Christian Financial Perspectives

Bob and Mary Jo recap some of their favorite episodes over the past year.

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It’s already been a year since our first podcast episode of “Christian Financial Perspectives” was released!

As a financial advisor with the heart of a teacher, I’m always looking for ways to share what I’ve learned over the past 35 years in business. As I began listening to different podcasts a few years ago on my phone while driving in my car, getting ready in the morning for work, or exercising, I realized how convenient a podcast would be to bring educational content on a weekly basis to my clients and friends. So, I began making plans to create a podcast and then the Lord brought me Mary Jo Lyons as one of the most incredible co-host and producers for the podcast I could possibly ask for.

If you haven’t had a chance to listen to any of the 51 podcast we have made in the last year, you can now access all of them at any time, day or night, on your smartphone, desktop, laptop or iPad in many different ways including here on our website and through the iTunes podcast app, Google Play app, Spotify, or Stitcher

We are celebrating one year with our 52nd episode recapping some of our favorite episodes! Listen in anytime and enjoy!

– Bob Barber

HOSTED BY: Bob Barber, CWS®, CKA® and Mary Jo Lyons, CFP®, CKA®

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Mary Jo: My how time flies when you’re having fun. Here we are celebrating a full year of podcasting with our 52nd episode of Christian Financial Perspectives. Today we’re going to revisit the “best of” from our first year of podcasting and share some of how it all got started. Bob, what do you think? Here we are.

Bob: It’s unbelievable. I can’t believe that we’re doing our 52nd podcast. I am excited and if you’ve been following along on our journey and you found value and gained a lot of wisdom, we’d love for you to share it with your friends and your neighbors and all your fellow Christians. Our purpose for our podcast is to really give our listeners an opportunity to feel connected to us and to teach how to better structure your financial lives. Both Mary Jo and I, we have the heart of teachers and we love educating. So we want to help you become better informed listeners and make better financial decisions and be good stewards of what God has given us.

Mary Jo: Before we get started, we also want to acknowledge several key contributors to Christian Financial Perspectives. We cannot do the show without them. Bob and I, we are extremely grateful for their help and the commitment to the podcast. Jenna Peters, our editor and our podcast Guru, she keeps us all in check, keeps us all organized, and she does all the heavy lifting behind the scenes. She takes our raw recordings and makes them into, I don’t know, just a miracle. She’s a miracle worker.

Bob: I remember that one time we did a podcast and the unedited version somehow got uploaded and I said, wait, get that off the air.

Mary Jo: Oh yes. So, she’s amazing.

Bob: Yes. Y’all don’t realize it when you’re listening to us, but we have a lot of mistakes that we make and Jenna takes all that out and makes us sound so good.

Mary Jo: Thank you Jenna. We also want to thank Kirsten Otto and Nathaniel Morris who also work beside us. They make sure our podcasts are compliant for publishing and it’s probably not real meaningful for you, but it keeps us out of advisor jail and we’re very grateful. We have a great team and we just wanna thank everybody for all the help that they do. It does take a village at times.

Bob: So before we start off with today’s podcast, as always, we want to start off with scripture. We thought today would be a good day, being our 52nd podcast, to start off with the scripture that we started off a year ago because it’s really the underlying foundation of why we do Christian Financial Perspectives and it’s from Psalm 24:1-5. “The earth is the Lord’s and everything in it. The world and all its people belong to him for he laid the Earth’s foundation on the seas and built it on the ocean depths. Who may climb the mountain of the Lord? Who may stand in his holy place? Only those whose hands and hearts are pure, who do not worship idols and never tell lies. They will receive the Lord’s blessing and have a right relationship with God, their savior.” So this scripture is why we started off our very first podcast and why a year ago, our first podcast was “What God’s Word Says About Money”, where we brought numerous scriptures and we wanted God’s word and biblical wisdom to be the foundation for all the podcasts that follows.

Bob: And if you haven’t heard that, we’d invite you to go back and listen to that very first one entitled “What God’s Word Says About Money”. We do this because we believe the Bible is the source of all wisdom, including that for our finances. It is believed by many Bible scholars that Jesus spoke of stewardship and how we handle God’s resources more than heaven and hell combined. And this leads us to believe that Jesus himself was very serious about how we manage his resources. We want to do what we do best to help our brothers and sisters in Christ handle what God has given us and be the best stewards possible of all of these resources.

Mary Jo: You know Bob, all good financial advice has its roots in biblical wisdom. Biblical wisdom, it’s timeless, transcendent, accurate, universal, and above all practical. The way we handle money is a reflection of our biblical values. For a Christian, financial decisions are also spiritual decisions. This means before a Christian makes any major financial decision, they should pray about it and see if and how it aligns with God’s word and if it doesn’t, it may be it’s not the right decision for you. The reason we stress this is to encourage others to become better managers and stewards of what God has blessed them with and is allowing them to have. At Christian Financial Advisors, our focus is on providing financial advice and investment management strategies that are founded on biblical principles. That brings us to our next podcast topic that helped create the foundation for Christian Financial Perspectives, which was episode 2, “Impact Investing” and BRI. So Bob, why don’t you share that one with us?

Bob: Well, the second podcast we did has been one of the favorites as well. It was called “Impact Investing” and we went into that first, what is impact investing and then about biblically responsible investing, which is a subset of that. So we defined that impact investing is investing in companies, organizations, and funds with the intention to generate a measurable, beneficial, social, or environmental impact alongside a financial return. The goal of impact investing is to help reduce the negative effects of business activity on the social environment, and some even look at it as a form of philanthropy. So biblically responsible investing is a subset of impact investing. And it’s also known as faith-based investing. This seeks to align itself with companies supporting Christian values while avoiding investing in public traded companies that are directly or indirectly violating biblical principles. Biblically responsible investing is truly an ideal strategy for those families and individuals who want their investments to be an extension of their faith and how they choose to worship our Lord and Savior. So the question is, do your investments reflect your Christian values?

Mary Jo: We’re hearing from people all the time who are interested in this, but they just don’t know how to get started. Well, we can show you how here at Christian Financial Advisors. If your advisor isn’t working with you in a way that speaks to your deeply held Christian faith, then maybe it’s time to look for one that does. So how do you choose a financial advisor? That brings us to episode 3, “Virtues To Look For When Choosing A Financial Advisor”. In this episode, we explored the qualities and characteristics of any Christian advisor, whether it be in finance or any other area of your life that you seek guidance in. By looking at the first book of Timothy 3:1-8 which spells out the virtue that church, elders, overseers, and deacons should have.

Bob: Some of these virtues are, is the advisor above reproach and do they have a good reputation in the community? Is the advisor a gentle person, faithful to their spouse and family? Are they able to teach and educate? Are they free from the love of money and greed? Do they manage their own household well? Do they exercise self-control, live wisely, and are not quarrelsome? Above all, are they a mature believer in Christ and know the word of God and how it applies to their own financial life? You know, when I seek advice from anyone who shares these kinds of virtues, I’ve never been hurt by their counsel because it’s just not about the experience. But it’s also important to look for a financial advisor that aligns with your values and who services include comprehensive wealth management and financial planning, not just investment management. And remember, just because a financial advisor happens to be a Christian, this does not make them a Christian financial advisor or a Christian financial firm. Is the advisor instituting biblically or morally responsible investing as part of their investment management process? Do they invest with your Christian values in mind? You know, today with so many choices of no load Christian mutual funds and even ETFs across every major asset class, there’s really absolutely no excuse for an advisor not to offer biblically responsible investing today. But you know, we’re still finding there are many Christian financial advisors and advisory firms that choose not to invest this way. Their investment portfolios include companies whose values and principles are in direct violation of biblical wisdom and it really makes you stop and wonder why with all the choices today.

Mary Jo: You know, Bob, another favorite from last year was episode 4 on “Estate Planning The Wrong Way And The Right Way”. We got a lot of feedback on this one and listeners really enjoyed it. Estate Planning is preparing for the management of an individual’s assets in the case of their death or incapacitation and this includes bequeathing assets to heirs or leaving assets to heirs and family members as well as the settlement of estate taxes. Your estate includes items such as your home or primary residence as well as vacation homes, land including farms and ranches, all your retirement and investment accounts, your bank and savings accounts, business interest, investments that are possibly not held in an account like various valuables and collectables – your car, your jewelry, family heirlooms, etc, and intellectual property and even life insurance. All of these aspects of estate planning can become overwhelming quite quickly. However, with the tips that we give in this podcast, we discussed the wrong and right ways for estate planning through the use of certified professionals and letting your family know your plans ahead of time before the time of crisis.

Bob: So Mary Jo, I’m kind of noticing we’re going in order here cause it was like our first four or five podcasts were some of the favorite ones, weren’t they?

Mary Jo: Well that’s so true. But you know it’s interesting. I think we just started with the ones that we felt like would resonate the most with our listeners and our client base. These kind of come from the heart and are just natural extensions of who we are and the nature of our practice.

Bob: And the good thing is you can go back and you can listen to any of those anytime of the day. So that took us to another podcast, which was a very popular one, and that was episode 5, “The 10 Uses Of Money”. In this episode, we discussed the 10 uses and the four daily uses utilizing the live, give, owe, grow model from Kingdom Advisors, which is applicable for most people in everyday life. It really boils down to money is spent in only four ways. Again, that’s live, give, owe, grow. My favorite of these though is give because giving breaks the power that money can have over us and we open our hands to release God’s resources for his glory. I love the scripture that goes with this is 2 Corinthians 9:7 “You must decide in your heart how much to give and don’t give reluctantly or in response to pressure. For God loves a person who gives cheerfully and God will generously provide all you need. Then you will always have everything you need and plenty left over to share with others.” What a great scripture.

Mary Jo: After this we discussed the six uses of money when it comes to setting longterm financial goals, including these areas such as financial freedom, charitable giving, freedom from debt, lifestyle choices, family needs, and funding a business. And there’s a lot to explore and consider when it comes to the 10 uses of money, and the most important highlight is to be content no matter how much you have or how little you may have. If you’d like to learn more about this, give us a call for our handout on the 10 uses of money. Our next podcast was also extremely popular because so many people think that buying a residential rental property is a good idea. In this episode we expelled this myth with facts.

Bob: But before we get into that, I want to say something in the middle here. One of the things I love so much about podcasting is that you and I both have the heart of a teacher and an educator and it’s allowed us to bring wisdom to people that we know and those we’d like to get to know. It’s such an easy way to hear the message. They can listen any time of the day that is convenient and easily come back to it. You know, I’ve really become a big podcast listener myself since I am a podcaster because you can listen to it in the car, in the shower, doing the lawn, preparing dinner, and just about anytime you have a few extra minutes. It’s truly a tool to help everyone become a better steward of their God given resources, and I just love that.

Mary Jo: We just came back from a nice, long road trip. We went to Colorado for a week or so, and my husband and I, we did, we took the advantage of that time in the car together and we listened to quite a few podcasts on topics that were important to both of us. So it’s a great tool.

Bob: This does take us again to episode 8 which was “The Real Yield Of Residential Real Estate”. And in this podcast we talked about the pros and cons of owning rental homes from the maintenance of a rental property to seasonal and vacation rentals. We went in depth of the many facets surrounding the secondary source of income. Many individuals we’re finding are interested in residential real estate over the years because of the extra income they think it’s gonna make them. It’s quite a popular thing to do. And for a few people, residential rental real estate works out. However, for many, the net returns from residential real estate is not near as good as they thought. We took a good look at all the hidden costs of owning rental real estate, including the many risks associated with the comparison of investing in real estate property versus passively investing in a diversified moderate portfolio of high quality dividend stocks and bonds. We really suggest to anyone thinking about buying a house for potential rental income to go back and listen to this podcast. Again, it was episode 8.

Mary Jo: So many people think that real estate, it’s something they can see and it’s tangible and they’re more comfortable that with an investment portfolio, but like you said, it just has tremendous risks. So we encourage you to listen to that episode before you take a walk out there on that one. Another great episode that many pre-retirees have commented on was episode 9 “Creating An Income Stream For Retirement”. In this episode, we discussed how to create a replacement income from retirement savings plans and avoid dipping too much into the principle of your retirement investments too early. We also discussed the guidelines for taking and managing your required minimum distributions, and we also went into the various forms of passive and non-passive or earned income, investment and portfolio income, and creating an income stream using a bucket strategy based on your different timeframes for needing retirement funds. You’re going to allocate some that you’re going to need in the next few years, then maybe five to seven years, and then much longer term assets. So, this is the challenge that faces most retirees. How do I go from a paycheck provided by my employer to a paycheck I provide by my various investment accounts? There are a lot of considerations to think about.

Bob: So this next podcast, Mary Jo, applies today more than ever with all the trade wars we’ve got going on with China in the news, creating all this extreme volatility that we’ve been experiencing in stock markets, and that was episode 13 called “The Emotional Investor”. In this podcast, we discuss one of the most fascinating aspects of investing, how emotions and fear can control your investment decisions. More often than not, investor’s behavior is fueled by emotions and as a result they tend to buy high and sell low, which is the exact opposite of what they need to do because the markets can really play with your emotions if you allow them to. Have you ever noticed how the media says the market’s soar to all new highs today and then a day later the same media says they plunged in the negative territory?

Mary Jo: I love those adjectives.

Bob: Knowing how your emotions correspond with all these market highs and lows, this is the first step to being aware of how to better control when it comes to investing. We have a wonderful chart. Also that Christian Financial Advisors has been using for many years when educating our clients. It’s a study of over half a decade of investor responses to market conditions like we’ve been having. So if you’re interested in this complimentary cycle of market emotions chart, give our office a call at (830) 609-6986 during business hours. Again, that’s (830) 609-6986 and ask for that chart called the cycle of market emotions.

Mary Jo: Another popular episode was episode 17 “The Need For Financial Planning”. Would you take a road trip without a map or a gps? In this episode, we covered the many reasons for needing financial planning. Financial Planning is the process of wisely managing your finances so that you can achieve your dreams and goals. Quite simply a map to help you get to the financial future you desire. So that’s where the GPS comes in mind. We all need a map to get where we want to go. A realistic comprehensive plan can help you meet your goals by addressing your financial weaknesses and building on your financial strengths. Without a plan and a strategy, there can be a lot of unnecessary risk in achieving these goals. Risks that can cause emotional stress and financial distress if not managed properly, and you don’t have to do it alone. A qualified financial planner such as a Certified Financial Planner, a CFP professional can help you make decisions that make the most of your financial resources.

Bob: Mary Jo, you probably remember this next one when we had our good friend and guest, Dave Hart from the eVALUEator, which is a computer program that we use and we interviewed him. He’s the President of Sales and Marketing for our eVALUEator tool that screens investments according to morally and biblically responsible values. It’s really a tool for giving investors knowledge and the ability to be a good steward and stay away from those various activities that do not support biblical teaching with their investments. So this tool screens out over 30,000 companies whose corporate policies and activities support things like abortion and pornography, non-traditional marriage, entertainment, Christian rights, alcohol, tobacco, and gambling. We then took a step farther and looked for companies who are good stewards and whose policies support Christian family values. In this episode, and again, this was episode number 18 and that was with our special guests, Dave Hart, and if you’d like to learn more about the eVALUEator, visit evalueator.com or moralscreening.com

Mary Jo: You know Bob, we often get questions for clients on how do we do this and how do we screen and that episode really dug in deep on how we do that. So it’s a great one for our listeners. Two of my favorites were episodes 25 and 26 and this was titled “All In The Family Parts 1 And 2”. In these episodes, we talk about how to have those very important conversations about money with the ones we love the most. This is not always easy to do, but it’s so important and when you’re married, so important to be in marital harmony by being on the same page as your spouse when making financial decisions. These decisions will impact your family. It’s also just as important to bring your kids into the conversation as well as your aging parents. We give you some guidelines on how to have those talks. It’s all part of the live for today, but plan for tomorrow mindset. Don’t wait until a crisis to learn what your parents desire for their end of life care and what that might look like. Have that talk today.

Bob: So next was where we bought the Bible study called “Biblical Viewpoints Of Money And Wealth” and we brought that in through episodes 29 through 33 this is a series again called “Biblical Viewpoints Of Money And Wealth”, which was originally designed as a Bible study. This Bible study is a deep dive into what God’s word has to say about money. So it was a perfect topic to cover on Christian Financial Perspectives over four weeks. The series included things like the difference between a biblical and secular worldview, the difference between an owner and a manager, the biblical worldview of working and retirement, choosing secular and biblical counsel, money and wealth giving and blessings and an inheritance and legacy planning. So if you’d like a copy of this Bible study called “Biblical Viewpoints Of Money And Wealth”, that is great to do either by yourself or in a small group setting, you can go to amazon.com to order one or you can call the office at (830) 609-6986

Mary Jo: You know, Bob, we covered so many important topics over the course of this last year. Another good one was episode 35 we called it “Car Buying 101”. You always started off with this question, what investment loses over 50% of its value on average every four years consistently. Would you ever voluntarily buy a mutual fund, a stock, or a piece of real estate that would lose 50% of its value over four years? I don’t think so, but we do it all the time with the cars we drive. Car buying is absolutely one of the worst investments there is unless it’s a collectible classic, and that’s maybe debatable, but my husband would agree. Yet we all buy cars like it’s nothing. Many of us give very little thought to the total cost of car owning. We shared our personal experiences, some tips and tricks when it comes to purchasing a new car and after all, the more money you save on purchasing a vehicle, the more cash you can put into savings or investments. And especially building that emergency fund. Some of the topics we covered included, helping to get a better price for your trade in vehicle and the best time to purchase a new car and even negotiating skills. If you’re thinking about buying a new car, trading your old one in or just wondering how to save money when it comes to buying one, this podcast is one you definitely want to hear.

Bob: All right, so we’ve gone over quite a few of our favorite ones. Here’s another one, episode 40 it was called “About To Retire, Now What?” Have you worked for a large company for over 20 years? Are you between the ages of 55 and 65 and now thinking about retiring, but you’re just not sure what to do? Well, you’re not alone. Retirement may be on your mind, but you may not be sure how that 401k plus a possible pension plan and company stock is going to work all together to create that stream of income for the rest of your life. We know it can be very scary because making a mistake at this age gives you little if any time to recover. So in this episode, Mary Jo and I covered the importance of working with a trusted advisor to help you understand the complexity of all the moving pieces and parts of retirement and how these pieces fit together for your benefit.

Mary Jo: Bob, I think this next one is my all time favorite, but I don’t know, maybe I’ll have other all time favorite too. But this one is episode 41 from FOMO to JOMO.

Bob: That was really a fun one. I enjoyed that one, yes.

Mary Jo: It was! In this episode of Christian Financial Perspectives, we address the phenomenon of FOMO or the fear of missing out. This episode shows how we can move from FOMO to JOMO, the joy of missing out joy and contentment with where you are and what you have. Wikipedia defined the fear of missing out as a pervasive apprehension that others might be having a rewarding experience from which one is absent. The social anxiety is characterized by a desire to stay continually connected with what others are doing. And Gosh, that is just such a horrible waste of time. I agree. Why do we care? But so unfortunately, so many people get obsessed by that. Ans as financial advisors, we call this mentality following the herd, which many of us are guilty of doing for fear of missing the next big thing. So it’s so true in our investment lives, this FOMO, and it’s also true in other areas of our lives. Many times investors experience FOMO or fear of missing out when they hear about a friend or a family member making a big short term profit on a risky investment. They probably are hearing about this on the golf course, but that might be another podcast. So, once you hear about a trade or investment that everyone is talking about, by that time, it’s usually too late to profit from. And then opportunity is lost. We want our clients to avoid FOMO and embrace JOMO

Bob: Well, I’ll tell you what, and I remember Mary Jo when you were making this, I was thinking FOMO JOMO what is this about? But then like you said, it was one of the funnest ones to listen to. And again, if you want to go back and listen to that when that was episode 41 in which we did do that, you know that’s not that long ago cause we’re making 52 that was just, you know, less than three months ago. We’re just about to the end of some of the best of our podcasts in episode number 42 we interviewed Mitch Mitchell – he’s got two first names there – of Riskalyze. And you know, we really fear volatility. So many people, they fear that when it comes to investing because we think it automatically means losses. However, in this episode we looked at volatility as a natural part of investing.

