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Laying the Foundation

I have an old wooden retaining wall in our back yard that has rotted away after 30+ years in the ground.  I finally decided to hire someone to come and replace the wall with a more permanent wall of retaining wall block made out of concrete which should stand the test of time hopefully!

It’s been very insightful to watch them work.  They spent hours and hours on the first layer of blocks to be laid.  As they worked, I thought “wow these guys are thorough”, and “man, this is going to take forever at this pace!” They would check each block 4 or 5 times to make sure it was level and in line with the block beside it, and make many small adjustments to ensure that everything was aligned and level.

After they finished that first course, it was even more amazing to see how quickly the next layers just flew into place.  They were all stacked upon a perfectly true first layer, and needed almost no leveling or adjusting at all from that point forward.

It’s the same way with stewardship.  If we get the base layer off, the whole rest of the wall will be out of line, unlevel, and unstable.  It seems pretty easy to look at others and see crumbling walls, but it can be difficult to assess our own walls sometimes.  The planks in our own eyes can be much harder to detect than the speck in our brother’s.

So what makes up the base layer for our financial walls?  Before we get to savings and spending habits, lifestyles, and even money personalities, we need to think through and know what we believe about Money.  What do you believe that Money is and isn’t?  Our beliefs shape our actions which form our habits.

Let’s take a look at some common good and bad beliefs when it comes to Money.

What Money Isn’t

I’ve heard it said that money makes a great servant but a terrible master.  While it can be used for great purposes, if we’re not careful it can start to rule our lives.  It’s one of the leading reasons given for divorce, the leading causes of crime, and can lead to addictions like gambling, workaholism, etc.  Here are a few of the common bad beliefs regarding Money:

Money isn’t a scoreboard – Many of us use money to measure up or keep score against others.  If I have more than you then I must be more valuable and vice-versa.  This might be you if you find yourself talking about you or other people’s lifestyles frequently, or looking at the value of your investments a little too often.  The reality is that there will always be someone with more or less money than you, and comparison is often the thief of joy.

Money isn’t a measure of self-worth – Tied in with the above bad belief is that I’m more or less valuable as a person depending on how much money I have.  We often confuse Net Worth with our actual worth and will feel better about ourselves if we feel above average.  It’s amazing how many articles I’ll see on how much it takes to be considered “wealthy” or “upper middle class” in America.  We all want to feel affirmed, and Money can be a false and fickle source of our worthiness.

Money isn’t a source of happiness – We’ve all heard it said that money can’t buy happiness, but it sure hasn’t stopped most of us from trying.  We’re constantly inundated with advertisements trying to sell us on goods or services that will make our lives better and make us happier.  We deal with the fear of missing out, keeping up with the Joneses, and all other manner of deceptive lies that try to get us to use our money to make us happy.  Real joy is a state of being, not a state of achieving.  It’s independent of our circumstances, bank accounts, and worldly successes.

These and other lies will all work to skew our walls out of alignment.  I think it’s also noteworthy that small misalignments in a block wall may not be noticeable at first.  But when the blocks are out of alignment then cracks grow, the wall starts to lean over time, and foundational flaws can cause the whole wall to come crashing down.

What Money Is

For all of the lies that we can believe about Money, there are great Biblical truths that we can counter them with.  These truths will keep us anchored to the Truth and keep the successive layers of financial habits and strategies from getting off course.  Credit to Ron Blue for coining some of these – I learned them very early in my career and they’ve always stuck with me as great foundational blocks for stewardship:

Money is a Tool – Money is a neutral, inanimate thing that can be used for great good (or evil).  Money can be a great resource, and God has used it throughout generations to provide for families (1 Tim 5:8), support ministers and the church (Malachi 3:10, 1 Cor 16:2), and help us to love our neighbors (1 John 3:17-18).  It can be used to pay for education, run businesses, and enjoy God’s creation.

Money is a Test – Money is a great test of our faithfulness.  Matthew 6:24 is pretty clear on this – “No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money.” We’re going to love either God or Money, but we can’t do both.  Which one will you choose?

Money is a Testimony – Stewardship cannot be faked.  If you want to see what someone loves, take a look at their calendars and their credit card statements and it will be fairly obvious.  What does your credit card statement say to the world around you?  Is it a testimony that God’s grace is sufficient, or do you find yourself chasing after other things?

Can we say like Paul that “I have learned to be content whatever the circumstances. I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want” (Phil 4:11-12)?

I feel like we’re just scratching the surface on many of these things. But I want to reiterate that when watching these guys build my retaining wall that they spent a ton of time on that first course.  We would be remiss if we just gloss over these money beliefs without getting our levels out and checking each block three and four times.

Unfortunately, unlike my retaining wall outside, these building blocks of money beliefs can get out of alignment over time, and need to be revisited every once a while to keep away the cracks that can lead to failure over time.  So spend some time looking at your first course of stone in the wall, and let’s strive together to honor the Lord with our wealth!

Following the Leader

Last week I had the amazing opportunity to take my 13 year old son on a brief ski trip.  It’s hard to get much one-on-one time with five kids, so we were both really looking forward to not only the skiing but also just some quality father/son time away together.

As we were on the lift, it kept taking us right over where they were doing ski school for some little kids, and it was fascinating to watch.  The way they were teaching them was to have the junior skiers simply follow directly behind the instructor.  They’d turn as he would, “pizza wedge” together, and the little ones would do their best to imitate the instructor’s form and stance.  It was much better than how I’d likely teach which is by allowing them to fall and learn the hard way what not to do!

In this way, the skiers were both building confidence and developing habits. When it comes to our money habits and personalities, they don’t just happen on their own.  We learn them at an early age and they often get reinforced by many repetitions.  We can certainly change them, but by the time we’re adults they can be so ingrained that they’re second nature.

Who have you followed?

If you’ve never done it, it’s a good idea to stop and think about the people who helped shape your money habits and personality.  How did your parents and siblings handle money growing up?  Do you find yourself a carbon copy of one of them, or perhaps the exact opposite?

