Slides: Financial Planning

By David Feddes

The Ultimate If

Now listen, you who say, “Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.” Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes. Instead, you ought to say, “If it is the Lord’s will, we will live and do this or that.” (James 4:13-17)

God has final say

In his heart a man plans his course, but the LORD determines his steps. (16:9)

Many are the plans in a man’s heart, but it is the Lord’s purpose that prevails. (19:21).

Don’t plan proudly

A man’s steps are directed by the LORD. How then can anyone understand his own way? (20:24)

Do not boast about tomorrow, for you do not know what a day may bring forth. (27:1)

Pride goes before destruction, 
a haughty spirit before a fall. (16:18)

Change of plan

God said to him, “You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?”

This is how it will be with anyone who stores up things for himself but is not rich toward God. (Luke 12:20-21)

Do not worry

I tell you, do not worry about your life, what you will eat; or about your body, what you will wear… Who of you by worrying can add a single hour to his life? Since you cannot do this very little thing, why do you worry about the rest. (Luke 12:25-26).

Godly fear and faith
 when making plans

Fear of God (vs. pride): There is no wisdom, no insight, no plan that can succeed against the LORD. (21:30)

Faith in God (vs. worry): Commit to the LORD whatever you do, and your plans will succeed. (16:3)

Why not plan ahead?

• Misguided faith: God will take care of my future. I should trust, not plan.
• Neglect: I haven’t paid attention to finance. I’m busy with other things.
• Laziness: Budgets are boring. I don’t like studying personal finance.

Financial folly

Not learning about finance and not planning ahead is bad theology, foolish neglect, and laziness!

I went past the field of the sluggard… the man who lacks judgment; thorns had come up everywhere, the ground was covered with weeds. (24:30-31)

Planning for prosperity

The plans of the diligent lead to prosperity as surely as haste leads to poverty. (21:5)

Go to the ant… consider its ways and be wise! ... it stores its provisions in summer and gathers its food at harvest. (6:6-8)

Make plans by seeking advice. (20:18)

Finance for dummies

• Spend less than you earn.
• Save what you don’t spend.
• Invest what you save.

Dealing with debt

1. Put God first. Tithe and pray.
2. Work hard. Gain gradually.
3. Budget to spend less than you earn.
4. Build an emergency fund.
5. Pay off debts in order of smallest balance or highest interest rate.
6. Avoid credit. Save at least 10%.
7. Invest for future goals.
   

Tax planning

Give to everyone what you owe them: Pay your taxes and government fees to those who collect them. (Rom 13:7)

• Property tax
• Sales tax
• Income tax
• Inheritance tax

Foreseeable fact

In this world nothing can be said to be certain, except death and taxes. (Benjamin Franklin)

It’s wise to prepare for things that are possible but not certain. But it’s absolutely necessary to prepare for things that are absolutely certain!

Foreseeable facts
You will either get old or die young. (unless Jesus comes in your lifetime)

If you get too old for a job, will you be able to pay for your needs?
Save and invest for retirement!

If you die young, will those you leave behind be able to pay for their needs?
Buy life insurance! Make a will!

Dangers ahead

You do not know what a day may bring forth. (27:1)

You do not even know what will happen tomorrow. (James 4:14)

A prudent man sees danger and takes refuge, but the simple keep going and suffer for it. (22:3, 27:12).

Simpleton

“Come,” each one cries, “let me get wine! Let us drink our fill of beer! 
And tomorrow will be like today, 
or even far better.” (Isaiah 56:12)

Prepare for problems

• Medical costs of illness or injury
• Property, auto, and liability
• Disability and loss of income
• Death of provider; needs of survivors

Share risks by insurance or a well-run Christian cost-sharing ministry.

Save up extra for hard times.

Invest for future goals

• Buying a home
• Starting a business
• Educating children
• Funding good causes
• Retirement & inheritance

Shorter time: lower risk & return

Longer time: higher risk & return

Risk and reward

Whoever watches the wind will not plant; whoever looks at the clouds will not reap… Sow your seed in the morning, and at evening let not your hands be idle, for you do not know which will succeed, whether this or that, or whether both will do equally well. (Ecclesiastes 11:6)

Dare and diversify

• Dare to invest despite risk: Cast your bread upon the waters, for after many days you will find it again.
• Diversify investments: Give portions to seven, yes to eight, for you do not know what disaster may come upon the land. (Ecclesiastes 11:1-2)

Risk and time

Invest in low risk for short-term goals. Seek higher return and risk when investing for longer term goals.

• Cash: savings or money market
• Bonds
• Domestic stocks
• International stocks

Dare and diversify

Spread risk and seek reward among various types of assets, since you don’t know what will perform best.

• Cash: savings or money market
• Total U. S. Stock Index Fund
• Total U. S. Bond Index Fund
• Total International Stock Index Fund

Simple but smart

Choose a retirement date index fund: a mix of domestic stocks, international stocks, and bonds. As the date gets closer, the mix is automatically adjusted to be less risky. This offers:

• Maximum diversification
• Appropriate level of risk
• Freedom from fuss

Investing

• Your wealth grows if others flourish.
• Aims for gradual growth in wealth
• Very likely to make you richer
• Rational risk

Gambling

• Your wealth grows only if others lose.
• Aims for instant wealth
• Almost certain to make you poorer
• Rotten risk

Buffet’s proverbs

If you aren’t willing to own a stock for ten years, don't even think about owning it for ten minutes.

Someone is sitting in the shade today because someone planted a tree a long time ago.

Predicting rain doesn’t count. Building arks does.

Bogle’s proverbs

If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.

Don't look for the needle in the haystack. Just buy the haystack!

The miracle of compounding returns has been overwhelmed by the tyranny of compounding costs.

Time is your friend; impulse is your enemy.

To invest with success, you must be a long-term investor.

Learn every day, but especially from the experiences of others. It’s cheaper!

Investing in eternity

Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moth and rust do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also. (Matthew 6:19-21)