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Grow in wisdom and knowledge by connecting with a community of thousands of Christians striving to be good and faithful stewards at Faithfi.com or by downloading the Faithfi app. Music The way of a fool is right in his own eyes, but a wise man listens to advice. Proverbs 12 15.
I am Rob West. It's good to learn from your mistakes, but it's even better to learn from someone else's. Rachel Wong joins us today with three big financial mistakes that young adults often make so you can avoid them. 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.
Music Hey Rob, thanks so much for having me. Sure. Um, when my husband and I were in college at Taylor university, we took a non credit class put on by some students, dads, and we learned a little about investing. And if we attended all the sessions, I think we got like $200 as a match to start a Roth IRA. Yeah, that was big money for college.
Absolutely. So we, we both opened them as college juniors and put in money monthly automatically. I think it was just like 25 or $50 a month as we got started.
It was relatively painless. And then as we got jobs and started working, we upped it. And as we, um, you know, made a little more, we, we sorta like started hitting the max, which again, it wasn't a ton of money. I think, you know, the max at that time was something around like $4,000 a year. Um, and then 10 years later, mine has $50,000 in it. My husband's has $50,000 in it. And if we don't touch them again for the next 30 years, if we don't put any more money into them and the market follows sort of historical returns, we could have a million dollars together.
Thanks to compound interest. Isn't that amazing? I love it. I just, I can't even wrap my mind around it still, but the program died not too long after we graduated.
But you know, we were thinking about it. We got such a leg up from the program and I just really wanted other students to have that too. So I decided to make my own version and it's called open hands finance. I tried to make it like a modern day Larry Burkett teaching about wisdom and generosity and money that, you know, it's not actually ours, it's God's resources that we're entrusted with.
And then I wanted to combine that with some practical exercises like opening a Roth IRA and setting yourself up to live below your means from the get go in a format that like college students would actually do. Well, let me add my endorsement folks. It's amazing. It's beautiful.
So the design is incredible, but it's so practical and just full of rich biblical content and Rachel and her husband actually do a podcast that goes along with it. So you're going to want to check this out. If you have a young adult in your life that needs to learn these principles at openhandsfinance.com, that's openhandsfinance.com. Now, I know we're going to be unpacking today while you're with us, Rachel, three mistakes that young adults commonly make when it comes to money. So we've got just a minute before our first break. Let's get started on mistake number one.
All right. So if you are a young person and you're sitting there thinking, I'm going to wait to start saving for retirement until I make more money. I think that is a big mistake because you're going to miss out on compound interest.
It's what Albert Einstein calls the eighth wonder of the world. And that is how our Roth IRAs skyrocketed and will skyrocket more in the next 30 years without adding any more money. And I think of it kind of like this. If you start saving in your 20s, it's like you're on a leisurely walk. It's easy. It's manageable.
You're not breathing too hard. Right. If you're going to wait five more years to start saving, you might be at a slow jog. Yeah. If you wait longer, it's faster than you can handle.
Yes, there's no doubt about it. We hear from so many of those listeners who are in that season having to come out of the starting gate sprinting. So young adults take Rachel's advice, start early with that leisurely walk and get started in saving for your future self today. Rachel walks here today and she's the author, along with her husband, of Open Hands Finance. Following this interview, your questions today at 800-525-7000. We'll be back with more after this.
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Principal loss is possible. Foresight Fund Services LLC. I'm so glad you're with us today on faith and finance. I'm Rob West with me today, my friend Rachel Wong. Rachel and her husband, Brian, are the authors of Open Hands Finance, a biblically based curriculum for teaching young adults how to manage money wisely.
You can learn more at open hands finance dot com. And Rachel, I so appreciated your story that you shared before the break about when you and Brian were at Taylor and you took this noncredit class and you learned about biblical financial principles. But you started this Roth IRA and you just saw the power of compounding at work and you can continue to see that today. And the first mistake you mentioned before the break was waiting to save for retirement until you, quote, make good money, which we know misses out on those really important years of compounding. So let's move right along and share the second mistake that young adults should avoid. Sure. I think the second mistake is waiting to give money until you make more money.
