160 – Avoid These Financial Mistakes

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160 – Avoid These Financial Mistakes

Make sure you are avoiding these common financial mistakes.

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Buckle up for this great episode on avoiding some of the top financial mistakes that are commonly seen by Bob and Shawn. They have pulled from their past experiences and from the experiences of clients to create a list that can help you avoid these costly financial mistakes in the future.

These financial mistakes include the error of taking financial and investment advice from anyone other than a financially successful individual or a financial advisor (which both Bob and Shawn have friends and clients to which this has happened), as well as more common ones like avoiding procrastination. Before these happen to you, listen in so you can try and avoid these top financial mistakes!

Mentioned In This Episode

Intro:
Welcome to Christian Financial Perspectives, where you’re invited to gain insight, wisdom, and knowledge about how Christians integrate their faith, life, and finances with a biblical worldview. Here’s your Christian Financial advisors host, Bob Barber and his co-host, Shawn Peters.

Shawn:
Welcome to another episode of Christian Financial Perspectives. We’re so glad that you joined us today. Whether you’re watching online or you’re listening on one of the podcast directories, we really appreciate it. If you do like this kind of content on financial topics, but from a Christian and Biblical perspective, we’d love for you to hit that subscribe button, like this video, maybe comment, let us know a topic you’d like us to cover in the future. So today we are gonna be covering, “Avoid These Financial Mistakes”. So it’s 10 financial mistakes to avoid, and normally we cover, “Here’s what you should do, here’s the good things you should be looking for.” So today, we’re gonna give you some practical advice on types of things to just avoid. Just don’t do it. And so, Bob, you wanna give us a little intro on this? So where’d you come up with these?

Bob:
Well, I came up with these, Shawn, in about 5 or 10 minutes. It wasn’t hard. I could have come up with more.

Shawn:
So, is that from the years of experience? Either yourself doing it or seeing it with clients?

Bob:
Yes, it is. Both. I gotta admit in my younger years, we’re going cover this first one here in a minute. I did a lot of that in my younger years.

Shawn:
So you haven’t always been wise and gray ?

Bob:
So, I’ve learned from lessons and I want to hopefully teach younger people to learn from these lessons that this older guy has learned from. And this is just something, a really good episode, I think, that if someone’s hearing it to share with some friends.

Shawn:
I think the key…

Bob:
And to share with their family, like if grandparents are hearing it or parents, share this with your children.

Shawn:
Yeah. And I think the key here is even though you can learn from the school of hard knocks, it’s a whole lot less costly to learn from someone else who went to that school so you don’t have to do it yourself.

Bob:
Yeah.

Shawn:
So the first one, avoid buying costly depreciating items too often. Example, probably most people can relate with cars, trucks, but also RVs and boats and for somebody in a different tax bracket than me, airplanes.

Bob:
We’ve had some clients that bought some airplanes, Shawn. And it’s really interesting, I was talking to one of them about three months ago when we were doing a review, and he says, yeah, it’s a lot cheaper to just fly first class. . So he was saying how expensive it was, and it is very expensive, but the one I see a lot of with even my retirees is they buy the RVs, and they easily spend a $100,000 or $150,000 on an RV, then the very next year, it’s worth about 70% of that. That is a depreciating asset. And every one of ’em will come back and say, that was a major mistake. I should not have done that.

Shawn:
Now Bob, if you notice, do RVs tend to depreciate as fast and as much as cars? Or because they’re kind of considered a home as well, that they don’t depreciate as much?

Bob:
No, they actually depreciate faster, I think.

Shawn:
Really?

Bob:
Well, I don’t know if it’s faster, Shawn, but it’s such a large purchase that the percent, you just think about how much money it is. I mean, whatever RV you buy, if it’s a $100,000, you’re probably gonna lose $20,000 on that over the next year. And you’re not getting it back.

Shawn:
So similar, similar to cars, it’s just the fact that there’s such a much larger dollar amount typically associated with them, that the actual dollar amount you lose is just a lot more.

Bob:
Tremendous. Exactly. Well, okay, you think about trucks nowadays, especially here in Texas, you gotta have the King Ranch edition, right. If you’re gonna be somebody, you gotta have the King Ranch edition, which costs about $85,000 or $90,000, and then that truck a year or two from the then end is worth $50,000. So there you go. You’ve lost $40,000 or $50,000.