Bob: The higher the volatility, the higher the possible return, and vice versa. The lower the volatility, the lower the return. It’s the same way with everything in life. The faster you drive, the more risk or volatility you can have, but many people are willing to take that chance to arrive at their destination sooner. So in this podcast we introduced a tool that helps you choose peace over worry when it comes to investing called Riskalyze. Riskalyze is a financial technology company that provides software for analyzing investment risks and building and implementing investment portfolios. So in our interview with Mitch Mitchell, a Customer Success Manager with Riskalyze, he gave us a complete breakdown of this piece of technology, how it works and how you can actually use it, and we have a link. If you go back on our website for Christian Financial Podcast, go to episode 42 there’s a link that takes you to that technology. Finally, the last one in our list of favorites from last year is…

Mary Jo: Episode 43 “Planning For What Ifs And Wins”. We talked earlier about the financial process and you know, that was one of our favorites and how important that is. Well, one of the things that makes the financial planning process real and wakes up our clients and they become really engaged in this process. It’s the what ifs and wins and how we can model that as we walk through the planning process. Have you ever wondered what your future will look like in 10 years? I think we all think about that or what would happen to your retirement savings if you bought that vacation home? Now, instead of waiting, we all have those same questions, even financial advisors. In this episode, Bob and I discuss planning for all the what ifs and whens that can happen in life. Those that are planned, unplanned, even emergencies. Everyone seems to focus their attention on investment management. However, it’s the ongoing relationship between your investments and planning for the future where the real magic happens. Financial planning is a lifelong process where you manage your entire financial picture in order to achieve your financial goals. Basically, when it gets down to it, the core financial planning, it’s really just goal planning. There are a lot of subtopics that should be covered as part of this process, but it all leads to the same place. Can you achieve your goals? What does that look like financially? What if the unexpected happens? And do I have enough?

Bob: Well, Mary Jo, what a year it’s been, we’ve been getting some great feedback on all these podcasts that we’ve made and we hope you have enjoyed listening to them as much as we’ve enjoyed bringing them to you. The reason for this anniversary edition today was to motivate you to go back into our archives and listen to our previous episodes in order to help you with your financial decisions in life, which we know are actually spiritual decisions. So we encourage you to take some time and review all of the many great topics we’ve covered in our first year of podcasting. You can find this at christianfinancialpodcast.com or on iTunes, Google Play or Stitcher. So stay tuned for more as we continue on this amazing journey. May all appraise. Go to God, our father in heaven for helping us get through all these podcasts.

[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

In this episode, Bob and Mary Jo cover many key points to protect yourself and equip you to make more informed decisions.

More episodes >>

The goal of Christian Financial Perspectives and Christian Financial Advisors is to help listeners and clients with discerning the truth when it comes to promises made about financial products and services. You may hear of promises of “high interest rates and stock market like returns without any risk”, “guaranteed income with no strings attached”, and/or “financial advice for free”. Unfortunately, if it sounds too good to be true, it usually is.

In this episode, Bob and Mary Jo cover many key points to protect yourself and equip you to make more informed decisions.

HOSTED BY: Bob Barber, CWS®, CKA® and Mary Jo Lyons, CFP®, CKA®

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Bob: Proverbs 2:2-12 “Make your ear attentive to wisdom, Incline your heart to understanding. For if you cry for discernment, Lift your voice for understanding. If you seek her as silver and search for her as for hidden treasures, then you will discern the fear of the Lord and discover the knowledge of God. For the Lord gives wisdom. From his mouth comes knowledge and understanding. He stores up sound wisdom for the upright. He is a shield to those who walk in integrity, guarding the paths of Justice and he preserves the way of his godly ones. Then you will discern righteousness and justice and equity and every good course. For wisdom will enter your heart and knowledge will be pleasant to your soul. Discretion will guard you. Understanding will watch over you to deliver you from the way of evil from the man who speaks perverse things.” So, the key words in this passage from Proverbs 2:2-12 are wisdom, discernment, understanding, knowledge, and discretion.

Mary Jo: You know, these words are so very important for today’s podcast because the topic for today is “if it sounds too good to be true”. Wisdom and discretion play a major role in seeing the truth. Our goal is to help you at discerning the truth when it comes to promises made about financial products -promises of high interest rates and stock market like returns without any risk, guaranteed income with no strings attached, financial advice for free – if it sounds too good to be true, it probably is. Another good scripture that came to mind as we were talking about this topic is from the second chapter in Peter Verses 2-3 , “But there were also false prophets among us just as there will be false teachers among you. They will secretly introduce destructive heresies, even denying the sovereign Lord who bought them, bringing swift destruction on themselves. Many will follow their deprived conduct and will bring the way of truth into disrepute. In their greed, these teachers will exploit you with fabricated stories. Their combination has long been hanging over them and their destruction has not been sleeping.” Wow. That’s pretty deep, Bob.

Bob: Wow. You know, as I listen to these scriptures, have you ever listened to AM radio on Saturdays and heard these shows where these financial planners are promoting these products that offer great returns at little to no risk? I’ve heard a lot of them. What about you Mary Jo?

Mary Jo: Oh, it amuses me. My husband and I will take a trip or go run errands on Saturdays and we always turn it on just to see what makes us laugh, and it’s so unregulated. We’re going to talk a little bit more about that. If our listeners could see us, we’re doing that “financial planners” in parentheses in the air, if you will, because anyone can call themselves a financial planner or an investment advisor. Another reason that we want to improve our regulation, but there is more to understand there, and we’re going to talk about that in a little bit more detail.

Bob: Rachael always says to me, Bob, why do you listen to this? Cause you get so mad at it because there’s so many false things that are said, and whenever I hear these things I cringe because I know it sounds too good to be true and listeners are getting sucked into a promise that is misleading and something they really don’t fully understand. They want to believe it’s true Mary Jo, but it’s just not. And what we’re talking about many times are these financial shows that are pushing annuities, both index and fixed annuities. So, in today’s show we’re going to talk about some of the things they don’t tell you on the radio. There’s going to be nine key points that we’re going to share about indexed and fixed annuities. But then we’re going to talk about some other things that sound too good to be true that doesn’t just have to do with annuities. The first key point I want to make, and this is kind of funny in a way, but in way it’s not, you know, we all get those invitations in our mailbox it says, come have a free steak dinner.

Mary Jo: I always wonder.

Bob: Yeah, you always wonder about that.

Mary Jo: Do they know who they’re mailing that to?

Bob: Oh yeah. They probably don’t want to email it to us, but you know, come get that free steak dinner and nothing is free, and there’s no free steak dinner in the long run. So be very careful when you get one of those invitations that is offering you a free steak dinner for some financial information.

Mary Jo: And you know, you may be getting that free steak dinner, but you will be paying a commission and it’s probably a pretty big one because somebody actually paid for that steak dinner. The company actually takes the commission out of your money, and this is why at the end of things, there is a surrender charge if you ever want to try to sell it or get out from under it.

Bob: Another thing that is a key point to understand when you’re talking about these index and fixed annuities and thinking about them is they’ll speak of cap rates on these radio programs or if you go to one of these workshops. But, you gotta be careful what is referred to as a cap rate because they can be very low and have expensive management fees. So what is a cap rate? It’s a maximum you can achieve. And many of these are marketed as you get the market upside with no downside risk. And this is usually tied to a cap rate or what we call a maximum participation rate. So, let’s say as an example, we have a stock market that goes up 15% which we’ve had in some recent years, and your cap rate may be three, four, or maybe as high as 7% what happens is you give up the spread for the promise of no downside, but that’s a very high cost to pay, wouldn’t you think?

Mary Jo: I sure would, Bob. Participating in the upside, but very little of that upside. So, it’s really a misrepresentation, and again, it does make me cringe when I hear it.

Bob: Some of these cap rates or even sometimes just 3% or 4% so if the markets go up that 15% in one year, the company’s taking much more than you made.

Mary Jo: They gotta make money somewhere.

Bob: Exactly. And that’s okay. We understand money’s got to make money, but be careful when you hear these terms of all stock market returns with no downside risks because the risk here is, is you’re giving up so much of your return. Some of these contracts give an option of what they call a spread instead of a cap rate. This can allow a limited upside of the markets, like if the markets go up 15, but the spread can range from 3-10% depending on the contract. So let me explain what the spread is. What the spread is is actually an expense. So let’s say the market goes up that 10%, and a spread is 3% or 4%. Well, they’re taking away from that 10% that you made, taking away 3 or 4% of that. They’re taking away 40% of the return that you made if it computes to a 4% spread and the markets go up 10%. Does that make sense? Mary Jo?

Mary Jo: Yes. You know we’ve gone over a lot and that can be kind of confusing. As always, we’re here to answer any questions but again, there’s no free lunch and you’re definitely giving up something on that upside, whether it’s in the form of a spread or a cap rate

Bob: And you’re giving up a lot.

Mary Jo: You’re giving up a lot, but those are terms you really need to understand. And remember, we started off with saying these are products that are very complicated, and people don’t really understand what they’re buying. So we really encourage you to lift the hood and really investigate those terms.

Bob: But Mary Jo, when you go to one of these workshops, you hear this on the radio, they never talk about the cap rate being low. They never talk about that spread.

Mary Jo: No, they use language that makes it sound so promising. There’s another one to pay attention to and the cost for ensuring a guaranteed income and there is a cost to these and there’s lots of rules. They sell these as if you’re getting a guaranteed income and that’s the benefit of an annuity, but you also need to look at how that guaranteed income is structured. You’re usually limited to taking only 3-5% a year in the way of an annual pay out, and if you have to dip into principle, you forfeit that guarantee. They also charge you an additional expense for those guarantees. Those guarantees don’t come free. That increases the expense of the product that you’re buying.

Bob: Another thing that you’ll hear a lot is that people will get bonuses when they put money into these types of annuities, like a large upfront bonus. Sometimes, it’ll range from 5%. Mary Jo, I’ve even heard as high as 15 or 20%, but with that bonus comes higher expenses or lower returns in the following years. Once they get you into it, then they have these huge surrender penalties. So it’s like you can’t get out. You’ve gotten this, maybe this 10% bonus upfront, but then the following years, the rate of return, let’s say on fixed annuity, the rate of return is only 2% a year. So, they’re making up for it. Where if you’d have bought one without the bonus, maybe you’d have made 4% a year. So, you gotta be very careful of these bonuses.

Mary Jo: They’re sweetening it. They’re dangling a carrot out there, but they’re putting on some really tight handcuffs to keep you from going after that carrot.

Bob: Yes, they are. This next one that you’re going to share is so important to understand the annual statements when they get them.

Mary Jo: Your annual statements will come out and there will be numbers on them about your account value. But you know, it states that it’s worth far more than it actually is. It can be quite misleading. So, here’s an example. Let’s say you put in $100,000, and you got a 15% bonus from the annuity company. So your statement reflects a value of $115,000, but if you try to surrender that policy and the bonus is taken away, plus the commission is taken out, leaving you with much less than what you actually put in. So again, you need to lift the hood.

Bob: Yeah, this is another occurrence that you gotta be so careful of. I see this a lot and people were like very surprised because they’re saying, “Well, my statement says I’m worth $115,000, but if I surrender, I only can get back $90,000?” And I always say, “Well, you know, something’s only worth what somebody would give you for it.”

Mary Jo: That’s true. Another good one, Bob.

Bob: Yes, it is. Another occurrence that often sounds too good to be true turns out to be nothing but a Ponzi scheme. You don’t realize it at first, but again, they make promises that are better than you can get in the market, and they promise inflated returns and little to no risk.

Mary Jo: Wikipedia defines a Ponzi scheme as a form of fraud that lures investors and pays profits to earlier investors with funds from the more recent investors. It’s a scheme that leads victims to believe that profits are coming from product sales or from other means and they remain unaware that other investors are the source of those funds. A Ponzi scheme can maintain the illusion of a sustainable business as long as new investors contribute new funds and as long as most of the investors do not demand full repayment and still believe in the nonexistent assets that are purported to own. You know, Bob, I always think that once there’s this big Ponzi scheme in the news and we all remind ourselves of Bernie Madoff and how that hit the headlines. But you know, even today we still hear about new Ponzi schemes out there and how many people are fooled by them. So, it’s not a thing of the past. It’s an everyday happening.

Bob: Yeah, there’s that program called American Greed. They make a whole program on this. And it’s interesting though, how people get into these and there’s four key points to understand before you get into a Ponzi scheme. The first one is very interesting, before I say it, because this is something that you just got to think about. Why are you getting into this? So the first thing is don’t allow greed to blind you from the truth. If it’s promising consistently higher returns than normal, Year-After-Year, that means something is up. So as an example, if it’s saying it’s going to make 10% every single year guaranteed when we know the interest rates that you would get from a good high quality bond or down at your local bank is two or three, something’s up. So if you’re getting into that, be careful because it could be your own greed as getting you into that thinking, well, I’m going to make more than everyone else. Because, like we said in the definition of a Ponzi scheme, they’re usually robbing from Peter to pay Paul until it finally catches up and the whole thing explodes. And you’ll see it’s crazy. I’ve watched American Greed and they’re always falsifying statements. They’re generated to show you that you have more than you do. So look at those statements too, because many a times will statements are generated in a falsified manner.

Mary Jo: You hear that all the time. I’m not really sure how they’ve managed to do it, but they do. And people don’t ever question it, which amazes me. Common sense reminds us that nothing is really free. But I’ve been writing a book, and I don’t know if I shared this with you, but I have a title and the book is called “Common Sense – Whoever Said It Was Actually Common”. And no for-profit professional gives their time away without some form of compensation or a hope of some form of compensation. And that would be a nonprofit or a not for profit type of business model. You know, that’s not something that an advisor would be entering into. So you gotta really think about that. And despite what you hear on am radio on Saturday mornings, free financial advice is anything but free. Someone’s paying for the radio time. It may be time again to lift that hood and see how this thing really ticks.

Bob: So this takes us into our next one. We’ve talked about annuities. We’ve about Ponzi Schemes. So, now we’re talking about free financial advice, and key points that you need to know is number one, you pay for financial advice and it’s either in the form of a commission, a fee, or underlying expenses of the financial products you invest in. Somebody’s making their money some way.

Mary Jo: The company takes money from your investments or your returns and pays the advisor, or you pay the advisor from your investments

Bob: Or you pay the advisor directly. Financial products, mutual funds, ETFs, et cetera. All of them have expenses and they may be hidden or unhidden, but they all had those expenses because how else are the companies, I always say, paying for all that expensive advertising.

Mary Jo: They sure are, Bob. They’ve got to pay for their brochures, they’ve got to pay for the marketing they do to the advisors that are selling them, their TV commercials, all the forms that they have to generate. So, there’s just the cost of doing business, so they’re paying for that somehow. All the financial services company put their names on the size of stadiums and sponsor professional sports teams and bowl games. Well, who do you think paid for all that? If it sounds as if we’re coming from a position of suspicion or cynicism and doubt, and I know that’s really a very negative approach to life, is that who we’ve become, you think?

Bob: I hope not. I hope not. But yeah. Mary Jo, we need to bring this up cause you make a great point. It may seem that way, but we’re really talking from experience, and we know this from clients all the time that we meet. We’ve done the research and we could sell these commission based products if we wanted to, but we’ve made a commitment to avoid doing business that way because as fiduciaries we don’t see this as being in the client’s best interests. Many of those commission-based advisors who sell these types of products are not serving their clients as fiduciaries, so they’re not held to that higher standard of care.

Mary Jo: And another thing we want to look at before we wrap up today’s show, let’s look at income streams for a minute. Retirees are often lured by the promise of income for life. You know, who wouldn’t be? Creating an income stream that you can outlive, it’s important and it’s attractive for many clients. We fundamentally agree with this concept. Everyone should have this in some form or fashion, but we look at these annuities a very expensive way to obtain this promise. So, you’ve got to consider the total return and the true cost.

Bob: It’s interesting. We can just look at the math. Let’s say they advertise a contractual guaranteed growth rate of 4% or maybe even higher. Once you figure in the commission costs of these products, which is the true taxable equivalent yield of these products, you may be paying 5%, sometimes 7%, commission to get that guarantee of 4%, so all you gotta do is the math. Does that make sense?

Mary Jo: You’re paying 7% in commission for guarantee of 4% now come on. Does that really make sense?

Bob: There has got to be more cost effective ways to achieve the same thing, and this is what we do for our clients.

Mary Jo: And much like the way the media describes the market each day if you turn on CNBC or any of the other market shows, the Dow, it’s soaring or it’s crashing, it’s diving to new lows, or climbing to an all time high. And they use these extravagant adjectives to get your attention. And these insurance companies, they do the same thing. They use words like safety, conservative, prudent, guaranteed, and all these words make us feel good. They’re reassuring and they use them for that reason – to lure you in and get you to lower your guard and lower your defenses. So if you start hearing this kind of language, you need to be wary.

Bob: The little bit of last minute education when it comes to these annuities, there’s three types. There’s the fixed annuities and these are insurance products that are regulated by the state insurance departments. And they’re usually not categorized as securities because if they were securities, the sales associates would have to be securities licensed and as such, they’d be subject to much higher regulation. So as a result, these products and these sales tactics, they pretty much go unregulated. And then there’s variable annuities that are security products and are regulated by FINRA and the SEC. And then there’s hybrid annuities, which are combination of these two. They’re very complex, difficult for even the advisor to really understand them. They pay even higher commissions to the broker or planner selling them. And the name became popular when you guessed it, the hybrid cars became popular. They appeal to a certain consumer and it makes them feel all warm and fuzzy. I’m guessing much like the new green deal they’re coming out with, with a lot of hidden costs.

Mary Jo: Oh, you know it. There’s another thing that sounds too good to be true, but that’s another podcast. And you know, we talked about this earlier. These products you hear, they’re sold and they’re marketed on TV and radio and the Internet. If these products were regulated by the Securities Industries, these ads, they wouldn’t fly. They would immediately be prohibited advertising practices. And you know, that’s something that impacts you and I, Bob, we are very limited to what we can say. We can’t ever use the word “guarantee” because of our licensing and the standards that we have to adhere to. One other thing we can ever do is put an image of a rainbow. So all those promissory words – we’re prohibited from using them, and there’s a good reason for that. As we’ve said, having some form of income you can’t outlive, it’s a good thing. And if the features of an annuity appeals to you, there are some good eggs out there. So, there are some good annuities with low cost and there are some great products that serve this specific need. However, you don’t see these widely advertised because there’s very little money to be made by the provider or the issuer, and they’re fairly priced. It’s one of those products that after you talk about them or try to sell them, you don’t feel like you need to take a shower. And I get that way when I talk about the fixed and indexed annuities, don’t you, Bob?

Bob: Well, yeah, I do. And knowing from years of experience now, I’ve seen it all, Mary Jo. And it has made me a little suspicious. In closing of today’s program, if it looks like a duck, sounds like a duck, and quacks like one, it probably is a duck. In other words, if it sounds too good to be true, it probably is.

[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

Bob and Mary Jo discuss the recent market volatility.

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Volatility in the markets can lead to many doubts when it comes to financial decisions. Is my money in the right place? Should I keep it in the market? Should I take it out? As experienced advisors who have seen many market downturns as well as many periods of strong market growth, Bob and Mary Jo have established some best practices, which they share on this episode.

At Christian Financial Advisors, we believe in using best practices and educating our clients about volatility. When the markets get rattled, we know not to react emotionally since we are already well positioned to withstand it. As Phillipians 4:6-7 states:

“Don’t worry about anything; instead, pray about everything. Tell God what you need, and thank him for all he has done. Then you will experience God’s peace, which exceeds anything we can understand. His peace will guard your hearts and minds as you live in Christ Jesus.”

We know in this life we will have trouble but God’s Word serves as a lifeline that comforts, sustains and transforms us.

HOSTED BY: Bob Barber, CWS®, CKA® and Mary Jo Lyons, CFP®, CKA®

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Bob: So on today’s podcast we’re going to be talking about, here we go again, surviving volatility, and we thought about some different scriptures to use, and Mary Jo and I came up with this one from Philippians 4:6-7, “Don’t worry about anything. Instead, pray about everything. Tell God what you need and thank him for all he has done. Then you will experience God’s peace, which exceeds anything we can understand. His peace will guard your hearts and minds as you live in Christ Jesus.” So in preparing for this episode of Christian Financial Perspectives, we are reminded that the Christian life is about God holding us in his grip and us trusting him and that he’s not going to let go of us. And we know in this life we’re going to have trouble. We’re going to have those worries. But God’s word serves as the basis and the lifeline that comfort sustains and transforms us.