My parents were both savers.  Thrifty has always sounded nicer than cheap, really.  I suppose we had to as my father was a restauranteur and we would have seasons of feast followed by famine depending on how the restaurant was doing.  Add that to the cost of raising five kids, and it makes a little sense in hindsight why I would see my mom washing out Ziplock bags to reuse them and why we always bought the generic brands of things.

Most of the lessons we learn regarding money aren’t ever spoken – rather we observe and follow in their footsteps.  My parents never had to tell me that it’s better to buy the less expensive option, I just observed and did the same.  Many of these habits aren’t good or bad in and of themselves, but they can be ruts that we fall into.  They can also be ways that we judge others who may not see things the way we do or make different choices than we would.

So take some time this week and think through the spoken or unspoken lessons you learned early on.  List out your core values regarding money, and see if you can trace those lines back.  If you’re brave enough, think through the ways your money personality can be a blessing as well as a curse, both to you and to others around you.

Who are you following?

I’m certainly an average skier at best – I can mostly stay on my skis without falling, but I know my limits and stay off the really steep terrain.  On our trip last week, I mounted up the courage to go down a couple of the terrain runs.  At the top, folks would briefly stop and take turns going down the run.  Watching others make different choices about whether they were going to go for the decent size jump or over the tamer section of hills, I decided to follow the chickens like me and go for the latter option.  The jumps looked like fun but a torn ACL didn’t sound like it would be!

We’re all following others with our finances in this season as well.  Our money habits may have started developing at an early age, but who we surround ourselves with currently plays a big part in our spending habits as well.  I watch too many young couples in particular end up in circles of friends who may earn more money than them and want to do a lot of fun things together like going out to eat or going on vacations. Expenses that might not strain one couple could be a huge strain for another, but they don’t want to seem or feel like they aren’t able to afford it so they end up going along for the ride and experiencing stress and strain on their finances and marriage as a result.

Peer pressure is very real, even for older, more mature folks.  When friends upgrade their homes or cars, there’s naturally something inside us that wonders if we should be doing the same.  The same is true for the colleges we send our kids to (or don’t), having the latest technology, fashion, Stanley tumblers (is this really a thing!?), etc.

On the other hand, your peers might be living very simple lifestyles.  I have several clients who are millionaires and yet have lived in the same small home for 40 years and live mainly off of Social Security income.  Their friends have simple pleasures that don’t require a lot of money.

Who are you following currently?  While we’d like to think we’re immune to peer pressure and the influence of others, that’s just simply not the case.  So think through how you’re being influenced by those around you. If you’re married, talk through the honest ways that you can be unwittingly affected by the choices your friends are making.  And how is media or social media affecting you?  I’d love to think I’m strong and wise enough to not be swayed by it, but it’s probably more foolish to think that than anything else.

Following Jesus

Paul charged the believers to “Follow my example as I follow the example of Christ” (1 Cor 11:1). Ultimately, our ideal is to follow Jesus, to follow others who follow Jesus, and to be imitators of Him for the benefit of others.

In all of our money decisions, habits and baggage, its best to lay them up against Scripture.  Are there things you’re doing that need to change in light of it?  I’d love for the Bible to tell me what an appropriate lifestyle is so that I can live accordingly, but if I’m honest I’d just use it in a pharisaical way to justify myself and look down my nose at others who didn’t have their act together as much as I did.  Instead, we have to be prayerful and intentional about not loving Money or the things it can do for us.  That might be from saving it up and having a large balance sheet, or spending it more carelessly than we should.

Many of our habits feel ingrained, but we can always be learning and growing.  So be mindful of who you’re following, and how you’re leading others down the trail.

What is Most Likely to Jeopardize My Financial Plan?

In the Sermon on the Mount, Jesus finishes his teaching with a parable of two people who built their houses on either the rock or on sand.  As you likely know, it didn’t go so well for the latter individual because when the storms came, his house folded like a deck of cards.

One of the things I love about this teaching is one of the assumptions that Jesus makes – that life is going to have storms.  The rains will fall, streams rise and winds blow and beat against our houses.  It’s pretty ignorant and foolish for us to assume that the weather will always be sunny and our plans will work out just like we drew them up.

With our finances, it’s always good to think through the various storms that could arise and jeopardize our plans.  What are the things that either have a high likelihood of happening at some point, or might be financially devastating if they do come to pass?  Better yet, are there things that can be done now to help safeguard against some of these dangers, or ways to avoid them altogether?  Keep reading to find out some of the most common danger areas we see and how to better protect your financial house.

The Right Amount of Cash

Cash is king it has been said. While most of us don’t keep very large amounts of physical dollars anymore, one of the best thing you can do is to keep enough cash in the bank in order to insulate you from disaster. Cash needs fall into one of two categories – expected and unexpected.

The unexpected needs are hard to predict because, well, they’re unexpected! The car suddenly dying, a health emergency, a job loss, the HVAC unit croaking, the list of these could go on and on. Most experts will give a range of 3-6 months of living expenses as an “Emergency Fund” to keep for these unanticipated financial storms. Conventional wisdom is that it should be on the higher end for single income families and lower end for dual-income families since there’s more insulation on the income-side.

In reality, we tend to see this number get higher as people get older, more conservative, and have more that they can afford to set aside for a rainy day. Personality also certainly comes into play when it comes to the right amount for this. Regardless, if you have any short-term debt like credit cards, you should pay these off before saving up an emergency fund because the emergency fund is just meant to keep you from taking on debt like this to begin with.
The expected cash needs are things like an aging car that you know will need to be replaced, paying for planned home upgrades or major travel and things of the like. These things aren’t emergencies by nature and should be factored completely separate when it comes to how much cash you’re keeping. Often it’s best to escrow these future needs on a regular basis so that you have the full amount saved up in addition to your emergency fund before the expenses actually arrive.