Shawn:
Yeah. Don’t let the last two or three years fool you, because this has not been a normal car market where it would be the opposite. That $90,000 truck is now worth $100,000 a year later.

Bob:
No, we’re talking normal.

Shawn:
But normal. That will catch up.

Bob:
Shawn. I know some people, they trade out these trucks like this every two or three years. I’m like, you’re just losing money over and over and over the years, how much has this affected your net worth?

Shawn:
A lot. It is far, far better to fix and maintain the vehicle than it is to buy a new one. You’re gonna be a lot better off.

Bob:
9 outta 10 times fixing that, even that $5,000 transmission is gonna be less than what you’re gonna depreciate in a new car. And of course, if you’re gonna finance it, which we recommend not doing you, you’re gonna have the debt as well.

Shawn:
So number two, avoid spending a 100% of what you earn every month, therefore, leaving no room for giving, saving, investing, and taxes. That’s a big one. I mean, you really need to be looking at a budget. I think crown.org has a really good resource. It’s a one page budget worksheet. But what’s great about it, Bob, is that if, for those of you watching or are listening, if you haven’t done one of these before, what it does is it has the taxes and the giving, the tithe, it has that at the very top. So you’ve got your, well, how much are you making? And then the very first questions it’s asking is that, and that’s really how you oshould do it. Because if you wait until everything else has already been taken care of, chances are you’re gonna have very little or possibly nothing that you think you can give to the church or give to God. And it should be your first fruits.

Bob:
And taxes should be up there at the top, too. You wanna make sure the IRS is paid. They’re not very nice if you’re not.

Shawn:
So, I know some people say that the taxes are not constitutional, but please, please don’t try that.

Bob:
Yeah. Don’t.

Shawn:
Just pay the taxes. Give to Caesar what is Caesar’s.

Bob:
I know a Christian brother from years and years ago and he thought that, and he ended up being in jail, so. All right. Number three. You go for number three.

Shawn:
All right. Avoid making large financial decisions that presume upon an unknown future.

Bob:
You know who taught me this one? Ron Blue. I’ve never heard anybody say this before, and it’s so true. None of us really know what the future holds. We don’t know if we’re gonna be here tomorrow.

Shawn:
So can you expand upon that? Give a little bit of example. Cause I feel like presuming upon an unknown future feels very grandiose. So what does that really mean? Practically speaking for us.

Bob:
Practically speaking, it means when you’re going out and you’re taking out a 30 year mortgage loan, are you sure that you’re going to live 30 years?

Shawn:
Mmm. Okay.

Bob:
Are you?

Shawn:
So what are people supposed to do when they’re trying to move somewhere? Should they not, should they not buy a house?

Bob:
I think they should still buy a house, but in this case, buy enough life insurance to cover that mortgage.

Shawn:
Ah, okay.

Bob:
That covers that. Yeah.

Shawn:
Yeah. And even if it’s just term life insurance. So when you buy that home, especially earlier on in that mortgage, get some term life insurance and the sooner you do it, the cheaper it’s gonna be anyway. But get some term life insurance where at least you have enough to completely pay off that house and your surviving spouse isn’t left in a horrible situation. Not only are they mourning your death, but also now, how are they gonna pay for the house?

Bob:
That’s right. So number four, avoid using debt to buy depreciating assets. Kind of goes back to that top one that we talked about.

Shawn:
Back to number one.

Bob:
But avoid using debt. I mean, you think about that, it’s depreciating plus you’ve got debt on it and you’re paying the interest. It’s like a double whammy.

Shawn:
Yeah. So you look at the total cost between the depreciating asset and what you’re losing in that value, and then you also look at the interest that you’re paying as well. And it’s like, man, that’s a, yeah, double whammy

Bob:
Number five. This is what I see a lot is avoid waiting for the perfect time to start saving. It’s never gonna come. I promise you, it’s never gonna come. The perfect time, Shawn, is never gonna come to save. So, you just have to do it.

Shawn:
The best time to start is today.

Bob:
Today. And you say, well, I don’t have anything extra. Well, then don’t go buy. We joked about, I saw this on our other video, we were joking about it. Don’t go by that latte.

