211 – Building Blocks Of Financial Planning

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Building Blocks Of Financial Planning

Discover how to manage your finances wisely while also setting clear, financial goals.

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Are you ready to take control of your financial future with a DIY approach? In this episode, Bob and Shawn guide you through 10 essential steps to effective financial planning, all from a Biblical perspective. Don’t find yourself unprepared for the future by not preparing now. Whether it’s discovering which stage of retirement you might currently be in or you just need to sit down and develop clear financial goals, this episode can help you discover how to manage your finances wisely.

Mentioned In This Episode

Shawn (00:00):
Are you ready to take control of your financial future with a DIY approach? In today’s episode, we’ll guide you through 10 essential steps to effective financial planning, all from a Biblical perspective, discover how to manage your finances wisely and achieve your goals. Let’s get some perspective. Welcome back to another episode of Christian Financial Perspectives. My name’s Shawn Peters. I’m joined as always by Bob Barber, and we’re so glad that you’re here with us today. Whatever day or night that might be when you’re watching or listening to this. Today, we’re going to be covering “10 Steps to DIY Financial Planning”. So we hope this helps you regardless of where you’re at in your financial planning journey, but this will cover how you could do your own financial planning and the 10 areas you need to make sure that you cover.

Bob (00:54):
Anytime during this you feel overwhelmed, we’re always here to help you. We want you to know that because we’re going to be covering a lot of areas that you need to cover when you want to do it yourself.

Shawn (01:04):
And it’s okay if you do feel that way because there is a reason why people like Bob and myself and the rest of the advisors on our team and this entire industry exists because it can feel overwhelming, it can feel complicated, but as always, our goal in this channel is not to just have everybody come work with us, but we want to be able to put as timeless as possible information out there to help people in the area of finance and investing in a way that glorifies God.

Bob (01:31):
And we do understand if some of you want to do it yourself, so we want to help you with that.

Shawn (01:35):
That’s right. Lots of entrepreneurs in this country, right Bob?

Bob (01:38):
Lots. Definitely. And I think a good scripture, why don’t you read the scripture we put in there and I think it’s a really good one to think about as you are doing financial planning.

Shawn (01:48):
That’s right. We are going to be reading from Luke 14:28-30, “Suppose one of you wants to build a tower, won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you laid the foundation and are not able to finish it, everyone who sees it will ridicule you saying, ‘This person began to build and wasn’t able to finish.'” I mean, I don’t know what more perfect of a scripture there could be for talking about financial planning and planning ahead before you actually start to build. That’s a great one.

Bob (02:21):
I really think of financial planning like a blueprint and you’ve got to have a complete blueprint. And these 10 keys that we’re going to give you are parts of the blueprint that you must have. You cannot just take one of them out. You need to truly have all 10 of them. And that first one is goals. You’ve got to have goals. There’s and old saying I have, “Aim for nothing and that’s exactly what you’ll hit. You’ll hit nothing, but aim for the stars and maybe you’ll hit the moon”. You have to have a target. If you don’t have a target, there’s nothing to hit.

Shawn (02:56):
Yeah, that’s right. So first you need to write down all of your short-term and long-term financial goals. Examples could include: becoming debt-free, building up three to six months of cash reserves, investing for retirement, or something else. But again, that main thing is, and this is very helpful not just for the purposes of financial planning like we’re talking about today, but also to give you more peace of mind. So if you do have a portfolio and you’re watching what’s going on in the markets or what the news is talking about that day and the headlines, if you know what your short and long-term goals are, you can stay more aligned to those and not panic as much when, “Oh, the market’s dropped,” or, “The markets are up today,” and you don’t get carried away in that emotion.

Bob (03:41):
Yeah, those long-term goals will keep you from looking at the day to day, hour to hour, minute to minute.

Shawn (03:46):
Exactly.

Bob (03:47):
If you notice, if you’ll go to a financial website, it’s always talking about what somebody’s – they’re just looking at such a small piece of time and you’ve got to look at it in a long-term perspective.

Shawn (04:00):
Over the year or more, are you actually on track for your goals?

Bob (04:04):
And it helps you get your emotions out of the way. We know emotions and finance just do not mix.

Shawn (04:09):
But it’s hard. We are made in God’s image and that means we do have emotions, but we’ve got to try to curtail those a little bit when it comes to financial decisions. And that takes us into number two, cashflow. And we have another scripture for this. Proverbs 27:23, “Be sure the condition of your flocks. Give careful attention to your herds.”