Mary Jo: Bob, as we were talking earlier, we talked about how we just want our clients and people that are concerned about the market to not worry so much and just find a sense of peace. That’s our intention for today’s message and just to remind some basic principles that should help bring peace as we think about the markets and the impact that it has on our retirement savings and income that can last a lifetime – two really important principles. Since our podcast is about what the Bible says about money, we’d be missing out if we didn’t talk about the current volatility we’ve been seeing in the markets the last few weeks. So here at Christian Financial Advisors, one of the things that’s really interesting is we don’t seem to get as many calls from clients during seasons of volatility. In my previous lives, I’m used to getting much more nervous clients calling all the time about what’s going on? What’s your perspective? What do you think should we make changes? And in other firms that I worked at in the past, that was more the norm when the waters got rough. They’re always looking for us to throw them a lifesaver, so to speak.

Bob: Well, you know Mary Jo, I hope that’s because, and I believe that is the reason, that we don’t get those as many of those calls is they really realize God’s in control and he owns it all. We’ve seen these rough seas before and we know the only approach is to have an ongoing approach, if that makes sense. If we use best practices and educate our clients and our friends like we do through this podcast, we don’t need to react emotionally when these markets get crazy like they’ve been getting because we’re already well positioned to withstand it. There is no guarantee of the future because none of us know what the future holds, but we do know that God holds the future in his hands. So as experienced Christian advisers, we’ve seen many market turn downs as well as periods of strong market growth and we try to establish some really good, best practices that we’re going to share in our podcast today.

Mary Jo: So, we also do have some best practices and some guiding principles that we want to share. The first one to start off with is to do a risk assessment, a true risk assessment and that will measure your risk tolerance. So do this every couple of years as your situation changes. We have a different risk tolerance in our 20s than we do in our forties and as we get in our sixties and closer to the point where we’re going to step away from our job, we won’t have the opportunity to replace that. So we want to do another risk assessment, and determine what’s appropriate at that life stage. I also want to say that if you can’t sleep at night, that tells me that you’re not investing according to your true risk tolerance, and you might want to consider a more overall conservative approach to your investment portfolio. What do you think about that?

Bob: I absolutely agree with you there, Mary Jo, and you know we did that podcast a couple months back on measuring your risk and using technology using that Riskalyze program that we have. And I will tell you, Mary Jo, as many clients as we have here at Christian Financial Advisors, you will have occasionally one that does get a little concerned when the markets do have their downturn. The majority don’t, because like I said, they know that we know that God owns it all. But as an example, I just did that risk tolerance questionnaire and went through that risk assessment online using Riskalyze just a couple of days ago. And you remember me telling you they really got it after that. I mean they really understood, okay I understand volatility and how the markets are gonna go up and down. Does that make sense? So the main thing is that you invest in a well diversified, what we call, risk appropriate portfolio. Preferably that’s using a biblically responsible investment strategy as well. Keep the funds that you’re going to need for the short term in cash or low risk investments that are not so tied to the markets.

Mary Jo: You know, if you’re relying on your portfolio for current income, then you should have three years worth of cash flow needs in cash or a low risk portfolio of short term bonds, treasury, CDs, and other types of investments like that. This is what we would consider an ultra conservative portfolio with zero equity exposure. Or, you know, you can take on a little bit more risk, maybe a more moderately conservative allocation that has minimal equity exposure.

Bob: I’m going to repeat what you just said there because – three years, most people would never think that – three years. Yes, three years because then when that market volatility’s happening, you’re not worried about it because you’ve gotten enough that you’re not going to have to touch growth investments for a long, long time. So, the next layer after you get that three years worth is a, like we said, the first is ultra conservative, then you go to a conservative, then you could start considering what we call a moderate allocation and that’s where you’re increasing your equity exposure slightly for income needs in the next five to seven years. This really allows for the part of your portfolio that may be growth or aggressive growth to rebound. And we refer to this as a bucket strategy around here. So just think of it, and if you can put this word picture in your head while you’re either driving – I was just talking to a person yesterday from out of state – they said, hey, I found you on iTunes and I really love how you use word pictures and things like that. So, think about this bucket strategy. Think here that you’re going to have five different buckets. So, you’re going to have these buckets full of water, but think of that as investments. So one bucket’s gonna be ultra conservative or just very little stocks or equities at all. It’s just mostly cash and CDs like you said, Mary Jo.

Mary Jo: That’s your three year bucket.

Bob: That’s your three year bucket. Then you got your next bucket and that’s going to be your four to five or six year bucket and that’s going to be your conservative and then you got your bucket kind of in the middle. That’s your moderate bucket. Then you’ve got these two buckets on the right and that’s gonna be your growth bucket. That’s going to have more growth types of equities in them. And we’re talking a diversified basket of them. And then you’ve got your bucket off here to the far right and that’s going to be your aggressive growth bucket and can be referred to as a bucket strategy. So you can think about dividing your money up between the buckets. It doesn’t have to all be in growth, it doesn’t have to all be in conservative, but we’re trying to say have enough in conservative and ultra conservative. Those buckets where when the growth’s acting like it is, which is a lot of risk and a lot of volatility, it’s not going to bother you and keep you up at night.

Mary Jo: I can’t think of a better visual than the bucket strategy. So, another best practice, we want to keep your eye on your longterm objectives. That’s what’s important. So what do you want to achieve over the long haul and stay focused on that. Remember that retirement can be a 30 year timeframe. So, you retire at 65 if you’ve got a fairly decent life expectancy, you’re going to have to make it till 95 so most investors need growth to sustain income over that lifespan. Also, you’re concerned about market volatility. Another great strategy, whether you’re investing or pulling money out is utilize dollar cost averaging – invest or withdraw a little at a time, especially if you got a large sum you’re working at. So you’re going to buy low and buy high. Buy low and buy high. Same principle when you’re investing in your 401k. You’re doing it on consistent calendar days and you don’t pay attention to what the market is doing. It’s a much more disciplined approach.

Bob: Yeah, like you say, that is a discipline strategy that forces you into staying the course, and that’s so important as we know when we have these high times of volatility,.

Mary Jo: Stay the course, not worry, and just do what you said you’re going to do and stay focused on that.

Bob: Just some things we want to share with you right now during this volatility that we do know. Just focus on some of the positive news out there instead of always the negative. Sometimes that negative can really get you down. Some positive news is right now consumer spending is still strong. As an example, retail sales in July were stronger than expected, and that’s three months in a row of weakening retail sales. That’s a key indicator of a recession, but we’re seeing just the opposite of that. And the consumer is responsible for two thirds of the economy. So in retail sales and it’s looking strong, that’s a good thing. That’s some positive news.

Mary Jo: Now, although consumer spending has slowed, we’re still seeing growth and we think that the market’s, they’re really being swayed by headline risk rather than actual fundamentals. In those headline risks, it’s all about the tariffs and the trade policies, about impeachment. So that is really what’s escalating the fear out there. Whereas, we want to focus on the positive as Bob said. Homebuilder’s competence is actually up as mortgage rates drop sharply. So builder confidence was 66 in August, which was slightly higher than July, wherein 50 is considered positive territory. So we’re doing well there and that’s a key indicator.

Bob: Another thing is normally a softening labor market is another key indicator, but we’re actually seeing an increase in jobs at a steady pace. Unemployment continues to remain at a 50 year low. Let me say that again. Unemployment remains at a 50 year low. I mean that’s really good news, and the Federal Reserve is poised for possibly another rate cut as they continue to take a stand toward easing some of those tariffs. So, a recession is defined as a significant decline in economic activity, which spreads across the economy lasting more than just a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale retail sales.

Mary Jo: So there are many current and variables indicate the economy is in really good shape, better than it’s been in years. However, the current global tensions and geopolitical factors such as the trade war with China, could have a negative consequence in the equity market. So we don’t want to lose sight of that. And this may mean that volatility, it will continue and a correction is likely, but many economic experts do not foresee a US recession in the coming years, so it’s not as bad as it sounds.

Bob: We do want to address some concerns in that bond yields have softened as global data weakens from China, Asia, and Europe due to a flight to safety and fear that the USA may follow this trend. And as a result, foreign investors are snapping up US bonds more so due to weakness oversees than any perceived weakness in the US markets.

Mary Jo: Factory output and industrial goods are down, and this is a result of the slow down in exports due to trade imbalances and trade war uncertainty, but manufacturing only represents 10% of the economy. China has shown some weakness, but not a sharp slow down. Reduced exports to the United States have resulted in increased exports to other areas of the globe. So some offsetting good news there.

Bob: We’ve been here before though. We’ve seen crisis after crisis that has rocked the markets in the years past, and the market has always rebounded in short order and gone on to achieve all new highs. It always has in the past. Will it always do it in the future? We hope so, but we can’t guarantee the future. Like you said, cause nobody knows the future. What information do you have that indicates this time is any different though? I don’t have any.

Mary Jo: I don’t have any. I think that we can only predict the future by what we’ve seen in the past. So, many in the financial press have shouted alarms about the recent yield curve inversion of the two year treasury rates over the 10 year treasury rates. And if you’ve been listening to the news at all, I’m sure you’ve heard something to this effect, they’re saying that this is an indicator of a recession and they believe the relationship between short term rates and long term rates offers insight upon upcoming economic condition. This was seen prior to the last five US recessions. What they fail to tell you is that over the last 40 years, the yield curve has inverted many times, and it’s taken several months and sometimes even years for a recession to materialize from the time of the first inversion. So this is anything but a clear indicator of an upcoming recession. The statistics just don’t support the narrative.

Bob: So in finishing today’s podcast, we want to encourage you to keep all this information we’ve shared with you today in perspective and our opinion, as well as that of many financial economists – the bias of the mainstream press right now is real, not imagined. Their goal seems to be to incite fear in the American consumer in order to possibly influence the upcoming elections.

Mary Jo: You know, you’re so right, Bob. Congress is also partly to blame. In anticipating the August recess, they wanted nothing more than to leave Washington with the marketing chaos in order to keep the heat on the current administration. So we think that this is what’s really fueling this storm, and we want to keep all of this, as you said, in perspective. So the best practices – set a longterm heading and stay the course.

Bob: All I can say to that is amen.

[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

Are you properly titling your assets to be passed to your intended heirs?

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This episode is a very educational, informative, and complicated topic on an extremely important subject – properly titling property and assets. We urge you to listen as it could mean the difference between chaos or an orderly process in the most extreme times of stress.

So, what’s in a name? Unfortunately, when assets aren’t titled correctly, property may not pass to the intended heirs. At death, property can pass in one of five ways:

There are pros, cons, benefits, and consequences to how property is titled. Property refers to investment accounts, savings accounts, and/or real property such as a home, land, a ranch, vacation home, boat, etc. Listen to learn more about properly titling your assets and property.

HOSTED BY: Bob Barber, CWS®, CKA® and Mary Jo Lyons, CFP®, CKA®

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Bob: Today’s podcast is going to be very educational and informative on a very complicated but extremely important topic. So, we urge you to listen as it could mean the difference between chaos or an orderly process in one of the most extreme times of stress. So what’s in a name? Let’s look at Numbers 27:3-11 in the Old Testament that tells a story of an inheritance of Zelophehad’s daughters and make sure I say that right again, Zelophehad. So here’s what Numbers 27:3-11 says, “‘Our father died in the wilderness. He was not among Korah’s followers who banded together against the Lord, but he died for his own sin and left no sons. Why should our father’s name disappear from his clan because he had no son? Give us property among our father’s relatives.’ So Moses bought their case before the Lord, and the Lord said to him, ‘What Zelophehad’s daughters are saying is right. You must certainly give them property as an inheritance among their father’s relatives and give their father’s inheritance to them. Say to the Israelites, if a man dies and leaves no son, give his inheritance to his daughter. If he has no daughter, give his inheritance to his brothers. If he has no brothers, give his inheritance to his father’s brothers. If his father has no brothers, give his inheritance to the nearest relative in his clan that he may possess it. This is to have the force of law for the Israelites as the Lord commanded Moses.'”

MJ: That is so interesting then how women and the laws have changed over time. I love the scripture. Thank you.

Bob: It is, and I figured out how to say Zelophehad. That’s a tongue twister. Say that one 10 times in a row fast.

MJ: But you know when it comes to your financial accounts, names are really important. Names mean things. How accounts are titled and how beneficiaries are listed is critical. The term titling refers to the legal form of asset ownership. So on today’s Christian financial perspectives, we’re going to be talking about understanding what these mean, why they are important, and what happens when they go wrong. Titling of accounts and beneficiary designations are two of the first steps in financial planning 101.

Bob: Yeah, today’s podcast is a really important topic, and it’s also complex. So, we’re going to do our best to simplify this and explain any terms that might not be familiar to you. We’re going to use some examples that hopefully will hit home for you, and if you have any questions, please as always, give us a call at 830-609-6986 during business hours or visit us on our website at ciswealth.com. The important thing to remember is to get help and ask those questions and seek the advice of an estate planning attorney as well as your financial advisor. So let’s look at this. At death, property passes in basically one of five ways – by law; by name beneficiaries like in an IRA or a 401k under the direction of the deceased; through a will, which is administered to the courts by process we call probate; under the direction of the deceased through a trust, which is another type of legal document administered by a third party; and/or according to the laws of the state if there’s no will, and this is known as intestate.

MJ: When assets are not titled correctly, property might not pass to the intended heirs. The form of ownership in which we take title to property can significantly affect the way the property is taxed, passed down to others at death, or divided in the event of a divorce. There are pros and cons, benefits and consequences to how property is titled. So by property, we’re referring to investment accounts, savings accounts, real property such as a home land, a ranch, maybe a vacation home, even a boat. You know, in my household I’ve always had this saying with my husband, his, hers, mine and ours. And we often joke, so what is mine is mine. What is his is mine and what is ours is mine. But you know, that’s all in good fun, but when it comes to titling of assets, it’s really not a joking matter.

Bob: That’s kind of Rachael’s philosophy too.

MJ: I figured as much. Us girls, we gotta stick together.

Bob: So let’s start with the titling of all your assets and accounts or account registrations. When two or more people own property, generally the options for title are Joint Tenancy with Right of Survivorship or Tenancy and Commons. And so if, you know, you go down to your bank and you open up a bank account, a joint account, this is the type of account it’s going to be. So keep in mind for the purposes of titling that “tenant”, that’s a term used to describe an owner, not a renter, which you can get mixed up him cause we’re used to hearing tenant. But in the case today, again, it’s a term used to describe an owner, which can be a little confusing.

MJ: Joint ownership can get really messy in the event of a divorce, a second marriage, children that come from multiple marriages, adoption, and blended families of all types. In today’s world, that is what we are dealing with more often than not. So, it’s important to understand the different types of ownership so you know that when a change may be needed in order to accomplish your goals and what you want to have happen with your property.

Bob: And as you say, that is so true today, especially because we’re living longer. So one spouse outlives another spouse and gets remarried, and they both have children. So that’s so important for everybody to keep that on their mind as we’re going through this.

MJ: Yeah, absolutely.

Bob: There’s Joint Tenancy with Rights of Survivorship or you might see the abbreviated and acronym is WROS. And that means when one of the joint tenants dies, the other owner takes control of the entire property. So you own it together. One dies, it’s easy, it goes to that person that’s living. The title states that two or more parties have simultaneous ownership. This is most commonly used between spouses or siblings like in a joint bank account. The deceased owner can pass none of it to anyone but the joint tenants, and spouses often agree that all or part of their community property will become the property of the surviving spouse upon the death of a spouse.

MJ: Usually that’s the case, but not always.

Bob: So this type of agreement must be in writing, signed by both parties, describing the community property subject to the agreement like banking accounts, investment accounts, etc, and include the appropriate language such as joint with right of survivor, which means it will become the property of the survivor or shall pass to the surviving spouse.

MJ: You know, Bob, if these statutory requirements are met, then the courts can’t intervene. So transfer of ownership in this case is not subject to the terms of the spouses will. Ownership reverts to the titling of the assets, and that’s the important thing you have to remember. So Joint Tenants with Rights of Survivorship is important because it eliminates the need for those assets to be probated through the courts. The information remains private. It’s not out there for public display. Ownership in this form dictates that all property interest goes automatically to the surviving spouse or co-tenant.

Bob: This is so important. As an example, when you buy a car or you buy anything like that, you want to buy it as a joint with right of survivorship. Otherwise, it’s going to have to go through probate and you don’t want to make life more complicated than it needs to be. So the next is Tenants in Common. That’s another form of ownership that’s commonly used for business partners. So, an example is when a partner dies, his or her share the business passes directly to his heirs as his will or living trust directs. Each party may freely sell, pass by will, lease, or otherwise transfer their interest in a business under a tenant in common as we’re speaking about. If a business partner dies without a will, the state determines how the business interest is distributed. In general, co ownership of a business, like in Texas where we are located, is presumed to be tenants in common unless specified otherwise.

MJ: So less common is Tenants by the Entirety. This is not recognized in Texas, but it’s one you may hear about as other states do use it. This can only be used by a married couple that owns property together. This titling only lasts as long as the couple is married. So under aTenants by the Entirety, ownership cannot be separated, which means creditors of an individual spouse may not attach and sell the property. Only creditors of the couple may make claims against the property. You know, there’s many things to consider when it comes to titling of assets and when it comes to the passing of property, it’s important that your intentions are carried out, but things can easily go wrong if the titling is wrong. So, that’s why we wanted to bring you today’s episode.

Bob: And if this is getting really complicated, we encourage you to keep listening, but we also encourage you to always feel free to pick up that phone and give Mary Jo or I a call during business hours at (830) 609-6986 to go over this with you because we really want to educate you about this very important topic. So, let’s go back to the Tenants and Common Registration or Title and some of the problems that it can pose in a business partnership. You have a business you own with two partners and suddenly one of you dies. That share is passed to his or her heirs per a will. So in this case, the surviving spouse, who may not have any knowledge, interest or desire in the business, they become a part owner in the business with the two other partners, and this can be very awkward and can put the whole business in an awkward situation, but this can all be avoided with proper planning.

MJ: So in Tenants in Common, ownership passes to the heirs of that owner. Whereas in this situation, if they had used their survivorship provision of a joint tenant with rights of survivorship in place with the business partners, it would have allowed the owners to automatically and immediately inherit another owner share if one of them should die. The property would pass outside of probate and by operation of law. Let’s look at another example. So let’s say you are one of four siblings and your only surviving parent is getting older; they need help with the bills. Mom decides she wants to add you to her bank accounts, investment accounts, checking accounts, et cetera, as a joint tenant rather than as an authorized signer. Well, mom passes away. Now, you own all of these assets. So you may be dancing in the streets, but your siblings have, for all intensive purposes, just been disinherited. So, is this really what mom wanted to happen? Oops, I’m thinking there might be some family drama happening. What do you think Bob?

Bob: It depends on who the favorite child is, right?

MJ: This is true. So, you can how just the little nuances between those two registrations and what a huge difference it can make in your estate planning.

Bob: I’ll tell you, Mary Jo it’s interesting as we go through this and does, I’m talking about this, you realize more and more on the importance of how all of this is titled.

MJ: Yup.

Bob: So let’s take a look at another interesting solution like a married couple that are injured in the same car accident or common disaster. When assets are titled Joint With Rider Survivorship, the surviving spouse in this case must survive the deceased one but at least 120 hours or five days. Because if this doesn’t happen, the property is going to be divided and passed according to the will of each person. So again, this kinda comes back, Mary Jo, to possibly eight second marriage and how that could be affected with children from each one. Let’s take a look at the roll of the last will and testament. In the absence of a will in our state of Texas, the probate code is the fallback by default. So without a will in Texas, you’re setting yourself up for the state to decide who’s going to get your property, and there’s other states like this as well. When a real estate deed contains no survivorship language, a co owner can make their wishes plain by using a valid will to provide specific language for inheritance of the deceased interest.

MJ: With Joint Tenant Ownership, both spouses need to sign the deed to sell a home. However, if the home is titled as Tenants in Common, a spouse can sell his share of the property without the other spouse’s consent. Both parties have a separate indistinct interest in the home. And you know how some of these marriages start to fall apart and there’s friction? You know, I can just kind of see that happening in the case of a disharmony or divorce and that would not go as planned. And in situations where percentage ownership is desired, let’s take a look in a business again. Somebody has 60% ownership, but then there’s two other partners with 20% ownership each. So you have a 60%, 20%, and 20% ownerships between three different people. Then, joint tenants with rights of survivorship titling cannot be used in that situation.

