Steady Plodding

Have you memorized Proverbs 21 5? It reads, Steady plotting brings prosperity. Hasty speculation brings poverty.

Hi, I'm Rob West. Maybe you know it by heart, but taking it to heart is a different thing altogether. It's a double-edged verse, and you must follow both parts to be financially successful. We'll unpack it further by diving into God's Word today, and then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance Live, biblical wisdom for your financial journey. Okay, so I said there are two sides to Proverbs 21 5, and they're really about not giving up and not giving in. Steady plotting means not giving up, and hasty speculation means giving in to greed. Let's look at the perils of hasty speculation first. To do that, we have a real-life story of an executive at a major western bank, and to protect his anonymity, we'll just call him Brian. Starting his career in finance back in the 1990s, Brian probably thought he was pretty good at managing money, although he admits he was living beyond his means and accumulating debt. That left him vulnerable to the promise of great riches at the peak of the dot-com craze in early 2000. Like so many others at the time, Brian hadn't grasped the biblical truth that hasty speculation brings poverty. When a co-worker offered to bring him in on the ground floor of a can't-lose tech startup, Brian was all in. He invested $10,000, he managed to scrape together, and as he describes it, got ready to pop champagne corks.

But the only popping Brian heard was the dot-com bubble bursting. He lost everything by investing in a company he knew nothing about. He had given in to hasty speculation and paid the price, as Proverbs 28-20 warns, A faithful man will abound with blessings, but whoever hastens to be rich will not go unpunished. Of course, God doesn't sit around and wait for you to make foolish mistakes with money so he can punish you.

He doesn't have to, because the consequences of poor money management happen all on their own, and those consequences can be severe. Hasty speculation born of greed is just one example. 1 Timothy 6, 9, and 10 warns, Those who want to get rich fall into temptation and a trap, and into many foolish and harmful desires that plunge people into ruin and destruction. For the love of money is a root of all kinds of evil.

Some people, eager for money, have wandered from the faith and pierced themselves with many griefs. Okay, so much for not giving in. Now for not giving up. That's a short definition of steady plotting. A longer one would be living within your means, avoiding debt, saving for short-term needs and investing consistently for long-term needs. And to do those things for a very long time.

That's steady plotting. And you might think it doesn't sound very exciting, but don't be fooled. There's plenty of drama in staying the course and following God's financial principles. When you do, you'll experience highs and lows, great peace and contentment, and probably some discouraging setbacks along the way. God's Word addresses this too. In James 1, 2-4 we find, Count it all joy, my brothers, when you meet trials of various kinds, for you know that the testing of your faith produces steadfastness. And let steadfastness have its full effect, that you may be perfect and complete, lacking in nothing.

So God's Word encourages us to not give up. And this is where we get back to our story of Brian the banker. Fortunately, he didn't give up, even after losing all his money. Instead, he took a course on biblical money management through his church, and that's when things started to turn around for him. Brian says God's Word taught him to be more frugal and disciplined with money. He saved and eventually began investing in real estate, something he knew more about.

He started small and went slowly, with no get-rich-quick scheme, just steady plotting. And over the years, it paid off. Because he wasn't over-leveraged, Brian's real estate venture survived the housing crash and great recession. Eventually, he was able to start a fitness-related business with his son, a dream he'd had for many years, and that business survived COVID and today is thriving. Brian says that learning to be more disciplined with budgeting, saving, and investing was an essential part of his financial turnaround. But doing those things over a long period of time was critical.

Steady plotting brought Brian out of financial ruin to eventual financial success and security. Now, if you suffer a setback, dust yourself off and keep going. Galatians 6-9 offers this encouragement, and we will reap if we do not give up. Alright, your calls are next. 800-525-7000. I'm Rob West and this is Faith and Finance Live. We'll be right back. Great to have you with us today on Faith and Finance Live. I'm Rob West, your host. Alright, it's time to take your calls and questions today. Whatever you're thinking about financially speaking, we'd love to hear from you. The number to call is 800-525-7000.

That's 800-525-7000. We'll be up on the broadcast today. We'll be talking to our good friend Jerry Boyer later in this episode. He weighs in each week on Friday of looking back over the week regarding economic data and the markets to give us his insights and perspective. A lot of data out this week about the health of the economy, the status of inflation, consumer spending, and a whole host of other issues. We will take a look at that and get Jerry's perspective on all of it.

That's coming up a little later in the broadcast. Plus your emails today and of course your questions. The calls are coming in right now at 800-525-7000. We look forward to hearing from you.

