7/3/2023_MWL

Today's Faith in Finance Live is actually not live, so our phone lines are not open. Therefore do not be anxious about tomorrow, for tomorrow will be anxious for itself. Sufficient for the day is its own trouble.

I am Rob West. Matthew 634 is a good reminder not to worry needlessly about the future. But still, the Bible also tells us to prepare for it. I'll talk with David Spica today about what that means for your investments.

Then we have some great questions lined up for you. But don't call in today because we're pre-recorded. This is Faith in Finance Live, biblical wisdom for your financial decisions. Well, we're delighted to have David Spica on the program again. David is the Chief Investment Officer at Guidestone, a financial services firm helping those in ministry as well as the broader Christian population and an underwriter of this program. David, great to have you back with us. Thank you, Rob.

Happy to be here. David, the recent debt ceiling impasse in Washington affected the markets for weeks. There was a great deal of worry about the future, even though the prospect of a debt default, at least long term, was highly unlikely. Now that the dust is settled on that agreement, what do you see driving the economy right now? The same thing that's been driving the economy for the last year and a half. Interest rates and inflation. Inflation is too high. We have core inflation that is as high as it's been since 1990 and the Fed is committed to bringing it down to the 2% level.

So they've got the Fed funds right over 5% and Chairman Powell has been very clear he's going to keep it there for an extended period of time, maybe as long as two years. So what that leads to is weaker employment and weaker spending. Ultimately, we cannot reduce inflation to a realistic and sustainable level unless we have a recession.

And to do that, you have to reduce consumer spending by reducing employment. So those are going to be the key factors in the near future. Yeah, it sure seems like the Fed is trying to engineer that recession to accomplish that goal. So then what is the likelihood, David, that markets continue to go higher in the months ahead? Well, we would have told you they weren't going to go higher year to date and they're up 12%.

So take this with a grain of salt. But stocks are very expensive today at 20 times future earnings and they do not reflect higher interest rates, higher inflation, nor do they reflect the potential for recession and much lower earnings growth. So we think the market has to come down. We expect stocks to decline by potentially as much as 15% to 18% retesting the lows we saw last October before they reach a level that's realistic. And ultimately, though, that's good for long-term investors, particularly those who have cash on the sideline and are looking for a better entry point. That's really helpful. Let's talk about fixed income securities.

Obviously, they've gotten beat up over the last year or so quite a bit. Now that the Fed seems to have at least paused its interest rate increases, David, how will that affect fixed income securities? We believe that the Fed pause will create much lower interest rate volatility, which is very positive for bonds.

Fed's near its peak. Interest rates should be relatively stable and ultimately will go lower. So we think that bonds are likely to produce the best total return we've seen since 2007. You've got very high yields today in short and medium duration bonds. So if you own high quality bonds, you're probably pretty well set over the near term.

Yeah. So that's obviously good news for those counting on the income from bonds that have taken a hit in the recent past. David, can you talk a little bit about the options at Guidestone, specifically for folks who really are concerned about their savings and looking for peace of mind?

Sure. On the equity side, because you never want to try to time the market, I just admitted we didn't call this 12% year to date. Our defensive market strategies fund is a low volatility defensive equity strategy that tends to incur only half of the volatility on the downside of the S&P 500. So that's a great place to have equity exposure.

On the bond side, our low and medium duration bond funds, both with yields nearing 5%, really, really play a role today in cushioning your equity volatility and also generating nice total returns. And finally, our impact bond fund, a relatively new fund, which provides for impact investing in areas such as the sanctity of life and spreading of the gospel is a true core bond portfolio that does have a good place in most investors portfolios. And David, for all of your strategies, can folks be assured that their values will be reflected in these investments?

Absolutely. We provide exclusionary screens and all of our funds. We also provide investor advocacy where we work with companies that aren't meeting what we think are true Christian values and then the impact piece as well.

So yes, all of our funds will adhere to Christian values. That's great. Well, David, really appreciate you stopping by today with an update on the markets and Guidestone. We're grateful for our partnership.

Thanks for being here. Thank you, Rob. You can get more information at guidestonefunds.com.

That's guidestonefunds.com. That was David Spica, chief investment officer at Guidestone, an underwriter of this program. Hey, folks, we're going to pause now for a brief break, but let me remind you, we're out of the studio today. Our team is not here, so don't call in, but much more to come just around the corner on Faith and Finance Live.