Bob: So let’s look at that scenario, but older, widower, with children that has a lot of property and assets. If he remarries but once those assets to go to the original children, it is important to keep them isolated as separate property. Otherwise, they would go to the new spouse in the event of his death before his new spouse and potentially to her heirs if she lives longer. So, the assets should be listed out and itemized as part of his estate planning. If those assets are co mingled, as in a joint savings or checking account, it’s seen as if those assets were intended to be a gift and those assets may not pass to the original children as intended. It does not even have to be formal. Merely treating certain personal property as if you both own it could accomplish the same thing. If you both bring furniture and housewares into a marriage and use them interchangeably without distinction of ownership. Those items I have probably become community property.

MJ: If I sit in Mike’s big man recliner that he’s had since forever, then that means that we jointly own it as opposed to him owning it.

Bob: That’s correct.

MJ: Interesting.

Bob: I think of antiques in this situation, Mary Jo.

MJ: His recliner is an antique.

Bob: Well, I’m not going there. Poor Mike. We always talk about Mike. Please, we’ve got to get Mike on the program one day because we make fun of Mike, and you mess with Mike constantly, and Mike is your husband of all things. We don’t mess with Rachael that bad, I noticed, on my end. As I think about this, we’ve had some antiques in our family and you know, Mary Jo, our family goes back 185 years in Texas and we’ve had antiques for many, many years that have passed down from one generation to another. So, if anything should ever happen to Rachael, and I were to remarry after four or five years and then I were to die before the spouse I remarried, those antiques may not stay in the family line because they can become community property.

MJ: So in Texas you need very convincing evidence to overcome the presumption of community property. Now here’s an interesting what if scenario. You have a home. It’s in one spouse’s name, and that spouse dies. What happens to the home? Many assume the surviving spouse automatically gets the house, and it’s not always the case. The law varies by state, so it’s important to know your rights and know the state property laws. You want to trust, but verify. A very important American once said, “In the U S Property Law, legal ownership of real property, such as a house, is evidenced through the deed on that property depending on the state. If you are not listed on the deed of that property, you are not considered it’s legal owner, even if you’re paying the mortgage.” So, your participation in paying that mortgage doesn’t mean that you are going to actually have ownership unless your name is on that property. That’s true in certain states. However, in a community property state such as Texas, money earned by either spouse during marriage and all property bought with those earnings, including a home, are considered community property and deemed to be owned equally by the couple. So generally, this applies no matter whose name is on the deed. Likewise, debts of either spouse incurred during marriage are generally considered debts of the couple, and you’re both responsible for them. See, it definitely gets complicated.

Bob: Yes, it does, and I feel for people that don’t do this on a daily basis like you and I do, Mary Jo, because it’s so much to remember, and it’s so important that you seek the advice of a good qualified estate planning attorney and financial advisor to help you with this.

MJ: Not all of our clients are in Texas. We serve clients all across the country, and we know we have listeners all across the country. We’re talking a lot about Texas law, but you need to be familiar with the laws in your state.

Bob: You know, there are a few other things you should be aware of in dealing with property and the titling of assets. If you are not named on your home mortgage, the spouse whose name is on the mortgage can borrow against the equity without your consent or knowledge. And if you’re not on the title, your spouse who is on the title can sell property without your consent. Another Uh Oh, and the spouse who is on the title can give the property to someone else in the event of his or her death. So he or she could, for example, leave the home to the children instead of you.

MJ: Another question that this brings to mind, can you get a home loan without your spouse? And yes you can. You can purchase a home and be the only person financially obligated. Your name can be the only person on the loan. Here we go again. However, in the state of Texas, your spouse will still be required to sign the security instrument at closing because Texas is a community property state. So guys, you can run but you can’t hide.

Bob: So let’s look at that again – community property versus separate property. Typically property that is considered separate property in Texas includes property that was owned or claimed before a marriage. Certain types of property acquired during the marriage such as gifts and inheritance and even social security benefits is considered separate property unless it’s co mingled.

MJ: That’s true – an important point. So in a community property state like Texas, all debts incurred and assets accumulated by either spouse during the marriage are classified as joint property. Each person owns an undivided interest in the entire property. When one spouse dies, the survivor automatically receives the entire interest, avoiding the need for probate. Property titled as community property will not be controlled by a person’s will or trust. There is also a benefit from a capital gains tax perspective in that the entire property, not just the half belonging to the deceased spouse, will receive a step up in cost basis upon that death. That’s huge from a tax perspective. Community property states include Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. These are all states that are mainly in the western United States, which is just kind of interesting.

Bob: I was hoping we were going to get to those states that were included in that, and I’m glad you said that. Again, that’s Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. If a home is acquired during a marriage, the wife’s name doesn’t have to be on the deed for her to have ownership rights. She’ll still need to sign as a grantor on the deed along with her husband to sell the home. However, if the husband owned the property before the marriage and his wife isn’t on the deed, the husband can legally sell the home without his wife’s consent.

MJ: Hang in there with us. We have just a few more points on titling of assets. We’ve gone over a lot, and today’s podcast is likely generated some questions in your mind regarding your individual, unique situation. Bob and I, we’re here to help. So, give us a call at Christian Financial Advisors or schedule a complimentary consultation on our website at ciswealth.com

Bob: Well, so far we focused on assets held in joint names. Now, let’s look at property that is sole ownership and in one name. Typically, assets in a single name are controlled by a will, but it can also be controlled through a transfer on death. We call that “TOD” or a payable on death “POD” designation. Establishing accounts with the TOD or POD designation bypasses the executor or administrator of your estate. The beneficiaries must take steps to re-register the account into their names.

MJ: There are also contractual relationships. These are accounts rule by a beneficiary designation. These types of accounts pass by named beneficiaries as part of a contract. Commonly held contractual accounts are annuities, life insurance policies, employer sponsored retirement accounts such as your 401k, 403b, 457 plan, and even your IRA and Roth IRAs. The will only controls disposition of contractual accounts if no beneficiary is specified or if the state is named as the beneficiary. So reviewing your beneficiary designations periodically is a really important step to a solid financial plan. Life gets crazy at times, and situations change as your life evolves. I can’t tell you how many times I’ve seen the name of a former spouse still listed as the beneficiary on a 401k or an IRA, and now there’s a new spouse. Ouch. I’m thinking somebody’s not gonna be too happy about this. What about you, Bob?

Bob: I’ve seen million dollar life insurance policies where the old spouse is still listed as the beneficiary.

MJ: Oh, that’s trouble happening.

Bob: So finally, for the last thing in today’s podcast – let’s look at assets that can be held in a trust. There are many types of trusts that can be established to take ownership of assets. The type of trust you choose can vary depending on what you want to accomplish and could have a significant impact on income and estate taxes. The final disposition of the asset and a trust will be determined by its terms. If you think your situation is complex and a trust might make sense, now’s a good time to seek the services of a trusted legal advisor. We can always provide a referral if needed. So, that’s it for the day on a very complicated but extremely important topic that nobody’s talking about. For more information about today’s podcast, please feel free to contact us by calling (830) 609-6986 during business hours or by going to christianfinancialadvisors.com

[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

This episode of Christian Financial Perspectives is provided for general education purposes only and may not be complete in nature. Neither Bob Barber nor Mary Jo Lyons are attorneys. We encourage you to seek both tax advice and legal counsel relating to your individual needs and circumstances before taking any action. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional.

Learn the steps that you should take if you suddenly come into an abundance of wealth.

More episodes >>

This episode is perfect for anyone that has recently, or soon will, come into a large amount of wealth. The phenomenon of suddenly coming into wealth is called – you guessed it – Sudden Wealth Syndrome. Bob and Mary Jo discuss four psychological dangers and four solutions for Sudden Wealth Syndrome, as well as nine common ways sudden wealth is obtained. This includes oil and gas discovery, an inheritance, winning the lottery, a personal injury lawsuit, and even being signed by a sports team.

Sudden Wealth Syndrome is described by Investopedia* as:

A distress that afflicts individuals who suddenly come into large sums of money. Becoming suddenly wealthy can cause one to become stressed and make decisions they might not have otherwise made. Sudden wealth syndrome symptoms can include feeling isolated from former friends, feeling guilty over their good fortune, or an extreme fear of losing all their money.

* https://www.investopedia.com/terms/s/suddenwealthsyndrome.asp

HOSTED BY: Bob Barber, CWS®, CKA® and Mary Jo Lyons, CFP®, CKA®

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Bob: Sudden wealth. It can be a blessing or curse. As Psalms 49:20 tells us people who have wealth but lack understanding or like beasts that perish.

Mary Jo: In Ecclesiastes chapter five verses 12 through 14 – “The sleep of a laborer are sweet. Whether they eat little or much, but as for the rich, their abundance permits them no sleep. I have seen a grievous evil under the sun. Wealth hoarded to the harm of its owner or wealth lost through some misfortune so that when they have children there is nothing left for them to inherit.” If you or anyone you know has suddenly come into a large amount of wealth, or soon will, then you will want to listen to today’s podcast. It’s about a phenomenon called sudden wealth syndrome.

Bob: First, let’s go into nine ways that we’ve seen sudden wealth obtained. The first one I have written down here was such a big one four or five years ago, and that was an oil and gas discovery on your land. And what we’re going to be sharing in today’s podcast is a lot of the workshops that I did with those down in like Cuero, which is about 45 minutes south of the New Braunfels, Austin, and San Antonio Corridor, and that was called the Eagle Ford Shale for those of you that are listening that may be not familiar with that. Well, four or five years ago there was this huge discovery people went from being poor to extremely wealthy overnight. So, a lot of what we’re going to share with you today is about that type of wealth that can come on quickly through an oil and gas discovery.

Mary Jo: That was such a big thing for this area in our neck of the woods. We should all be so lucky, but it was a blessing and a boom time. But then it also was a crash and not so good at times. So, there is a lot tied up in that, and it’s very real for us in central and south Texas

Bob: Hitting the oil and gas was like winning a lottery. And you know that’s another way that sudden wealth is obtained. One of the most common ways sudden wealth is obtained is from a large inheritance from a wealthy relative. We see this a lot, don’t we? Boy, it can be spent so fast. Another way is a large lump sum benefit at retirement. Maybe you knew that was coming, but we call that sudden wealth because it’s suddenly the sell of a valuable piece of real estate, a personal injury lawsuit, taking a company public, company stock options. Then, we have those that are very blessed physically. The Lord just blessed them and they’re good athletes and that’s a sports contract with a professional team. Boy, they just come into all this sudden money that they just don’t know how to handle it. And again, we call that sudden wealth syndrome.

Mary Jo: You know Bob, Investopedia defines this phenomenon called sudden wealth syndrome as a distress that afflicts individuals who suddenly come into large sums of money. Becoming suddenly wealthy can cause one to become stressed and make decisions they might not have otherwise made. Sudden wealth syndrome symptoms can include feeling isolated from former friends feeling guilty over the good fortune of an extreme for and extreme fear of losing all their money.

Bob: So, there’s four psychological traits that we’re going to go through for sudden wealth syndrome also referred to as SWS, and we’re going to break that down into detail. The first psychological trait, it makes you different. That’s because all of a sudden now you can drive nicer cars if you want to. You can live in a larger home in a nicer area and even possibly buy a second vacation home. You can buy different clothes and accessories. You can even fly first class to far away places like Hawaii and Europe and anywhere else you may desire. You can eat at nicer restaurants and even buy food that’s better for you, such as organic, non GMO at places like Whole Foods that can be very expensive but it’s healthy. You can buy the latest iPhones and computers, technology and other electronics and get the best medical care for you and your loved ones that before this you couldn’t do.

Mary Jo: You know, Bob, all of these are nice things and it’s a great blessing to have, but I want to go back to the different clothes and accessories. You forgot shoes. We could buy more shoes. Second, sudden wealth can also cause isolation. Your old friends can’t go everywhere you can now. Your old friends can’t afford to stay at the hotels you can like a Ritz Carlton, a JW Marriott, the Four Seasons, or a Grand Hyatt. They can’t afford season tickets to professional sports teams on the floor at the 50 yard line or in a suite and they can’t drive luxury automobiles like Mercedes, Lexus, Land Rovers, BMWs, and of course that King Ranch edition, big truck that you’ve got sitting outside like so many of our neighbors do. They can’t afford these things and they’re uncomfortable when you offer to pick up the tab, so the dynamics can change in those relationships, and it can create a feeling of isolation.

Bob: Third sudden wealth syndrome can create a dangerous mindset. We’ve seen this a lot. I’m now smarter than everyone else because of my new found wealth, and I no longer need to listen to the advice of others. Boy, we’ve seen that one online. I can buy whatever I want whenever I want it without regards to any budget. I can manage it better than others now that I’m wealthy. No one tell me I can’t have it when I can pay for it now, and I can afford it all because I have plenty, for now at least, and I’ll never run out. So, how many times have you heard about that professional athlete who signs a big contract and then is broke in a few short years. They end up with an injury and can’t play any longer or they end up having to support family members and/or they end up supporting lots of other folks that just kind of come out of the woodwork wanting some money.

Mary Jo: So Fourth. Sudden Wealth Syndrome, it can create stress and anxiety and lack of sleep over things like the sudden reality of the income taxes at this high income tax bracket you’re suddenly in because you always heard that wealthy, they don’t pay their fair share from all the liberal politicians out there. You’re also impacted with capital gains taxes. There are increased expenses on living wealthy, increased maintenance cost on larger homes, luxury automobiles, et cetera. Not only are they more expensive, but they cost more to maintain. You’ve also got the envy of others and demanding that you share it. Also, there’s a liability, exposure and legal expenses that come with that. You’ll need your own attorney on call due to a larger footprint and extravagant lifestyle and some of the high risk activities that you may now be participating in. And not to mention every other attorney just waiting to sue you over something, so they’re all waiting in line out there. You’ve got investment volatility that you need to be suddenly concerned about. You’ve got pent up material once of things you’ve always wanted. Those childhood dreams that you have. It kind of reminds me of a certain celebrity stardom, who was that name and that ranch – Neverland. Does that ring a bell? The need to have more and more. There’s lack of contentment and self worth. There’s also a fear of losing it all, becoming lonely and depressed that it can provide real joy like you thought it could and a lack of significance.

Bob: So Mary Jo, I don’t know if I want to be suddenly wealthy now after hearing all this.

Mary Jo: I know. It might be a dark space.

Bob: Okay, so we’ve talked about some of these issues, but we do want to share with you solutions. So we’ve talked about four major issues. So let’s get into some solutions and healing with sudden wealth syndrome. And the first solution is what we define as what the purpose of wealth truly is. Because remember that money is basically only spent on four things. And you’ve heard us talk about this many times on the podcast living, giving, what you owe, which is debt and taxes and you’re always going to owe taxes, and growing some for the future. So, when you think about the purpose of wealth categorize it. Categorize your wants versus your needs, and it’s really only going to be spent on clothing, shelter, health, and medical needs, education, create a well thought out giving strategy for those that you want to help. How can that wealth that God’s blessed you with glorify him? Really, the bottom line to this first part is don’t think selfishly, don’t think just about yourself when it comes to what the purpose of this wealth is.

Mary Jo: The second solution is to seek counsel. Seek counsel from others who’ve been in your situation for many years, and they’ve learned from their mistakes. Seek counsel from those who’ve gained wealth entirely on their own over many years and have learned how to handle it well. You also want to seek counsel from a fee only, fiduciary based, financial planner that aligns with your values and the virtues of an overseer that we have found in the first book of Timothy Chapter three. From Solomon’s writings in the book of Proverbs and Ecclesiastes found in the old testament who was the wealthiest man to ever live on this earth. And lastly, do not seek counsel from friends, family, and others who have not obtained wealth on their own or come about it suddenly. That’s the last place you want to go for wisdom.

Bob: Yeah, Mary Jo, I remember when we did our third podcast about how to find that fee only planner, and we went over all those virtues in 1 Timothy 3. That was a good while ago. We’re coming up on a year now. So, the third solution when it comes to sudden wealth strategies and sudden wealth syndrome is establish written financial goals. You know the book of Deuteronomy sixth chapter in the ninth verse. It talks about this, writing things down like scriptures on your door frames of your homes and your gates, and write them on a tablet and scribe them on a scroll. Write them in your heart. So important. Write things down and look at those financial goals and cultivate a longterm perspective for making all those financial decisions, not a short term one. You need to determine how much is enough. What do I really need to support a reasonable lifestyle for the rest of my life with this sudden wealth that the Lord has blessed you with?

Mary Jo: Do you want to leave a legacy? You want to develop a plan to establish this. What impact do you want to have on the next generation? You also want to develop a giving strategy. We mentioned that a little earlier. In 2 Corinthians chapter 9 verse 7, “Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion. For God loves a cheerful giver.” You also want to diversify using biblical principles. In Ecclesiastes chapter 11 verse 2 it reads, but divide your investments among many places for you do not know what risks might lie ahead. Stay consistent and be wise without getting caught up in making monetary gains quickly.” You also want to avoid risky investments if you’re not willing to lose it all.

Bob: And for all means in this stage, why would you need to borrow money? So, avoid using leverage and borrowing money to invest. Proverbs 22:27 speaks of this. “If you lack the means to pay, you’re very bad could be snatched out from under you.” So if you overextend yourself, there’s just really no reason to do that, but that’s what could happen. Monitor all your anxiety and emotions. Establish limits on the amount you’re going to invest, and pray about it. Share and discuss all your financial decisions with your spouse, and if you’re not married, with a close brother or sister in the Lord that can help you. Well, you know we like to use scripture and we’ll refer to this one. for that – Philippians 4:6, “Do not be anxious about anything, but in every situation by prayer and petition with thanksgiving, present your requests to God.”

Mary Jo: You know, Bob, I think that is just one of my all time favorite scriptures. Don’t worry about anything but pray about everything. And that is so true in this situation and with this very important topic. And the last solution is understanding the different perspectives of wealth, and one perspective in particular is a secular worldview. And in a secular worldview, you think about it, it’s all about me getting rich quickly, thinking short term. It’s all about spending and consuming. Time is the enemy. You begin to think about things like day trading and gambling in the markets, and it’s so easy, anyone can do it. That’s not the case, however.

Bob: And the other perspective though is a biblical worldview, and that’s preserving and growing wealth little by little. Like Proverbs 13:11 says, “Dishonest money dwindles away, but he who gathers money little by little makes it grow.” Another worldview is thinking longterm about wealth. I love the scripture from Luke 14:28, “Suppose one of you wants to build a tower. Will he not first sit down and estimate the cost to see if he has enough money to complete it.” That’s thinking long term. And saving and investing from a biblical worldview too, which is investing in good companies while avoiding the bad and looking at values based investing and doing that in a wise way.

Mary Jo: You know, time is my friend and a tool so we want to remember that. In Proverbs chapter 6:6-8, “Go to the ant you sluggard. Consider its ways and be wise. It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest. Diversification is wise. In Ecclesiastes 11:2 it tells us, “Give portions to seven, yes to eight, for you do know what disaster may come upon the land.” And especially seeking experience counsel, so much biblical wisdom here. In Proverbs Chapter 15 :22 we learn, “Plans fail for lack of counsel, but with many advisors they succeed.” You’ve heard us repeat that scripture many times on our podcast, but it’s so true in this situation.

Bob: So there you have it. We’ve gone over 4 psychological traits of sudden wealth syndrome and 4 solutions. You know, Mary Jo and I, we’ve seen it all when it comes to sudden wealth, and we want to guide you and coach you through all these maze of questions if you or anyone you know is coming into a large amount of money. The main thing in hearing all of this is realizing that it can all be gone in the blink of an eye and not to make any quick spending decisions until you seek professional counsel from a well qualified financial advisor that’s going to put your interests first. We recommend using the services of a fiduciary, fee based advisor that gets paid by you, not an annuity firm or a brokerage house in the form of a commission. Again, that can create a huge conflict of interest. If you have any questions, feel free to call one of us at (830) 609-6986 or visit our website at christianfinancialadvisors.com.

[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

Living with and preventing financial regret.

More episodes >>

How often have you looked back with regret on something that you did (or didn’t do)? We make countless decisions every single day, and there are bound to be some regrets. Regret can often be wasted energy. Unfortunately, you can’t change the past, but you can move forward with better clarity.

Often times, it is financial decisions that are filled with regret. Many times, it’s because we didn’t know any better. Unfortunately, most people don’t really understand their complete financial situation and if it is healthy. Bob and Mary Jo are here to help with that by presenting some of the most common financial mistakes that they see with clients.

HOSTED BY: Bob Barber, CWS®, CKA® and Mary Jo Lyons, CFP®, CKA®

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Bob: Ephesians five 15 through 17 be very careful then how you live. Not as unwise but as wise making the most of every opportunity because the days are evil. Therefore do not be foolish, but understand what the Lord’s will is.

