Faith Based Investing

FREE 88 Page Ebook “10 Mistakes that Could Jeopardize Your Financial Future”:

Having success is often related to avoid deadly wealth destroying mistakes.  In this ebook, I share ten of the most common mistakes I have seen people make over the past 16 years of my financial advising career.  Come lean and make sure you avoid these mistakes like the plague!

Big Mistake #1: Paying too much $$$ in fees

Big Mistake #2: Getting advice from the wrong places

Big Mistake #3: Choosing the wrong places to store wealth

Big Mistake #4: Failing to plan ahead

Big Mistake #5: Failing to properly account for inflation, taxes, and long-­term health care

Big Mistake #6: Spending more than you make

Big Mistake #7: Failing to properly understand risk

Big Mistake #8: Failing to save regularly

Big Mistake #9: Using debt to consume rather than to conserve

Big Mistake #10: Gambling with your assets instead of investing

Download the ebook here:

10 Mistakes Ebook

What would you do with an extra $1,000 or $2,000?

The Tax Relief Act of 2010 will give many of us the equivalent of a 2% raise in 2011. Employee payroll taxes have been cut from 6.2% to 4.2% this year.1 So if you pay into Social Security, you are looking at a rise in your take-home pay.  

What are your plans for that extra money?

How about directing it into your retirement account? That 2% “raise” will show up in your paychecks throughout the course of the year – it will come to you incrementally rather than as a lump sum. Still, 2% is nothing to scoff at – if you make $50,000 in 2011, you’re looking at $1,000 of found money.

What could $1,000 do for you over 20 or 30 years? Well, let’s see. If you invest $1,000 today and simply let it sit there for two decades with a 6% annual return, you end up with $3,207.14 in principal and interest. If the initial grand just sits there for 30 years at 6% interest, it turns into $5,743.49. (That’s using annual compounding – if you plug in 30 years of daily compounding, it becomes $6,048.75.)

Click here to read more »

Steps to take before the end of 2010

What has changed for you in 2010? Did you start a new job – or leave a job behind? Did you retire? Did you start a family? If some notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and the next one begins.

Even if your 2010 has been comparatively uneventful, the end of the year is still a good time to get cracking and see where you can plan to save some taxes and/or build a little more wealth.

Here are eight questions to review before the ball drops in 2010.

1. When was your last portfolio review?

Many investors fail to incorporate their faith and values into their financial plan. Many also take too little or too much risk. During volatile times like this, would it be great to have peace of mind knowing your portfolio is exactly where it should be – morally and financially sound.

2. Did you practice tax loss harvesting?

That is the art of taking capital losses (selling securities worth less than what you first paid for them) to offset your short-term capital gains. You might want to consider this move, which should be made with the guidance of a financial professional you trust.

In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and and remaining capital losses above that can be carried forward to offset capital gains in upcoming years.

There is still the risk that if Congress doesn’t act soon, long-term capital gains will be taxed at 10% for those in the 15% bracket and 20% for those in the higher brackets beginning in 2011. President Obama has himself proposed a 20% top tax rate for capital gains.2 So you might think of triggering excess capital losses in 2010 and using the losses to shelter future long-term capital gains that could be taxed at a higher rate.

If you are in the 10% or 15% brackets (taxable income of $34,000 or less for an individual, $68,000 or less for a married couple), 2010 could be the final year in which you can cash in capital gains without triggering a tax.3

3. Do you itemize deductions?

If you do, great. Now would be a good time to get the receipts and assorted paperwork together. Besides a possible mortgage interest deduction, you might be able to take a state sales tax deduction, a student-loan interest deduction, a military-related deduction, a deduction for the amount of estate tax paid on inherited IRA assets, an energy-saving deduction, a homebuyer credit … there are so many deductions you can potentially claim, and now is the time to meet with your tax professional so that you can strategize to claim as many as you can.

4. Could you ramp up your 401(k) or 403(b) contributions?

If you can do this in November and December, that will lower your taxable income. Do it enough and you might be able to qualify for other tax credits or breaks available to those under certain income limits.

5. Are you thinking of gifting?

How about making a contribution to a charity or some other kind of 501(c)(3) non-profit organization before 2010 ends? In most cases, these gifts are partly tax-deductible. If you pour some money into a 529 plan on behalf of a child, you could get a deduction at the state level (depending on the state).