Stick around. Great to have you with us today on Faith and Finance Live. I'm Rob West, your host.

Our team is away from the studio today, so don't call in. But coming up a little later, we'll have more of your questions right here on the program. Hey, let me take a moment to mention the Faith Fi app. We'd love for you to download it. Just head to your app store wherever you download apps and search for Faith Fi. That's Faith Fi.

You can manage your money. You can access the best content in biblical finance, podcasts, articles and videos. You can also participate in our Faith Fi community where you can post questions and get answers from others on their stewardship journey. You'll find it in your app store. Just search for Faith Fi, or if it's easier, head to our website at faithfi.com.

That's faithfi.com and you'll see the app right there on the home page. Hey, before we head back to the phones, let's revisit this conversation we were having with Steve just before the break was specifically related to the US dollar as a reserve currency. You know, my friend Kim Frankie likes to remind us that often people speak of the end of the dollar as a reserve currency and that being imminent. Frankly, comments like that reveal, I think, a misunderstanding of how the international monetary and currency systems work.

Analyst James Rickards points out that the key mistake in almost all such analysis is a failure to distinguish between the respective roles of a payment currency and a reserve currency. You see, payment currencies are used in trade for goods and services, remittances of dividends, interest, royalties, any flow from a direct foreign investment. Almost everything we read about the dollar's demise has to do with other nations efforts to substitute their local currency or a new multilateral currency for the dollar, but as a means of payment in trade relations and remittances. This is entirely different than a reserve currency, which is like the savings accounts of sovereign nations who earn surpluses from international trade. So, I think it's important just to distinguish between those two as we think about the implications of potentially being replaced as the world's reserve currency. Keep in mind, 60% of the global currency reserves are in dollars. Second place at only 20% is the euro. So, and we still, as I mentioned earlier, 90% of all foreign exchange trades involve the dollar. So, it's a far cry from the dollar being replaced anytime soon. And hopefully that distinction is helpful to you as you think about where we're headed in the future. All right, let's head back to the phones to Oklahoma.

Craig, go ahead, sir. Yes, I was telling your call screener that it's been back several months ago now. I was offered a deal from social security that if I would take the pay for 69 years old, 69 and a half, excuse me, versus 70, which I was 70, that they would give me a check. And at first she didn't tell me how much, and I said, well, how much? And then she come back and she said $22,000. And at $22,000, I kind of did a quick figure in my head and I thought, I'll never make up the $22,000 at like $160 a month. I thought it would take me forever to make up that difference. Have I made a mistake? How was this brought to you?

I'm a little confused by it because I'm not familiar with this approach. And part of me thinks this might have been a scam. How did you get this information that you could take a reduced benefit amount at an earlier age in exchange for a lump sum payment? Well, when I called in and I talked to I think it was Larry, was that the gentleman's name that passed away? That was doing your show? Larry Burkett?

Yeah, back in the early 2000s. I talked to him back several years ago and he said, you know, and I told him I was kind of as far as 401k and all that stuff. You know, I have very little in it.

It's somewhere less than $50,000. And he said the best thing for me to do would be to wait till I was 70 and then draw social security. So I did that. Well, when I called and was making the arrangements, the lady come back and said. You can if you will back up to sixty nine and a half. We will send you a twenty two thousand dollar check. I see.

OK, I'm following you now. Yeah, there is the ability to get a lump sum option worth six months of Social Security benefits. So, you know, would it have been better to take that and invest it and take the reduced amount or would you be better to get the higher check for life? I mean, eventually it's typically it works out to about 12 years that you would have to live in order to make that up. And then at that point, you would be in the money, so to speak, for the rest of your life with a higher check. So if the Lord tarries and if he doesn't, it doesn't matter. But if he does and you're in good health and you'll live beyond 82, you'd probably be glad that you didn't take it and that you get this higher check for the rest of your life. OK, well, that's the problem I have already.

OK, well, and that's fine, too. I think the key is just to put it to work for you. What did you do with it? Right now, I paid off every time debt free. OK, I still have about twelve thousand of it left in the bank. It's just sitting there. It's not really doing much.