Mary Jo: James Chapter one verse five – but if any of you lacks wisdom, let him ask of God who gives to all generously and without reproach and it will be given to him. How often have you looked back and regret on something you did or didn’t do? Since we make 35,000 decisions each and every day, we will clearly have some regrets, but for some of us there are far too many regrets and in my opinion, regret. It’s just a wasted energy. You can’t change the past, but you can move forward with better clarity. Ralph Waldo Emerson once said, for everything you have missed, you have gained something else. So life is a lesson. The decisions we make are hopefully the best we can do at the time with the information we have available. Another quote that I read recently that I thought was pretty profound was from Brene Brown. She declared in her book “Dare to Lead”. When we have the courage to walk into our own story and own it, we get to write the ending. And when we don’t own our stories of failure, setbacks and hurt, they own us. So when it comes to your financial health, we encourage you to own it.

Bob: So Mary Jo, I got to ask you – 35,000 decisions every day?

Mary Jo: Well, you know, a decision to do nothing is still a decision.

Bob: We’re making a decision to talk. We’re making a decision to move. Yeah, you’re right. That’s a lot of decisions.

Mary Jo: Think about it – brushing your teeth. That’s a decision.

Bob: If the normal person has 35,000, does that put me at about 60?

Mary Jo: Yes, Bob. Yes. Yes it does. But that’s another podcast.

Bob: Most definitely. Today’s podcast is going to be really fun. When I say fun, we’re going to talk about common financial mistakes and most people have a general awareness of their current financial situation, but most people, they don’t really understand their complete financial situation and it is really healthy. Some people, they saved a lot, but they’ve spent it off. They may not really have enough. I think about this as an example. Someone that comes in and we see this a lot. Mary Jo, you know, they’ll come into our office with one and a half million dollars and they think they can pull off for retirement $150,000 a year from that one and a half million plus their social security and pensions and they don’t realize that withdrawing 10% a year over 20 year period or less with inflation in a moderately invested portfolio that’s built for a retiree that’s going to deplete that portfolio completely. I just don’t think they understand that, you know?

Mary Jo: No, I don’t either. And we see that a lot and we’re always having to reset expectations. But I think you said something really interesting right there was that a moderately invested portfolio is ideal for a retiree. And you know, we don’t do cookie cutter and we’ve made these grandiose generalities when we say that moderate is appropriate for a retiree, but reality is a moderate allocation has won the race over the long haul repeatedly. And when you become very aggressive, even though you have time on your side, when the market does have a decline, your lows are much lower and it takes longer to make those up. So having a moderate portfolio that doesn’t drop so severely in a down market will save you over the long haul. That’s why we say that the moderate portfolio is appropriate for retirees, but probably most people,

Bob: And I’m glad you brought some clarity to that cause that’s true. As we move through life, even if we’re trying to get our financial life on track, it is human nature to make those mistakes because when it comes to money, sometimes those mistakes can be emotional, and we have got to make sure that we take emotions out of those decisions. Sometimes they’re due to a lack of understanding, and sometimes they’re just due to a lack of foresight or whatever. The reason is it seems that mistakes happen to all of us as much as we don’t like them, but hopefully by walking through some of these common mistakes, we can help you avoid that same path.

Mary Jo: Bottom line is there are actually only four uses of money. Live – what we spend it on, give – what we give it to. Owe – that’s for taxes and debt and grow. So live, give, owe, and grow, and grow is for the future. It’s savings and investments. And we call these the four short term uses of money. Today we’re going to review some common mistakes people make that can have a negative impact on their financial fitness. So let’s get started.

Bob: All right, we’ve got a lot of these to go through. So the first one that we see is people just burying their head in the sand and saying, oh, it’s not going to happen to me now. Like not reviewing their investment accounts on a consistent basis, looking at what’s working and what’s not, and making those necessary changes as needed. And it seems most people just continue to invest in their company’s sponsor retirement accounts such as a 401k or 403b each pay period, but they never review where it’s going. There’s no idea and they’re not looking at that on a consistent basis.

Mary Jo: We’re busy and we forget about things and sometimes we just don’t want to get started on something that they feel like is going to be, I don’t know, drudgery, but just getting started is the hard part most of the time. When it comes to your investments, are you considering which fund your retirement plan offers that are best in class? So you want to take advantage of these funds whenever possible, and maybe your spouse’s plan has a different best in class fun. So you want to consider the overall allocation, looking at all the accounts together rather than investing each one in a vacuum. By doing this you avoid overlap. You avoid investing in core performers, which none of us want to do.

Bob: Also make sure you’re adjusting your risk tolerance as time goes on, and be sure you know how to access your retirement accounts and that this information is available to your spouse and your financial power of attorney as well. So that’s one of the first mistakes we see. What’s the number two mistake we see?

Mary Jo: I think it was a toss up. This could be the number one actually, but let’s just keep going in order and it’s trying to time the market we hear about this so often and you know Bob, if it were possible, everyone would be doing it and we’d all be making millions. You and I would be retired on an island in the Pacific. It’s possible to get lucky once in a blue moon, but no one in history has ever been able to consistently time the market. So we just want to encourage you to make a commitment and stick to it. If in doubt you want to consider dollar cost averaging. This is when you buy a fixed amount on a fixed, predetermined schedule. You set it up automatically.

Bob: You know there’s another part of trying to time in the market that most people don’t think about and this is those that are sitting in cash on the sidelines because they’re always too nervous to make that move and that’s a part of market timing as well. No one knows for sure when the market low or high is going to be, and if you’re waiting to get in and look for a drop, if you see this big drop come in, dollar cost average into the market, that means let’s say you want to put $50,000 in the market, well put $5,000 in the market in 10 different increments that gets up to that $50,000. We call that dollar cost averaging and do that on a consistent basis and don’t look back because if you do, there’s the old adage that’s out there. As soon as you get into the markets, they’re going to go down and as soon as you get out they’re going to go up. So trying to time it, it’s just going to drive you crazy.

Mary Jo: When we invest in our company 401k or 403B or whatever retirement plan they offer, we’re actually doing that dollar cost averaging because each week or each pay period, when they take the money out for our contribution, then that gets funneled into our account and invested. And it happens methodically over time. So same principle.

Bob: It’s kind of funny when people look at me with kind of a deer in the headlights look, I’ll say, now what you want to do if you’re putting money into the market monthly is you want the market to go way, way down and stay down for about 15 or 20 years and then go way up about a year or two before you retire. And they look at me and go, why is that? I said, because you’re buying cheap and then it’s gonna go up.

Mary Jo: That would be nice if that would only happen on our timeframe, but it may not be our neighbor’s timeframe.

Bob: That’s right.

Mary Jo: So another common mistake is reacting emotionally and sometimes acting like a day trader. So that’s where you’re buying or selling based on headlines versus following a longterm strategy. And basing your decisions on fundamental research. Day trading is a loser’s game day. Day traders are people that make a living on short term investment moves, buying and selling in the same day at times or just doing so very frequently.

Bob: You know, we all hear those stories or see the advertisements that claim you can learn to trade like the pros, right. You know, and they only tell you about the extremely few people that are successfully doing this on their own, but they never talk about the ones that are slowly dwindling away their savings that are trying to trade like those pros. And I’ll tell you, there’s far more losers than there are winners when it comes to trying to compete against the pros with their multiple staff members. They have master’s and doctorate degrees in finance and economics. They’re using sophisticated algorithms. You’re just not going to be able to compete. It’s like me, Mary Jo, I’m not blessed with that height. I don’t think I would compete very well getting on the floor with the San Antonio Spurs, my team since we’re so close to San Antonio. So trying to trade like the pros is very, very difficult. And if you’re buying and selling in a taxable account, you should also be aware of the tax consequences and fees that come with that.

Mary Jo: That kind of brings us to our next common mistake and not not paying attention to tax consequences and investment placement. What we mean by that is, you know, you gotta be thoughtful where you’re placing the kinds of investments. There are certain investments that are great for a tax deferred account, and there are other investments that are much more tax efficient for a taxable account. And if you have inefficient investments in a taxable account, these can spin off capital gains and dividends and other tax consequences that’ll create taxable income for the year. So you want to be thoughtful about this. Speaking of taxes, you’ve got traditional mutual funds. These are those examples I was talking about. These are best suited for tax deferred accounts because they do spin off capital gain payouts. And taxable income to you as the shareholder. So instead, we’d recommend that you use tax efficient exchange traded funds and/or dividend paying stocks that you plan to buy and hold. And if you have questions about that, Bob and I are here to explain it and help walk you through that and make sure you understand what the differences are.

Bob: So I want to get a little bit into this tax code and helping you understand just a little bit of this. We’re not going to get too detailed, but understand your holding period that any gains are taxable when you sell. So you got your term gains and that’s anything you’re holding less than a year and that’s taxed at ordinary income tax rates. So if you’re in a high tax bracket, be very careful of that. Then you have your longterm gains as greater than a year. And that’s tax to either a 0, 15, or 20% rate, depending on your income level. But dividends, they’re taxed at ordinary income and investment losses can be offset. So under the tax code, investors can write off any amount of losses against their gains. So as an example, if you lose $50,000 one stock and make $50,000 and another, these gains and losses are offset. Really, you’re at zero. If your losses exceed your gains, you can write off up to $3,000 of the excess losses each year against your income known as carry forward, and you can carry those losses forward until you’re able to offset them. Also, let me give you an example that, so let’s say you have a loss, a pure loss, $30,000 you can’t write that all off, but you can write off $3,000 of that for up to 10 years against your taxes.

Mary Jo: And our next common mistake, this one’s a big one, spending beyond your means and not saving enough. So, this is pretty much a no brainer. Spending beyond your means can create financial chaos in very short order. So, we always encourage to avoid the use of debt. That’s one of the major biblical financial principles that we talk about so often here on the podcast.

Bob: So, we’ve gone over five common financial mistakes so far, and the sixth one is getting sidetracked by the headlines and paying too much attention to all that noise out there in the media and Facebook and all the different internet sites and cable. I mean it can drive you crazy cause the media sensationalizes everything. So just you’ve got to tune it out and create that longterm investment strategy and stick to it. Don’t let those short term, emotional reactions derail your plan. Do you ever notice how the stock market plunges? The media always says that it plunges, it dives, it crashes, but then it surges, skyrockets and sores and they use these adjectives for a reason. They want to create fear and generate an audience that might otherwise tune them out.

Mary Jo: You know, I’m thinking they make me tune now just with all that noise. But I think that is so true.

Bob: Yeah, most definitely.

Mary Jo: The next common mistake, it’s investing with different firms. People think this gives you a better chance of covering different investment strategies. But you know, when we talk about diversification, that’s not really what we mean. It’s good to have your investment spread across multiple asset classes. That’s the best way to diversify. And when we talk about asset classes, we’re talking about large cap stocks, midsize companies, small companies, international companies and bonds. And when we talk about bonds, we’re talking about corporate bonds and treasury bonds and all kinds of different types of investments. So, that’s what we mean by asset classes. You should have one advisor that’s a trusted advocate. A fiduciary is always looking at everything you have in order to ensure it’s properly coordinated and correlated. That’s how we avoid overlap as excessive fees and ensures you’re tapping into the best in class investment options at each provider. So, you’re looking at your 401k and getting the best of what they have to offer, your spouse’s 401k, your brokerage account, and looking to make sure you’re putting the right investments at the right place. And then looking at how it all fits together, like the pieces of a puzzle.

Bob: And you know, Mary Jo, something that goes along with this, which I say is common financial mistake number eight, is not disclosing everything to your financial advisor. It Is kind of like the old saying, “garbage in is garbage out”. Really, to provide appropriate advice that’s in the best interest of you, your advisor has got to know the full, big picture. If you aren’t open to revealing this, you’re only shortchanging yourself. I mean, think about this. Would you do this with a doctor or your doctor who’s trying to help you and leave out important information when she or he is asking for your medical history in order to make a recommendation? I also think of it like a blueprint. If you have a builder and you’re building a new home, are you going to tear off some of the blueprint and not show them the whole thing in order to build the house properly?

Mary Jo: You know, Bob, we all have our images I think that paints these pictures in our mind’s eye, and I’ve always called this, you’ve got to open the Kimono and you gotta tell me everything. You know, you’re also being unfair to the advisor. So, how can they help you if they don’t know what the whole big picture really is? They may provide inappropriate advice because they don’t have all the facts, and that’s not fair to you as the investor and it’s not fair to the advisor.

Bob: So a ninth common financial mistake we see is making those major purchases like a car, a home, maybe a vacation home or even paying for college without really understanding all the cost involved. So, first I want to get into the car. I remember we had a whole podcast on this, Mary Jo. We talked about buying a car. An example is buying a new car and this is one of those gray areas. Everyone has an opinion and you know, should you buy a new or used, and buying new is not always a mistake. But when you’re not able to pay cash and or don’t plan to keep it long term, you know, buying used may make more sense. The main thing is when you drive off that lot, you need to understand you’re going to take an immediate hit on the value of any asset, like a car RV or especially a boat.

Mary Jo: Okay.

Bob: A new car is going to take a biggest depreciation first two or three years. According to edmunds.com 19% on average in the first year. So why not buy something that’s about three years old if you can find one that is in good shape.

Mary Jo: You talked about another asset – your home. Buying real estate too quickly can also be a common mistake. We would encourage you to rent first and also avoid those track homes. Get to know the neighborhood you’re interested in, the schools, the traffic patterns, the crime rates, the trends, and if there’s going to be future highways coming through or future construction. It gives you a chance to do all that research and get a feel for things. And when we say avoid buying builder track homes, these are usually pretty poor quality. They use poor quality materials, they tend to cut corners, and they don’t use the most experienced crews. They have a lot of turnover. So a custom built home tends to hold its value, and you’ll also have confidence that the materials and the craftsmanship are a cut above average. So, we really encourage you to think about that

Bob: Yeah, you know Mary Jo with my real estate background, I can sure chime in on this too, because I’ve seen over and over and even our own clients who have bought these track homes and they think they’re making an investment. Five years down the road, they’re having to repaint them and maybe they want to sell it and they’re having to do all kinds of new things to it and they’re selling that same home down the street for the same price that you bought five years ago. So, people go and buy the newer home.

Mary Jo: People buy those starter homes when they’re really strapped for cash and they typically don’t maintain them. We’re talking in generalities, but I’ve seen it happen so many times. That brings down the value of the entire neighborhood. So oftentimes if you decide to sell, you can’t get what you even paid for the home, cause the whole neighborhood has depreciated.

Bob: If you’re going to buy a home from a track builder, I would really encourage you to go look at a neighborhood that’s say five to eight years old that that same builder has built and go find that neighborhood and see how those homes are doing.

Mary Jo: Oh. That’s a great idea, Bob. Good advice.

Bob: Oh, thank you. You know, being in real estate for so many years, you know, that was my background and my dad was in real estate for over 50 years, so I really understand a lot about that. You know, another major purchase. Most people don’t think of it as a purchase, but it is as a college education and tell you what, it’s so expensive and so many of us can relate to. Let’s say you got a degree in one field and you’re not even using that degree still in that same field. So, when you think about a college education, consider a tech school or like a community college those first couple of years, taking on all that college debt without a strategy and how you’re going to pay it off is a financial crisis in the making. Is that four year degree at a top college really the best choice. Every child’s different, so a trade school, sometimes those salaries are very high for many of those trades. For example, plumbers, electricians, carpenters, mechanics that know those computer systems. Those are well paid jobs and are in high demand and are not near as expensive as a traditional college education.

Mary Jo: You’re so right, and I’m a big fan of the community college. You can get the basics for the first two years at a fraction of the cost at a community college. They’re typically closer to home. So many students, they’ll get depressed, they have emotional issues, they gained a lot of weight when they’re away at school because they’re home sick. If that’s your child, maybe consider that community college. You also want to consider the cost of transportation. Can they utilize public transportation and maybe avoid needing a car during college. Take a smaller course load so that the students can work part time and that way they’ll have skin in the game and when they have skin in the game they’re much more likely to take it serious, their grades are better, and they tend to stay out of trouble because they don’t have time. They’re busy working. And also you get a job with an employer if you could, that pays tuition reimbursement as an employee benefit after a short time. This is especially good if you’re looking for an advanced degree such as a master’s degree. Let the job pay for it.

Bob: So Mary Jo, I feel like that’s probably enough financial mistakes to go over for today’s podcast. What you think?

Mary Jo: Well, let’s hope we slow down and we give thought to all those financial decisions and we just try to do better.

Bob: God encourages us all to be good stewards with what he’s given us and you know, he’s given us our time, talent, treasure, truth in relationships for the accomplishment of those God-given goals and objectives, the process of goal setting, that’s a faith process because you’re asking God what he would have you to do and do that always first. God wants us setting goals because it’s part of his intentionality. A faith goal and objective toward which I believe God wants me to move in faith – that’s acting out on the basis that this is what God wants me to do.

Mary Jo: So understand that we all make mistakes, but when it comes to money decisions, we encourage you to seek wisdom first. Be Intentional and understand that every spending decision, it’s actually a spiritual decision.

Bob: We want to help you avoid as many of these mistakes as possible by walking beside you in your financial journey. So if you would like to talk about your financial situation and how we may be able to help you, give us a call at (830) 609-6986 or go online to our website at ciswealth.com and set a 15 to 20 minute phone appointment with either Mary Jo or I through the website’s online portal. At the top of the website it says “meet with an advisor”.

[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

Dollar cost averaging will not guarantee a profit or protect you from loss, but may reduce your average cost per share in a fluctuating market. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

Are you just starting out or nearing retirement? Most people want to know if they are on track no matter what stage of life they are in.

More episodes >>

With each stage in life comes different hurdles and considerations financially, mentally, and physically. Bob and Mary Jo cover the financial aspects of the most common life stages. Whether you are just getting started, on the brink of retirement, or somewhere in between, consider your life stage when making these financial decisions that can impact your future.

The 5 main life stages covered in this episode include:

HOSTED BY: Bob Barber, CWS®, CKA® and Mary Jo Lyons, CFP®, CKA®

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Bob: Ecclesiastes three, three through eight. “There is a time for everything and a season for every activity under the heavens. A time to be born, and a time to die. A time to plant, and a time to uproot. A time to kill, and a time to heal. A time to tear down, and a time to build. A time to weep, and a time to laugh. A time to mourn, and a time to dance.

Bob: “A time to scatter stones and a time to gather them. A time to embrace, and a time to refrain from embracing. A time to search, and a time to give up. A time to keep, and a time to throw away. A time to tear, and a time to mend. A time to be silent, and a time to speak. A time to love, and a time to hate. A time for war, and a time for peace.”

Bob: So for today’s podcast, we’re going to be discussing financial tips for all these times, and we’re going to call it Financial Tips For Every Life Stage. If you’re just starting out or nearing retirement, most people want to know if they’re on track, and what stage of life they’re in. So whether you’re just getting started on the brink of retirement, or somewhere in between, consider the life stage when making those decisions that can impact your financial future.

Mary Jo: First off, I think it’s important to remind our listeners about a few financial tips that are relevant for any life stage. It’s always a good idea to reevaluate your risk tolerance. This can change over time due to your current situation and market conditions.

Mary Jo: And you know, Bob, we were just talking about this, and the market’s rocking and rolling and heated up. We’re not going to change our philosophy, but what is always a good reminder to clients and investors, do you have the appropriate risk tolerance? So that’s something to always consider.

Bob: And we’ve talked about that on some other podcasts, haven’t we? And you really need to not just look at it in percentages, but in dollar amount, how much can you tolerate?

Mary Jo: Absolutely. And do you have your needs for the next three years in cash or cash equivalent? Good thing to keep in mind, no matter what life stage you’re in. Next, it’s important to reevaluate your financial goals and investment strategies at least annually, and as significant life events occur. Just to see if you’re on track.

Mary Jo: And lastly, review your asset allocation to make sure your investment portfolio is diversified across all the various asset classes based on your risk tolerance. Be sure to consider your aggregate or overall portfolio, not just your 401k. Do all your investment accounts fit together and complement one another? You can’t just look at each account in a vacuum.

Bob: That’s the truth. And so many people do, Mary Jo. They look at it that way. They don’t look at it from a holistic point of view. And, Mary Jo, I’ve mentioned on a lot of podcasts, we’ve been building a house for a long time, we’ve got one blueprint. We don’t have five different blueprints and five different builders. You’ve got to stay focused where you can see the whole picture.

