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Dealing with Investor Anxiety

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
September 2, 2022 5:30 pm

Dealing with Investor Anxiety

MoneyWise / Rob West and Steve Moore

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September 2, 2022 5:30 pm

As the recent economic challenges continue, the financial markets also continue to go up and down. And that volatility has certainly caused investors to feel anxious about their portfolios. On today's MoneyWise Live, Rob West will talk with Chad Horning of Praxis Mutual Funds about dealing with investor anxiety. Then Rob will answer your questions on various financial topics. 

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Rob West and Steve Moore
Rob West and Steve Moore
Rob West and Steve Moore

If you've felt discouraged, worn down, or are thirsting for hope, you need rest and renewal. Hi, I'm Deb Gorton, host of Becoming Well, and I want to invite you to join me at the Renew Women's Conference this September for a time of deep encouragement and challenging teaching. You'll hear from me, author Heather Holman, and so many more wise and wonderful women of faith. Learn more and sign up for Renew 2022 at Do not be anxious about anything, but in everything, by prayer and supplication, with thanksgiving, let your requests be made known to God.

Philippians 4-6. Hi, I'm Rob West. That passage is always comforting, but especially now as we face new economic challenges. Investors are certainly feeling anxious about events on Wall Street. I'll talk with Chad Horning today about how to deal with that anxiety. Then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial journey. So it's always great to have my friend Chad Horning on the program. Chad's the president of Praxis Mutual Funds, a leading faith-based family of mutual funds and an underwriter of this program. Chad, great to have you back with us. Thanks, Rob. It's good to be here.

I'm glad to chat with your listeners. Yeah, well, this is certainly an interesting time in the markets, and I know you'll be an encouragement to them today. Chad, with the markets like they've been this year, how have you all been advising investors about their investing portfolios?

We try to convey that during chaotic times like we've been experiencing, it's important to remember that as people of faith, we're encouraged not to worry, as you said in the verse, but to put our trust in the Lord for all that we need. Of course, we live in a world that has its stresses and obligations, and so it's important for us to make good decisions in the world that we inhabit. Portfolios that are invested well can help us smooth out our financial needs over many stages of life. But there are times that we will be tested for sure. We'll be tested by the markets that go up and down, and it won't always be when it's convenient for us.

Well, that's exactly right. So then how should investors plan for the inevitable ups and downs of investing that we've been experiencing as of late? Many of us have financial advisors. Your listeners likely have either a financial advisor that they talk directly with or they have accountants or others that help to advise them, and it's typical for financial advisors to ask people questions early in their relationship to assess their tolerance for risks. So it often will be something like, well, how will you react in a hypothetical market selloff? And they ask questions that try to get at how much risk you might be willing to tolerate. Yeah, and that's an important exercise to go through. Take that a little further.

What would that look like? Well, one example would be an advisor might ask a client to say, what would you do if your investments were down 20 percent over a very short period of time? Because they want to know whether or not you can tolerate that kind of volatility that would be associated with earning returns over the longer period of time.

And if you say that you'd be willing to accept 20 percent down if you could get a higher return over time, then they're likely to invest in a more aggressive strategy for you that would include things like stocks rather than a whole lot of bonds. But the real question, of course, is whether you will be able to tolerate the periods when your portfolio loses money and stay in the markets so that you can benefit from them for the long term. So it's this hypothetical type of situation that advisors often set up for their clients to get a feel for whether or not they can handle the inevitable ups and downs. Yeah, the key, though, is, is there a breakdown between their response and reality when it happens, right? Because it's one thing to say, oh, sure, that 20 percent when I open the statement and see my portfolio has lost one hundred thousand dollars, I'll be OK. I'll just keep a long term perspective, a little harder to do that in practice, right?

Oh, of course. When the rubber hits the road and the downturn eventually arrives, it inevitably will feel different than what you expected during your hypothetical exercise. Now it becomes real. It can be easy for you to justify away the attitude you might have had years earlier, but when you're in the middle of it, it feels very different. What often happens is in the middle of a downturn, people will focus on the unique factors that cause the downturn.