It's yeah, it's so easy to think, you know, I'm a student. I barely make anything. I'll just start giving when I make a real paycheck. But then you have these examples straight from the Bible of the widow's might.
She hardly had anything. She gives like a tiny little piddly amount. But then Jesus is pointing to her as our example for giving. And then you have that other verse that's like, whoever is faithful with little will be faithful with much. So if you're someone who starts giving with a small income, it's starting to become a habit.
It's a discipline. If you give a set percentage away, that habit will likely hold even as you make two times, three times or 10 times the amount of money. And giving is just so good. It's an aspect of our spiritual lives. If you're a regular giver, you know what I mean? Sure. Just give something, add it in and make it regular.
That's so helpful. And you know, we've talked before, but money can have a grip over our lives if we allow it to. It's not that money is bad. It's a good gift from God. But when we worship the creation over the creator, it becomes a problem. And there's something about giving, Rachel, that when we hold it loosely, it just calibrates our hearts to God's. And it's a muscle that we need to begin to exercise. But when we experience the joy that comes with it, it's a game changer, isn't it?
Yeah, I really think so. It puts us from this mindset of scarcity to the abundance that we've been given when we have enough that we can give from the overflow. Yeah. And I think that's a key idea as well, is that New Testament giving is giving proportionately to whom much is given, much is required, as you mentioned. And it's giving sacrificially, but it's giving freely. So it's not under compulsion where I'm trying to check a box. It's this idea that you're referring to an overflow of gratitude to God for all that he's entrusted to us, right? Yeah. And I just, you know, add it in wherever it fits.
Make it regular. Yeah, no doubt about it. All right. Well, that's a key idea as well. So we don't want to wait to start saving until we're, quote, making good money. We certainly don't want to wait to start giving until we're making money. We've got time for one more mistake, Rachel.
What is it? OK, so this is one where you shouldn't rely on your own willpower to make good money decisions month after month. This is where we encourage you to set up automatic savings or automatic deposits into a retirement account.
Use this technology to your advantage. So I'm a financial counselor and I even messed this one up. It wasn't until a few years ago that I started paying myself first at the beginning of the month with an automatic sweep that sent money to a savings account. And then all of a sudden that's when our savings really grew. I also want to talk about that first paycheck moment that younger people have.
It's so critical that could set your path for decades. When my husband got his first job, he just automatically started contributing 18 percent of his salary to retirement and giving away 10 percent. Because he just started right out of the gate.
He did not know any different. He made the discretionary income work. If he would have waited even just a year into his career, I don't know that he would have saved so aggressively after life expenses has started piling up.
I just want to remind younger people they have such an opportunity in that first paycheck moment. You know, that's such an important idea that you just shared there. And how much of that, Rachel, do you think was because of what was modeled for him and his upbringing or perhaps just his temperament? You know, what was it that caused him to be able to do that right out of the gate? Oh, great question.
I think it's probably both. You know, we get so much of our money habits from our parents, whether we want to or not. But Brandon and I, we're both very blessed to have parents that were wise and good money managers who showed us what generosity looked like, who showed us what living below their means looked like. And so, you know, I don't want to discount any of that. But at the same time, I know some folks that have gone through the program that maybe they didn't have quite that stable foundation that, you know, you get a wiser advisor bug in your ear to start out the gate, aggressively saving, aggressively giving.
And they do. They can change the course and rewrite how their family does money. Well, and when you just condition yourself to live on what's left after you take care of these more important ideas, it's a game changer because you can then just continue that pattern even as you add more money to the equation based on your job pay increases down the road. Now, I want to come back to one other thing you mentioned, and that was this idea of automating your savings.
Talk to our listeners, the young adults particularly, about why this is so important versus, you know, writing myself a check or just going in and manually making that transfer versus the automatic. Yeah. Yeah. And again, I'm speaking from my own experience here. And you'd think someone like me that does this all the time would have the willpower to do this month after month. But I'm telling you, I didn't.