Of course, you can also reduce the value of your taxable estate with a gift or two. This year, the gift tax exclusion is $13,000 – so you can gift up to $13,000 to as many people as you wish this year, with the understanding that you have a $1 million lifetime limit before you are actually hit with gift taxes.

6. Have you reviewed your estate plan lately?

Take a moment to review the beneficiary designations for your IRA, your life insurance policy, and your retirement plan at work? If you haven’t reviewed them for a decade or more (which isn’t uncommon), double-check to see that these assets will go where you want them to go should you pass away. Lastly, take a look at your will to see that it remains valid and up to date.

7. Should you go Roth before 2010 ends?

The IRS has given you a little incentive to do so: if you convert a traditional IRA to a Roth in 2010, you can optionally split the income taxes stemming from the conversion across 2011 and 2012 – without increasing your 2010 taxable income. If you wait until 2011 to make the conversion, that choice won’t be there.

8. Do you have a student in college or a private K-12 school?

If you’re paying for private school with Coverdell ESA funds, here’s an alert: the annual contribution limit is dropping from $2,000 to $500 in 2011, and primary and secondary school tuition will no longer count as a qualified expense next year. In 2010, you can buy your college student computer hardware, computer software and Internet service with funds from a 529 account; you won’t be able to do that in 2011. You’ll also want to see if you can claim the American Opportunity Credit (which is as much as $2,500 per student) for qualified college expenses in 2010; it may or may not be extended for 2011.

What’s your next step?

People often ask me about coaching them on their business and in their personal finances.  Here is how I look at a person’s financial life analyzing ten key areas.

Analyzing the Ten Key Areas of  Your Faith-Based Financial Plan

1: Ownership. God Owns 100% of everything. This i the foundation of any plan determining who is the owner of all that is entrusted to you.

Key Verses:

Haggai 2:8 “The silver is mine and the gold is mine,” declares the Lord.

Psalm 24:1 “The earth is the Lord’s, and everything in it, the world and all who live in it.”

Key Coaching Areas:

• Assess attitudes & motives in your personal financial planning.

• Rather than, “How do I protect/use my money?” the question becomes, “How can I best look after/use God’s money?”

• To rely on God and his provision not on our wealth or our ability to create wealth.

Click here to read more »

“Certified Financial Planner” – what does that title really mean? When you search for a financial advisor, it means everything. Let me explain why the CFP^® designation is so important.

Today, the financial world is full of credentials and designations. Some are respected, some aren’t. The CFP^® designation is easily the most respected. You really have to earn it. (There are some financial credentials simply conveyed to people after the completion of a glorified sales course. The CFP^® designation is not one of them.)

It denotes education. To become a Certified Financial Planner™ practitioner, you have to study financial planning at a college or university (or at the very least, through an educational program) that offers a comprehensive financial planning curriculum. You also have to pass a 10-hour exam administered over two days (kind of like a bar exam) which covers financial planning, tax planning, employee benefits and retirement planning, estate planning, investment management and insurance topics.

It reflects ethical and experiential standards. Before you can be certified as a CFP^®, you must pass a strict ethics review and agree to work by the CFP Board’s Code of Ethics and Professional Responsibility. As a CFP^® practitioner, you must put the interests of the client first, and act “fairly and diligently” when providing financial planning advice and services. Those services must be based on the client’s needs, and delivered with objectivity and integrity. You must also have at least three years of experience working within the financial planning field before you can even earn the CFP^® certification.

You must maintain these standards. As a CFP^® certificant, you have to be recertified every two years. That requires at least 30 hours of continuing education, so that you may stay informed of the latest developments affecting the financial planning profession. Two of those 30+ hours must be spent studying the CFP Board’s Code of Ethics and Professional Responsibility or Financial Planning Practice Standards.

This is why the CFP^® designation is so respected. Knowing all this, would you settle for any less qualified financial advisor? I doubt it.

The critical difference. Many people today call themselves “financial planners” without having this kind of experience and knowledge. Many of them work with a sales-based mentality. Often, they will suggest an investment product as a financial solution. Quite often, they get a nice commission off the sale of that product.

On the other hand, CFP^® practitioners know that investments are simply components in an overall financial plan, not financial solutions in themselves. We have the education and experience to create integrated financial plans using not only investments, but also strategies for tax reduction, wealth accumulation, wealth preservation and tax-efficient wealth transfer. We have the knowledge to plan for the long-term goals of our clients, and the experience to implement, oversee and revise these plans through the years.