The Right Insurance Policies

Some things just aren’t logistically coverable by cash savings like paying for a kidney transplant or replacing a house. Others, like replacing a newer car or dental work, might be paid without insurance but it may be a good idea to have a policy to cover them.
Again, this is part wisdom and part personal preference. In general, insurance is meant to cover events that are unforeseen and potentially catastrophic. So things like homeowners insurance should be a no-brainer (and is required if you have a mortgage), while others like Pet Insurance or insuring a toaster are in my opinion a bit more superfluous.
Where should you draw the line? Much of this depends on what you consider to be catastrophic events, how much cash you have in an emergency fund, and your personal comfort level. I lean on the non-insurance side of the spectrum, and will often decline insurance coverage on appliance, travel plans and things of that nature. Others might prefer to potentially outlay more in up front expenses if they can limit their downside risk on those items. It’s okay to take on the uninsured risk so long as you know what could potentially happen and have enough of an emergency fund to take on the potential expenses. You should also think through your deductibles when it’s an option on things like home and auto insurance. Higher deductibles mean lower premiums and vice versa, and which one is right for you should depend on the same factors.

Can I Recession-Proof My Investments?

In a word – no – you cannot recession-proof your investments. While you can avoid downside risk by sitting on the sidelines or buying an annuity product, these solutions often cause more damage than they avoid by exposing you to inflation risk, hidden fees and a host of other problems.

You can, however, be smart about how much of your investments are exposed to certain amounts of risk such as stock market volatility. Make sure you have any amounts you’re expecting to withdraw in the next several years in conservative assets like bonds and cash. That way when the storms come (not if), you won’t have to be anxious or panicked as you’ll have plenty of time to wait out the storm.

That’s why your investments should always go hand in hand with your overall financial plan. Lining up your investment strategy with your future cash flows allows you to have a lot more confidence in your ability to anticipate and plan around the things that could jeopardize your goals being reached.

Lastly, we want to encourage you not to focus too much on the storms. When Jesus told Peter to get out of the boat and walk towards him on the water, he did just that. He was literally walking on water, until he got distracted by the wind and waves around him. When he did that, he sank like a rock (which, ironically, is what his name means!). We can focus so much on the storms that haven’t even happened yet that it can cause us to try to build up huge portfolios and bank accounts so that we will be safe. But security in this world is ultimately an illusion. It can never really be attained and we wear ourselves out trying to run after that which is unattainable.

So do your best to be wise and guard against the dangers that may lurk ahead while not letting the fear of the future tear down your house.

Rich in Good Deeds

I am not a night owl.  I’ve fallen asleep in the middle of more conversations with my wife in the evening than I care to admit.  My college roommates used to make a game out of stacking things on top of me after I had dozed off on the couch at night.  So when our friends the Suttons invited us over for a New Year’s party, I gladly volunteered ahead of time to take the early shift and bring our youngest two kids home around 9 or 10 while everyone else stayed to watch the ball drop.

When we got there, I quickly realized that I had set way-too-low expectations for the gathering that evening.  Giant “2024” balloons had been strung up, a spread of food fit for King David’s table had been set out, and our kids started cracking open some of the 500 glow sticks they had purchased for the night.  As the evening went on, games were played, new friends had been made, and I had consumed way too much Buffalo chicken dip!  Nine o’clock came and went, and my 4 and 8 year old were having as much fun as I was, so we partied on.  As midnight struck, balloons dropped, confetti was launched, and horns started blowing.  I eventually took the younger crowd home around 12:30, while the rest of my crew stayed and danced and played until closer to 3 in the morning.

As we chatted the next day when we eventually all got up, all of our hearts were full.  All of us were feeling rich in friendship and overwhelmed by our hosts’ generosity.  In reflecting on the night, it’s been a tangible fleshing out of what Paul wrote in 1 Tim 6:17-18:

“Command those who are rich in this present world…to do good, to be rich in good deeds, and to be generous and willing to share.”

That night felt like a great picture of that, and gave our family some things to talk about.  About how they spent the next several days after the party vacuuming confetti off of the couches, removing stains and washing dishes.  About all the time spent in planning food, decorations, supplies and games.  About how generous they had been with their time, their money, and their home.

God’s desire for us is that we would use the riches that he has blessed us with to use them to bless others.  That we would shift our mentality from wanting to store up riches for ourselves to emptying ourselves that others might be enriched.

The verse that follows is even better: “In doing so, they will lay up treasure for themselves as a firm foundation for the coming age, so that they may take hold of the life that is truly life.” Far too often we can view generosity as a box to check rather than a lifestyle to live.  We’re convinced that generosity is a good thing, but tend to view it as a cost to us rather than a gain.  Scripture, however, teaches us that generosity doesn’t go in the “cost” column but rather in the “gain” column.  In giving up our treasure on earth, we actually gain treasure in heaven.  What we give up is so very temporary, but what we gain is for eternity.

It has inspired in the Terry family some fresh conversations over what it means to be generous and rich in good deeds.  How will we be intentional about that in the year ahead?  What are the ways we can transform our earthly riches into an eternal treasure?  How can we use them to do good? And are we convinced that in doing so, it really will lead to the life that is truly life?

I’d challenge you to ask yourself the same questions.  We don’t get a second pass at this life, and before you know it, it will be 2025.  So let’s live this year with joyful generosity towards those who we share a roof with, our neighbors, friends, and the least of these around the world!

Money Value of Time

When it comes to investing and financial planning, there’s a concept known as the Time Value of Money. Basically, the earlier you get access to money, the more valuable it is because of the compounding effect of inflation. A dollar today is worth more than a dollar 20 years from now as we all know.

However I think a concept that is just as important if not more so is the Money Value of Time. For most of us, it’s not money that we will ultimately run out of, but rather it’s time. We only have so many days on earth, and each one that is spent is gone permanently. Unlike money, there’s no earning additional days or years, and somehow the older we get, the faster time seems to erode.

I’ve been fascinated by this thought for several years, and have been trying to be intentional about the relationship between money and time. I’ll often get asked by clients what the best decision is in a certain situation, and I always stop and ask what they mean by “best”. For instance, when it comes to planning out retirement, if the best decision is the one that ends up with the most financial security, then my counsel would be to never retire. Of course, that’s not what folks typically desire, so it leads into a deeper conversation over how much financial security is enough, what they would give themselves to if they did in fact retire, and so on.

That’s where this concept of Money Value of Time comes into play. While I can’t buy myself more time, I can use the money that’s been entrusted to me to leverage time, free up time, or perhaps make it more purposeful or enjoyable.