Shawn:
Yes. That’s it.

Bob:
Did I say it right? Okay.

Shawn:
Bob, you know how to say the word latte.

Bob:
So, okay. So don’t go by the Starbucks today or the the $3 or the $5 cup of coffee. You can make it at home for pennies on the dollar, and it’s gonna be just as good.

Shawn:
Now if you do want something fancier, I could make a recommendation here.

Bob:
Oh, okay. What is it?

Shawn:
I usually get a cold brew concentrate, but you can get it from your grocery store. And so what’s great about that is it tastes better and it’s a little fancier, but also it’s a whole lot less expensive than going to your Starbucks or local coffee shop. I mean Sure. Support local businesses, but don’t do it every day.

Bob:
. Exactly. All right. Now, Shawn, I’m gonna let you share this next one because we, you and I had a pretty, I can say, heated discussion about this before.

Shawn:
We did a little bit.

Bob:
We did, we did.

Shawn:
We didn’t film that, though, because we needed to get our thoughts in order.

Bob:
Poor Garrett, who was filming this was like, are you guys going to jump on and tackle each other? No, we didn’t. We were nice to each other.

Shawn:
So number six.

Bob:
We had a really good discussion about this, and so go for it.

Shawn:
Number six, avoid carrying a balance on a credit card or adding monthly expenses to the credit card. And I put the disclaimer here. Bob says that according to the statistics, about 85% of people do not have a detailed budget. And so because of that, when you’re adding monthly expenses to your credit card, you end up spending about 10% to 15% more than you would otherwise. And that’s kind of a double danger I would say, because when you’re adding more to the card, what if you add a little bit too much and now you can’t pay that balance off in full. Now, you’re gonna get hit with interest in all that. Which goes back to the most important part, which is don’t carry a balance on the card. Now, if you happen to be that maybe 15% of people that have a detailed budget and you monitor it regularly, my wife and I do that. So Bob told me that I’m weird.

Bob:
Yeah. Well, you’re not weird, but you’re different because Shawn, out of our 450 clients that we have here at the firm, I don’t think, I can’t count more than 10 of ’em that do a budget. And now, so you look at percentage wise. Now they don’t overspend. Because remember when we did the program that budgeting is not all about numbers, it’s also just about not overspending what you get every month.

Shawn:
Right. So, most people that you deal with, Bob from in this, again, getting a little bit of behind the curtains. But Bob’s point in this is that most of the clients that he works with, they do have a, “Well, this is how much we can spend each month,” but they don’t go into the details of the different categories. And how much each category you can allow yourself to spend. And so because of that, that’s where you can get that creep. You can get that extra 10% to 15% you’re putting on a credit card, which can get you in trouble. And so yeah. So, if you happen to be one of the 1 in 10 people approximately that might have a detailed budget that’s watching or listening, you might be okay with the monthly expenses. But I think as a general rule, it’s avoid carrying a balance and avoid putting monthly balances…

Bob:
It’s better using a debit card. I mean, when you overspend that debit card, that bank’s gonna nail you. And you’re gonna see it. You’re gonna know. But the credit card company’s gonna say, “Bring it on, man. Keep on spending.” Because if you can’t pay it off, we’re gonna charge you 25%. All right. Oh this is big one. This next one, we’ve done entire programs on this financial mistake, haven’t we?

Shawn:
Yep. We’ve been putting this one off the whole episode, . Number seven is avoid procrastinating. Things like adequate insurance coverage. So, we kinda mentioned that earlier about term for your mortgage. But health, life, home, and disability insurance in the case of an unforeseen accident or natural disaster, as well as procrastinating to do your estate planning, starting with the saving and investing and your financial planning.

Bob:
Yes. You gotta do financial planning, y’all. You just gotta do it. I know. It doesn’t sound exciting. It is to us, though. I love it.

Shawn:
We do this for a living, though.

Bob:
And I would go back and we did a really good episode on integrative financial planning. And that to me is exciting because it’s just amazing to see how it changes every single day.