Bob: So those things that you just mentioned really go with any life stage. We’re going to go into four or five different life stages, and that first one has to do with age. And the first life stage is what we call in your 20s and fearless, or you’re just starting out. What do you do when you’re in your 20s? And hang on with us, because we’re going to get to your life stage wherever you are, but these are good things to think about.

Bob: Maybe you’re in your 50s, but maybe you have some children or you have a cousin or a nephew that’s 20. so these are good life stages that you can share with others. In that first life stage, in 20, pay yourself first. Start a disciplined savings strategy as soon as you start earning money.

Bob: Mary Jo, we were just talking about this this morning, weren’t we? That college graduate gets out, they’re used to living on a thousand or 2,000 a month, and now they’re making four, 5,000 a month, and they forget to do this. They spend all that money. So start that disciplined savings strategy right off the bat when you’re in your 20s.

Mary Jo: So important. Before you get other obligations, before the kids come, before you start wanting to furnish that new home, you need to start a saving strategy. It’s the number one thing.

Bob: The last stage that we’re going to talk about, in 50s and 60s, later in the program today, you’re going to be very glad you did that. And next, take advantage of those employer-sponsored retirement plans that you may have right off the get go. Because time is so much on your side in your 20s. Let that power of tax deferred compounding work for you.

Bob: Delay or defer the payment of income tax on those earnings is a really good idea, because you’ve got that extra money that would normally go to taxes. Now it’s growing for you as an investment, so you’re earning interest on your interest, and even on those taxes that you would have paid. The earlier you start, the longer your money has to grow. That’s what we love to talk about this first life stage when you’re in your twenties.

Bob: And you say, “Well, I can’t contribute anything.” Well, just start with something. Even if it’s $25. You’re going to spend that just going out to eat, easily. So start small. You don’t have to start with $300 a month at this age. You can start with 25 or 50, and then increase it. And such a good idea to do it now, too, is because your employer matches your contributions, and at least put the amount and that you’re going to get a matchup too.

Bob: So you’re making 100% return on your money. Make a commitment to increase your contributions by at least one, five, or even 10% each year. Every time you get that raise or a promotion.

Mary Jo: Establish a safety net. In the event of a crisis, the money tree in the backyard, it could just be uprooted or disappear. Then what? So without an emergency fund, a crisis could be financially devastating. Consider how much you need to cover your expenses if your income was cut off for a period of time.

Mary Jo: Having an emergency fund eliminates the temptation to use credit card for short term cash shortfalls, or any kind of credit in that regard. Put aside a minimum of three months of living expenses in a savings account. As you age and your lifestyle expands, this amount should increase along with it.

Bob: Yeah, we’ll be talking a lot about those living expenses and that cash reserves as you get older and older. Last, while you’re in your 20s, and with every other age as well, manage that debt wisely. We emphasize that manage debt wisely, barring money for those large purchases, like financing a home or buying a car. Yeah, that’s expected, but don’t borrow money for other things.

Bob: Manage your lifestyle by relying on credit cards. It can be a slippery slope and get out of hand quickly, so be careful of those credit cards. It’s amazing what you can do in two or three weeks. It could take you two or three years to get out of it. Good debt management ensures that you will have credit when you need it, void that risk of being overextended. A good key point here to remember is to consider the cost of money. If you borrow money, it’s a good practice to periodically evaluate your debt situation and determine whether you can reduce that cost of debt.

Mary Jo: So some good practices, establish a best practice of paying cash, and when it comes to college, maybe consider paying as you go. Work and take fewer classes rather than taking out loans. That can be a tremendous burden upon graduation. You know the student loans we’re hearing so much about, those are crippling. So you want to do everything you can to avoid those.

Bob: It is amazing what we’re hearing about these college loans coming out. I agree with you so much on that statement you just made.

Mary Jo: Absolutely. Consider a trade school, if that’s a better fit, and there’s nothing wrong with a community college, either. Maybe do the first two years at community college and then move on. That’s much more economical and affordable. Then consider getting a job with an employer that might help with college costs. Walmart helps pay for college, so think about that, rather than go into debt yourself.

Bob: That’s something I didn’t know. That’s a great thing for them to do. So those are some things for that life stage of in your twenties, so now, let’s look at the 30s, because this is a time when so many today, they’re getting married, and they’re having children, and now what? You’re in your 30s.

Bob: Well, the first thing that we like to emphasize is that you really establish those basic life documents now that you’re in your 30s, and boy, do I see this a lot, that has not happened yet. In your 30s, you’re thinking, “It can’t happen to me,” but it can. When we’re young, we tend to think of ourselves as invincible.

Bob: Yet tragedy can strike at any time. We’ve seen this. I don’t like to talk about it, but it can. So this is the time to see an attorney, establish that will, and a healthcare directive, what we call living will, a medical power of attorney, a durable power of attorney for financial purposes, for you and your spouse.

Bob: And these are just the basic documents that everyone should have in place. Because if something were to happen to you, who has that power to intervene on your behalf in case of a medical emergency, as an example, or a financial emergency? So if you became incapacitated, who’s going to pay those bills and manage all those financial concerns if you can’t?

Bob: If you have young children, have you determined who should take care of them if something were to happen to you and your spouse? And this may be a worst case scenario, and it’s not a very likely event during your 30s, but it does happen, and I’ve seen that over the years, Mary Jo, and I know you have, too.

Bob: If you have young children, it’s so important that you choose a guardian and who you will have as that guardian while you’re alive. You can choose that instead of the state making that choice for you, and have it in a recorded, legally binding document.

Mary Jo: You think about that, the court would say it would probably go to your parents, but what if you don’t have a great relationship with your parents, and you’d rather a friend take over your children, or a sibling? So you make sure you choose, and don’t let the courts have to choose for you. So important.

Mary Jo: And you want to protect yourself and your family. The financial planning process involves establishing an adequate coverage for insurable risks, so consider the purchase of life insurance and disability insurance as your family grows and your financial responsibilities increase. This is so important.

Mary Jo: Your ability to earn money over the course of your life is what is known as your human capital. Life insurance and disability insurance can protect a young family from the loss of that human capital in case of your premature death or a disability of the primary income earner. It’s one of those critical financial foundation pieces that you need to have in place before you start worrying about an investment portfolio. These are things you need to do first.

Bob: And you know, Mary Jo, in this life stage of your 30s, it’s so inexpensive. It’s amazing to me how much life insurance you can get for dollars, less than you’ll go out to eat one time with your family, and you could take care of your family in the event of a premature death. And like I say, we don’t like to talk about this stuff, but we’ve seen it happen.

Mary Jo: We have, and it’s a horrible thought. I’m so passionate about this. I saw it happen just a few short years ago. Our next door neighbor, a young mom, walking her child to school one morning, just two blocks from our house, and a lady ran a stop sign and hit them both and killed the mom instantly. So it can happen in the blink of an eye. And like you said, we don’t like to talk about it, but we just really encourage our listeners to do these things first. They’re so important.

Bob: Mary Jo, that was in the news all across Texas. And I remember seeing that, and then realizing that was your next door neighbor. My goodness, what a small world it is. And in this life stage in your 30s, establish those financial goals and develop a good savings strategy. Because as you age, your financial life becomes so much more complex. And it’s a good idea to really sit down and ask yourself, “What is it I’m working for?”

Bob: In your 30s, it’s the time to establish those financial priorities. Do you want to retire at 55 and sell tacos on the beach, which may be a fun thing, or send your kids to an Ivy League college while you take an extended trip to the Maldives? So make that plan why you still have the flexibility to adapt your finances accordingly at this age.

Mary Jo: You know, Bob, the Maldives were the hot travel spot a few years ago, but now I understand it’s Como in Italy. So wherever you want to go, now’s the time to be thinking about that vision.

Bob: All my kids are taking those trips to Europe and staying in these airbnbs for 50 bucks a night, and they’re really going cheap, so I’m amazed. That’s not for me, though.

Mary Jo: No, me neither. I don’t go on the cheap. But another good thing to consider is fund a spousal IRA. If you’re married, and you’ve made the decision to have one of the parents work at home raising a family, then that is their job, and the employer, which is the family, should agree to put some additional funds away for that person’s retirement.

Mary Jo: Every adult should take responsibility for funding their own retirement. In a society where half of all marriages end in divorce, that’s another thing we don’t want to talk about, but it is the reality, this has become more and more important. It also provides a psychological boost and a lift to that individual self esteem. So it’s a win-win and something we should all consider.

Bob: I’ve always done this for Rachel. There’s a lot of things in that life stage, in your 30s, I know we covered a lot in there. So now, we’re going to go to those in their 40s, that fabulous 40, things are going good. You’re thinking, “Already? Wait, now how did I get to 40? Where did all that time go?”

Mary Jo: Don’t blink. It goes fast. So you’re more than likely entering your peak earning years. And this is a time to solidify your investment goals and map out a strategy to get you where you want to go. But you have to first think about that vision. Over time, your needs change, and it pays to periodically review your insurance needs, your coverages and your costs.

Mary Jo: So consider your health insurance, life insurance, disability insurance, auto insurance, homeowner’s insurance, or renter’s insurance, and your liability policies. Is it sufficient? Is it cost effective? Can you get more coverage for less money? So talk to your insurance agent, look for ways to save. You could be eligible for a safe driving discount, or maybe a bundled policy, if you keep everything with one carrier.

Mary Jo: And another way to save is to raise your deductible. If you have that emergency fund, then maybe you can live with a higher deductible. Again, consider consolidating your coverage with fewer carriers.

Bob: And you know, Mary Jo, I’d like to say something here, too, about this insurance review. Find somebody you can sit across the desk from, or around the table with, that really understands this. This is something hard, when you were talking about all those different insurances, the health, life, disability, auto, homeowners, renters, liability. That can get kind of mind boggling because there’s all those different policies. I like the independent agents that will sit down with you, because it’s hard to do this online. It’s just too much stuff.

Mary Jo: A couple of years back, I created a spreadsheet, and I put all these things in there so I could use it for myself, but also to help clients. I think it’s always a good idea, as you said, you want to talk to independent agents as well as some national change. As you’re doing these reviews, you want to compare policies with different carriers, consolidating everything with one carrier, but then also looking for that independent agent that can go anywhere. So important and a good point, Bob.

Bob: And you’re in your 40s, many times, those kids are getting older, and this is a good time in your 40s to have a talk with those loved ones about, maybe, your financial health and wellbeing, and hold some biweekly or even monthly financial meetings with them. And especially with your spouse, too. Open those lines of communication. Keep those financial lines of communication open.

Bob: Now, we know from experience, and I will tell you this and be transparent, that can get heated. So you’ve got to establish a time when you’re going to do that. You don’t just start off without any warning. I’ve learned that, at least in my case, and I have a feeling many others are the same way.

Bob: So make a commitment to review those financial priorities, your obligations, and the available resources to pay for them, and confirm that you’re in agreement with your spouse to establish some true financial ground rules. Be careful of letting emotions getting bobbed. Can you relate to that, Mary Jo?

Mary Jo: Oh, I sure can. So you know, it’s important to establish financial ground rules, but it’s also important to establish ground rules for these discussions so that it’s a safe space, that everybody can be heard and get their points of view out there. And if the emotions run high, take a break, pause, walk away, and come back, or agree to come back together at a different time.

Mary Jo: And instead of dismissing someone’s point of view, give it time to think about what they’re saying, so that you’re talking with a love language and not letting things get out of control, because that’s not productive.

Bob: And this may be where you need to bring a counselor in, if it does get out of control.

Mary Jo: But if you start with these biweekly vision setting, basically, my husband and I joke that everything in our marriage is a negotiation, but hey, we’ve made it 37 years. So maybe that’s not a bad way to go. But we negotiate everything. So you don’t win every battle. You have to accept that.

Bob: My wife always says, “Choose your battles wisely.”

Mary Jo: Yes. So you come to a compromise, come to agreement. And then, the rest of it begins to take care of itself. You know what each other’s thinking, and then you don’t have to have these ongoing battles.

Bob: So I know you’ve got another really good financial tip at this life stage, in your 40s, that you need to think about.

Mary Jo: Absolutely. So you want to know your parents’ wishes. So when it comes to money, it’s also important to establish these open lines of communication, with our spouses, with our kids, but also with our parents. In so many households, that money topic, it’s taboo, and you don’t want to talk about it. But that’s old school. I just think it’s so healthy to know what everybody’s thinking. Then there are no secrets.

Mary Jo: Well, if something happens to your parents, you know what’s on their hearts and you know how to proceed. So in our 40s, we often begin to notice signs of aging in our parents. Here, we find out what their wishes are, what resources they have available, maybe what planning they already have in place. If they haven’t shared that with you, you need to ask them. So don’t wait until it’s too late. When it’s a time of crisis, things are stressful already. I always say, “Plan today for the uncertainties of tomorrow.”

Bob: That is true. That’s the number one reason for financial failure, procrastination, and you don’t want to wait on that one. And in your 40s, like we said, talk to your spouse and your children, and I want to emphasize a little bit more about your children, because this is a really good time to teach them budgeting, because I’ll tell you, they’re not getting it in school. So engage those kids. Yeah, you want to say something right in there. You joined right in.

Mary Jo: It’s not in the curriculum, and they’re not learning this in school. They don’t even bring out a checkbook ledger anymore.

Bob: While your kids are young, you can help them with that decision making process when it comes to finances, and when appropriate, give them a chance to establish their own priorities, and ask them a question like, “Hey, is it going to make more sense for the family to save for college for you, or take that annual trip to the beach?” I have a feeling that kids are going to say, “Let’s go to the beach.”

Bob: But you can ask the question, and get them to thinking about it. And this provides a really good opportunity to teach them about money management and the shared responsibility and consequences of those decisions that are made today, and how it’s gonna affect life in the future. Those are good life lessons.

Mary Jo: You know, Bob, we have that tool that’s available that we’ve done on a previous podcast. There are four uses of money. Live, owe, grow.

Bob: [inaudible 00:00:20:59]. Live, give, owe, grow.

Mary Jo: Owe and grow. That’s right.

Bob: That’s the only four uses of it.

Mary Jo: That’s right. So let your kids understand that. What a teaching moment that would be. You also need to review your retirement saving strategies. Are you saving enough? I always say, “You can’t invest your way to retirement. You have to save your way to retirement.” So know what those numbers are and what is your strategy to get there.

Mary Jo: So this is a great time to establish a relationship with a financial planner to ensure you’re on track to meet your retirement savings needs. And if you’re falling short of your goal, then you still have time to react and make changes. Then you can start to reprioritize.

Mary Jo: You don’t have to have $1 million to work with a financial planner. A lot of them, such as myself, and at Christian Financial Advisors, we’re on a fee base, and we can do hourly consultations if that’s all you need. And we encourage you to think about that.

Bob: I want to say one of those things, I’m going to try to say it right, Mary Jo. You said you can’t invest your way to retirement. You have to save your way to retirement. And that’s so different than what we hear in the world today.

Mary Jo: It is.

Bob: You know, go take that high risk, and you can just invest your way to it. But biblical wisdom really is about that, “Dishonest money dwindles away, but he who gathers money little by little makes it grow.” Proverbs 13:11, one of my favorites. And I’ve really emphasized that to our children and in my own life. And it works. And I know it’s worked for you and Mike as well.

Mary Jo: Absolutely. It gives you choices.

Bob: And I’ve seen it work for so many. The millionaire next door is, little by little, they’ve saved their way to retirement. And build that solid portfolio, diversify across the complete tax code. So important in your 40s. Your high income bracket, some of your peak earning years, of course, 50s can get a little bit higher there, too, but contribute the max you can to that 401k, maybe even consider funding a Roth IRA, if you’re eligible.

Bob: So if you’re not eligible for a Roth, contribute to a non-deductible IRA, because you’re still going to get the tax deferred growth. And in retirement, there are advantages to having savings, and all these different kinds of accounts from the Roth to the regular IRA, 401k savings plans. You want to have many different types of programs for those different life stages that have different tax advantages to them.

Mary Jo: Absolutely. Good idea, Bob. Don’t forget those after tax savings, those brokerage accounts. You need some money there as well. And we want to consider the cost. Cost matters. Be sure you’re getting what you pay for. It’s okay to pay a fee for expert investment advise. Most people don’t have the time, they don’t have the expertise or the desire to manage it themselves.

Mary Jo: So a hire a financial professional to help you and your family develop a plan for creating a solid financial future. And if you’re not comfortable with your investment professional, maybe it’s time to consider making a change. It’s important to build a solid relationship with somebody that you trust. And it’s true for both spouses. So if you’re a husband and wife, are both of you comfortable with the advisor?

Mary Jo: Now, I’m going to take this minute to encourage you. If you don’t go with your spouse to these meetings, start now. You need to develop a relationship, and you need to ask your questions. No question is a dumb question. What’s really dumb is not taking an interest. You don’t have to know how the clock works, but you need to know the moving pieces and parts.

Mary Jo: Even if you don’t have sufficient assets to warrant an ongoing relationship, as we talked about earlier, find someone who will work with you for an hourly fee, or even do a one-time financial plan. It’s much more affordable than you might think, and it’s also a small price to pay if you find a need to change course and to reevaluate your saving strategies.

Bob: And Mary Jo, while you were sitting here saying all this, I was thinking to myself, too, really look for the word fiduciary. You want to look for an advisor that’s a fiduciary. They’re putting your best interests before theirs. So be careful of a commission-based advisor that can create a conflict of interests.

Mary Jo: That’s right, Bob.

Bob: So now, Mary Jo, we’ve gone through our 20s and 30s and 40s. Let’s get into this next phase. You’re 50, and you’re freaked out. That’s what happened.

Mary Jo: This makes me laugh.

Bob: What do I do at this … I’m already 50. What do I do during this phase? Well, one of the things that we talked about earlier was building those cash reserves in your 50s. It’s important to build more of those cash reserves, because, as your age increases, and your income increases, you should extend that emergency fund to a minimum of six months, and even, ideally, a whole year.

Bob: I know that sounds like a long time, but take it from somebody who had that established a couple years ago, and I do, again, when my wife came down with cancer, we were so glad that we had those strong cash reserves of about a year aside, because we needed about three or four months of those while we dealt with this, and praise the Lord, now everything’s fine, and Rachel is doing great.

Bob: But the more you make and the older you are, the more you can expect possibly have an unforeseen job loss, or a major critical illness come along. And I’ll tell you, age discrimination can be a real thing in today’s job market. So it’s so important to build large cash reserves during your 50s, and 60s, and 70s, and beyond.

Mary Jo: So true, Bob. You want to think about, how secure is your job? We just visiting with some old friends, and they shared with us that he had gotten laid off, and was out of a job, and was looking for the better part of a year, and they came really close to losing their house. We knew it was bad, I didn’t know it was that bad, but it can happen to anybody.

Mary Jo: Be thinking about your job, how secure is it? If you’re the primary source of income, you want to really give that serious thought. So what’s the industry that you’re in? What’s the volatility of that industry? The financial health of the company that you’re in, the competitive environment, and your job level? If you lost your job today, how difficult would it be to replace your current income?

Mary Jo: So consider this. There’s a whole lot more sales opportunities than there are opportunities for an executive vice president of human resources. So where do you fit in, and how many of similar jobs are there out on the market? Be thinking about that, and maybe you want to reevaluate where you are and how popular your world is.

Bob: And while you’re in the 50s, this is the time, while you are still employed and have a good job, to catch up on those retirement plans, because you get those catch up contribution provisions. At age 50, you can contribute an additional $6,000 to an IRA, or a Roth IRA, as well as your 401k, they had those catch up provisions. So it’s a great way to catch up if you’re behind in those savings goals, because you didn’t start in your 20s or 30s.

Bob: Hopefully you start into your 50s. Occasionally, I’ll meet somebody that comes in and they’re trying to start in their 50s.

Mary Jo: Whoa.

Bob: That’s really, really difficult to say that you’re ever going to be able to retire if you start that late, but you can. You still can. It’s just going to push that retirement up more like into the mid-70s, if you wait until you’re in your 50s to start.

Mary Jo: As we continue to talk about the 50s, and that life stage, this is a sweet spot for considering your longterm care costs. Can we afford longevity? Now, that’s just a big question. We’re enjoying longer, healthier lifespans, but at what cost? If you could design your own plan and strategy for your end of life care, what would it look like?

Mary Jo: Are you all set and can easily afford to self insure against the rising cost of longterm care? If not, then what? What else are you going to do? What are the alternatives? The sweet spot, as I mentioned, for purchasing longterm care insurance, it’s in your early 50s. So now is the time to establish that plan.