It's kind of an emergency fund for me or something along them lines. I am still working. OK, I still have an eight to five job that I'm that I'm, you know, still doing.

If the Lord allows me to continue on, you know, which he has been with me for a lot of years, a lot of people don't realize I'm 70 years old when they look at me. Well, that's great. Well, I don't think this was a bad decision. I like the fact that you paid off some debt. I like the fact that you short up your emergency fund. Let me ask you, Craig, if you were to stop working, do you have enough with the benefit you will or are receiving plus your savings to maintain your lifestyle or are you going to fall short in terms of covering your monthly bills? You know, it's really close.

It's really close. OK. Yeah, I think the key is just continuing to work as long as you can and save so that you've got something to fall back on. So you just keep following Jesus, live modestly and work as long as you can.

God created you to be productive. We know that. Thanks for your call today, sir. We'll be right back on Faith and Finance. Stay with us. You're listening to Faith and Finance live, and you can find us online at faithfi.com.

However, today we are not live. So if you hear that phone number, please don't call. But do stay with us. There's lots of good information ahead. You know, let me touch on a topic that I think is often overlooked on the part of stewards that is so critical.

It's not one we like to talk about, but it is really important. You need to think about your estate plan. Now, there are some common misconceptions about estate planning that I'd love to touch on today, because I think this is really important.

I'll move through these and we'll certainly mix in your calls and questions along the way at 800-525-7000. First, a definition. What is estate planning? Well, it essentially prepares your assets so that your wishes and the law are followed in the event of your death, but also, and a lot of folks miss this, in the event of your incapacitation. You see, your estate is everything you own. It's your car, it's your home, it's your bank account, it's your investments, your life insurance, as well as your personal possessions. Now, an estate plan can include a will, but also legal trusts, powers of attorney, funeral arrangements, and even healthcare directives. So your wishes can be followed in the event that you need decisions made and you're unable to make them. You know, the first assumption that I want to dispel today is that estate planning is about what happens after you die. And that's only partly true. While an estate plan does prepare your assets, or what's called your estate, quote-unquote, for distribution after your death, it also goes into effect if you become, again, incapacitated, which gives instructions about your medical care and how to handle your financial affairs. So, really important to think about your estate plan and I'll give you a few other misconceptions between now and the end of the program, but the first one to realize is that it's not just about death.

It is bigger than that, which makes it really important. All right, back to the phones we go. Let's get another caller here. First time caller, Chris in Alabama. Go ahead, sir.

Thank you, sir, for taking my call. My question is, my daughter's getting married toward the end of the year and I don't have the money to pay for it in savings, but I've got a 401k that's got about $175,000 in it, or do I take a personal loan? Yeah, it's a good question. Were you thinking of taking a withdrawal from your 401k or a loan from your 401k? Well, I was looking at it and they were going, if I do a withdrawal, then they were going, I'm fully vested, so I've got 35 years in with my company. So, they were going to go ahead and take the taxes out to pay, you know, the federal. Yeah, 20% probably.

Yeah, it was, yeah. And the loan is probably cheaper. I wasn't real sure on, you know, because of the amount. I'm not wanting to borrow you a whole lot. Thank the Lord that my daughter is not, she's kind of frugal like me, so they're not going to have an exorbitant wedding, but... That's good.

Yeah. Well, I would say, Chris, first of all, I love that you're giving this some careful thought. Number two, I think it's important to try to set that not to be exceed number that you want to make available to her. And if they decide to go over that, they're going to need to fund that themselves. And you could also make the opposite truth is that if they want to spend less than the amount you're willing to give them, then they can hang on to that for maybe a down payment first, last and security on a apartment or maybe a down payment on a car or something like that. So, I think the key is to think about how much you can actually afford and then have that conversation with them because we don't want to impact your retirement plan just to pay for this wedding. And I think to that end, I would prefer you don't touch that 401k as a loan or withdrawal, especially right now while the market's down. I want all that money to be available to recover and continue to grow as we get beyond the recession and these interest rate hikes so that you've got what you need as much as possible to offset or to supplement Social Security to cover your expenses. So, I think the key is set a modest amount as what you would be willing to fund.