Somehow they feel scarier than the generic reasons that you might have created for yourself in your hypothetical situation. Yeah, that's really helpful, Chad. When we come back, we'll continue to unpack this and talk about the importance of self-awareness for investors.

How do you avoid the temptation to act quickly and what does the data say in terms of staying in the market even during these challenging periods? We're joined today by Chad Horning. Chad's the president of Praxis Mutual Funds, an underwriter of this program. We come back much more on this topic just around the corner.

Stay with us. Thankful you joined us today for MoneyWise Live. I'm Rob West, your host, joined today by Chad Horning. Chad is the president of Praxis Mutual Funds, a leading faith-based family of mutual funds and an underwriter of this program.

You can learn more at Just before the break, Chad, we were talking about the temptation in these volatile markets to jump ship, maybe go to cash and miss out potentially on the market's recovery because of the fear that can set in during these tumultuous times. It sounds like you're really emphasizing the importance, as we think about this, of self-awareness for investors.

Is that right? Yeah, Rob, you know, one example here as we were talking about that we recently experienced in the first part of the year is the sell-off. And we had the ongoing effects of the COVID pandemic. We had a war in Ukraine, which was frightening.

We had the highest inflation since the early 1980s and more. And so these were these were unique characteristics of the sell-off that the hypothetical that you put yourself through, perhaps years ago, you wouldn't have known. And so knowing what you know about the state of the world and the things that could go wrong, an investor might be tempted to react differently than they thought they would. Yeah, that's exactly right. So then how would you counsel investors, Chad, that are tempted to act quickly in the face of fear?

Well, this is hard. We are hardwired to respond to threats quickly. Our ancestors, or you could say the ones who've survived, have been very effective at either fighting or fleeing when faced with danger. And this instinct is really powerful. And it leaks into all of the decisions we make, including investing. And so the urge to sell when things are scary might be your first impulse, but it really can be detrimental to your investment portfolio and therefore to your financial future. It's often better to wait to pause a little bit if you have a professional investment adviser to talk with them rather than making a quick decision. Yeah, I know data also helps as well, Chad. You know, as you said, reacting on impulse can be really detrimental to your investment portfolio. But I'd love for you to help us understand what we can learn from the past.

Would you share a real-life example to illustrate this? Sure. I think let's use the last 42 years or so since 1980. So 1980 through the end of 2021 as our period to look at. The S&P 500 index, which is a good measure of the large publicly traded companies in the US, the S&P 500 index was up 12.3 percent on an average annual rate.

So that sounds great. Twelve point three percent. But it was anything but a smooth ride. An investor had to stay invested in that index to achieve that return over that really long time. But it fell 20 percent seven times and it fell 15 percent 15 times.

Interesting. And so you really had to withstand a whole bunch of fear along that 42 year period. So think about some of the big things that happened during that period of time. There was the Black Monday crash in 1987.

Yeah. The technology bust in 2001 and two. The Great Recession in 2008 and nine. The September 11 attacks and all of the fear that that induced and many other unnamed selloffs. So an investor had to stay involved all that time in order to get that return.

Yeah, I'm sure many of our listeners remember where they were during some of these. I can remember exactly where I was when the headline came across that Lehman Brothers, you know, had collapsed. And, you know, as we were entering this great recession and all that came with it. And really, it takes real willpower to stay invested and keep investing to get the benefit of dollar cost averaging through those dark periods, doesn't it?

That's right. And this period certainly tested investors. What's really amazing after thinking about the statistics that I gave you is that the market, the S&P 500 generated positive returns in 35 of those 42 years. So we had all those downdrafts. But really, if you look at it year by year, you had 35 out of 42 positive years.

And here's the catch. You had to be invested the entire period to get that 12.3 percent annual return I mentioned. An investor attempting to move in and out of the market most likely would have had a record that was significantly less than that.

So, Chad, sum this up for us. Where does this all leave investors today? Of course, nobody knows when the equity markets will settle down or what might soothe investors' collective anxiety. We don't know whether the Federal Reserve will be able to tame inflation the way they're targeting and not cause a recession.

