By Robert Chism
This is the third in a series on what you can do to make a difference in achieving the Great Commission and the Great Commandment.
For the last 40 years church giving has not exceeded 3% as a portion of income. 53% of Christians have not given to their church in the last month. (According to Dave Ramsey in Financial Peace University The Bible (Basic instructions before leaving earth) mentions money over 800 times. In fact, Jesus says in Luke 16:11, “So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches?” It appears from this verse that God uses money as a test of our management and stewardship skills before entrusting us with spiritual things. Proverbs 13:22 “A good man leaves an inheritance to his children’s’ children,” indicating that God wants us to make a difference, financially, in our family tree. Proverbs 21:20 “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.” This gives us an idea of how God wants us to save for a rainy day, to set something back for safekeeping. Proverbs 22:7 states that “The rich rule over the poor, and the borrower is servant to the lender.” The Bible discourages debt. Luke 14:28 “For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it.” Jesus really wants me to save up and pay for the things I buy. Matthew 6:24 ”You cannot serve both God and money.” If money is this important to God, why are there so few Sunday school classes on this topic? Why don’t we see lots of small group studies on “Managing Your Finances” or “Getting out of Debt”? Why aren’t there more sermons in this area? There are many reasons, but the top reason is that most people don’t realize how much of a problem managing money is for the average family. Look at the financial statistics below: It is a problem that affects everyone, inside and outside of the church. George Barna says that the fastest growing churches are teaching about marriage, child rearing, finances, and careers. Money is a serious subject and God is serious about money, which is why we should study closely what he has to tell us. Finance and strategic planning were a part of my 40 year business career. Since retiring in 2005, one of my passions has been generosity ministry. As a starting point, I participated in a Significant Living Seminar, “Leaving an Honorable Legacy” and Dave Ramsey’s FPU. As a result, I have developed an awareness of where you may want to look, if you want to make a difference in the next decade. One of the pioneers of financial education and training is Dave Ramsey. Last quarter, I attended FPU. Would that I had started 20 years earlier. The course was filled with help information. For example, Baby Steps: Investing For Those Just Getting Started In Baby Step 4, you’ll invest 15% of your income. If your employer matches your contributions to your 401(k), 403(b), TSP, then invest up to the match. Next, fully fund a Roth IRA for you (and your spouse, if married). If that still doesn’t total 15% of your income, come back to the 401(k), 403(b), or TSP. Mutual Funds Dave recommends mutual funds for your employer-sponsored retirement savings and your IRAs. Divide your investments equally between each of these four types of funds: If your risk tolerance is low, which means you have a shorter time to keep your money invested, put less than 25% in aggressive growth or consider adding a “Balanced” fund to the four types of funds suggested. Single Stocks: Dave does not own single stocks and does not suggest single stocks as part of your investment plan. Single stocks don’t consistently generate returns as high as mutual funds do in the long-term. If you really want to own a stock for some reason (company stock, for fun, etc.), limit single stocks to no more than 10% of your investment portfolio. Certificates of Deposit (CDs): Dave recommends CDs only for savings (for a purchase, taxes if you own a business, etc.), not for long-term investing because of their low rate of return. Long-term investments must earn a high enough rate of return to outpace inflation (3-4% per year) and cover taxes on the gains if not inside a retirement account. Most investors need to average a minimum of 6% per year over time to do these two things. Bonds: Dave does not own any bonds and does not suggest them as part of your investment plan. People mistakenly believe bonds are “safe” investments that have slightly lower rates of return than equities. Single bonds can actually be very volatile and go down significantly in value. Bond mutual funds can at least be tracked for historical returns but do not offer the returns equity mutual funds do. Fixed Annuities: Dave does not own any fixed annuities and does not suggest them as part of your investment plan. Simply stay away from these! Variable Annuities (VAs): Variable annuities cause more confusion than any other financial product. What are they? Dave has strong suggestions for investors considering VAs High-income earners If a person earns too much to contribute to a Roth IRA and is limited to what he can contribute to a 401(k) plan due to top-heavy rules (unable to contribute 15% into pre-tax or tax-free investments), Dave recommends using either low-turnover mutual funds or a combination of low-turnover mutual funds and variable annuities. While this is an option for high-income earners, Dave still does not personally use variable annuities. Worth mentioning Investing For College Dave recommends investing the first $2,000 per year in an Education Savings Account (ESA, Coverdell Savings Account). ESAs are very simple and work much the way a personal IRA does. When saving for a young child who will attend a public school, the ESA will usually be all you need. For investing more than this amount or if your income exceeds $200,000 annually, choose a 529 plan. The challenge with 529s is that every state has a different 529 plan and they all work differently. Some allow you to pick mutual funds; some require you to