And then I think if you don't have it available, taking that personal loan and just trying to limit your lifestyle as best you can so you can pay it back as quickly as you can is probably the best approach at this point as opposed to pulling that money out of the 401k and preventing it from being able to recover with the market. Right. Okay. Well, that was, you know, it's not going to be a large personal loan.

Plus, I don't have a lot of personal debt. Yeah. And so it was probably gonna be 10 or $12,000. So I've got a friend that's at a local credit union that, you know, said he could set it up for, you know, five years if I wanted it. So yeah, that's great. And I think just try to focus on prepaying that and getting that paid off as quickly as you can by just cutting back wherever possible and send in extra money. Just settle into the automatic scheduled payment. Try to accelerate that to the best of your ability. But hey, Chris, congratulations.

You sound like a wonderful father and all the best to your daughter and her future husband as they enter this exciting season of life. God bless you, my friend. Thanks for being on the program. Eight hundred five to five.

Seven thousand is the number to call to another first time caller in Tennessee. Hugh, go ahead, sir. Yes, sir. I'm just wanting to check with you to see what your thoughts are on investing and running part of your hour for one k or hour from a from that to a to gold or silver. Yeah, I like the precious metals.

I wouldn't overweight there personally. I mean, it's a safe investment. It's a safe haven when the markets typically are in decline because it's uncorrelated. It also can be a little bit more volatile than than a just properly diversified stock and bond portfolio. It's not an income generating asset. So, you know, unlike stocks and bonds, the return on gold is based entirely on the price appreciation.

Were you thinking of investing in physical gold through like a self-directed IRA or were you thinking of buying just maybe a gold tracking ETF that just follows the price of gold inside the existing retirement plan? I guess the first thing you mentioned, the self-directed IRA. OK. Yeah, I probably wouldn't do that if it were me.

I mean, there's additional complexities there of just the premium on the buy and the sell. And then you've got to store it. And, you know, you can obviously use some folks that would help you do that. There are a lot of gold IRA custodians that would help you with the self-directed IRA and actually secure the gold for you. But in my view, having a 10 percent allocation to precious metals is probably the right number not to exceed that. Some folks think that, you know, we're going to get into really hard times here in this country and therefore they should really start to overweight in gold.

I'm just not there. I think I think this market will recover as soon as we know the Fed's done raising rates. Yes, we've got some longer term challenges here in this country that we've got to deal with, but I don't think those are going to come to roost anytime soon.

And I think your very best opportunity to build wealth and overcome the effects of inflation is a stock and bond portfolio with a modest allocation to gold, either physical gold or a gold tracking investment, but probably not more than 10 percent. That's just my take on it. I can't weigh in on a specific company as to the pro or con there. You know, so I think you need to do some research on that.

Read plenty of reviews before you make a final decision there. But we don't give specific advice on individual companies or investments. So I think we've got to keep it more general in nature. But I like the way you're thinking. I think absolutely having an allocation there in your investable assets makes sense. And it will just keep you properly diversified as we read it in Ecclesiastes.

That idea comes right out of God's word. You, thanks for being on the program today. Well, folks, we're going to head to a break, but let me remind you, we're out of the studio today.

Our team is not here, so don't call in. But much more to come just around the corner on Faith and Finance Live. This is our final segment of a Faith and Finance Live program that we previously recorded.

Thanks so much for being with us today, and we hope you'll stick around and enjoy the rest of the program. Hey, before we head back to the phones, if you're a part of the faith and finance community, perhaps you listen to this program with regularity and you've found some benefit or you just want to help us support our work in reaching more and more people with the message of God's financial wisdom. Well, you can do that by making a gift to our ministry.

We are listener supported. This is a not for profit ministry, and we rely on listener support to do what we do. And if you'd like to support our work, it would go a long way to helping us to give any amount. And we mean that if it's forty dollars or four hundred or four thousand, whatever you can do, we'd be grateful. Just head to our website, faithfi.com, that's faithfi.com, and then just click the give button.

Again, faithfi.com, just click give. Thanks in advance. All right, let's round out the program today with as many calls as we can get to. We'll head to Texas again.

A lot of calls from Texas today. Hi, George. Go ahead, sir. Hey, how's it going, sir? Great. Thanks.