We don't know how long inflation will remain high and erode people's income. But if history is a guide, taking your time and not making rash decisions in the face of fear is usually a wise choice. Markets have always been risky, so the recent experience we've had in 2022 should come as no surprise. The specifics are unique and they feel scary, but this is not a surprise for us. But your reaction and your feelings in the face of these circumstances may have surprised you. If they did, we'd invite you to go back to an advisor and talk through what might have changed in your situation to require perhaps an adjustment. But if during that hypothetical conversation you had years ago you said you would sit tight in the face of a bear market, you have your answer for how you might want to actually follow through.

Yeah, that's really helpful. Chad, before we let you go today, I want to give you an opportunity to talk about a different topic, but that's still of course related, and that is how we can apply our faith to our investments. Of course, Praxis Mutual Funds is really a leader among faith-based mutual funds. This is an exciting day in terms of the opportunities to align our values with our investments. Talk about the opportunity that exists for believers that they may not realize and what that looks like. Yeah, of course.

Thanks for the chance to chat about that. As you mentioned, relative to let's say 10 years ago, believers have lots of ways to express their faith through their financial decisions. It can be in the conversations you have with financial advisors, and it can be in the investment products that you choose to invest in.

There are a range of mutual funds in particular in ETFs that might fit your emphasis, the kinds of things that you care about most. Nearly all of those products have some sort of negative screening that allow you to avoid investments in certain types of companies that you would rather not support. Many of them, like Praxis, would do other things like shareholder advocacy, where we work with company management teams to encourage them towards better behavior.

All of them are careful in the way that they vote their proxies, which is a bit of an arcane area of the markets, but it's a way to communicate values to corporate managers in ways that reflect your faith. Well, that's great. Thanks for helping us keep a level head about our investments, but also I'm glad we were able to talk for just a moment about the incredible opportunity as believers to align our convictions and our values with our deployment of capital through the investments that we own. Folks, if you want to learn more, I'd love for you to check out Praxis Mutual Funds at That's P-R-A-X-I-S. Chad Horning is president of Praxis Mutual Funds, and Chad, it's been a privilege to have you with us today. Thanks for the opportunity.

All right. Folks, your calls are next. Here's the number, 800-525-7000.

We'll be right back. Great to have you with us today on MoneyWise Live. I'm Rob West, your host, taking your calls and questions today on anything financial. 800-525-7000. That's 800-525-7000.

This is where we apply God's wisdom to your financial decisions and choices. We'd love to hear from you. Let's head right to the phones.

Hagerstown, Maryland. Judy, thank you for calling. Go right ahead. Thank you.

I'm anxious to hear your advice today. Okay. Go right ahead. Do you want me to tell you my question? Yes, ma'am.

Okay. I am about to receive about $230,000 as a result of a sale, and I have no bills, and my income is about $3,000 a month. I don't need any money. So I'm trying to give at least 10%, over and above my church. This doesn't count, giving to my local church. I'm already doing that.

But I need to know how to handle the tithe of that large sum of money before, so I can work best with the taxes, and just, I don't know how to handle how to give with that. Yeah, sure. It's a great question. Judy, is this a piece of real estate that was sold? Yes, as a farm, yes. Okay. And it was not your primary residence, correct? Correct. No, we just have had the family for a long time and decided to sell.

Okay. And were you a partial owner of that? Yes, yes. It was family property. All my children and I owned it together. And the $230,000 you're going to receive as the proceeds for your portion? That's my portion, yes.

Okay. So there'll be capital gains that will be due on that. So you'll owe some taxes based on the profit that you all realized.

The purchase price will be the cost basis, and then you'd add to that any improvements that were made to the property to increase the value, the transactions costs, and then all of that will get subtracted from the selling price, and that will determine the overall profit, and that would be allocated out to each of you as owners. So have you set something aside for the taxes on that, or are you planning to? Well, no, that's the gross income. Okay, very good.

So that's before anything is taken out, yeah. Got it. Okay, excellent. And then has the property already been sold?

