid that penalty. And you would want to make sure you do that on a timely basis. Okay. All right. Well, thank you very much.

All right. You're very welcome. We appreciate your call today. 800-525-7000 is the number to call. We'd love to tackle whatever's on your mind in your financial life today. You can call right now. We've got some lines available for you and our team is standing by again. That's 800-525-7000.

Let's go out to Washington State. Hi, Paul. Go ahead.

Hi. So I'm 72. And last year, I set up to make charitable contributions out of my IRA. But the church I go to is not a 501c. And I was wondering, does it need to be a 501c in order for me to make those contributions for my IRA?

Yes. Yeah, you do have to have a 501c3 organization in order to make the tax deductible contribution, which would include that qualified charitable distribution. So unfortunately, that would not apply. You'd be able to give to another 501c3 ministry, just not that particular one. Okay.

I didn't make those. So I was wondering if I could do that or not. So and then my other question was, I've been working part time and how much can I contribute to my Roth IRA this year? Yeah. So you said you you do have earned income. Is that right? Yes. Okay. Yeah.

And what is your age? 72. Okay, great.

Yeah. So you over age 50, you could put in for 2024. And you could put this in all the way up until you file your 2024 return, even as late as April of 2025. But you can put in $8,000 for you. And if you have a spouse, your spouse could do another 8000 as well. And then you could turn around and do the 2025 contribution as well. So my spouse could put in 8000 even though she had no income.

Do you have enough earned income for the two of you to do 16,000? Yes. Yeah.

So then as long as Yeah, as a spousal IRA, she can be a non working spouse and contribute to a Roth IRA so long as you have enough earned income to cover both of those contributions. Oh, I didn't know that. Okay. Glad I called. All right.

Well, that answers my questions. Thanks. Okay, you're very welcome, sir. We appreciate you being on the program today. Lord bless you.

800-525-7000 is the number to call. You know, I love the qualified charitable distribution. By the way, if this is a new idea for you, it's definitely something for you to check out. Because, you know, remember, although you can't double dip in the sense that you can exclude it from your taxable income and take the deduction, you do end up getting this money, essentially going in and coming out tax free. Because remember, when you make that initial contribution to your 401k, or IRA, it's excluded from your taxable income. And then by giving it straight to your church or ministry, 501 c three organization, it comes out tax free.

So there's never tax any pay any tax paid on that, including the gains. And that means more money into ministry, which is just a wonderful opportunity. And what a lot of people miss is, yes, it's an opportunity to extend your giving and perhaps do more than you were already doing. Because you continue your giving out of cash or savings wherever you normally give from. And then you do even more from the IRA as a qualified charitable distribution.

By the way, you can do up to 105,000 this year. But a lot of folks don't do any more giving, they just replace their giving. So if you're already, let's say giving a tithe to your church every month, out of after tax dollars from your checking or savings account, and you just replace that with money coming out of the IRA, what a great opportunity, especially if you have a required minimum distribution that now you satisfy that required minimum, and you don't have to pay any tax on that money.

And essentially, you're just giving the same amount. Now, you can't out give God and with the joy that comes that follows with charitable giving, I would be looking to do more. And perhaps by giving off of your balance sheet from, you know, your IRA appreciated stocks, that allows you to do far more giving than you had previously. But even if you just replaced your current giving with money coming out of your IRA, the tax benefit is tremendous. So 70 and a half or older, make sure you check out that qualified charitable distribution and doesn't have to be complicated. For instance, if you have check writing privileges on your IRA, and a lot of IRAs do or you literally have a checkbook to write it, you just write the check to the church or charity. And it goes directly from your IRA to the church or charity that constitutes as a qualified charitable distribution. So long as you have the documentation to show that it went from the IRA custodian straight to the church or charity doesn't ever come to you.

That's the requirement from the IRS. So don't miss that, especially here in this giving season. What a great opportunity to give even more. Big thanks to my team today, Autumn, Devin and Jim. We'll see you tomorrow. God bless you all. Bye bye. Announcer This program is brought to you by Faithfi and listeners like you
Whisper: medium.en / 2024-12-31 04:25:42 / 2024-12-31 04:35:46 / 10

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