A quick email that came in to us just in the last couple of days to askrob at faithfi.com. Jeannie writes, we renovated our home and have four new appliances. The manufacturer's warranties are all about to expire. Is paying for extended warranties like from a big box store worthwhile? Jeannie, it's a great question. I would say usually not.

Here's the idea. You're better off putting what you'd pay for the warranty into your emergency fund so that if something breaks, you can pay for it yourself. These warranties tend to be expensive. The fine print often excludes many things you think would be covered.

Often you can't use the contractor of your choice. And even then, we find that Consumer Reports indicates most people wish they hadn't purchased it. So although you may be a rare exception on the average, folks typically don't find the value in these extended warranties. So with a relatively new appliance, as long as you take care of it, it should last a good while. But in the off chance it doesn't. If you take the same amount you'd be putting toward that extended warranty. Stick that into your savings account, your emergency savings.

You'll be ready when something breaks. Jeannie, thanks for writing to us. This one comes to us from Michael and he writes, my grandfather gave us $25 savings bonds when we were young. I have 13 grandkids. Wow, Michael, congratulations. What can I do to help my grandkids get started with savings?

And this is a great question. Michael, what I would say to you is first, you've got to define the time horizon on the money. So if this is money you want available along the way as they grow and therefore the time horizon may be less than three years, I'd probably just open a high yield savings account and just start systematically dropping that money in. You could use what's called an I-BOND, an inflation bond at treasurydirect.gov either in your name or as a custodial account. The challenge is if you make it a custodial account, it is automatically going to become their asset at the age of majority. Which means based on financial and spiritual maturity, if you decide you want to withhold the money for a period of time, you wouldn't have that choice in a custodial account.

It would automatically be there. So option one, perhaps you do something in an inflation bond which would be a little better than your typical EE savings bond. You could use just a straight high yield savings account. If you wanted the ear market for college, you could use a 529 education savings plan, set up one for each of the grandchildren. Or if you want to look a little more long term, maybe drop it into a regular brokerage account at Charles Schwab and put it in the Schwab Intelligent Portfolios. Buy a series of indexes that are very low cost, very broadly diversified and just let that money grow over the next decade as these grandkids grow up.

But either way, I think a systematic contribution to an account in their name will be a real blessing for them down the road. Alright, let's take your calls and questions today. Just a few lines open, we'd love to hear from you. 800-525-7000 is the number to call. Let's head to Virginia. Hi Sarah, thank you for calling. Go right ahead.

Hi, thank you for taking my call. So my question today is, can a 529 plan be used to fund K-5 through 12th grade private school tuition? It can be up to $10,000 over the life of that 529. So you are limited in what you can put toward K-12, but you can use it for that purpose.

So you certainly could think about at least a portion of what you're saving going toward K-12 and then the rest of it, if you save beyond that, would have to go to higher education. Alright, I appreciate your time. Thank you so much for taking my call. Alright Sarah, thank you for checking in with us today.

All the best to you. By the way, my favorite website for looking at and evaluating 529 college savings plans because each state has one and you don't have to use your states. Now 30 I believe of the states offer some sort of state tax deduction for state taxes, state income tax. There is no deduction for a 529 plan for federal, but you may be able to receive a benefit there in your state with regard to your taxes by using your state's plan. However, you may do better either if you're in a state that doesn't have an income tax or just because the performance of your state's 529 has lagged, you may be better going outside of your state to open a 529. The best way to determine that is a website savingforcollege.com.

They'll do an analysis of your state's plan and compare and contrast that to other states so you can decide where is the best place to go. Alright, let's head to Florida. Robin, I understand you called yesterday.

We ran out of time. How can I help you? Hi, good afternoon Rob.

Pleasure speaking with you. Okay, so I have about $145,000 in equity on my home. I don't have a savings account. All I have is a checking account.

I am single and I don't have a whole lot of bills. So I was wondering if I could put in an online banking system. You said that online banking is a good way to go. It's about six and a quarter percent of some of that interest rate. No, with an online bank, the best you're going to do right now for a savings account is about 3.3%. But tell me, Robin, what it is you're looking to do. I got that you have $145,000 in home equity. Your bills are low. You have a checking account. But what was your question specifically? I wanted to know if it's a good idea to pull some equity out and put it in an online banking system. Oh, okay.

Pull equity out of the house. Yes. What is the house worth?