Yes. Okay, very good. We're waiting for settlement.

Okay, all right. If it hadn't been sold, I would say that we could have given a portion of this away prior to the sale, but that's okay. You'll realize your portion, you'll pay the tax on it, and then you can make a donation, a charitable contribution for the amount of the tithe based on your increase, which I would say all of this is your increase.

You didn't buy this property, is that right, yourself? Correct, yes. It's definitely all increase.

Okay, very good. So at that point, I would say if you were to give a tithe on this, which is a tenth of the increase, let's say you were to give $23,000, that would allow you probably with any other charitable contributions you made throughout the year, plus if you had mortgage interest, it'd probably allow you to get above the standard deduction, which would mean that you'd be able to itemize on your taxes. So you'd get a tax deduction for what you made as a charitable contribution, so that's going to help to reduce some of your taxable income. One really effective way, unless you just want to write this check to one, your church directly, one great way to think about this might be through what's called a donor advised fund, where essentially you'd make the $23,000 contribution or whatever amount you want to give to your donor advised fund. It would be recognized when you make the contribution as a single charitable contribution in the tax year that you made it, and then you're able to then give it out kind of like a charitable checking account to whatever ministries or nonprofits you want to in whatever time period you want. Now, if you know where you want it to go and you just want to make that gift all on the same day, well then there's probably not a need to do that, but if you want to give it out either over time or to multiple charities or ministries or church, then a donor advised fund could be a great way to do that, because you get a single charitable contribution receipt for tax purposes, but then through the click of a button, you could actually distribute the money at whatever time period and in whatever increments you want, as long as it's going to a charity or a church.

Does that make sense? Yeah, that does make sense, but do I have to set that up? I have to set up the donor advice, or is it already something like that? Yeah, you would set it up, but through our friends at the National Christian Foundation,, it would take you less than five minutes to do online. It's like opening an online checking account. You'd just go through the process of filling out all the information, click the button, and it's open. And then you would make the contribution directly to the donor advised fund, and then through that online account you would create, once that money is received, then you could grant it out to ministries or charities at your discretion. Right.

That sounds like just exactly what I want. Okay, great. So you'll go to That stands for National Christian Foundation.

That was started by Larry Burkett and Ron Blue in the late 70s. And it's a wonderful organization. When you get there, Judy, you'll look for the button that says, Open a Giving Fund.

That's what they call a donor advised fund at NCF, a giving fund. And you'll open that right there online. And if you have questions, you can call the number and they'll help you answer any questions you have and walk you through the whole process. That's perfect. Thank you so much. That's exactly what I'm going to do. Great. And you can go ahead and set up the account, Judy, even before you receive the proceeds. So if you want to go ahead and get that done, you could go ahead and do that right away.

And I hope that's helpful to you. God bless you and thank you for calling today. Eight hundred, five, two, five, seven thousand.

Eight hundred, five, two, five, seven thousand. In just a moment, we're going to take a quick break and we come back. More of your questions. A quick email that goes kind of along with this question we just had from Judy. Jan writes, Does the Bible say a tithe includes what we give to the church, but also to other ministries too? And I would say, Jan, basically the Bible says that the tithe should go to the local church. In Acts four, people gave their tithe, their offerings to the elders, the apostles. And in Galatians 6 six, Paul writes, Let the one who has taught the word share all good things with the one who teaches.

Our friend J.D. Greer at Summit Church in North Carolina calls tithing to your local church, God's plan A. And I think it's very clear that, you know, when he says it's the vehicle through which we care for the poor, feed the hungry, equip people to minister in the community and send people out to the nations.

When we give to the local church, we give to the central institution for the mission of God. We'll be right back. Stay with us.

Great to have you with us today on Money Wise Live, biblical wisdom for your financial decisions. Got some lines open here today on a holiday weekend. It's a Friday, but we're not done yet. So give us a call at 800-525-7000. By the way, coming up in the next segment, our final segment of the broadcast today, Jerry Boyer, our resident economist, stops by. Jerry will give us a week in review as we look back over the markets and the economy and weigh in on perhaps what he's seeing as we head into a long weekend.