I recently had a call with a client who has a great career in the medical field. He makes a great living but the demands are pretty high in this season of balancing career and a young, growing family. He told me his desire was to work hard for the next 15 years or so until he can get the kids to college and then slow down after that.

To me this seems to be counter to the things he holds most dear. He’ll always be able to make more money down the road, but his time is most precious now while his kids are being raised. In the trade-off between time and money, he’s giving up time now for more money so that he can have more time down the road. I tried to lovingly ask him to consider that it may be worth giving up more money now in order to “buy back” some time that he won’t get a second chance at.

This is a perfect example to me of decisions we’re faced with all the time. Is my time or money more valuable in certain situations? Should I do the painting myself or hire a painter? Work the extra shifts that will pay overtime? Take the time to cut coupons for groceries? Spend money to fly the kids somewhere for a vacation together? Money isn’t always a function of time, but I’m amazed at the frequency that the two seemed almost inextricably linked.

I’d also encourage us to keep in mind that in God’s economy, the most efficient use of time and money isn’t always the right answer. In fact, he offers (and commands) us a sabbath day of rest once a week, intentionally slowing down so that we can rest, rehearse thankfulness for all of God’s blessings, and be reminded that we’re mortal and shouldn’t try to burn the candle at both ends. For someone who likes to make the most of his time, that can be hard to do sometimes!

What are some ways you might be able to leverage your money to make the most of your time? My encouragement is that we’d all take some time to slow down and consider what’s really important to us. The world would tell us that it’s simply gaining as much money as we can to protect ourselves and provide enjoyment. There’s nothing wrong with gaining money, but we should be certain to ask ourselves why we’re doing it, and if there are any better ways we could put it to use. Blessings on the journey!

How to Handle Healthcare in Retirement

Health Insurance is one of (if not the) biggest concerns for early retirees.  Giving up employer-sponsored coverage can feel like the golden handcuffs that can keep us in the same job longer than we might otherwise choose.

You might have questions about your options for coverage.  Is Obamacare a viable or good option?  How about a Christian health-share option instead of traditional insurance?

Health insurance and other medical costs are becoming a larger and larger portion of our budgets, but if you know what you’re doing, you can lower your costs dramatically.  Let’s take a look at your major options, how you can play the health insurance game to win, and how to enter the retirement phase with confidence.

COBRA Coverage

If you have been employed and received employer-sponsored health insurance, there’s a likelihood that you’re eligible for COBRA insurance coverage.  COBRA gives workers and their families who lose their health benefits (even voluntarily) the right to choose to continue group health benefits provided by their group health plan.

COBRA can be a good option for short-term needs, as it can last for up to 18 months from separation of service.  It is generally one of the more expensive options, as you’ll need to pay for the entire cost of coverage (employee cost plus employer subsidy) plus a 2% administrative charge.

However, if you only have a shorter gap until Medicare and several pre-existing conditions, it may be your best bet.

One note is that you can retroactively choose COBRA up to 60 days after separation for service, so you could in theory wait to find another health plan for up to two months and hope you don’t have any health incidents, which may save you several hundred dollars in other health insurance costs.

You can download a full guide to COBRA coverage here.

Marketplace Insurance

If you need or want to get private insurance, another good option is a marketplace (aka Obamacare or Affordable Care Act) policy.  The full cost of these policies is likely similar to what you could get through COBRA, but there is one big advantage to an Obamacare policy – subsidies! These subsidies are based on your Modified Adjusted Gross Income (MAGI; this is usually the number on line 11 of your 1040).  In general, the lower your MAGI, the more of a subsidy you’ll qualify for.  However, there is one major caveat.  If your MAGI is too low (below 100% of the Federal Poverty Line, you won’t qualify for any subsidy at all as the government will deem you eligible for Medicaid.

Unfortunately, most early retirees who won’t qualify for a subsidy because their income is too low also won’t qualify for Medicaid because they have too many assets.  Fortunately, there is an easy fix for this.  Just make sure your income is high enough (usually around $18,000 depending on age and number of dependents) through taxable retirement distributions or Roth conversions.  Roth conversions can serve here as a double-win as they can help you qualify for low-cost health insurance while converting part of your retirement assets to grow tax-free for the rest of your life.

If your income is too high (again, depending on age and dependents, but usually around $40,000 – $50,000), you may not qualify for much or any of a subsidy. If this is the case, private health insurance may still be your best bet if you are uncomfortable with the alternatives or if you have significant pre-existing conditions which may not be covered by Christian health-share options.  While there are many things I disagree with about Obamacare, it is nice to know that everyone is eligible for some sort of insurance, even if it is exorbitantly priced.

We’ll cover tax-planning strategies in further detail next week, but know that tax planning and insurance planning can be vitally linked for early retirees and should be done in concert with one another.

Christian Health-Share

Christian Health-share ministries are becoming a more prevalent option for those seeking alternatives to traditional insurance.  The major players here are Medi-Share, Christian Healthcare Ministries, Samaritan Ministries, and Liberty HealthShare.  Each is slightly different in terms of the cost, what they cover or exclude, and how the coverage actually works.  Some are set up to look more like traditional insurance, and some operate more like self-insurance where members help each other out.

One facet of these ministries that many Christians find attractive is that there are certain procedures and medications that are not covered, such as abortions and pregnancies conceived out of wedlock.  Some of these companies require an affirmation of faith, a prohibition against drug use or drunkenness or other provisions.  In some cases these are for faith reasons and in others they help keep members cost lower.

These ministries are not considered insurance for tax purposes and are not eligible for things like Health Savings Accounts (HSA’s).  They do, however, meet the qualifications for qualified health care coverage under the Affordable Care Act, so the government will consider you insured even if they won’t give you a tax break for it.

Our family has used this type of coverage and have had a great experience.  I’ve similarly had clients and friends use it with generally positive experiences as well.  There are pros and cons to each of these companies and you should evaluate the best one for your family based on projected medical needs, prescriptions, and overall frequency and severity of doctor’s visits.

This is a very high-level look at these programs.  If you are considering making a switch to one of these, I highly recommend an in-depth comparison. Michael Kitces has an excellent write-up of the ins and outs of these, as well as a thorough comparison of the four major providers.