choose funds based on your child’s age, while others are pre-paid tuition programs. When choosing a 529 plan, pick a plan that allows you to choose the funds up front and to keep those funds all the way up until time to use the funds for education. Remember to stick with the four types of funds Dave suggests. Don’t use the pre-paid plans or ones that do age-based asset allocation. Insurance Long Term Care Insurance (LTC) Dave recommends making LTC part of your plan when you turn 60 years old. LTC is a wise choice even if you do not have a sizable estate to protect as long as the premiums are well within your budget. For example, a 60-year-old couple with a plentiful current income but a smaller estate may choose LTC simply for the quality of care it will provide them. Disability Insurance Dave recommends everyone purchase long-term disability insurance to replace income in the event they are disabled. The cost of long-term disability depends on your occupation. White-collar employees carry less risk than blue-collar employees and therefore are less expensive to insure. For short-term disabilities (90 to 180 days), a fully funded emergency fund will cover your expenses, so Dave does not recommend purchasing short-term disability policies. Life Insurance Everyone should have 15-year (or longer) level term life insurance. Your coverage should equal eight to 10 times your annual income. The logic behind this is that a beneficiary could invest the entire amount into mutual funds and draw 8-10% annually as income without actually consuming the original insurance amount. Effectively, this replaces the income that was being generated by the deceased person. Never purchase any type of cash value or permanent insurance such as whole life, variable life, universal life, etc. Never cancel any old policy until the replacement policy is fully in force. Exchange Traded Funds (ETFs) Dave does not own ETFs and does not recommend them as part of your investment plan. ETFs are baskets of single stocks that are intended to operate like mutual funds, but they are not mutual funds. Separate Account Managers SAMs are third-party investment professionals who buy and sell stocks or mutual funds on your behalf. Dave prefers to stick with the team of managers in large, old, experienced mutual funds. Real Estate Investment Trusts (REITs) Dave does not own any REITs and does not suggest them as part of your investment plan. As a category, REITs don’t perform as well as good growth stock mutual funds. If you really want to invest in REITs, limit this to no more than 10% of your total investment portfolio. Equity Indexed Annuities Dave does not own Equity Indexed Annuities and does not suggest them as part of your investment plan. Equity Indexed Annuities agree contractually to limit your loss while you agree to limit your gains. Instead, invest directly into index funds if you want to follow an index such as the S&P 500 or similar. Thrift Savings Plan (TSP) Dave’s suggests investing 60% in C; 20% in S; 20% in I fund/plan. Values-Based Investing Dave does not use a values-based investing approach. Here’s why: Commissions and Fees Long term, class A shares are much less expensive than B shares or C shares, so Dave recommends them. Dave does not personally choose fee-based planning. (paying 1% to 2.5% annual fees for a brokerage account). With an A share mutual fund, you pay an upfront load of 5% to 6% once. But with a fee-based account, also known as a wrap account, you agree to pay a 1% to 2.5% fee every year—forever. As your account grows, the 1% to 2.5% fee will really add up. Pay a Pro or Do it Yourself? Pay a pro. Dave still chooses to use a pro and suggests you do too. Statistics show that “do-it-yourselfers” are quick to jump out of funds when they begin to underperform. A good professional advisor will remind you why you chose the fund and prevent you from buying high and selling low. Working With Your Advisor They advise. You make decisions. This is very important. You are paying them for advice and the ability to teach you enough to make smart decisions about your investments. You are not handing over this responsibility because they are a professional or even because they are trusted by Dave Ramsey. Retain ownership and responsibility for all final decisions. Don’t invest in anything unless you can easily explain how the investment works to your spouse. If you cannot communicate easily with your financial advisor, find one that does a better job of communicating. Take your time and make wise decisions (daveramsey.com, 14 Jul 2009, “Dave’s Investing Philosophy”). The Truth About Retirement Dave Ramsey has taught more than one million families how to get out of debt and build wealth. He recommends you begin investing for retirement after you’ve done two things: you’re debt-free, and you have saved an emergency fund of three to six months of expenses. Three-fourths of the people on Forbes list of the 400 wealthiest people in America say getting and staying debt-free is the most important thing you can do when it comes to handling your money. The full emergency fund insures you have a cushion in case of an illness or job loss and that your retirement funds stay where they are and keep growing. A Simple Plan That Works Your income is your most powerful wealth-building tool, so once you’re debt-free; invest 15% of your take-home income in Roth IRAs and pre-tax retirement accounts. If you receive a 401(k), 403(b) or TSP match from your employer, invest up to the match. Then, fully fund a Roth IRA for you (and your spouse, if married). If that doesn’t add up to 15% of your household income, invest more with your employer plan until you reach 15%. Here’s an example: (Couples under age 50 can contribute up to $10,000 per year to a Roth IRA. There are income restrictions on Roths. Consult a professional to be sure you qualify.) *The employer match does not count toward your 