So look forward to that. Jerry Boyer joining us today on the broadcast. All right. Back to the phones we go.

Libertyville, Illinois. Jay, thanks for calling today. Go right ahead. Hi.

Hi there. Thank you for taking my call. Can you hear me? Yes, ma'am. OK, so I'm very grateful for your program. Well, thank you. I was calling because, yes, I enjoy it.

So I kind of know that the answer is going to be no, but I was thinking because you guys are the experts that you can say something that will see. OK, so I own a condo that has an association fee and it's gone up quite a bit over the last four years, I would say. And I should mention I'm. I'm old enough to retire. Sixty two. I'm not going to retire, God willing, until sixty five.

OK. But I wanted to get a single home versus. This condo because, yeah, the association fees are going up and I fear that the mortgage that I pay now, which is very low because I only owe about.

Forty something thousand on it, which I could pay off with my 401k if I wanted to, but I don't. I've listened to you show enough to know that that's probably not a good idea. I would agree.

That's not a good idea. Yeah. So I was I was just wondering if I purchased a single family home, it would possibly be half of what I would pay. For for mortgage. Because of my association fee going up, I'm afraid it's going to be a mortgage payment by the time it goes up many more years.

Yeah. Well, I think the key here, Jay, is not really single family home versus condo. It's what is your total housing expense in one versus the other? You know, it doesn't really matter whether, you know, it's it is one or the other, as long as you count the cost. So in the case of the condo, you've got this association fee, which, as you said, continues to climb.

And that's real in the house. You have other expenses that you probably would have to pay directly than in the case of the condo or rolled into the association fee. You're going to have to count potentially additional utilities. You're going to have upkeep for the yard. You might have some more maintenance to keep the roof up to date and replace it at some point.

And, you know, the windows, perhaps you have more of them. So I think as you look at the total cost of ownership for the condo with the association fee plus the single or the single family home and all the associated expenses that come with a single family home, you've got to compare apples to apples. And then it really comes down to the price point. So for the amount of living space you want in the neighborhood you're looking for with the condition of home you want, what are you going to have to spend to buy that home versus the condo that you have right now? And then look at, you know, what kind of mortgage payment, principal interest taxes and insurance, plus those other expenses. And then just it really becomes a budget question at that point.

So I think you just really need to crunch the numbers. You know what it costs you to live in that condo. The next step is to say, OK, what home would I be comfortable in that fits my lifestyle and the location, all those things, and then find out what are the utilities and what is the upkeep and how much do I need to put aside for home maintenance. And then I think the answer will become pretty clear as to your financial readiness to do that, whether it's more expensive or less expensive. And then it's just a quality of life issue. Do I like the idea of being in a condo where I can lock the door and leave or do I want a single family home? I've got a little more space, a little more independence, but I've got all this upkeep that I didn't have to think about when I was a condo owner. So give me your thoughts on that.

Yeah, well, that's wonderful. I didn't think about the expenses as far as electricity, gas and all that, but I did think what if I need a new roof? A new roof would be expensive.

I wouldn't want to be on a payment plan for a roof. But the other problem is they haven't. So they're upgrading a lot of the condos and they haven't upgraded mine. And they say that they will.

But once they upgrade, then you then you get an additional cost for that because it's just not because you pay association fees. Sure. It'd be an assessment on top of it.

Well, I think you've got some homework to do, Jay. I think your next step is to begin house shopping and start to figure out what is it actually going to cost me to get a home that I would be comfortable with to maintain my lifestyle. And then you need to figure out, OK, based on that, you'd probably need to plan on a good rule of thumb is one percent a year of the home value for home maintenance repairs. So two hundred thousand dollar home. You'd want to save two thousand a year, you know, or one hundred and seventy dollars a month toward just a fund that's going to allow for home maintenance, then figure out the utilities and the taxes and all of that. And then I think you're in your decision will become much clearer at that point. So I think you've got a little work to do for me. It doesn't matter which one you go with.