Mary Jo: And if you’re considering some hedge against the rising cost of healthcare, and we know it’s only gonna go up and up and up, so we really encourage that. Now is the time to think about that and take some action.

Bob: And as long as you and I, Mary Jo, have been in this financial planning business, we have seen longterm care costs skyrocket. So, you’re right, it’s the time to consider it. This age is a really sweet spot, and I know we did an entire podcast on that that you can go back and listen to, about longterm care.

Mary Jo: You want to think about it before those diseases that we all want to avoid set in. Before you need back surgery and you get cancer and all these other things. That’s why the 50s is the sweet spot. We’re still relatively healthy.

Bob: So we have one more thing in the 50s, at this life stage, and then we’ll get onto the 60s. You still have a lot of living left to do at this age, but it’s a good idea to start doing some real planning. Consider what your retirement dream is, what you want that next phase of your life to look like.

Bob: Is it time to consider traveling more? Do you want to leave that corporate world behind and start a nonprofit organization? When do you want to retire? Can you do it in your 50s, or do you need to wait till your 60s? How much income are you going to need to maintain and sustain your desired lifestyle? So, these are all the things that we need to look at during that stage of the 50s, which takes us to the next stage and beyond. And which one is that, Mary Jo?

Mary Jo: You’re 60, sagging, and loving life.

Bob: Say that one more time. That’s too funny.

Mary Jo: 60, sagging, and loving life.

Bob: Goodness.

Mary Jo: Gravity’s not your friend in your 60s, not that I’m speaking from experience or anything.

Bob: Okay.

Mary Jo: So finally, the kids are out of the house, and it’s time to travel. You also want to think about planning for inflation. When you think about that next chapter in your life, be sure to give adequate consideration to rising cost, the rising cost of everything, and especially, as we mentioned earlier, the rising cost of healthcare in retirement. Plan for inflation and make sure you’re putting that into your planning process.

Bob: And this is the time in this life stage to create that income stream. Now that you’ve saved for all these years, we have a challenge, and it’s facing many retirees, is, how do you take those available resources that you’ve been saving and accumulating and create a stream of income that you can’t outlive?

Bob: This is the time to put a plan in place for replacing that weekly paycheck that you counted on for all those working years, and determining what is a sustainable withdrawal amount, and being conservative, and avoid dipping into that principle, if possible.

Mary Jo: We talk a lot about retirement, but this is also a time to think about reinventing yourself. You may want to think about that next chapter, so consider possible ways you can delay taking your social security. They say they never stop working, but hopefully you get to a point where you choose to work, but it’s a job we love for a cause that fuels our passions and brings us joy.

Mary Jo: Many seniors are continuing to work past the traditional retirement age of 65, and many have to, but also, many are choosing to, and that’s the beauty of it. When you have savings and you have a plan, you can work if you choose to, but you’re not forced to because you have to.

Bob: I am seeing this so many times, too, our retirees, and they’re going back into the workforce, but like you say, it’s something they really love to do. They’re going in at part time, and most of them are working out of their home, I’ve noticed, as consultants.

Bob: So another thing in your 60s is, this is the time to develop that strategy for when to take that social security. I’m a big believer now in waiting longer if you can, if you’re not going to have to deplete your investment portfolio, wait to take that social security. Because you get paid raises of around 8% all the way up until age 70, also by waiting.

Bob: So let’s take myself as an example. We’ve got myself and my wife, Rachel. If I wait to take social security longer, and then something happens to me, then she’s going to get a higher amount, because I waited. That’s so important. So if you’re healthy and expecting a long lifespan, your parents are still alive in their 90s, really consider waiting, because it’s a good idea.

Mary Jo: Absolutely, Bob. So important for women to think about this. And no matter what stage of life you’re in, we recommend that everyone develop a relationship with a trusted financial advisor. Having a solid financial plan in place can help you weather the storms of life without putting your financial future at risk. Plan today for the uncertainties of tomorrow.

Bob: And as we come to the end of the day’s podcast on the Financial Tips For Every Stage Of Life, we want you to know that, at Christian Financial Advisors, we’re equipped and we’re experienced to help you during many of these life stages, especially during your 50s and beyond.

Bob: Give us a call if you have investible assets of at least 250,000 or more, or you’re looking for financial planning services that may include ongoing financial planning advice, or our hourly consultation services. You can reach us at 830-609-6986, or visit us on the web at christianfinancialadvisors.com.

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[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

Learn about the ins and outs of Medicare.

More episodes >>

Bob and Mary Jo discuss a topic that is very important to the financial life of most seniors, and that is Medicare with special guest Mr. Brooks Boyd of Senior Savings Organization. With over 30 years in the insurance industry, Brooks has the knowledge and expertise to help navigate the confusing maze of Medicare and all the options available to consumers and help avoid the pitfalls and penalties that may occur when making the wrong decisions.

Brooks is an Independent Agency Owner, with a focus on helping seniors eligible for Medicare make the best possible choices when it comes to Medicare Supplements and plans.

Medicare is such a complex topic, so Brooks shares with our listeners about how he and his company specifically helps clients sift through all the noise regarding Medicare and simplifies it for them. Learn how Medicare differs from Medicaid and so much more!

GUESTS: Brooks Boyd of Senior Savings Organization

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Bob: Psalm 7:5-9, “I have become a sign to many. You are my strong refuge, for you have been my hope, sovereign Lord, my confidence since my youth. From birth I have relied on you. You brought me forth from my mother’s womb. I will ever praise you. My mouth is filled with your praise, declaring your splendor all day long. Do not cast me away when I am old. Do not forsake me when my strength is gone.”

Mary Jo: Oh Bob, I just think that’s a great scripture and you know that part, “Do not cast me away when I am old.” We need to rethink how we think of old people and what old really is. I was just reading an article in the New York Times about a woman named Julia Hawkins. She’s 103-year-old senior and she just ran the 50 and 100 yard dashes at the 2019 National Senior Games held in Albuquerque. She’s an inspiration to us all on how to age well. She said in an interview, her secrets to longevity, they include to stay in shape, keep active, have many passions, look for magical moments, seeing things like sunrises and sunsets, and music, and rainbows, and birdwatching, things along that line that give us joy, and keep interested in a lot of things to keep you busy and your mind busy. So I’m not sure I want to live to be 103, but if I can run 100 yard dash, that’s okay.

Bob: Yeah, I’m not so sure about 103 myself, but if I could make it to 90 I’ll be very, very happy. You know, speaking of senior citizens, today on Christian Financial Perspectives, we’re going to be discussing a topic that’s very important to the financial life of most seniors, and that is Medicare.

Mary Jo: So we have a special guest with us today, Mr. Brooks Boyd, with Senior Savings Organization. Brooks is an independent agency owner and he has a focus on helping seniors that are eligible for Medicare make the best possible choices when it comes to Medicare supplements and Medicare plans. Welcome, Brooks.

Bob: Yeah, Brooks, thanks for joining us today. I see you have a lot of experience in this Medicare. I don’t. So I’m looking forward to having you on.

Brooks: Well, I want to thank you and Mary Jo for having me on, and I enjoy talking to folks about Medicare. The biggest question I get from folks is, “What is Medicare? How does it work and what does it cover?” And it may seem like a simple question, but the answer is actually quite complex. But just broken down, the basic answer for what is Medicare is, it is a national United States health insurance program for people 65 and older. It is also for people with certain disabilities or end stage of kidney failure. And it is divided into various parts and it’s important to learn how these things fit together.

Brooks: Medicare can feel scary when it’s entirely new to us. Most of us spend our lives working for an employer who selects our insurance for us, you know, we go to an annual benefits meeting and sign up for the plan they chosen for us. And when we hit 65, we’re clueless about Medicare and all the plan options. It’s a daunting maze that we have to navigate. If you’re new to Medicare, it’ll be your primary insurance. Maybe when you’re working and not even sure if you need Medicare, but you want to make sure that you don’t unknowingly get a late enrollment penalty. And that’s one of the biggest things and concerns that folks have is knowing what to do, when to do it and how to do it. Because there are penalties involved if you make a misstep, that can follow you the rest of your life.

Mary Jo: You Know Brooks, I understand that is one of the most important things for them to kind of keep in the back of their mind. But before we get too much further, I know one thing I wanted to talk about and kind of get you to clarify, there seems to be a lot of confusion between Medicare and Medicaid, but they’re very different animals. So can you talk about that a little bit?

Bob: Mary Jo, it’s funny you say that too. Mary Jo, just today I was confused, wasn’t I?

Mary Jo: You were.

Bob: Are we going to be talking about Medicare or Medicaid? And she said, “We’re going to be talking about Medicare.” I said, “Oh, okay.”

Brooks: And that is not uncommon. Matter of fact, sometimes folks use those terms interchangeably, but they are very different. Medicare is a health insurance program for the elderly. Medicaid, on the other hand, it’s financial or health care assistance for low income individuals. Now some folks, 65 and older can qualify for both. In that scenario, Medicare is primary and Medicaid is secondary. They can get on certain types of plans, they’re called dual plans, Medicare, Medicaid plans. But for the purposes of today we will be talking about Medicare. Again, Medicaid is financial assistance from the state,

Bob: So Medicare is such a complex topic. Can you share with our listeners more about how you yourself specifically, help people sift through all this noise regarding Medicare, and what can you do to help them simplify this?

Brooks: You Bet, Bob. Oftentimes we see people get confused early on. They want to try and jump right into figuring out a Medigap or a Medicare Supplement Plan or a Medicare Advantage Plan, and how that will coordinate with their employer coverage. But that’s really putting the cart before the horse. So let’s just put that aside for now. What I want people to focus on are the different parts of Medicare. Original Medicare consists of Part A and Part B. Those are provided to you by the federal government. In fact, you’ll enroll in these two parts through the Social Security office. Those are really the only two parts though that you would actually enroll through the social security office. But again, your original Medicare consists of Part A and Part B.

Brooks: Part A is hospital coverage. This is the coverage that pays for your room and board in the hospital or a skilled nursing facility. Part B is outpatient coverage. That includes pretty much everything else, the doctor visits, equipment, lab work, surgeries, durable medical equipment, et cetera. There’s also another part, Part D as in Delta, that is your drug coverage. Just think of that as a pharmacy card. It allows you to purchase your prescriptions at a much lower price than retail. Those are the different parts of Medicare. There’s actually another part, Part C, which I’ll get into in a little bit, but understanding those different parts helps understand how medicare works.

Bob: I want to make a comment in here then. So Part A is hospital. B is outpatient?

Mary Jo: Or just think of it as doctors, Bob. It pays for doctor care.

Bob: Okay. Okay. So like when my dad had a major accident, he was in the hospital for a month or so. Then he had to go to rehab. So was that Part B that paid for that?

Brooks: Correct. Part B. Anything that’s outpatient. Doctor visits, outpatient surgeries, rehab, yes, that is outpatient. Correct.

Bob: All right, and D is just drug coverage. So D’s pretty easy, because you think of drug starts with a d and that starts with a d. Am I right in that assumption?

Brooks: Yes you are. You’re on the right track. Now it’s important to know certain things about Medicare. There are no networks in original Medicare. You can see any Medicare provider that accepts original Medicare, no matter what supplement company you choose, by the way. And choosing a doctor outside of Medicare will cost, you’ll pay for what is called excess charges. What Medicare covers is a variety of services, doctor visits, preventive care, lab tests, emergency services, things like that.

Brooks: What it doesn’t cover though, and that’s where people get confused. They think that once I get Medicare Part A and B, I’m set. Well that’s not exactly the case because there are big gaps in Medicare. Part B has a deductible per confinement period of $1,364 for 2019, and that typically goes up every year. And that’s for the first 60 days in the hospital. 61 through 90 there’s a copay of $341 per day, 91 through 150, $682 per day. So you can see that you can run into quite a bit of expenses if you don’t get a Medigap or a Medicare Supplement Policy. And the same is true, Bob and Mary Jo, with Medicare Part B. Now there’s $185 annual deductible for 2019 and Medicare pays 80% of all approved charges after the required deductible of $185. After that, 20% is to the Medicare beneficiary, and there is no cap on that 20%. So if you have anything major done, you can run into some big dollars that you’re having to pay out. That’s why these Medigap Medicare Supplement Policies exist.

Mary Jo: Is a Medigap the same as a Medicare Supplement? Are those one in the same?

Brooks: Those are one in the same, and there’s also what’s called a Medicare Advantage Plan, and that’s what I was referring to earlier is a Part C, that is Medicare Advantage. Now real quickly, Medicare Advantage Plans were created as an alternative to original Medicare and Medigap. When you join one of these plans, you direct Medicare to pay the Advantage Plan a set monthly amount for your care. In return, all that you get from Part A and Part B services, they take on all your medical risks. So Medicare Advantage, in its simplest form, the best way to explain it is private Medicare. You opt out of original Medicare and now you’re getting your Medicare from an insurance company such as Cigna, Aetna, United Healthcare, Humana. Those are some of the major ones that provide Medicare Advantage.

Bob: Wait a second, sorry I ask a question. I heard something, I’m not sure if I understood that right. So you opt out. So if you’re getting Part C, you still have Part A and B?

Brooks: Well you still have Part A and B. You’re still going to pay for the Part B premium, but you’re in essence opting out of original Medicare. Now Medicare Advantage has to, by law cover everything that original Medicare covers and they typically cover a little bit more. For instance, dental, vision and hearing, those aren’t covered by original Medicare, but oftentimes you’ll see those types of benefits covered by a Medicare Advantage Plan. Also transportation to and from the hospital. There are meal services that can be provided in some of these plans.

Brooks: So there are differences, but also keep in mind with a Medicare Advantage Plan, you will have a network, whether it’s an HMO or PPO, you will have to stay within network in order for that plan to pay.

Mary Jo: You’ve gone over so much and you’re right, this is definitely a complex topic. So let’s take a step back. Tell us a little bit about yourself, your expertise, and how you can simplify this and why somebody would need to work with an expert such as yourself.

Brooks: Great question, Mary Jo. You can tell just by the short conversation we’ve had that Medicare can be very, very confusing, overly so. For whatever reason our government makes all these different acronyms and parts and plans. They all kind of meld together. What is Medicare, how does that differ from Medicaid? All these questions that people have. I have been in the insurance business since 1989 and my practice is 100% focused on Medicare. That is all I do. And I work a lot with referral partners who have clients that are Medicare age, aging into Medicare, and they just quite frankly need help. They need hand holding to navigate this maze and that’s where I step in. I specialize in Medicare. That’s all I do.

Brooks: I work with folks on just finding out, first of all what it is they know so far, and it runs the gamut. They could have been doing lots of research, so they know exactly what they want and where to go. But more often than not they’re about as confused as everybody else. They’re getting phone calls from across the country from big call centers that are trying to sell them a Medicare Supplement Plan or a Medicare Advantage Plan. They’re not sure what to do or where to go. Their mailboxes are being stuffed full of flyers and mailers from all these different insurance companies. They’re watching the commercials on TV, the Signa, the Humana, the United Healthcare, the Aetna commercials. They’re telling them to do this or they’ve got the greatest plan, but they’re not really getting any unbiased information. They’re not really getting any information that’s pertinent to their exact situation.

Brooks: And what I do, Mary Jo, is I sit down with folks and I say, “Look, my main job is to educate you in order for you to make the most informed decision that feels right to you.” And that’s it. So that’s where I come into play. But not only that, once they get a policy from me, I’m also going to work with them on an annual basis reviewing their prescription drug plan, because these drug formularies can change from year to year. So what may be working for them this year as far as drug coverage, may not work for them next year. It might be higher and there might be a better prescription drug plan out there that’s better for them.

Mary Jo: That’s a great point because you never know when your prescriptions that you need are going to change.

Bob: You know, another thing is you’re not dealing with an 800 number. You’re dealing with a person,

Mary Jo: Exactly.

Bob: Because I can tell you, we started off … I’m just trying to write notes and keep up with you, Brooks. And it gets very confusing very quickly trying to figure out, as you were saying, the different deductibles and how much it pays per day, and then this one covers from this point. I just want coverage. And something that is so complex, I need a human being that I can talk to that is going to be the same person, preferably every time and stick with me to help me understand this maze of Medicare.

Brooks: Well, you’re exactly right Bob, because things do change. Not everything stays the same, as we all know. Prescription drug plans, they’re in different tiers. Tier One, Two, Three, Four and Five. And a Tier One is your lowest cost generic drug, and you can pay as little as $3 or $9 for a 90 day supply. But if you’ve got a generic drug and it’s in a Tier Two or Three, you may be overpaying for that drug. And oftentimes I’ll get on the phone with a client, and we’ll get on a three way call with the carrier, and we’ll lobby for a tier exception to try and get that generic drug lower to a Tier Two or One. And that can save folks quite a bit of money on a monthly basis.

Brooks: Also sometimes folks will file a claim and they don’t quite agree with it. Well if they want to file an appeal for that claim, I can take them through that process. So these are just some of the things that I try and bring to folks, next level service, for when they do have a question or a concern or do need help when navigating Medicare, that they have somebody to go to.

Mary Jo: Well I just feel so lucky that we’ve been able to find you as a resource, because I know our clients always have questions. And I want to revisit something you said earlier. So when someone’s nearing 65 what’s the most important thing that they need to know regarding Medicare?

Brooks: Well, the most important thing they need to know is to get help. And I know that’s probably over-simplified but they are going to be barraged with a whole lot of information and it’s going to be overwhelming. There’s going to be an anxiety level there, and they’re going to be stressed out. So align themselves with somebody that they know and trust. Oftentimes they’ll go to their financial planner, their advisor that they know and trust. And typically somebody like you, Mary Jo, is aligned with somebody and you outsource that expertise to a specialist such as myself, so that they can chat, sit down and talk with those folks and just find out where they are in the process. Maybe they are still working for an employer, so they’re not ready to get on Medicare, but it might behoove them to get Part A and not Part B.

Mary Jo: So let’s touch on that for just a minute. So if they’re still working and covered by a group health care plan, they should go ahead and get Medicare A?

Bob: Mary Jo, you’re thinking of the exact same questions I’m thinking of. Because I was thinking that too.

Mary Jo: Sorry Bob.

Bob: No it’s okay, Mary Jo, you steal my thunder. That’s all right. Because I was thinking, because I’ve got clients that are still working. If they’re still working, do they need Medicare if they’re still working at 67 or even 68? And they’ve got that group health plan.

Brooks: Exactly, and that is a whole another can of worms that you open up and it should be more cut and dry. But guess what? We’re dealing with the government and it’s not. So let’s say you’re working and you’re at 65 or older, what do you do? It depends on what size company you work for. So let’s take a large company, 20 employees and up. Now if you work for a company that has over 20 employees, Medicare is secondary if your employer is that large. This is called Medicare Secondary Payer. In that scenario, your group plan is going to pay first, then your Medicare pays second. Most active employees with group coverage, they enroll in Part A because it’s premium free if you’ve been working for 10 years. Plan A can coordinate to lower your costs if you have a hospital stay.

Brooks: And let’s take an example. Let’s say you employer health plan has a $3,000 deductible. Well, for 2019, the deductible for Part A is $1,364, so that will coordinate so you’ll have a lower deductible when you go in the hospital. In that scenario, it would make sense to go ahead enroll in Part A. An exception though … now there’s always going to be an exception … is if you participate in an HSA, a Health Savings Account. If you have a high deductible plan and you participate in an HSA, you should not get Part A or Part B, because that will make the HSA taxable.

Bob: I just never … man, I had no idea.

Brooks: Well, and again, it’s not uncommon for me to come across folks that have been given wrong or incorrect information, and I’ll give you a a real for instance that I came across. He’s a client now, but when I met him last November, he had enrolled in Part A in 2010. He was 73 years old. And Part B, he enrolled, had an effective date in 2013, but he was still working for a large employer. So he was paying his Part B premium unnecessarily because he was told to by an HR director. The HR director he talked to really didn’t have the correct information. That’s not uncommon. So he, throughout the years, I estimated has paid over $20,000 unnecessarily in Part B premiums because he had group coverage.

Bob: He’s not going to get that back either, is he?

Brooks: No he’s not, unfortunately.

Mary Jo: So Brooks, isn’t there something magical about applying for Medicare early, before for your 65th birthday?

Brooks: If you have a disability, you can become eligible for Medicare, so yes.

Bob: You can apply after that. That’s the only reason to apply before?

Brooks: Yes, correct.

