Faith Based Investing

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?

Over the past 15 years as a financial advisor, I have seen  four habits that constantly trip people up financially.  Many of these mistakes are avoidable.  Being aware of past mistakes, looking at your current behaviors, and making changes is critical to your success.  Take a look at these behaviors and see if any of these describe you:

BAD HABIT #1: Discontentment

“Content makes poor men rich; discontentment makes rich men poor.” – Benjamin Franklin

This is by far one of the worst habits.  Buying more than you can afford and endless spending destroy wealth in a heartbeat.  It doesn’t matter how much you make, if you spend more than you make, you’ll go broke!

Instead:

• Analyze your needs versus wants
• What you think about you become!  Solomon said it best: “For as he thinks in his heart, so is he.” (Proverbs 23:7)
• Are you preparing your finances to be blessed?
• God talks a lot about being faithful with small things before He will bless you with more
• Likewise, He cannot bless steps you never take

BAD HABIT #2: No Budget/ No Plan

Far too many people “wing” and “fly by the seat of their pants”.  What about you?  Do you have a plan or better yet are you following it?

• In Matthew 25, the master gave each servant something to manage according to their ability.  Those who were faithful were rewarded with more.  The servant who buried his talent in the ground was considered lazy and gave his talent to the one more obedient.
• People who lack money often fail to handle the basics (set up a budget, spend less than you make, save for a rainy day, and planning for the future).
• Look at our Federal government.  You can’t spend more than you make. Our government chooses to spend more than it makes and is making up the difference with debt (borrowing from U.S. citizens and companies, and other national governments, etc.).

BAD HABIT #3: Failure to understand basic economics

Far too many people are financially illiterate.  They fail to understand the stock market, basic economics, and budgeting to name a few.   This leads to heartache and an empty bank account.

• What about our economy?  Our economy was built on a house of cards – a mirage.  With easy credit and ability to use our homes as a piggy bank.  Now the debt is catching up with America.  How will you get back on course?
• We will go through more economic ups and downs.  How you respond to the ups and downs is most important.

BAD HABIT #4: Too much debt

This is a hard lesson learned.  You can delay payments, pay interest only, refinance, etc but eventually the bills become due and will you be able to keep up? Borrowing too much will impose on your future.

• Over-consumption leads to debt (spending from credit cards, loans, etc.).
• You get deeper into debt the longer you spend more than you make.  The longer you spend more than you make the more debt becomes a habit, and habits (especially lifestyle habits) are hard to break.

These four habits will surely get you off track.  Do any of these habits trip you up? I’d love to hear your story…

Is your financial house built on rock or sand?

I have been advising and counseling others on how to build true wealth for the past fifteen years. I have seen my personal share of ups and downs and witnessed thousands of others. The 2008-2009 financial crises was sure a wake-up call for many investors as they watched the financial system they trusted for their future collapse in a few short months.

It got me thinking about how many people, Christians included, built and continue to build their financial houses on sand. I am reminded of Matthew 7:24-26:

“Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. The rain came down, the streams rose, and the winds blew and beat against that house; yet it did not fall, because it had its foundation on the rock. But everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand.”

Five steps to help you build a solid foundation

Early this year I set out on a journey to see who thrived in 2009 and who barely survived. I conducted nearly 600 interviews to determine if there was a solid difference between those who did well in difficult times and those who fell apart. The numbers were alarming! Only 5% thrived and moved forward financially during the difficult times in 2009 while 95% of those I interviewed took major setbacks and fell deeper into debt or lost major ground.

Of the 5% who thrived, there were some major common threads:

• They identified what they valued most in life. They had spent time finding what they loved to do and how to get paid generously for it.
• They discovered their meaningful purpose in life. They concentrated on using their key strengths and abilities to add value to the world and bless others.
• They designed their compelling vision for their future. Most had three, five, and ten year goals almost memorized! They knew where they were heading and had a good idea on how they were going to get there.
• They had a real personal mission statement. Though many of them did not call it a “mission statement”, they lived their life like they were on a mission. Their financial and business lives had clarity and purpose; they created a sense of urgency, and were persistent in their attempts to succeed. If your personal goals and dreams have deep meaning to you then you are far more likely to succeed financially.
• They not only set goals, they created an action plan. This helped them implement their mission, live their values, and work toward achieving their vision. They hired a good team of advisors and had great council and accountability to set their paths straight.

Because of my key learning and my desire to help others see how they can thrive and not just survive, I just finished an eBook called “Thrive in Your Life – Creating the life you were meant to live”. It describes the Five to Thrive Principles I uncovered as I interviewed those who were succeeding financially.

Thrive Principle One: Become a passionate income earner

Of those who become wealthy, very few become wealthy from the stock market itself. By far, the number one way to becoming wealthy is through finding a way to get paid doing something you absolutely love.