The Bigger Picture

Regardless of which option you choose, I think there are a few main points of consideration:

Stewardship – When it comes to our finances, Jesus encouraged us to be “shrewd as serpents”.  If you play the health insurance “game” well, you can save thousands of dollars per year.  This can make a substantial difference and may free you up to retire earlier, be more generous, or just not be stretched so thin.

Conscience – You may also find yourself with two similarly-priced options, but one supports large insurance companies while the other is supporting other believers.  Stewardship in this case might mean opting for non-traditional coverage.

Providing for Your Family – 1 Tim 5:8 instructs us that “if anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever.”  In addition to providing income and basic needs, this should also include access to doctors and health care when needed.  So make sure that you have a plan in place whatever it is.

Faith – If we knew exactly what illnesses and injuries we would go through, this process would be much easier to navigate.  Not only can we not know the future, but we’re not called to worry about it or try to control it.  In the end, we can trust the Father to watch over our health and financial needs.  So don’t obsess over making the perfect decision or over the small chances that something bad could go terribly wrong.

 

Contemplating Early Retirement?

In recent years the concept of early retirement has gained tremendous popularity, and it doesn’t seem to be slowing down. This idea of having a large nest egg to retire as early as possible can be alluring in offering freedom to pursue things that might seem more fulfilling than a career. Retiring early can be both a great aspiration as well as a path fraught with pitfalls.

Retirement in and of itself isn’t a very biblical concept. It’s only really mentioned for Levitical priests, who were to retire at the age of 50. For the rest of us, it was presumed we’d keep on keeping on at working until our kids would take over the family business and support us in our old age.

I also think of the parable of the man who had riches and tore down his barns to build bigger ones to store it all, telling himself “You have plenty of grain laid up for many years. Take life easy; eat, drink and be merry.” It seemed like a good plan, but God had some other thoughts.

In my experience as an advisor, I’ve seen folks enter into retirement and it be everything they had hoped for. I’ve also watched clients flounder and take years to try to figure out their new identity and rhythms of life. We’ve gleaned a few things from conversations and observations and wanted to share a few insights that might help you process retirement for yourself.

Keys to Successful Retirement

Retire Towards Something – One of the most important things about retirement (whether it’s early or late) is to retire towards something, not just retire away from working. Being financially independent can unlock new opportunities, whether that’s pouring into your family, friendships, church, community, etc. It can take the form of teaching, mentoring, volunteering, missions work, writing – the sky’s the limit! But be intentional with your time and talents; we weren’t meant to take our light and hide it under a bushel, or to bury our talent in the ground. You likely won’t have this totally nailed down by the time you retire from your career, but it’s important to have an idea of the things you’d like to try out and pursue in the next season.

Take Advantage of Relative Youth – While we’re not advocating for a life of leisure, there is the reality that our bodies will deteriorate quicker than we’d like and there will be a window of opportunity to pursue more active things like adventure and travel. Sometimes we put these things off because of the fear of spending down our savings, and sometimes we just don’t make time for it.

So long as these aspirations are apart of your overall financial plan, there are no prizes for dying with a big of money and unpursued dreams. With that in mind, use your money well to see part of the world, visit old friends, and enjoy some of the fruits of your many years of labor.

Stay productive – Retirement doesn’t have to mean you’re useless to society. Many of our most satisfied retired clients are engaged in their church, volunteering with a non-profit, or have a part-time job at Home Depot just for the fun and fellowship of it. It could also mean taking up a hobby of woodworking, painting, or finding other talents that have been hidden behind the curtain of a career. God loves the idea of rest – it’s why He gave us the sabbath. But the day of rest is meant to be a break from being productive, not a full-time state.

Pitfalls of Early Retirement

Giving up Identity and Impact – Our careers should never define us, but often our identities can get wrapped up with them. It’s only natural after spending 40 hours a week for 30-40 years and then no longer having that thing to feel at a bit of a loss. It can create a bit of a void for us to deal with. It can also lead to sadness and depression, and a feeling of lostness.

The best way to deal with this is to both retire towards something and to stay productive. But be prepared to deal with feelings of loss and insecurity as it can be a normal part of the process.

Avoiding too much leisure – When we do have voids in our time and identity, we’re on average not very good at filling them well. A recent Wall Street Journal article details how much time is spent doing certain activities in retirement. Retirees on average spend 4.5 hours a day watching TV, and 6.25 hours on “relaxing and leisure”, compared to a half an hour or less of time spent reading, socializing, or exercising. The results are as you might guess – an unsatisfied and extremely unhealthy retirement.

Stress of Withdrawing from Savings – You’ve saved and accumulated for decades, all for the very purpose of having funds to spend during retirement. But there’s a real visceral challenge for some of us (I’m talking to you “savers”) in transitioning, often suddenly, from putting money into a savings account into pulling money out of the account. It just feels wrong. Couple that with a bear market like we’ve been in and it results in feelings of stress and anxiety. There’s nothing wrong with intentionally spending down investments and savings over time, but beware of the emotional challenges that can accompany this season.

Where to Find Direction

Ecclesiastes 3:1 reminds us that “For everything there is a season, and a time for every matter under heaven”. There is a time for work and time for rest, just as there is a time for planting and a time for harvesting.

Whether in our working years or in retirement, finding joy and purpose in what we do is a principle that transcends age. Early retirement can be a means to explore new passions, interests, and hobbies that bring fulfillment and satisfaction. Also, early retirement is a personal decision, and it varies from one individual to another.

The Gospel emphasizes the importance of seeking God’s guidance, finding contentment, serving others, being good stewards of our resources, and finding joy in all seasons of life. Whether you choose early retirement or continue working, let your decision be rooted in faith, guided by biblical principles, and motivated by a desire to advance His kingdom.

Estate Planning Beyond Your Will

A will is important in any estate plan, as it serves as the backbone document of what will happen when you pass away.  But there are several other pieces to a good estate plan that go beyond a will.  If you don’t tie up some loose ends, you might be surprised at how wrong things can go even with a shiny new will in place.  So keep reading to discover some key non-will factors you need to consider for your estate plan.