I don't. You probably won't. Even with the best of intentions, you're just going to have months where you'd rather hold on to that money. You're going to have months where something breaks and you need the money to fix it. But if you upload the savings at the front of the month and without you having to do a single thing, the money just sweeps into your savings account, you will do it month after month.
Yeah, that's exactly right. And it's easier than ever with online banking. We can just set it up and forget it.
And today's young adults are just used to that way of transacting business anyway. So it's really helpful. All right.
We've got just about a minute left. Rachel, I want you to share with our listeners a bit more about your small group curriculum, Open Hands Finance, and why this is such a powerful tool. Sure.
Yeah. It is a six week course designed for college students and those early in their careers. It's student led, it's student run, and it combines biblical principles with practical money exercises like setting up a budget and opening up a Roth IRA. And the Roth IRA portion is designed to incorporate a matching incentive sponsored by a university or parents or a third party.
That's where we got our money from to start our Roth. So my husband and I joke that the program keeps on growing and thriving in its own, despite our busy lives with full time jobs and a new baby. A big thanks for that is one student.
His name's Win, Win Coggin. He took the program, brought it to other universities. He even did his doctoral thesis on the program and the results were really promising.
Students were learning and applying financial skills. So it's been amazing to see how much impact it's had. Well, you and Brian did a masterful job putting it together. Folks, I hope you check it out. You can go to openhandsfinance.com. That's openhandsfinance.com. Rachel, thanks for stopping by. Thanks, Rob. That's accredited financial counselor Rachel Wong. We've got to take a quick break, but much more just around the corner. If you have a question today, call right now.
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Soundmindinvesting.org. Thanks for joining us today on faith and finance. I'm Rob West here in our final segment. We'll get to as many calls as we can.
We've got them all stacked up. Let's go to Cleveland, Ohio. Hi, Kathy. Go ahead.
Hi, thanks. I have a question about a financial company called Thrivent. I was just wondering what your thoughts were. It's a reputable and trustworthy company. They do a good job. Yeah, very reputable.
I know Thrivent well, and they've been around a long, long time serving the faith community, starting with the Lutheran coming out of the Lutheran Brotherhood, but then changing their common bond to serve all Christians. And so they are a faith forward company. You will find all kinds of investment options there and financial planning services. They do annuity products as well as just straight investment management. They'll also do insurance, life insurance and other types of insurance and financial planning. So I think just like any firm, it really comes down to the advisor that you select and whether that person is a good fit for you. You have a good rapport.
You feel like they understand you and are taking the time to get to know you and your needs. I love the fact that with Thrivent, you would likely have somebody who shares your values and therefore could help you implement your values as a Christ follower into your financial decisions. But I would say I wouldn't just go with Thrivent because it's Thrivent. I would really take the time to interview several advisors. And if they happen to be with Thrivent, great. I would have no concerns there. But I think it's best to find somebody that you really feel like is a good match for you, if that makes sense.
Okay, sure. And then, so I've been seeing this gentleman, actually one that's training with him, so there's a couple that I've been seeing. And so the one wants to move, I'm looking at retirement within a few months and he wants to move about 150K from my 401K and put it into an annuity with the 1.1C. I was wondering what you thought about that, the variable annuity with a 6% guarantee.
Yeah, it's certainly an option. I tend to like keeping even retirement assets in this season of life outside of annuity products just because it gives you more access to the money. And so you have the ability to use it how you need to in this season of life. And if you want to let it grow in the investments, albeit more conservative investments in that season, but still invested, you can let it grow.
If you need to draw an income from it, you can draw an income. If you needed to pull a large portion out because you needed long-term care for a period of time, you have the ability to do that as well. So I kind of like the flexibility that comes with being outside of an insurance product, but there are trade-offs. And what you get for the annuity is you get those guarantees, you get the floor so you're guaranteed not to lose money. And some people like that and really value knowing that they have at least what they've accumulated and they can't lose anything, which is not the case when you're investing in stocks and bonds. So if that really feels like the right fit for you, you find peace of mind in knowing that you have a guarantee. It may be worth somewhat of the slightly higher costs and the lack of liquidity, meaning less access to the funds. And if that's the case, then an annuity could work for you. I will say they're not all created equal. So if you're going the annuity route, probably not a bad idea to check with two or three folks and have them share with you what they feel like would be the best type of annuity for you because there's a lot of fine print.