It's just a function of can you cover the cost in the single family home and are you up for the additional maintenance and work that goes into maintaining a home in this season of your life? So you think and pray about that. And if we can help along the way, give us a call to Tuscaloosa, Alabama. Augustina, thank you for calling.

Go right ahead. Yes, thank you for taking my call. I'm calling for my daughter, who is a nurse. She's been working for a year now, and I see she had twenty five thousand in her savings account all the time. She's able to pay her full loans and everything, but she has that in the savings account. I wanted to know what she can do, what kind of investment or what type of savings will be good. This is an Alabama credit union, and she's not getting anything on it.

Yeah. The question is, what's the purpose of that money? Is that money that she plans to need to tap into in the next three to five years?

I think when she decides to buy a house, that's what she would need as a deposit. Yes. Very good. And that that could be in the next three years or so. Yeah, three, four years from now.

All right, good. So then she doesn't need to invest it. But what I would do with it, Augustina, is put it in a high yield savings account. So I do look at one of the online banks. They're paying about one point seven percent right now, and that's going to keep climbing as interest rates climb. I'd look at, Ally Bank or Capital One 360. They all have great customer service, no fees, and they pay great interest rates because they don't have brick and mortar bank branches. But they're still FDIC insured, so they're still just as safe as any brick and mortar bank. They just pay a lot higher interest rate. Another option she could look at is she could put up to ten thousand dollars in what are called I bonds, which are backed by the U.S. government. They're paying nine point six percent right now with almost zero risk. You can only put in ten thousand a year and she'd have to leave it there for at least 12 months.

She couldn't touch it for 12 months. But what a great interest rate with no risk for up to ten thousand of that twenty five thousand. So I think those are two ideas, the high yield savings with the online bank and up to ten thousand in the I bonds.

As long as that leaves her enough for her emergency fund, which needs to stay completely liquid so she can get to it in the event of the unexpected. I hope that helps you today. We appreciate it.

By the way, the I bonds you can find out more at Treasury direct dot gov. We appreciate your call today, folks. We're going to take a quick break when we come back. Our final segment of the broadcast today, Jerry Boyer joins us plus more of your questions here on Money Wise Live eight hundred five to five seven thousand. We'll be right back.

Great to have you with us today on Money Wise Live biblical wisdom for your financial decisions. Hey, before we go back to the phones, it's Friday. That means a new segment for us.

Our friend Jerry Boyer, resident economist, president of Boyer Research, editor of the Business Channel at The Christian Post. Jerry is going to join us on Fridays to give us a bit of a week in review and maybe even as I gather a few of the harder questions for the week, we'll toss those at him as well. Jerry, good afternoon, sir.

Good afternoon. Let's save the tougher questions until after our segment is over. Can we do that? I'll get back to you on that one.

I appreciate you joining us, my friend. Boy, markets been under some pressure the last week. You know, it started with the Federal Reserve Chairman Powell and Jackson Hole, beautiful Jackson Hole telling us the gloves were off. He's ready to fight inflation no matter what that takes. On the other hand, we got a report today that payrolls rose by three hundred and fifteen thousand in August.

So the job market continues to rage on, which some say that means a soft landing on the economy is still possible. This seems like maybe a bit of a tug of war. Yeah, a tug of war.

And when a tug of war is occurring, that means you're pulling in two different directions. And that's, in fact, the problem that the Fed has. It has two mandates. And those mandates are not consistent with one another. One of them is keep unemployment low and unemployment just rose today. And the other is keep inflation low.

But inflation is rather high. I happen to think that it is a mistake. You know, James talks about a double minded man being unstable in all his ways.

Ipsuke in Greek, too sold. And whether we're talking about our personal life or whether we're talking about our nation, when you give an institution two conflicting goals and that institution has enormous power. I mean, think about the way we pour over the Fed minutes like it's like, you know, some prophetic utterance and we have to find the inner meaning of it.

You know, like it's divine words or something. This institution has so much power. So every day markets have to guess what the Fed is going to do. Markets used to be focused on how the business is going to do.