Beneficiary Designated Assets

For many if not most Americans, the majority of their estate won’t be controlled by their will.  The will controls the probate estate, but there are many assets that won’t be included in this.  For example, life insurance proceeds, IRA and 401(k) accounts, and Jointly held accounts won’t be directed by the will but rather by the beneficiary designations on file.

So while you think you’ve protected  one of your kids from receiving too much of your estate too early, you may have them listed as a primary or contingent beneficiary on an insurance policy and they could receive a sizeable windfall. Or you may intend to give 10% of your estate to charity and designate this in your will but it turns out that the will only controls 25% of your actual estate, leaving the charity with 2.5% rather than 10%.

With this in mind, be sure to look at all of your accounts and insurance policies to make sure that beneficiaries are up to date and that they are coordinated with your will.

Adding Beneficiaries Whenever Possible

With the above in mind, adding beneficiaries is a great way to minimize your probate estate.  Probate assets are subject to probate fees, and are also subject to public record.  So whenever possible we often recommend that you add beneficiary designations to banking and investment accounts so that they’ll go directly to your loved ones and not get caught up in probate.

Investment accounts that aren’t jointly owned can have a Transfer on Death (TOD) designation added, and bank accounts can have a Payable on Death (POD) designation added.  Talk to your financial advisor or bank representative to get these added – it’s simple to do and can make things much easier down the road.

Another benefit to these designations is that if your desires change down the road, it’s much simpler to update the TOD or POD designation than it is to update your will (and it’s free!).

Should I Use a Trust in my Estate?

When a basic will doesn’t seem to be sufficient, a trust can coordinate with your will to help achieve your estate goals.  Revocable Trusts (or Living Trusts) are made during your lifetime and can be altered, edited, and revoked as long as your live.  They are often used as a will substitute than can shelter assets from probate (particularly useful for real estate in other states that would have to go through multiple probates) and can keep more of your estate out of public record.

Irrevocable trusts, on the other hand, are permanent and, yes, irrevocable.  They become a separate tax entity and can be useful when you’re needing to limit estate taxes, are trying to do some Medicaid planning for long term care coverage, etc.  Once assets get placed in an irrevocable trust, they are no longer property of the grantor but instead belong to the trust permanently.

Testamentary trusts are trusts that are established through your will at death, and can be used to hold assets for minors or young adults, for spousal benefits, and many other uses.

There are also special trusts that can be useful for special needs situations, blended families to make sure that assets get distributed properly at a second death, and many more uses.  The bottom line is that if you’re trying to pull something off through your estate, there’s probably a trust that can help you out if your will can’t do it!

Ancillary Documents

While a will can help control your assets when you pass away, it won’t help with the other planning for end of life.

A Power of Attorney document will enable a spouse, child, or other loved one to help you with your financial affairs if you become incapacitated or mentally unable to perform the necessary tasks.  If you don’t get this in place before you need it, you’ll have to have the courts appoint someone for you.  This could be for something as simple as paying your bills to helping you sell your home.

A Healthcare Power of Attorney gives someone you choose authority to make medical decisions on your behalf.  The last thing you want is to require a major procedure with the doctors unable to consult anyone about it.  You can choose how wide of a scope you want this to have if desired.

A Living Will or Advanced Medical Directive will take the pressure off of your Healthcare Power of Attorney by pre-deciding how you would like your end of life care to be.  Do you want to be kept alive under all circumstances?  Do you want to be resuscitated?  These simple decisions can help accomplish your will and will be a huge weight off of your loved ones.

Communicating Your Desires

Once you have your documents in place, it’s important to let those involved know if they may have a role to play in your overall estate plan.  This will give some folks the chance to opt out of the responsibility or to ask any questions they might have.

Some folks want to prep their heirs for any large sums that may or may not come their way, or to leave some notes along with their wills to be delivered after their death that offers some insights as to why certain decisions were made.

It’s also a great idea to sit down with whoever would be in charge of your funeral/memorial and discuss your desires.  That in and of itself is a big gift to your loved ones so they don’t have to spend the first few days after you pass away event planning rather than grieving.  Let them know some of your preferences such as location, officiants, and maybe even a few songs to take this responsibility off their plate.  You may want to give them some guidelines for any obituary as well.

As always, we’re only peeling back a few layers of this onion. There are many possibilities and decision points, but the main point is that you should take some time to think through these non-will decisions before it’s too late.  We’d be glad to process them with you if need be, and help hold you accountable for getting these important yet not urgent tasks done!

Should I Redo My Will?

I’m going to give you the benefit of the doubt and assume that you already have a will in place.  Sadly, nearly 60% of adults don’t and could have the state decide who gets their money and their children if they were to pass away.  If that’s you, please stop reading this and get that done ASAP!

 

If you were responsible and got a will done several years ago, how do you know when it’s time to redo your will?  When does it become outdated, irrelevant, or possibly harmful?  Thankfully, estate law has become much simpler over the past few years, but there are some key mistakes to avoid that could leave your loved ones with a mess on their hands if something were to happen to you.

 

Mistake #1 Naming the Wrong Trustees and Guardians

 

Relationships are funny things, and even more so when dealing with money and our kids.  When you wrote your last will, you might have had a great relationship with your brother-in-law who now you’re not so certain about or who may not even be your brother-in-law anymore!

Check your will to make sure that the people who will take care of your children (guardians), money (trustees), and settling the estate (executors) are still the folks you would most trust with those tasks.  Trustees and executors don’t need to be legal or financial professionals per se, but you want to be sure they are folks who will handle the responsibility well.   You may also have grown children that can now help with some of these tasks.  In either case, it’s likely time to redo your will.

 

 

Over the past several years, the amount of assets that can pass free of estate tax has ballooned.  In addition, married spouses now have “portability”, essentially meaning that you can focus on one higher estate-tax-free amount rather than two individual ones.  This translates into an estate of $6.46 million for singles and $12.92 million for married couples.  Unless you plan on h

 

Mistake #2 Overcomplicating your estate plan

 

Having an estate higher than those thresholds, you’re more likely to overcomplicate things than anything.  This can happen by having old wills that put assets into marital trusts, credit shelter trusts, and other irrevocable trusts to try to avoid estate taxes.  While these won’t necessarily hurt you, they result in additional entities, tax returns, and headaches that you could be stuck with for a long time.