Right now in Kissimmee it's about $368,400. Okay. All right. No, that's not a good idea, Robin.

And here's why. I really want you to eventually pay that off completely. So even if you were to put it in a savings account at 3.3 and your mortgage was at 2.75 because you have one of the older mortgages from before a year ago that were really attractive rates, still not worth it. Even if you took it and invested and said, Rob, I can invest it and I could probably get 6% or 8% a year. Yeah, that's true, but you've got to take some risk. The other piece of this is just the financial peace of mind of knowing that you own your home, that you're out of debt, you're unencumbered.

You've got flexibility here. If the market takes a nosedive, you don't have to think about that in terms of being able to sell your house and move somewhere else. So I wouldn't think about that equity as something you can put to work. I would think about that as I want to get out of debt completely over time and I've already made great progress to that end. You might have $200,000 in equity.

Here's the thing, Robin. If you can get this mortgage paid off by the time you retire and it's at zero, think about that largest expense, your mortgage payment coming off the table. And now your monthly need for income is much lower because that biggest expense is gone. So I wouldn't pull that equity out by any means.

I'd leave it right there in the house and in fact, I'd really try to pay off the rest of it so you can be debt free. Thanks for calling, my friend. We'll be right back on Faith and Finance Live. Stay with us. Thanks for joining us today on Faith and Finance Live.

I'm Rob West. We're taking your calls and questions. We've got a few lines open today. 800-525-7000 is the number to call. That's 800-525-7000.

Let's head back to the phones to Indianapolis, Indiana. Hi Deb, thanks for calling. Go ahead. Hi Deb, go right ahead.

Hi. I'm 71 and I just recently got divorced and I'm selling a home and I'll have about $120,000 to invest. Okay. I was wondering what's the best thing to do with money. I have a rental home and I was thinking about maybe buying another rental home but I don't know if that's the best way to go. Yeah, so you've got, you said $120,000, is that right? Right. Okay, and is that, was the home you just sold a rental and that's where the $120,000 came from?

No, no. It was just a second home that I sold. I see.

Okay. And what would you be looking to spend just based on the types of rental homes you've owned before and what you might want to purchase again? Would that $120,000 cover it or would you be looking to add a mortgage on top of that? No, I'd have to add a mortgage. I'd probably have to borrow maybe $80,000. Okay, so you'd be looking to spend a couple of hundred thousand, is that right? Correct, correct. Okay. Yeah, and how would that fit into your spending plan right now? Do you have a good bit of margin?

Would you be able to absorb that? Oh yes. Okay, very good. The home I live in is paid for. Oh great.

Okay, very good. How has that worked out for you in the past? Have you enjoyed being a landlord?

Has it added a lot of kind of extra stress and responsibility? Do you have a property manager? How have you handled that? Oh, I've always handled it. I've had several rentals. Right now I just have one rental home and the home I live in. Okay.

Yeah, very good. You know, I think you could go a couple of approaches. One is because you have experience here, if this is something you've enjoyed doing and you don't mind dealing with making sure it stays occupied and dealing with the maintenance issues and somebody needs something in the middle of the night, I'm sure you have a list of contractors you call and they take care of things if you've been doing this a while. So it's moved from a seller's to a buyer's market and so this may not be a bad time for you to go in and be able to pick up a property that makes some sense. The idea here would be that you'd be able to absorb without any problem the debt service and that you'd have enough left over to take care of not only paying that mortgage through the rent but also maintenance and property taxes and insurance and so forth. Hopefully you wouldn't have to come out of pocket at all because you could just rely on that rental income.

Of course, if you didn't have it rented, we got into a deeper recession than we expected and maybe it was vacant for a little while. That's where you just want to make sure you're not putting your financial house in jeopardy. There is a rule of thumb. They call it the 1% rule that you could look at that just simply says, you know, you want to be able to try to generate 1% of the value of the property in income. So for a $200,000 home, you'd want to try to make sure that you could generate about $2,000 a month.