Thrive Principle Two: Become a generous giver

Many fail to give back to our society because they insist they have the lack of two precious resources – time and money. However, those who are most successful often give more than 10% of their income away and spend countless hours volunteering and sharing their time and talents to bless others.

Thrive Principle Three: Become a wise investor

Investing does not just mean haphazardly investing in a mutual fund. Most investors hand over their hard earned dollars to let someone else handle their investments. This can often be the worst thing you can do. Those who are successful invest rather than gamble. Warren Buffet, for example, does not invest a dime in anything unless he is quite certain it will go up in value. That is investing. Gambling, on the other hand, is committing money to a stock, a mutual fund, or something else without a clue as to whether it will go up or down. Too many people gamble rather than invest.

Thrive Principle Four: Become a cautious debtor

If 2008-2009 didn’t teach us anything, debt can be a huge deterrent from gaining wealth. There are good, bad, and ugly uses of debt. Far too many American use debt foolishly and it keeps them enslaved rather than reaching the desired destination – financial freedom!

Thrive Principle Five: become a prudent spender

Those who succeed financially evaluate each spending decision from a variety of angles. They look at price, value, durability, and how it lines up with their life purpose. Just because you have more money doesn’t mean you can or should spend more, especially if your spending doesn’t line up with you life’s values. Those who are successful, despite having wealth, still carefully analyze. Want to the results of being wealthy and missing this principle? How many lottery winners, sports stars, actors and actresses, and other celebrities go bankrupt after earning millions of dollars?

READ THE EBOOK

A good coach can bring light to your situation

After 6 years, Tiger Woods recently made a major change.  Before you start with the infidelity jokes, I’m talking about major changes in his career – professional golf.    Tiger got to the top of his golf game with a little help from his coach.  However after six years of coaching, Tiger called it quits.

Why is Tiger Woods parting ways with his golf coach?  The reality is Tiger needed to make a move.  When something isn’t working, it is really frustrating – for everyone involved!

I talk with hundreds of people each month via the telephone, email, and in person. Money always seems to be a hot topic!  With the stock market back on a roller coaster course – people are more dazed and confused!  Many coaches, financial advisors, and stock brokers are asset gatherers not asset managers.  They have a vested interest to keep you invested in the markets even when it may not be the best choice for you.   Is your coach part of your team or do they have a hidden agenda?  Why not find an advisor who help bring light to your situation?

It may be time for you to change coaches too

Just like Tiger, it may be time for you to change coaches. The sharp ups and downs recently in the markets are a shocking reminder of what we saw in 2008 and 2009.  Don’t go back down that path! If you have found that you are not where you need to be financially or not getting the help you desire, it may be time for a coaching change! Take control of your future today.  Email me at jay@jayperoni.com for a FREE 30 minute evaluation of your financial situation!

With over 15 years of experience, I can look at your:

• Investment strategies
• Retirement plans
• Business ideas and ways to grow business
• Estate and legacy plans
• Tax efficiency (or lack thereof)
• Savings and spending
• Debt management
• And how all these tie together with your faith and values

Miracle on the Hudson

Captain Chesley “Sully” Sullenberger avoided catastrophe by safely landing a US Airways plane on the Hudson River.  On January 15, 2009, Sullenberger was the pilot in command with an extensive flight and military experience, the kind of guy you want in the control pit with the slightest hint of danger.

According to reports:

“Shortly after taking off, Sullenberger reported to air traffic control that the plane had hit a large flock of birds, disabling both engines.  Several passengers saw the left engine on fire. Sullenberger discussed with air traffic control the possibilities of either returning to LaGuardia airport or attempting to land at the Teterboro Airport in New Jersey. However, Sullenberger quickly decided that neither was feasible, and determined that ditching in the Hudson River was the only option for everyone’s survival.  Sullenberger told the passengers to “brace for impact”, then piloted the plane to a smooth ditching in the river at about 3:31 P.M.”

The Miracle?

Every passenger survived!  To land the way Sullenberger did in such a small space with no casualties was beyond a miracle.  With God’s protection and Sullenberger’s expert skills, this flight is remembered for what was saved not what was lost…

There are some things best left to a professional

I can think of a short list of professionals I would want by my side in a jam:

• Doctor for my health issues/problems
• Attorney for my legal issues/problems
• CPA for my tax issues/problems
• CFP for my financial issues/problems

People often refer to the professionals when it comes to legal and health issues, but when finances enter the picture, all too often people tackle their 401ks, IRAs, and investments alone without consulting a professional.  I’d like to say these do-it-themselves-ers often land safely, but unfortunately miracles are few and far between…

This  only confirms to me that sometimes having a professional makes all the difference in the world!