 

If you’re planning on having an estate of a few million dollars or less, you’re likely going to be fine with a simple will.  So check your old will to see what happens to your money when you die and make sure it’s still appropriate.

 

Mistake #3 Leaving the wrong amount of money to your heirs or at the wrong time

 

If you made your will when your kids were young, you had no clue how they would be able to handle an inheritance.  When they’re older, you have a better sense of their ability to steward wealth and whether it would be a blessing or a curse to them.

 

It may be that you would be leaving them too much money for their own good (this is way more common than leaving them too little in my opinion), or giving it to them too early (you can stagger distributions if need be) or late (at an age beyond when it would be most useful).  So check your will to see who your beneficiaries are and when they would be entitled to receive how much money.

 

Mistake #4 Naming the wrong (or no) charitable beneficiaries

 

Giving money to your favorite church or charities is easy to do through your will, and you don’t have to worry about whether it will cause you to run out of money before you die!  I always encourage folks to consider making a charitable bequest through their will as it could be the largest gift they ever get to make.

 

On occasion I’ve seen money left to a church that someone attended 20 years earlier, or to an organization that doesn’t even exist anymore.  This should either be updated to current desires (can be done through a simple amendment, aka “codicil”, to your will) or left to a donor advised fund at a public foundation such as the National Christian Foundation.  If you set up a “legacy fund” at NCF, you can leave a portion of your estate to your fund, and then direct where you want the money to go through your giving fund.  This prevents you from needing to update your will in the future if your desires were to change again as you can just update your legacy fund online.  You can also leave your heirs as successor advisors to the fund and let them decide where some or all of the gifts go to let them be a part of the stewardship process.

 

We also want to make sure you’re aware that while we’re not attorneys and don’t draft estate documents, we have a great partnership with My Advocate and can offer discounted pricing for online estate document preparation, including wills, revocable trusts, and ancillary documents.  We can walk you through the process and review your documents before you sign them to help make sure everything is in good order.  If you’d like to stop delaying and get the process started, just shoot us a line and we’d be glad to assist!

Is it Time to Bail on Bonds?

While the stock market had a terrible year last year, bonds didn’t do much better.  In fact, when you look at it on a risk-adjusted basis, bonds were much worse.  The S&P 500 lost 19.44% in 2022, while the Barclay’s Aggregate Bond index was down 13.0%.  While we expect stocks to go through rough stretches every so often, it’s usually during those same periods that investors look to their bonds to keep their portfolio afloat.

To put the bond return in perspective, this was only the third time recorded that bonds have lost any money when stocks were down more than 10%, and the only other two times were before 1942 and the loss was less than 3% each time.  To say that last year was an anomaly is an understatement.

In 2023, bonds haven’t done themselves any favors.  With the S&P 500 up over 17% YTD, bonds have been continuing a bit of a slow bleed, down around 1.75% for the year.

And with cash earning upwards of 5% with zero risk, it’s hard for many to make the case for investing in bonds. Why take on the added interest rate risk when you can get a risk-free rate of return of 5% on your non-stock investments?  And what happens next for bonds?

Bonds: After the Hikes

The Fed is mostly done raising rates at this point, indicating that they may in fact raise them one (possibly two) more time(s) if needed, but with a target rate that begins to lower sometime early next year.  As you’re likely aware, bond returns are inversely related to interest rate movements, so lower rates are like bonus returns for bonds. That’s why as the Fed has continued to rapidly raise rates, bond investors have been punished.

Once the Fed does stop raising rates, it can be a very good environment for bondholders.  As you can see below, the one-year returns following Fed hikes can offer stock-like returns for bondholders who haven’t given up on beat-up bonds.

How bonds have responded after the Fed stopped raising rates

From <https://advisors.vanguard.com/insights/article/series/active-fixed-income-perspectives#%20overview

Another source of encouragement is the inverted yield curve you’ve heard about in the news.  The yield curve gets inverted when the yield for 2-Year Treasuries is higher than 10-Year Treasuries.  In a normal environment, you get paid more for loaning out your money for a longer time.  But the lower 10-Year number points to a consensus projection that yields will be falling in the future.  And future falling rates points to…you guessed it – higher returns for bonds.

So we certainly haven’t bailed on bonds.  The big questions for us are “when?” and “how much?” We don’t know precisely what the Fed will do (nor do they at this point), nor do we know how sharply rates will lower.  Forecasts are just that, and are subject to change just like weather forecasts.

What does seem highly likely is that the worst of the bond carnage is behind us.  So at this point it’s mostly a waiting game.  We can see the value in having some of your conservative investments in a bond-alternative like cash or shorter-term treasuries, but when you take too big of a gamble in either direction, it can often lead to more harm than good.

In the end, I’m reminded of Ecclesiastes 11:2: “Divide your portion to seven or even eight, for you do not know what misfortune may occur upon the earth”.  Diversification makes sense as it always has.  That doesn’t mean you shouldn’t be making some tactical changes, as we have been doing for our client’s portfolios.  But it does mean that you shouldn’t put all your eggs in one basket, or abandon one basket that hasn’t gotten many eggs lately.

Drifting Away

My wife and I recently got back from a trip to Wyoming to celebrate our 20th wedding anniversary. It was fantastic to 1) get away and 2) be overwhelmed at the majesty and beauty of God’s creation.  One of our favorite parts was a float trip we took down the Snake river.  It was a nice break from hiking to sit back and enjoy the scenery while we lazily floated down the river.  While we drifted, I was reminded of a few lessons along the way…

Coasting Can Get You In Trouble

While the Snake River seems mostly calm at first glance, we covered 10 miles of river in about 2 hours.  There wasn’t any need to paddle, motor, or strain to move the raft – it just hummed along with the current.  For the most part you can just follow the river on down.  But there are fallen trees, big rocks, and other hazards along the way that we would have gotten stuck on if we just drifted on our own.

In life, floating has that same allure.  If I can just eliminate the frustrations and stresses in life, it seems like floating along for a while would be pretty appealing.  Life with five kids in the home certainly can suggest that!  But there is no true safe coasting in life or on a river.  There is always debris and danger lurking if we’re not careful.  No matter how much I try to plan things out, I can’t get to a place where I can simply float without eventually drifting into trouble.