They're very complex products. It's not necessarily a bad thing, but it's just never a bad idea when you're making a decision like that to get multiple opinions. So I would say generally speaking, you know, those would be my thoughts and it would ultimately line up with, you know, what is the best fit for you just based on your goals and objectives. Does that make sense? Yes, it does. Well, thank you so much. All right. You're welcome, Kathy. Thank you for calling today. Yes, ma'am. Let's go to Illinois.
Patrice, go ahead. Hi, I was calling to ask about if it's wise to do a equity line of credit for my home for paying off debt. I just wanted to know if that'll buy move to make use your home for that.
Yeah. What type of debt do you have that you're looking to pay off, Patrice? Mainly just like through credit cards, mainly it's just like bills that have accumulated over the years or have evolved in accounts.
Well, let me tell you, I'm actually not a fan of this approach and for several reasons, and we'll talk about where you go from here. You know, number one is the type of debt you're talking about, credit cards in particular, is unsecured debt. And so as Christ followers, we always need to meet our obligations.
Bible is very clear. The wicked borrows and does not repay. So you need to repay it. But if you were to get into a real hardship and you were unable to pay, there's not a whole lot of recourse they have. They could get a judgment against you and they probably would, depending on the balance. But as soon as you attach that to your home, if you can't pay, now your home is at risk.
So that's issue number one. Number two is, you know, even though the interest rate would be lower, it's not going to be great because rates are still high. I mean, you're going to be in the high sixes probably. And with a home equity line of credit, it's usually prime plus a certain amount. And so the prime rate today is sitting at seven point seven five percent. So prime plus one, you're going to be at nearly nine percent on that home equity loan.
It's on all likelihood. That's number one. Number two is people tend to pay back home equity lines and mortgages much slower. So even if the interest rate is less, you're going to end up paying more interest over time.
The third one point, and this is probably the big one, is I don't want you to solve the symptom. I want you to solve the problem that got you into the place where the credit card debt and the inability to pay the bills on a timely basis is addressed. And typically, and I don't know the details of your situation, but typically that comes from lifestyle spending beyond your means. And so I want you to solve for that and do the hard work to rein in your spending. Cut back wherever possible.
Make the hard decisions to free up margin so we can get the debt paid off, not just put a bandaid on it by putting it on the house. And then you call me six months later. And this may not happen.
I've just seen it time and time again. That's why I'm raising it. If somebody calls me six months later and they say, guess what, Rob? Not only now do I have the home equity line of credit, but the credit cards are back.
And the reason is they didn't solve the underlying problem. So what do you do from here? What I would do is I would start working on your budget, look for areas to cut back, get a detailed accounting of what you're spending, look for every opportunity to cut. And then I would call our friends at Christian Credit Counselors, Christiancreditcounselors.org on the web. They will get the interest rates down. You can leave the debt right where it is. You'll pay it off 80 percent faster on average. And I think that will lead to you making the changes that once this debt is paid off, we don't ever go back there again.
So that's my best advice. Patrice, thanks for calling today. God bless you. Folks, such a privilege to come alongside you each day to encourage you to hear your stories. We count it a privilege that you invite us into your journey as a steward of God's resources. And our goal is to be hopeful, to be encouraging, to be reverent as we deal with and approach God's word, but always to point you back to Jesus.
Here's my experience. When we get this area of our lives right, our finances, it has a ripple effect through every other area of our lives and ultimately will lead to a more intimate relationship with the Lord. That's our goal. A big thanks to my team today, Taylor, Devin and Pat. And we'll see you next time right here on Faith and Finance. Faith and Finance is provided by Faith Buy and listeners like you.
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