15%. However, it automatically doubles your investment in your 401(k)! Put your retirement money in growth stock mutual funds with a track record of at least five years of consistent returns (12% average). Divide your portfolio equally among growth, growth and income, international and aggressive growth funds. This Is Long-Term Investing. The money you invest for retirement is not to be used for anything other than retirement income, for two really good reasons: After investing for 25 years averaging 12% per year, the couple in our example above will have nearly $1.6 million saved for retirement! (daveramsey.com, 22 Mar 2010,”The Truth About Retirement”) Teach Your Church How To Give Dave Ramsey offers Momentum which is a church-wide journey that will transform the way your church views money and giving. Momentum is all about leading your people to financial maturity by cultivating a culture of giving in your church and your community. You will accomplish this by using a comprehensive plan, as part of your Momentum journey, to intentionally disciple your church about finances. Momentum meets your church at the point of its greatest need. Your church will learn how to handle God’s money God’s way while reaching out and making an impact on the community. Estate & Gift Planning Estate Planning is “the creation, conservation, and utilization of estate resources, to secure the maximum benefit now, during disability, and at retirement;” and “the best way to transfer the estate to family members, charitable organizations, and others during life and at death, with minimum shrinkage caused by taxes and probate.” But for the Christian, there is another dimension. What is God’s plan of stewardship for my estate? The recognition of God as owner of all (including our estates) places us in responsible positions as stewards. As stewards, it is important that we use our estate assets to their fullest potential during our lifetimes for our personal, family, business, and charitable interests. And at death, we must arrange for the transfer of our assets to individuals or charitable interests who will continue to use them to reflect our Christian lifestyles. We must also make the transfer in the most efficient and effective manner. The Estate Design Process As a good steward, it is important to carefully plan your estate: Planned giving is a process that determines which giving technique will provide the greatest charitable potential to both the donor and the charity. It encompasses gifts that are made annually, gifts that are made for special projects, and gifts that are made for future use. There are four types of donors: Those who can make gifts now Cash Real Estate Personal Property (Appreciated Securities) Those who can make gifts, if they receive income in return Charitable Gift Annuity Charitable Remainder Unitrusts Those who can make gifts, but only in the future Gifts From Your Will or Trust Gifts of Life Insurance Gifts From Your Retirement Plan Gifts of Real Estate Gifts of Personal Property Those who want to preserve assets for their heirs Deferred Gift Annuity Charitable Lead Trust Estate & Planned-Gift Design Service By limiting yourself to new donors; you’re missing out on developing relationships with a vast constituency of prospects who, in all likelihood will turn their attention to another charity. You should never turn down a potential gift, even if it is deferred. Instead, respond in such a way that you acknowledge the person’s circumstances, suggest other ways to give to you, and offer your hope that perhaps if the opportunity arises in the future, the prospect will consider accelerating his or her gift. By providing donors with all options for giving, donors are often able to achieve their philanthropic and financial objectives — which may make it possible for them to make larger gifts than thought possible! Minimum prerequisites include Website Layout, Estate Plan Guide with Confidential Estate Inventory and Director. Ultimately, a foundation is essential to provide a financial vehicle for the long term enhancement of endowment, building and property, and special accounts. A foundation solicits and maintains funds which are entirely separate from the annual general operating budget of the church. Sample Description for a Director of Development Position The position can be implemented initially as volunteer and evolve into a part time or a full time person. According to Rick Warren, likely for best person is already a member in the local church. Development: Identify, cultivate, and challenge partners; increase the level of generosity participation and ownership, through direct involvement and consistent financial giving. Qualifications: Strong personal relationship with Jesus Christ as evidenced by spiritual maturity, a close daily walk with Him, a consistent vision with area of ministry and our mission statement. By prayer and with God’s help, what are you going to do about it? About Robert W Chism He is a member of the Builder (Bridge) generation. Having retired from secular work in 2005, he has refocused his 24/7 energy toward experienced adult volunteer ministry. He is a member of CASA Network and serves on their prayer team; YES and serves on their prayer team; Christ Together; and enrolled in The Center for Christian Leadership of Anderson University School of Theology, Certificate of Aging Ministries. Bob and Karen, his wife of 47 years, reside in Antioch, Illinois; have three adult children and six grandchildren. For a copy of an Estate & Planned Gift Guide contact Robert W Chism: 847-395-1626, chism.w.robert@comcast.netWhat Does The Bible Say About Money
Household take-home income:
$70,000
Husband:
$38,000
Wife:
$32,000
15% of $70,000
$10,500
Husband’s 401(k) matches 3%*
-$1,140 (3% of $38,000)
Wife’s 401(k) matches 4%*
-$1,280 (4% of $32,000
Remainder into Roth IRA
$8,080
Some of the benefits of the Momentum journey include
Leave A Comment