Go ahead. So I need your help. Me and my wife and I, we have three kids. We have incurred a lot of debt, having a lot of our stuff, trying to build up flyer miles, etc. And we've overspent a lot, bought a house and stuff like that. So my issue is we're trying to get rid of our debt. I'm about to incur about 10 grand more due to COVID. We lived in California at the time and I was a hairstyling teacher at an academy and we were laid off and hired, laid off multiple times. And so they have said I am now going to be over, I was overpaid and I got to owe them $10,000, unfortunately. So we were looking into doing maybe like debt consolidation. Possibly we didn't really want to, but bankruptcy or like a HELOC loan, but I don't think we have enough home equity.

And I was just kind of wondering what you think would be the best. I don't really understand debt consolidation if I'm giving my debt to another company and they're negotiating and then it still looks bad on my credit or what. Yeah. All right.

Let's dive into this. What I think you're describing there on the tail end is what's called debt settlement, but we can get into that in a moment. First of all, George, let me just say I'm really sorry to hear about the situation you're in. I realize you're taking ownership for part of it. Part of this is just a result of you being in and out of work. And I know going back, you'll probably wish you could make some different decisions.

And yet here's where we are. So let's try to be wise and faithful as you move forward and just handling what God is entrusting to you, meeting your obligations to the best of your ability and making some changes so that as you get out of debt and ultimately are debt free, you're in a position where you're living on a balanced budget, managing with discipline, what God has entrusted to you. And I know that'll take a lot of pressure off you and your wife. And hopefully just with a plan, you all will feel like you're making some progress here.

But I realize this can all be very overwhelming. Give me kind of just a rundown of the debt that you have right now. So right now we're looking at about sixty five thousand dollars worth of debt. OK. How does that break down the type of debt? It's mostly just credit cards. It's all credit cards.

OK. So sixty five thousand in credit card debt. Are you making the minimums right now? Yes.

So that's a good thing. We've created a budget. We pulled all of our credit cards from any of like Amazon. We're just sticking to our debit cards right now.

My job that I have, I'm able to earn bonuses. So we're putting that towards debt. We've my wife said she handles all the finances, you know, but right now we've already paid about five grand off. But that's got to take up from the ED saying we're going to owe like 10 grand. So I don't know.

I just I'm at a loss. So are you spending about two thousand a month in minimum payments? Yeah, for sure. Yeah. But you've got the cash flow to support that, right? Yes. OK. All right. But we thought if we could consolidate that into a lower interest rate, it would go away even faster. We'll talk about that.

What is there an ability to negotiate the payment terms on this ten thousand that you owe? I don't know yet. It's something because this just happened. We just got the letter.

I thought we were going to win it because it wasn't really our fault. But at this point, I still have a lot of digging to do and how it is out. But I believe so. I believe you can come up with an agreement. And who do you owe this to?

The state of California, the EDD unemployment. Yeah. So, you know, they should be willing to work with you. I would definitely reach out to them and negotiate a payment plan.

Hopefully that fits into this overall budget. I mean, they can't expect you to come out of pocket. Ten thousand all up front. I mean, they may end up charging you some interest and fees. But the bottom line is you need to get on a payment plan that everybody's agreed to that fits into your budget moving forward with regard to how to approach the sixty five thousand. I don't like the idea, even if you had the equity of securing this to your home. This is unsecured debt. If something happened and you were unable to pay and you were forced into bankruptcy, you could still try to meet this obligation.

You know, you won't find the word bankruptcy in the Bible. We do see that there's needs to be an absolute commitment to repayment. So if you're forced into that legally, I think that's OK. As long as you have that absolute commitment to repay. But attaching that to your home now, all of a sudden you put your home at risk and I just don't want you to go there, especially in light of the situation.

I'm glad to hear you've made the changes. You've got the budget going. You guys are living on cash only. You know, your wife's managing this. It sounds like that's working well. We just need to get these interest rates down that are now probably on average, you know, more than 16 or even 20 percent.

And that's just killing you. My preferred approach on this is not to take out new debt and pay it off and consolidate it, because even if the interest rate comes down, a lot of times the repayment is is extended. Also, it takes the pressure off. And I realize you all may have learned your lesson and say, no, that's not us. But so often what I see is we pay it off with a new loan that takes the pressure off and then the credit card debt comes back and we have the consolidation loan on top of it. I also don't like debt settlement where you stop paying and get it into collections and then try to negotiate something that's going to trash your credit.