Choose a CFP^®. If you are searching for financial planning advice, you should first see a Certified Financial Planner™ practitioner. Talk to a CFP^® practitioner today, and enjoy the confidence that comes from meeting with a truly educated and qualified financial advisor.

Are you marrying soon? Have you recently married?

As you begin your life together, it’s important for you to start planning your financial future together and putting your finances on the same page. Here are some priorities you might want to write down on your financial to-do list …

Step one: Manage debt. Many of us go through life shouldering five-figure or even six-figure debts. When couples marry, the danger is that one spouse’s debt will be seen as “his debt” or “her debt”. Arguments may start because “your debt” is hurting “us”.

Debt management should be a priority for any newly married couple. There are good debts which we assume on the way to a positive result (such as a mortgage), but there are also bad ones we assume through our credit cards and other channels.

Step two: Live within your means. An established, mutually-agreed-upon budget can be very helpful in this regard. Different people have different levels of thrift, and different perceptions of what a “bargain” looks like. This perception gap can result in some interesting financial moments in your life – your spouse may pick up a “bargain” that you would call an extravagance.

Step three: Save for college. If you plan to raise children, it’s never too soon to start. You can do it a little at a time, a little per month. You can open a college savings account using different investment vehicles – stocks, funds, or investments with lower risks. 529 plans in particular offer you some fine tax breaks.

Step four: Insure yourself. If you are under 40, you may not have any kind of disability or life insurance. You may feel you don’t need it yet. However, getting a policy early can be cost-efficient: if you buy a term life policy (or even a permanent life policy) when you are young and healthy, chances are you will pay less expensive premiums than people in their 40s and 50s who may be obese, diabetic, heavy smokers or drinkers.

Step five: Communicate to avoid surprises. No matter how much of a “we” a couple becomes, there is always the need for some private space, some individual pursuits and “me time”. That’s great, but that’s probably not the best approach when it comes to your shared financial life. When a spouse starts to hide a money-related matter or omit it from conversations, it may open the door to troubles. Open, frank conversations about money may be the best way to avoid problems in your finances (as well as your relationship.)

Step six: Build an emergency fund. You’ve probably watched or read a number of stories about couples who were hit hard by the downturn – nice, once-affluent people who suddenly had to live in their car or a motel. When things got rough, many had no emergency fund to sustain them and ended up homeless. Consider building up a cash reserve (gradually, if necessary) that you could tap into should something go wrong. You won’t regret having it around.

Step seven: Plan for retirement. There is a chance that decades from now, many of us who are currently saving and investing for the future might end up millionaires. Actually, we may all need to become millionaires.

Consider this: according to current Social Security Administration projections, the average 63-year-old in 2010 is projected to live until age 84.  So today’s typical retiree is looking at a retirement of approximately 20 years. Some of these people will live past 100 – many more than in previous generations.

Given ongoing advances in health care, how long might you live? Living to be 90 or 100 might become commonplace for the members of Gen X and Gen Y. Factor in inflation’s effect on the cost of goods and services, and you can see a possible scenario ahead where you might need, say, $100,000 or more a year for 30 years to have a nice retirement in which you don’t outlive your money.  This (strong) possibility means you may want to make saving for retirement NOW a higher priority.

In a typical couple, one spouse is more risk-averse than the other (sometimes dramatically so). So you need to agree on the investment approach you take, preferably with the help of a financial consultant who can help you determine how much money you might need for certain life goals or financial objectives.

Want More? Spend Less!

Many wished that money grew on trees.  Just seed, plant, and let it grow!  Having a never-ending supply of cash may be a dream. Wouldn’t you love to do whatever you want whenever you want? The truth is, if you plan properly, this day of true financial freedom can occur.

It is far better than the alternative—incurring debt. In order to pursue true wealth, you need to understand the difference between “good” and “bad” debt.

So how can you tell the good from the bad?

Here are the working definitions of what I am talking about:

Good debt: Good debt involves purchasing something that will gain, retain, or create value. A home mortgage is a prime example of good debt.

Bad debt: To put it simply, bad debt is any debt you incur when buying something that will lose value.

Ugly debt: Ugly debt is debt incurred when purchasing something consumable (meaning it will have no further value). This seems logical, right? Spending does not equal happiness

Many spend more than they make going deeper and deeper into debt. Before you consider debt, ask yourself:

• Is this adding to my wealth or subtracting from it?
• Do I really need this now?
• Do I have enough in savings to pay for this?
• If I borrow, how much interest will I pay?
• Does this make financial sense?