So if earnings go up for business, that makes it more valuable. Now, the dynamics are almost completely driven by on any given day when the Fed looks at the economic news, which mandate will they choose? Will they choose to fight inflation by raising rates? But that slows the economy and hurts the labor market. Or they choose to go the other way and not fight inflation. And so we don't have a recession and we don't have high unemployment today.

You and I talked a few hours ago and that sentiment is completely reversed since we've talked. The labor market, when people looked at the jobs report, it was a little weak because unemployment rose. And so they said, oh, OK, the Fed's going to have to pump money into the system. Then we got some news that a Russian oil company is not going to produce as much oil. That's inflationary high oil prices. So then, oh, well, the Fed's obviously going to have to go back to tightening. And so the markets whipsaw based on what a few people in Washington who have enormous power, what the markets are trying to guess they will do at the next meeting.

Yeah. And that's obviously the challenge we face right now. Jerry, obviously, the Fed has been focused, laser focused at keeping rates near zero for a long, long time. They've been able to keep inflation in check at the same time.

The challenge is many are saying that's just not going to be possible as the base case moving forward. And given our debt levels now, it's not a matter of the debt and the percent of the GDP. It's about servicing the debt, which is the real issue with each of us. You know, out here when we borrow, that results in a monthly payment that has to fit into our budget. And if interest rates have to head up because we've got to fight inflation, that could create some real challenges, right?

Yeah. When you're talking about an individual family, when a family has a debt crisis, you know, say bankruptcy or restructuring or something, they don't get it because of their abstract net worth. What's their total debt minus their total assets? They get it when they can't make the payments anymore. The trigger is they can't make their payments anymore. So it's the monthly deficit, not the overall debt picture that tends to be the trigger.

By the way, and I've looked at, you know, 100 nations over 30 years, exactly the same thing is true with nations. You don't look and say, well, the debt is this high, therefore we have trouble. It's more like, can they make the next payment? What the central bank has done is it's kept interest rates so low that our federal government can make the next payment because the next payment has like a low mortgage rate. Like the interest rate is low. But by doing that, they're pumping money into the system, creating bubbles, housing bubbles, et cetera, and inflation. So what do they do? Well, what does a double-minded man do when neither decision is acceptable?

What they do is they tend to go back and forth between two scenarios. Oh, I'm going to fight inflation. Oh, no, I don't want to fight it too much. The markets are going down. Oh, I guess we're going to, we want to fight a recession and we're going to create new money and we're going back and forth and a double-minded man is like a wave driven by the sea and tossed. And that's what our leadership is right now. Yeah. Well, we're going to have to keep a close eye on that.

Jerry, I mentioned the hard questions of the week. Obviously, the spotlight this week, largely on the action from the president's office, from the administration on student loans for giving up to $20,000 for most folks, up to $10,000 in student debt. Let's keep the politics out of it for a second and just talk about, is this inflationary? What does it mean for the rising cost of college tuition moving forward? And what about those folks that were really diligent in paying their debt off? It's a little bit inflationary because if we're talking about three or 400 million over 10 years, that's not a lot of monetary creation, except what if this isn't a one and done? What if this is the opening bid and now politicians are going to say, well, he forgave 10% or he forgave 10,000, I'm going to forgive 20. Usually there's a bid when it comes to debt default. It's bad economics, but it's worse culture because it tells you thrift doesn't matter.

You shouldn't be self-disciplined. Actually, the thing that bothers me the most about it is that I've seen Christian leaders going out there and saying, well, Jesus says that we should forgive our debts, that our debts will be forgiven as we forgive our debtors. And the Bible talks about debt forgiveness and Shemitah and Jubilee.

Therefore, this is a good thing. See, when the world does wrong things and things badly, I'm bothered. But when the church can't think with clarity, then I'm really worried because we're the guide. So if we're a good guide and the world isn't listening, there's still hope. But if we are so biblically illiterate that we can't understand the difference between the edict that went out of transferring the debt from the holders to the taxpayers, can't tell the difference between that and what Jesus did on the cross, which is the debt wasn't forgiven.