Now, that may or may not work in the locale that you're at but that would be a good gauge to determine is this really worthwhile. Beyond that, I think the other opportunity for you, Deb, is to think about diversification. So if we think of real estate as an asset class, there's other asset classes, stocks, bonds, cash, and so would it be better to diversify into a more passive investment opportunity through stocks and bonds? So if you're 70 years old, you might say, okay, what would a typical portfolio look like for a 70 year old? Well, we might be thinking in terms of a 30% to 40% in stocks, 60% to 70% in bonds. We'd be buying in at a discount. We like to get discounts at the grocery store and when we go clothing shopping, sometimes we don't like to get discounts in the stock market. We think we need to wait till the market recovers before we invest. This is actually a great time to invest because we're buying things on sale. And so regardless of what happens over the balance of this year, if you're looking out 10 years or more and the Lord tarries and you're in good health, this money can grow for the next 10 or 20 years or more. And if that's the case, then we're looking long term and we're saying this might be a great buying opportunity and now you've got a real estate portfolio and you have a stock and bond portfolio that over time doesn't require you to do the maintenance and the upkeep that the house does, but it can be income generating and it can have capital appreciation too. So I think there's not a right or wrong answer here. It's just what you're more comfortable with, perhaps even more familiar with if you decided to go the route of stocks and bonds, you may want to hire an investment advisor to make those decisions for you, of course, with your goals and objectives in mind.

But give me your thoughts on all that, Deb. Well, I have about $400,000 in a government savings plan that I'll have to start drawing on next year, so I don't really need income. I mean, I'm not hurting for income. The current rental house, I make about $500 over and above what the mortgage is every month. All right.

Yeah, that's good. If you could do that again, that would allow the rental income to pay your mortgage and then you're building equity. I will mention, you may not be aware of this, but because of the change in the law that the Congress just passed, it changed RMDs and required minimums now have been moved to 73 instead of 72 years old beginning January 1st of this year. In 2033, it moves to 75, but it did move out one more year. The other thing I would mention to you is that if you don't need that money, when you do have to start taking RMDs, you could look at a qualified charitable distribution to get that going direct to ministry.

You don't recognize it as income and you satisfy your RMD at the same time. I hope that helps. It sounds like maybe buying another piece of property would be a great option for you, Deb, but at the end of the day, you've got to decide what the best fit is for you. You've certainly made it work for you, and I don't know why you couldn't do that again, especially given that we've had a softening in the real estate market, which means you probably wouldn't be paying that premium over the asking price that a lot of folks were paying six months ago.

So hopefully that gives you some things to think about. All the best to you, Deb. Thanks for calling the program today. This is Faith and Finance Live.

I'm Rob West, and we'll be right back. Stay with us. Hey, thanks for joining us today on Faith and Finance Live. Are you a part of the FaithFi community? Have you benefited from this program and you've been on our website, maybe you use the FaithFi app? Well, we'd invite you to be a supporter of the ministry. We only do what we do because of your generous support, and you can give to support our work at our brand new website, faithfi.com. That's faithfi.com.

Just click the Give button. Hey, coming up in the next segment of the broadcast, Jerry Boyer, author, columnist at World Opinions, and our resident economist will stop by. He'll reflect on the week's data.

There was quite a bit of it, and tell us about the economy and what he's thinking about the markets moving forward. That's coming up in the next segment. Let's head back to the phones to Alabama we go. Hey, Steve, thanks for calling, sir. Go ahead. Oh, thank you so much.

Thank you for taking my call. So my wife, my wife and I are trying to figure out how best to invest our emergency fund. We've got about $400,000 that's sitting in a bank savings account. It's in a brick and mortar bank, so virtually losing everything to inflation, and we've been trying hard to figure out how to better invest this money. And I'm wondering, we listened to your show and have come to appreciate your advice and was wondering what you might think.

Well, thank you, Steve. And let me just ask first, I mean, the obvious question is that sounds like a lot of money in your emergency fund. So why do you have so much there in liquid savings and also kind of how does this fit into the rest of your liquid assets?

Well, so this is probably all that we have that's liquid. We don't have a mortgage. We still have two kids that are in college. And so we've over the years just kept sort of sticking it back thinking, well, you know, we might need that. And so we have a fully funded retirement account that, of course, is not part of this.

And so it's really been I'd have to say nothing more than it's not really laziness. We've looked hard at places to put it. We just never could figure out what the right thing is. You know, we've looked at bond funds. We've looked at money market accounts. We've we've got money in I bonds.

It's not part of what what I'm describing for you here. And so we we just we just are, I think, crippled by by choices and can't seem to figure out what the right thing is. And by doing so, we just keep we know we keep losing to inflation.

Very good. Well, you know, I mean, the first thing you could do just while you're making this decision would be to move it into a couple of FDIC insured online savings accounts. So as long as you don't put any more than two hundred and fifty thousand per institution with a similar title.