Brooks: Well, what you can do is go to the Social Security office or go to ssa.gov, and sign up for Part A and Part B. And you can do that online, it’s very simple. But also there is a Medicare supplement open enrollment. It is a one time window during which you can enroll in any Medicare supplement. You will not have to answer any medical questions during your open enrollment. In other words, the supplement insurance companies cannot turn you down during their personal open enrollment period. Now this only lasts for six months, so it’s imperative that when you turn 64, you start looking into your options. And best case, you sit down and start building or establishing a relationship with somebody that is going to guide you through this process, so you make sure that you don’t miss out on any late enrollment opportunities.

Bob: You mean this is only one time in your entire life?

Brooks: One time in your entire life when you turn 65, or if you still have group coverage and it’s creditable coverage, when you leave that employment and retire, you have a special enrollment period to where it is open enrollment and you do not have to answer any health questions at that time as well.

Bob: Let me ask you, once someone is on Medicare and they choose that specific plan, are they stuck in it for life then?

Brooks: No, and that’s actually another great question, Bob. It is not uncommon for folks that have been on a supplemental plan for three, four years or so, every year they’re going to have those premiums raise, sometimes several times in a year. And different carriers, they’ll have different rate stability. Some are more stable than others. Some have been in the game, if you will, longer than others. You see a lot of carriers out there, a lot of the major carriers, but there are a lot of other carriers that aren’t quite as well known, not that they’re bad insurance companies. Some of them are quite stable, and all the plans are standardized. Keep that in mind. If you’ve got a Plan F or G with Aetna, it’s going to be the same Plan F or G with Humana or Cigna or United Healthcare.

Brooks: But let’s say you’ve been in a plan for three or four years or longer, and it started out to be paying $100, and now you’re paying $150 or $160 a month. It would behoove you to shop around, if you can qualify and pass the health questions, to see if there is another carrier out there with better rates.

Mary Jo: So they would have to go through underwriting again?

Brooks: They would have to go through underwriting since they have passed for open enrollment at age 65, or when they left a group plan, they would have to qualify it. But it’s typically not uncommon for folks to shop around and get approved. It’s not uncommon at all. And also keep in mind that different carriers underwrite differently. Some will be very stringent on their underwriting, and they’ll have knockout questions that are very strict. The others are more lenient, and where you may not get approved with one carrier you can with another. So I tell folks every year or so, make sure that your drug formularies in your prescription drug plan have not changed, and that you’re going to not get hit with a big increase in your drug costs. But at least every two years or so, shop around your supplemental or Medigap plans to see if there’s not a better deal out there for you

Bob: Well that would be shop around if you’ve not gotten a major disease though too, because you know once you hit 65, 75 that’s when a lot of things start coming on, and if you’ve gotten a major disease or you’ve gotten cancer or something, it’s going to be pretty hard to go to someone else, isn’t it?

Brooks: It is, and unfortunately for those folks, they’re stuck where they are at now. Keep in mind they could always go to a Medicare Advantage Plan during the annual enrollment period, which is from October 15th through December 7th. Now, I typically don’t recommend somebody going from a supplemental plan if they have had a major disease like cancer or heart attack or stroke, to an advantage plan, because there is going to be that out of pocket costs. There is a cap on an annual basis for these Medicare Advantage Plans, but I just don’t recommend going from a supplement to advantage plan if they’ve had a major disease.

Brooks: Now it’s not uncommon for folks that have had a supplement and now they’re paying upwards of $200 or more a month, and they say, “Look, I just … I’m healthy. I’m tired of paying $200 a month plus another $25, $30 for my prescription drug plan. I’m going to go with a an advantage plan and I’ll pay a zero premium or maybe $20 a month premium, and instead of paying as I go, I’ll just pay as needed.” That’s not uncommon. And keep in mind that these advantage plans, there are some with very good networks. It’s about 40% of the market now. And I just read an article the other day that in about 20 years, about 70% of the market will be the Medicare `ans. Now that statistic blew my mind, but you know these things are becoming more and more popular. It’s not a which one is better, it’s which one is better for you.

Mary Jo: So I know that there’s a lot to consider with the prescription drug plans and that’s a concern for a lot of recipients. So what’s important for them to know about that?

Brooks: Well, fortunately there is a website called medicare.gov and that’s run by the government. Medicare. CMS is Centers for Medicare Services. And they can actually go in themselves and plug in their drugs, and it will turn out a list of all the prescription drug plans in their area, and it’ll show which ones are the cheapest and also how those particular drugs are covered. Or they can call up somebody like me and I’ll walk them through that. Keep in mind, just because a plan only costs $10 or $11 a month for a prescription drug plan, doesn’t always mean that’s the best plan. And a real good example of that is, what kind of service are you going to get from that particular carrier that is only charging you $10 versus a more common carrier that is charging $25 for that prescription drug plan? So the cheapest isn’t always going to be the lowest cost, if you know what I mean.

Bob: Oh yeah. You get what you pay for. Brooks, I know you’ve shared so much with this, and in the beginning we shared the A, B, C and D Parts, and there’s just so much parts to this thing. As we get close to the end, what are some common questions that you may get from clients that Mary Jo or I have not asked you today, that you might want to share for our podcast listeners?

Brooks: Well, good question. There’s always going to be a few myths that need to be dispelled about Medicare. Myth number one or question number one that I get a lot is people that say, “You know, Medicare is going to cover all my medical expenses.” In reality, it only covers about half of all medical and skilled nursing care expenses for an average Medicare enrollee, unless of course you get a supplement. But also Medicare does not cover longterm care, routine dental care, dentures, cosmetic surgery, acupuncture, hearing aids, exams for fitting hearing aids. Those are some of the things that Medicare does not cover.

Brooks: You know, a lot of times people will think that Medicare is free. Well we do know that Part A is free, but Part B is not. Part B this year, the premium is $135.50, and it goes up from there the more money you make. Again, a lot of people think that having poor health means I will not qualify to join Medicare. But as we discussed earlier, during your open enrollment, you do not have to answer any health questions.

Brooks: So, myth number four, one of the questions I get, “Once I’m unrolled, my coverage and costs will not change.” Reality is that costs and coverage change every year. Congress votes on this. There are changes coming to 2020 to Medicare. Some of the plans will be going away. Deductibles always go up. So there are changes every year.

Brooks: Also, one of the biggest questions is, when can I enroll in Medicare? Can I enroll at any time? Well, first time enrollment, it’s usually wise to enroll at age 65 if you’re not working or don’t have employer insurance. There’s a seven month window around your 65th birthday, three months before and four months after.

Brooks: So those are some of the most common questions are some of the most common myths that I get from folks about Medicare.

Mary Jo: Brooks, all those things that you said that Medicare didn’t cover. Now does a Medigap Plan cover those things?

Brooks: The Medigap Plan will cover the deductibles and the co-insurance for Medicare Part B, but the supplement plan does not cover for longterm care or routine dental care or dentures or cosmetic surgery or hearing aids. But the Medicare Advantage Plans, a lot of those plans do have some very good benefits when it comes to dental, vision, and hearing, transportation costs to and from the hospital, if you are checked into a hospital. So that’s why a lot of these advantage plans are becoming more and more popular, because some of the benefits that they’re starting to offer that original Medicare and the supplement plans don’t.

Mary Jo: Wow. You shared a lot of great information with us today, Brooks, and I just thank you for that. Summarize for our listeners, what’s the benefit of work with someone like you?

Brooks: Well, the benefit of working with somebody like me, Mary Jo, is we’re going to take you by the hand. They’re going to lower the anxiety and stress level. They’re going to help you make a decision that feels right to you. They’re going to explain all your options, explain all the parts of Medicare, explain the different plans, explain the difference between a supplement and a Medicare Advantage, explain when to enroll, explain the different enrollment periods. You’re talking about annual enrollment period, open enrollment period, special enrollment period, initial enrollment period. That’s enough to make somebody’s head explode, just trying to explain all the different enrollment periods alone.

Bob: You’re already making my head explode.

Brooks: My biggest advice I can give is don’t go it alone. Work with somebody that’s going to be an advocate for you. And if you can find somebody that’ll be an advocate for you, you’ll have somebody that you can turn to for the rest of your life.

Bob: Well, I’ll tell you Brooks, I want that to be you. You’ve done such an amazing job today on the podcast and sharing all these points. I tried taking notes, I couldn’t keep up with you. I tried to take notes and go along with you and your knowledge about Medicare just blows my mind. If someone wants more information, how do they find you?

Brooks: Well, it’s really easy. I’ve got a website, seniorsavingsorganization.com and you can go to that website and it’s got all my contact information. It’s got a whole wealth of information as well about different parts of Medicare. Some of the exact same things we’ve talked about today, some of the different parts and the costs and plans. So that’s my website, SeniorSavingsOrganization.com.

Bob: We will make sure here on Christian Financial Podcast, on our website, that we’ll have a link to your website and if y’all didn’t get all that … I mean I know a lot of you are probably driving right now, or maybe you’re running and listening to this podcast on your iPhone, so just give us a call. We’re always here. Mary Jo and I are always here to help serve you. One of the things that we’re doing on our website now is you can go right to our website and make an appointment with either Mary Jo or I for 15 minutes to ask us a question. So feel free to do that, and just go to christianfinancialpodcast.com or give us a phone call if you prefer the old fashioned way of talking to somebody by the phone. We love that. And that’s (830) 609-6986. Hey, Mary Jo, do you have any last things you wanted to say?

Mary Jo: Not at all. I think we’ve covered a lot and hopefully our listeners found some great value there, and hopefully they’ve got more questions and we can help facilitate that for them. So Brooks, thank you so much for joining us.

[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

Brooks Boyd and Senior Savings Organization are not affiliated with Christian Financial Advisors. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

Learn about Eventide Mutual Funds – a company whose motto is “investing that makes the world rejoice”.

More episodes >>

Today we are going to be talking about how, as advisors and as investors, we can do well while doing good. Isn’t that what we all want to do at the core of our investment philosophy? As investors, we want to support companies whose products and practices help make the world a better place.

Eventide Asset Management, LLC is a Boston-based registered investment adviser pursuing “investing that makes the world rejoice.” Founded in 2008, Eventide’s vision is to serve individuals, financial advisors, and institutions by providing investments that create compelling value for the global common good.

Eventide is the Adviser to the Eventide Mutual Funds and other advisory services. Eventide manages more than $3.7 billion in net assets. Joining Bob and Mary Jo is Shaun Morgan, Eventide’s Portfolio Consultant.

GUESTS: Shaun Morgan, Eventide Portfolio Consultant

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Bob:

Mary Jo:

Bob:

Shaun:

Bob:

Shaun:

And as a byproduct of this, we’re hoping that that makes the world rejoice. Just have this reaction of over the top excitement for things are. So that’s our goal with investing. The reaction that we’ve seen from investors as we explain this concept, it’s something that really everybody gravitates to. It’s something that they want to be a part of. And so explaining to financial advisors or investors on the end, whenever they understand the heart of, “This is why investing that makes the world rejoice. This is the idea behind it.” They kind of gather behind it also and it’s something that they want to be a part of.

Mary Jo:

Shaun:

We’ve seen so much progression over the last couple of decades to where financial advisors are asking the questions of what does it mean to truly be human? How has God created us to operate? And some of these principles that you’re able to find in the Bible that really offer a more holistic view for financial advisor’s clients to be able to say, “Hey, more than just seeking the most amount of money here on earth, us as Christians, we actually believe we have a higher purpose.” And so seeing that become more and more of the norm for Christian financial advisors to be able to integrate their faith into how they’re actually giving advice is really, really exciting. And you can see how much deeper this space has gotten. Some of the more complex issues and questions that people are asking, we are now able to look through that with a biblical lens to say, “This is what the Bible speaks to on this.” So it’s really exciting

Bob:

Shaun:

I’ll give you one anecdotal example of a company that we have in our portfolio. It is a company that has been addressing a specific disorder, a deficiency in hormone development. Right now, and actually this was just last week, I was in a company meeting where our analyst was explaining this company to our group, our company, and he was explaining how really people with this disorder, this deficiency of hormone development, they’re just underdeveloped and there’s a lot of other health issues that come along with this disorder.

Well, right now there is one drug on the market that addresses this and you have to give this daily injection to children for all the way from toddler-hood or whenever they first discover that they have it all the way through puberty. And so it’s a very taxing every day injection. Imagine just giving a toddler and injection every day. So as our analyst is explaining this, we actually have somebody in our company raise his hand and say, “Yeah, my son has this. And yeah, yeah. And yeah, everything that you’re saying is true. And we’ve sat down and kind of looked at the type of life that this would lead to for our son. And we’re really thankful that this drug exists because it’s helping a lot, but it’s also very restrictive.”

So as Augustine is explaining this company that is now developing a slow release version of this drug that would allow it to be just injected once a week, that you could see the kind of light bulb and the excitement in this guy’s face of saying, “an, this is going to be a game changer for my family.” And I could just imagine the types of changes that this one company is going to make in lives all across our country is great. So as far as the excitement around investing in biotech and healthcare, that’s just one story of many that we’re looking at important human needs coming into contact with technological innovation to say this is actually creating value for society and all the stakeholders that are touching it. That’s really exciting for us.

Mary Jo:

Shaun:

But we also rely heavily on our ability to gather what I call thick data. And this is more intangible data, data that you get from hearing the tone of voice from a manager on a call, or sitting in the room at a conference as a new technology is being explained and feeling the weight of the room and how they’re reacting to it. Those are aspects of thick data, and being in Boston, so specifically for healthcare and biotech, we have access to a lot of that thick data to where our team is intricately involved in what is happening in the biotech universe up in Boston. So I would say that a lot of our process involving deeper research than just what’s available to everybody, we do a lot of that research and we have access to all that thin data, but we also overlay that with a lot of thick data that we have.

Mary Jo:

Bob:

Mary Jo:

Shaun:

Mary Jo:

Shaun:

Eventide takes an approach of looking at companies holistically on the front end and saying, “We actually believe good investments are companies that are treating all of their stakeholders well.” So we’ll look at the product or service that they’re providing for society saying, “Do we agree with that?” And then we’ll see how they’re executing it. How are they treating their customers, their employees, their suppliers, their host communities, the environment and society more broadly? We’ll look at all those stakeholders and say, “Companies that are engaging with all these stakeholders respectfully and adding value to all the stakeholders, we believe those are good investments.” So you can see just kind of the evolution take place to where something that started out pretty simple has now become just as deep and complex as any other part of the industry. It’s great to see that there’s a lot of thoughtfulness in this space.

Bob:

Shaun:

Mary Jo:

Shaun:

Bob:

Shaun:

You’ve seen a number of those success stories play out to where that ends up actually really benefiting a business longterm because they’re having to spend less time training new people because they’re keeping their same people on board. Those employees are more motivated to seek out new ways to help the company prosper. So I believe that’s a good way that you can see how this has played out in the industry where people are figuring out that “Hey, doing good to your stakeholders actually ends up being a pretty good thing to do for your business.”

Mary Jo:

Shaun:

Some of the challenges as, once again, kind of back to the themes, it actually takes a deep knowledge of examining some of these themes and developing a conviction around whether or not we believe that this theme is going to be adding value to society or extracting value from. So some of those themes actually take, it’s a little bit challenging to get to the depths of them and look at the consequences of, “Hey, if this theme or to play out and some of these companies were to take off, would that be good for society?” And those are some of the challenges that we address.

Bob:

Shaun:

Mary Jo:

Shaun:

Bob:

Shaun:

Mary Jo:

Shaun:

And so once that concept is established and we understand that, then we can take the next step and ask the question, “Well, what kind of companies do we want to own?” And whenever you actually have that sense of responsibility of, “What kind of company do I want to own in my portfolio? What are the practices of the types of companies that I would do? What are the goals of these companies that I want to own?” That’s where you can really see a light go off in a lot of adviser’s minds and say, “Man, we actually, we have a huge responsibility here.” And it’s kind of exciting to think about investing in that way, bringing it back to the original purpose of investing.

Bob:

Shaun:

Bob:

Shaun:

[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

Shaun Morgan and Eventide are not affiliated with Christian Financial Advisors. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

Help prepare for what ifs and whens that occur throughout life.

More episodes >>

Ever wonder what your future will look like in 10 years? Or, what would happen to your retirement savings if you bought that vacation home now instead of waiting? We all have those same questions, even financial advisors! Bob and Mary Jo discuss planning for all the What Ifs and Whens that can happen in life – planned, unplanned, and emergencies.

Everyone seems to focus their attention on investment management. However, it is the ongoing relationship between your investments and planning for the future where the real magic happens. Financial Planning is a lifelong process where you manage your entire financial picture in order to achieve your financial goals.

Basically, when it gets down to it, the core of financial planning is goal planning. There are a lot of sub topics that should be covered as part of this process but it all leads to the same place:

HOSTED BY: Bob Barber, CWS®, CKA® and Mary Jo Lyons, CFP®, CKA®

Want to ask a question about your specific situation? Schedule a complimentary 15 minute phone call.

[INTRO]

BOB:

MJ:

Bob:

MJ:

[EPISODE]

Mary Jo:

Bob:

As you and I were putting this program together, planning for those what-ifs and whens, it made me think about a couple that came in to see me about a month ago that were in their mid-30s, just such a sweet, dear couple, had one child that was 18-months-old. They both have careers. They both have a 401K, and they’re contributing to that. But when they came in, all they wanted to talk about was setting up a 529 plan for their child, which is a wonderful thing. Yeah, it’s a good thing. But when I started talking to them, they had no estate plan, no medical power of attorney if something were to happen to either one of them, no durable power of attorney for financial reasons, no assigned guardians for the child set up. They really didn’t understand their 401Ks or the investment risk that went with it. They weren’t sure about life insurance and what their needs were or if they became disabled. They had not thought about any of those what-ifs and whens in life.

Mary Jo:

Bob:

Mary Jo:

Bob:

Mary Jo:

Bob:

Mary Jo:

Bob:

Mary Jo:

Bob:

Then we look at what are your insurance benefits? What kind of life insurance do you have? Let’s look next at taxes and how’s your income affecting your taxes. These are some of these base facts and then your current investments as well as planned savings.

Mary Jo:

Bob:

Mary Jo:

Bob:

But in some cases, it may not. So we’ve got to look at things like that or buying that beach house that you just mentioned or taking that big vacation with your family or that mission trip, all that needs to be looked at. With today’s technology, we can put scenarios in, and you can watch the lines move up and down how that’s going to affect you in the long run. Should you pay now or pay later? It’s really amazing to watch it move.

Mary Jo:

Bob:

Mary Jo:

Bob:

Mary Jo:

The other things you want to think about, can you plan for early retirement? You want to have financial independence, so when can I retire? When can I start that business that I want to start? Can I buy a new car? We always want to plan on that every four to five years, so we build that into the plan.

What’s your plan for longterm care? Can you afford to buy longterm care insurance? Or should you self-insure? Maybe you’ve got sufficient assets to make that happen. What if there is another type of unexpected health event like one of you gets cancer or something along the line? Maybe you want to treat the entire family to a Disney vacation. Is that a reasonable goal?

So, planning emergencies. You know there really is no such thing. Before we get too far along, I just want to take a step back and talk about planning for emergencies. You have to assume there will be emergencies and plan for them, thus the ever-present, ever recommended emergency fund. So, you’re in your 20s and 30s. This needs to cover unexpected expenses like maybe an emergency room visit for the kids. One of them falls out of the tree fort and breaks their arm. I hope that doesn’t happen, but it does. And in your 40s, it’s typically a new car or household repairs or maybe you want to consider putting in that swimming pool. And in your 50s, it’s generally about unexpected layoffs or the loss of a job and the risk of that, so the older you get, the more you earn, the longer it takes to replace it.

Bob:

Mary Jo:

Bob:

Mary Jo:

Bob:

Mary Jo:

Bob:

Mary Jo:

Planning for future purchases, so you maybe want to start a car buying fund or a beach house fund. How long will it take to save? And what impact does that have on your other longterm goals?

Bob:

Mary Jo:

Bob:

Mary Jo:

Bob:

Mary Jo:

Bob:

[CONCLUSION]

You’re listening to Christian Financial Perspectives. Join us next week as we explore what God’s word says about money. Don’t forget, you can sign up for our free newsletter on ciswealht.com or give us a call at 877-71-TRUTH. That’s 877-718-7884. To make sure that you don’t miss any of our podcasts regarding the truth about money, make sure to subscribe to Christian Financial Perspectives at christianfinancialpodcast.com for free. If there are any specific topics you would like to hear more about, we would love to hear from you.

That’s all for now, until next week!

[DISCLOSURES]

Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.