Shawn:
Well, and I think the really important part of that, for those of you watching or listening, is that financial planning may not be pretty, or some people might say may not be sexy . But the thing is is what it’s really good for is knowing, “Okay, am I on the right track? Am I on the right? Like, am I doing what I need to be doing?” And so many times we have people that will ask things like on the investment management, “Oh, well what’s the return like?” Well, the return is just one small piece of the equation. What’s more important is assuming an expected average rate of return, assuming all the other things that you’re doing when you retire, are you likely to outlive the money or is the money gonna last longer than you?And that’s what financial planning really, that’s the whole point. That’s what you’re trying to answer, right?

Bob:
You got it. So I wanna share this next one, too. This is a really big one. I just spoke with a sweet lady just last week that told me this one. And I was thinking that is a financial mistake and I’ve seen it over and over. This is the big one. Here it is. Avoid taking financial advice from anyone that is not financially successful. Is that right? So if they’re not financially successful, don’t take advice from ’em.

Shawn:
Don’t take financial advice from ’em. Now they might be able to give you advice on other areas of life.

Bob:
Exactly. Exactly. But not financial advice.

Shawn:
Like your pastor.

Bob:
Yeah. Spiritual advice. Absolutely.

Shawn:
Spiritual advice. Absolutely. But if they don’t have any experience on the financial side of it, they may not be the best person for financial advice.

Bob:
Especially investment advice. And that’s what this lady told me. She was so sweet. She’s about 75, and she said, yeah, I was at Bridge Club and they told me to buy this stock. “You ought to go buy this stock.” And I was like, “What? Are they a financial analyst?” “No. No, they’re not.” And she goes, “I lost all my money in it.” Happens every time. Take that one at heart. Okay, we got two more.

Shawn:
Two more. Number nine, avoid using emotions to make financial decisions. Just don’t. Don’t do it, like buying expensive items too quickly without counting the cost. Again, that goes back, that’s the emotions. You’re buying it on emotion, not thinking it through, not thinking about what the true cost of that’s going to be. And it kind of goes back to number one, I think again you get caught up in, oh, look how good that new car looks or that new truck looks. And I really wanna get one. Just don’t .

Bob:
And the last one, and this is the biggest financial mistake I see with investing, is investing in just one sector of the economy. All right. You gotta be very careful of that. I see this over and over, especially in our area, I see a lot of people, they invest everything in the real estate sector. But you need to diversify. Even Solomon, the wealthiest man that ever lived on the face of the earth. And we quote this a lot around here, Ecclesiastes 11:2, “Give your portions to seven or eight, because you don’t know what disaster may come upon the land.” Don’t put all your eggs in one basket. So, don’t put all of your investment dollars in real estate or just CDs. Cause then you’re losing inflation. You’re losing purchasing power or all stocks or all bonds or, some do gold. And we’ve had a program on that.

Shawn:
Yeah. We won’t cover that here. Go check that up episode out.

Bob:
Another big one? Another big one was my business owners. They put everything they have in their business.I am not, I do not want to be the shoemaker’s son. I do not do that. I diversify in all of these different sectors of the economy. And only a small percentage is in my business. Because I don’t want everything based on one thing. I watched my dad put everything in real estate and at about 64, 65 years old, this was in the mid eighties, the real estate economy just collapsed. I watched him, and I watched many of his friends declare bankruptcy and these men were too old to recover. It was a sad thing. So, I hope that helps you. There’s 10 financial mistakes…

Shawn:
To avoid.

Bob:
To avoid. Don’t do ’em. And share this with some of your friends and share this with your kids and your grandkids because it’s good information.

Shawn:
Yep. Like we said before, if you like this kind of content, we’d love for you to hit that subscribe button for more videos on financial topics from a Christian perspective. Thank you so much for joining us and God bless.

[CONCLUSION]

That’s all for now.

We invite you to listen to all of our past episodes covering many financial topics from a Christian Perspective. To make sure you don’t miss any of Bob’s upcoming episodes you can subscribe to Christian Financial Perspectives on iTunes, Google Play Music, Spotify, or Stitcher. To learn more about integrating your faith with your finances, visit ciswealth.com or call 830-609-6986.

[DISCLOSURES]

Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors, a registered investment advisor registered with the SEC. Registration as an investment advisor does not imply a certain level of skill or training. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Shawn Peters, and their guests. Bob and Shawn do not provide tax advice and encourage you to seek guidance from a tax professional. While Christian Financial Advisors believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.