So if it was jointly titled between you and your wife, you'd need to use two banks, you know, at Marcus or Ally Bank or Capital One 360. You could get about three point three percent right now. Again, FDIC insured fully liquid and available.

You want you could bump that up by doing a CD ladder. And, you know, you could get up four and a half percent plus. And, you know, even staying less than 18 months, maybe you do a year, 18 months and two years. And then, you know, after a year, every six months, you've got a third of it coming due. Obviously, you're going to want to keep a portion of it liquid because this is your emergency savings.

So by definition, you need to be able to get to it. I think beyond that, we could look at hiring an investment advisor who could deploy a portfolio that's as conservative as you want. I mean, it could be in, you know, very high quality corporate bonds. It could be in government bonds, you know, U.S. Treasury bills, bonds and notes. You could even move a little bit up the risk spectrum and, you know, start looking at things like a very high quality dividend paying stocks or preferred stocks and then kind of move up from there and build a portfolio that has the potential to do a little better over time. But an offset inflation, which you've mentioned, but keep you on the, you know, still on the relatively conservative end of the risk spectrum.

So any of that would be in play. I think at the very least, let's try to take advantage of these higher interest rates, which that's all relative, right? Because inflation is, you know, a good bit higher than that. But even at 3.3%, at least you're earning something.

I mean, on $400,000, you know, you'd be looking at $13,000 a year that you could bring in at a minimum without taking any risk and still having it fully liquid. And then I think you move on from there. I think the other opportunity here, Steve, and, you know, you all may be doing a whole bunch of giving, so I'm not saying you're not doing enough. This is between you and the Lord.

But I think you all are ripe to have that conversation between yourselves and maybe with a certified kingdom advisor if you want a third party to answer the question, how much is enough? Because God's blessed you with a lot. You said your retirement account is fully funded. Your mortgage is paid off.

Your kids are going to be out of college here soon. So if you think of your four areas of, you know, your spending, you've got the lifestyle. You probably capped that.

You're probably not looking to increase that dramatically. You've got the so you got live and then let's skip give for a second. Then you've got, oh, well, you don't really owe anybody anything.

And that's a good thing. And then you've got grow. And if you say I'm fully funded on retirement, I've got an extra $400,000 in my emergency savings. I don't really need to save anymore. So now all these three buckets go away and really the only one left is the give bucket and perhaps leaning into that to saying, how can we really explore our passions and see how those align with where God is at work and what can it look like to be really strategic in our giving for a portion of this, maybe using a donor advised fund or other tools.

So I don't want to miss that piece of it as well. But coming full circle to the investment side of the equation, which of those opportunities that I laid out sound like they best fit with what you and your wife would be comfortable with? Well, we've been looking hard at at the at at putting in some sort of a the money market account or or something like that. So I think your your thoughts about the CD ladder is, I think, also plays a role.

And so I think we'll probably divide it up into at least three portions and and follow the advice in that direction. Yeah, money markets are back in play now to Steve, so you could look at that. I mean, a lot of these brokerage firms have some very attractive money markets, you know, government money markets and and other money markets that are very stable.

I mean, I can only think of one case where they kind of, so to speak, broke the buck. That's what it means when it falls below a dollar. But as long as you stay with the most reputable and largest financial institutions, money market for a portfolio this size could be a very effective strategy as well. And so I might look at a Fidelity or Schwab, you know, one of those and see about opening a brokerage account. But you don't have to use stocks and bonds. You could stay, you know, just in the money market. So I think between the CDs, the savings and the money markets, you know, you could develop a pretty good strategy that throws off a good bit of income, allows you to feel better that, you know, you're not losing purchasing power at quite the clip you were, you know, now.

And, you know, still have all of your options open and sleep well at night knowing that you're not going to wake up and open a statement and see your portfolio down significantly. So hopefully that helps you, Steve. Appreciate you calling and listening. Thanks for your kind remarks about the program and all the best to you and your wife. We appreciate it. Hey, folks, before we take this next break and then back with your calls and Jerry Boyer, let me mention something. We're partnering with our good friends at the Institute for Christian Financial Health and director of the Institute, Art Rainer, to really do some exciting things in the days ahead related to our coaching ministry. And Art is putting on a great free 20-minute webinar next week that you may want to check out. You can learn more at faithfi.com slash CCFC. If you're somebody who wants to help people in their stewardship journey as a coach or a counselor, he's going to go over his discovery process, the process he uses for intake and discovery with new counselors. He'll share that free again, faithfi.com slash CCFC. We'll be right back. Stay with us.