There Is No Standing Still

Just as on the river, there is no standing still in life.  It took absolutely zero effort to get going down the river.  The moment you enter, the current zips you off on the way.

In fact, if you don’t want to be carried downstream, it takes considerable effort to paddle against the current.  Not losing progress is work, while going against the current is a non-stop battle.

Hebrews 2:1 warns us of this – “We must pay the most careful attention, therefore, to what we have heard, so that we do not drift away.”  It takes careful attention (i.e. hard work) to not drift in life.  The older and more tired I get, the more alluring coasting seems.  It seems like surely just resting for a bit won’t be that bad.  But God instructs us that resting for any length of time frankly isn’t an option.  We’re to run our races with perseverance to the end, until one day when we get to enter true rest in heaven.

We Need a Guide

Jay was a great guide for us on the river.  Informative, experienced, and fun.  He manned the oars the entire time, keeping us heading in the right direction.  Having led around 200 trips a year for 12 years, he knew every inch of the waters and where to spot bald eagles, moose tracks, and how to avoid the hidden obstacles.

Proverbs 15:22 reminds us that “Plans fail for lack of counsel, but with many advisors they succeed.”  Having Jay onboard allowed us to not have to give a moment’s thought to any of those things and allowed us to simply enjoy the ride.

At Shepherd, we delight in serving as a guide for your finances, helping our clients to avoid hidden obstacles and navigate the waters to get to the finish line as smoothly as possible.  We love being in the raft with you and allowing you to benefit from our years of guiding others along the way.

Rafting with Jay reminded me of the privilege that is, and how necessary it is to have a guide along for the ride with you.  So thanks for allowing us to travel in the boat with you and share the journey.  We’ll do our best to continue to navigate the waters and hopefully the adventure will be just as enjoyable for you!

Marrying Bank Accounts

A recent study out of Indiana University has shed light on an intriguing connection between combined finances and the longevity and happiness of marriages.  There’s now scientific research that supports the merging of financial resources and bank accounts in a marriage. The study recruited and followed 230 couples over their first two years of marriage and tracked their marriages over time.  The researchers found that those who shared their bank accounts to be generally happier and with stronger marriages.  On the other hand, they even found that there was “a significant percentage of those who separated after not merging bank accounts”.

Money is a particularly sensitive topic, something that is seldom discussed even amongst close friends.  It’s one of the primary sources of conflict in marriages, so there can be a temptation to want to keep some separation.  After all, shouldn’t that lead to fewer conflicts, not more?  On the contrary, the research lines up with biblical wisdom that sharing really is caring!

The Perils of Separate Accounts

Separate bank accounts seem to make sense to some.  We tend to see it more often among younger couples, who desire freedom to spend their incomes without needing permission, as well as among blended families and second marriages that occur later in life. The latter scenario is a bit understandable, as it can involve protecting the interests of children from previous relationships as well as a fear of going down the same path again.

However, separate finances can easily become a transactional mess of who pays which bill, who paid for something last time, and what’s “fair”. If ones spouse earns substantially more than the other, should things be split evenly, or by income levels?  Does the person who pays more get more say? Determining the amount to properly split can be exhausting, and lead to conflict and hurt feelings.

Maintaining separate accounts can also lead to temptations of financial secrecy, creating an environment prone to distrust and brokenness. This opens the door to being able to hide purchases or participate in self-indulgence.

The Power of Shared Finances

Conversely, combining finances is powerful, practical, and biblical.  When we combine our finances with our spouse, it sends a profound message of trust and unity, aligning with the meaning of marriage, two becoming one.  Our money is important, and what communicates trust more than giving someone access to all of your money as well as the records of how you spend it?

What the research shows (and experience can attest to) is that by pooling financial resources, couples develop a deeper connection that fosters mutual support and a shared sense of purpose. Rather than approaching finances as a transactional give-and-take, combining resources promotes a mindset of working together towards shared goals and aspirations.

On top of all of these reasons, you are now creating accountability and honesty with each other.  There’s no place to hide secret spending, and that fact alone can help us curb some spending that would otherwise be harmful.  And we’re forced to actually talk about some of our spending decisions, as every decision affects not just you, but your spouse.

As if this wasn’t enough reason, shared finances take out the need to do separate accountings, make sure things are “equal”, and just simplifies the entire situation

Lessons from the Early Church

The Bible takes shared finances a stop further.  Beyond just a husband and wife (which there would have been no thought to the contrary), the early church promoted all believers as sharing their finances.  Believers in the early Christian community willingly shared all their belongings and did not claim anything as their own.

“All the believers were one in heart and mind. No one claimed that any of their possessions was their own, but they shared everything they had.” -Acts 4:32

This emphasis on communal ownership highlights the significance placed on trust and a spirit of oneness, even in the realm of finances.

We also have warnings of what can happen when we don’t do this. When Ananias and Sapphira sold a piece of land in Acts 4, they tried to deceive the apostles by holding some of their proceeds back for themselves.  What happened?  The Lord ended up striking them dead! Now I don’t think that’s going to happen should you choose to not combine your finances, but the message rings loud and clear that God values sharing, trust, and a spirit of oneness with our finances.

In This Together

Please know that in advocating for combined finance I’m not trying to promote communism or socialism. After all, forced sharing is never really sharing.  When we focus on equality and self-protection, it becomes challenging to truly demonstrate love through our financial decisions. Rather, the biblical teachings encourage us to love one another through our financial actions, prioritizing trust and a willingness to support each other.

Likewise, in our marriages, sharing our checkbooks is an act of love and trust.  It says, “I love you enough to trust you to with our money.  I love you more than our money.  I’d rather have your heart than all the money in the world!”

In line with biblical teachings, the concept of two becoming one is perfectly exemplified through shared finances. The notion of maintaining separate bank accounts after joining one another contradicts the whole point of this union. If spouses have become one flesh, it seems a bit odd to keep their financial matters separate.  So if you haven’t already, go ahead and combine those bank accounts!  We think you’ll be glad you did!

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