The debt was paid. If we don't understand the Bible that well, that we can fall into this and think this is a biblical practice, then no wonder the world is confused. Yeah, interesting perspective, Jerry. Jerry, we're about out of time. I'll give you the final word. How should we then be thinking, not as a double-minded man, but as God's people looking through a biblical lens about these times and the path forward? Single-minded. That's the alternative.

And the single-mindedness is focused on Christ and his kingdom. Now, I'm not telling you what to do with all of your decisions, but you only have one mandate. Isn't that simpler? Isn't that easier?

Now, sometimes it's a little hard, but the yoke is still light. Why? Because you don't have to decide what your mandate is. You just have to decide whether you're going to follow it. So if you do that, you won't be driven by the wind and tossed and you won't be looking at these market whiplashes and get worried and make bad decisions. Now, you should be prepared. I don't mean get out of markets entirely. I don't mean it's the end of the world. I don't mean you load up on shotguns and all the rest of it. Yes, there's some risk out there, but if you're frugal, you follow your plan, you stay out of debt, remain generous, remain in community.

That is the best hedge against economic disaster is remaining in Christian community. If you do that, then you can look at the wind tossing the waves, but you're not surfing them. You're not being tossed with them.

You're standing on solid ground. Oh, that's a good word. Well, that's a great place to leave it for a holiday weekend, my friend. Grateful for you, and we'll talk to you next week, Lord willing. And for you. God bless. All right.

Bye-bye. Jerry Boyer with us today, our resident economist. You'll find his writing at Christian Post and many other places.

He's the president of Boyer Research. All right, back to the phones for our final moments of the broadcast today to Chicago. Ed, thank you for your patience. Go ahead, sir.

Thank you for taking my call. I'm currently about 61 years of age, looking to retire, 67 to 70-ish, God willing, on a condominium worth about 165 to 170 that I owe 100,000 on. Would like to buy a home so they'd have more room to enjoy the kids, the grandkids. Was thinking of purchasing a home in the ballpark of 285, somewhere in that nature.

Just trying to see so late in life that that's a wise decision. I currently have about 50,000 in one account, the house account, just sitting in a bank account. And then I have another account, about $20,000 in cash. Retirement account currently has about $350,000 in it. And that account I haven't done anything with in the last five years, haven't rolled it over into an active account. The continued earning has just been sitting.

So two-part, should I take on that additional debt of trying to purchase a home? Second, what should I do with that $350,000 that is just sitting there? Yeah, and that's inside a company-sponsored plan of some kind? It was from my previous employer.

However, it's just still sitting on the books. So it's not active, and I have not rolled it over into a new plan yet. Okay, but it's inside a tax-deferred retirement account.

Yes. Okay. Yeah, I think the thing to do here, Ed, is to fast-forward eight years, and let's say you're in retirement. What does your budget look like? And begin to look at what income sources you have, let's say, over the next five to eight years.

That $350,000, you go ahead and invest that and have an advisor invest that for you. Let's say that grows to a half a million dollars. That would probably throw off about $20,000 a year, plus Social Security. Is that enough to meet your budget?

And what budget? Does that include the principal interest taxes and insurance on a $100,000 mortgage? Or could it support a $200,000 mortgage, which is what you're telling me it probably is going to be if you buy this next home. So I think you need to kind of run that scenario, build out your budget based on this new home that would have, you know, probably a couple hundred thousand dollar mortgage on it instead of a $100,000 mortgage. Look at what you'll expect to be able to pull out of your retirement accounts, plus whatever you're expecting from Social Security and any other income sources, and just see if it works.

As long as you're going in with 20% and you are, and as long as you can support the payments not only now but in the future, then I'd say it makes sense and gives you the ability to enjoy your kids and have a little more space. So I think that's your next step, Ed. If you have questions, give us a call. God bless you, my friend. Folks, that's going to do it for us.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Thank you to Dan and Amy and Jim. So grateful you joined us. Have a great long weekend, and we'll see you next week. Bye-bye.
Whisper: medium.en / 2023-03-02 20:42:52 / 2023-03-02 21:00:16 / 17

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