It's just fraught with problems and could end up in lawsuits. So where do you go from here? Well, my preferred approach is debt management. It's a different thing entirely where you leave the credit cards right where they're at with the current creditor. But by using a debt management program through a nonprofit credit counseling agency, each of these creditors has a credit counseling interest rate that's going to be lower than your current rate. And they'll work with you to get one level monthly payment that you'll pay to them. They distribute it to all of your creditors and the combination of that level payment plus the reduction in those interest rates is going to have you paying this off 80% faster.

So that would be the way that I would go. They'll work with you. They'll get it fixed into your budget and help you understand exactly what this will look like. My friends at ChristianCreditCounselors.org is the place we like to send folks. They've worked with hundreds and hundreds of our listeners. They're all godly folks who have trusted the Lord and this is part of their ministry, but they do a great work.

So that would be my next step for you, George, is to contact ChristianCreditCounselors.org and get set up on a plan. And then if you have other questions along the way, you can certainly reach out to us. Awesome. You're the man. I appreciate it.

I knew you'd have answers. So I really appreciate the help and a long time listener, first time caller. So thank you so much.

Awesome. Well, thank you. And listen, all the best to you, George. You guys can do this. Don't lose heart. And I think once you have a plan, you'll feel a whole lot better. We appreciate you calling today.

Let's see quickly to Mississippi. Hi, Diane. Go ahead.

Hi. I'm 58. My husband is 62. And we have a, well, he has a hundred thousand dollar term life insurance that ends when he's 70. And that's all we got. And I don't know what to do if I should continue a different kind of life insurance to cover when we're really, really old. Yeah.

Well, here's the thing. I mean, most often I like the fact that you've got this term policy and it goes all the way through age 70. And if you built that into your budget, that's great. But typically what would happen is when you reach age 70, you would just let that policy lapse. You don't get anything for it, but you were offsetting the risk that existed during those working years to cover that loss of income if the Lord were to call him home.

And so at that point, you just drop that. You recoup that money into your budget every month. And at that point, you're relying on the assets that you've accumulated to both supplement your income in retirement. And if something were to happen to one of you, it's not going to create a hardship because he's probably not working any longer. And therefore, you're living off of Social Security and what you've accumulated. And hopefully between your assets and in savings, you would have enough to cover burial expenses and things like that.

Continuing that policy beyond age 70, Diane, is just going to be really cost prohibitive. Yeah. So I shouldn't have to worry about getting another one that's smaller.

I don't think so. I mean, you need to be well planned. But the idea would be that you don't need that insurance anymore. Hopefully you've got the assets to cover your lifestyle and your expenses, no matter whether you die first or he does, and you've got enough to cover burial expenses. And so then life insurance is not necessary at that point.

It really is just during those working years where you're saving and building up for retirement, a loss of income during those years would be really create a hardship for the other spouse that survives you or him. But in this case, once you reach age 70, that's no longer the case. So you'll pay through age 70. But at that point, when that premium jumps up, you just let it lapse. You don't replace it.

And then you just recoup that money into your budget each month. I hope that helps you, Diane. Hey, thanks for calling today.

God bless you. We appreciate it. You know, we've covered a lot of ground today. You know, before we wrap up, money management can often be confusing, a seemingly endless number of decisions that we have to make. And yet, if we think about it, we can actually reduce our money management just to five uses of money. There's the money we live on, the money we give, the money we owe for debt and for taxes and the money we grow, live, give, owe for debt and taxes and grow. And God's word speaks to all of them. You know, when we pull the principles from God's word out and apply them to our financial decisions, we can have confidence because they're timeless.

They don't ever change. They transcend the tax code and actually allow us to move forward with peace of mind. That's what we're after here on this program every day. I'm so thankful for my team on behalf of Amy Rios and Tahira Haynes, our call screeners and Jim Henry.

We couldn't do this without them, but we also couldn't do it without you. So thanks for stopping by today, telling us your stories, asking your questions, even sharing your testimonies. We always love to hear what God is doing in your financial life. Faith and Finance Live is a partnership between Moody Radio and FaithFi. Hope you enjoy the rest of your day and come back and join us next time on Faith and Finance Live.