Bob (04:32):
It’s very important that you do a detailed cashflow where you look at, what we call, live, give, owe, grow. That’s the four areas that everything kind of comes into. Live, give, owe, grow because you’re always going to owe taxes, by the way. I mean you could be debt free, but you’re still always going to owe taxes. You want to grow. And a great budgeting worksheet that I’ve used for, gosh, 25 or 30 years is through Crown Ministries. You can go to www.crown.org and just look for the estimated budget worksheet, and this is a really good worksheet to help you do a detailed cashflow analysis. I would suggest also that you do it in pencil with an eraser, that you also make several copies, and then go in on the internet and start building yourself a spreadsheet. But a lot of the programs today have built in spreadsheets as well.

Shawn (05:26):
I love that budget worksheet as well. It’s literally just a one pager and it’s so helpful for people, especially if they’re just getting going with kind of figuring out what is my cashflow? It has all these different categories that people don’t think about. And so, it’s like, “Hey, well what about this? What about this? What about this?” And so they’re like, “Oh, well, how much do I spend on that?”

Bob (05:47):
Well, if you don’t know where things are going, it’s just total chaos.

Shawn (05:50):
We’ll try to put a link in description as well.

Bob (05:52):
Yeah, exactly.

Shawn (05:53):
Which takes us into number three, debt. Now this is one the things under the Owe, like we said, taxes, no matter what, you’re always going to have taxes. But for debt, we have Proverbs 22:7, “The rich rule over the poor and the borrower is slave to the lender.”

Bob (06:08):
I think that’s pretty big words there, too. Like you say, Proverbs never holds back.

Shawn (06:12):
Nope.

Bob (06:13):
And you do, you become slave to that lender, especially if it’s putting you in a position where you just can’t pay it all back.

Shawn (06:20):
That’s right.

Bob (06:21):
And you need to look at how you’re going to get out of debt. There’s a lot of different types of strategies and you have your mortgage debt. Some people have auto debt, they have consumer debt and then college debt, which is a really big subject today, especially politically. They talk about that, and you’re going to have to come up with a strategy for each one of these, and there’s a lot of people that can help you with these different strategies. There’s a snowball effect. Have you ever heard of that before, Shawn? Dave Ramey speaks on that.

Shawn (06:49):
I know Dave Ramsey’s probably the most popular on that.

Bob (06:51):
Which means you actually take your smallest payment first and get rid of that debt and then you snowball it. Don’t worry about the large payment right now, and eventually that will help you get debt free much quicker. Next one is number four.

Shawn (07:07):
Savings.

Bob (07:07):
Kind of say you want to get that debt free. Start the savings part.

Shawn (07:11):
Proverbs 6:6-8, “Go to the ant, you sluggard. Consider its ways and be wise. It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest.” Now, technically they have a queen, but the queen doesn’t really operate the way normally we think of the King or Queen.

Bob (07:29):
When I was kid, I always loved watching ants and how they were constantly working. They got a little piece of food and they’re taking it back and they’re storing that up and with savings, again, there’s a lot of different types of goals. One is that you want to save it for cash reserves and that can take a while, but what are you going to do in the case of you have a medical emergency or the car breaks down or the water heater breaks or the air conditioner breaks. That’s what those cash reserves are there for and why that’s so important to have those.

Shawn (08:04):
Right. Or it could be what we call income shocks and expense shocks. So your income shock for whatever reason. Maybe you are a dual income family and one of you loses your job, you get laid off. Or what if there’s cutbacks and maybe you just get a pay cut or you get your hours cut. It could be a number of different reasons for why your income might have a shock to it and it drops. And then of course these expense shocks, just those, some of the ones we mentioned – those unexpected things that well – you got to pay for it and you don’t want to have to borrow or put it on a credit card. So having that savings is extremely important for that.

Bob (08:41):
And I think it’s good that you have different savings accounts. A lot of people don’t ever think of this, but to have the different types of savings accounts, one savings account that we do is just for gifting – Christmas times, birthdays. That can be expensive, especially when you have grandkids.

Shawn (09:00):
And I know your wife’s love language is gifts, so you’ve got to save up for that.

Bob (09:05):
So you could have those different types of savings accounts.

Shawn (09:09):
Another one for automobile replacement, that you have an account for that. So if eventually you’re going to need to replace the car, well start saving up and put that in a separate savings account so you have an actual emergency savings account. Then you have maybe something for gifts for Christmas, things like that. And then maybe have another one specifically for the automobile, so when it comes time to have to replace that, whether you’re forced to or you decide it’s time, okay, this is how much we have for that in that specific account. I would recommend that you guys go check out episode 186, which is, “Do these seven things before buying your next vehicle”. We went into more detail on the automobile.

Bob (09:48):
Well, and you think about the automobile is one of the most expensive expenditures that you have today besides your house. I mean, automobiles can easily hit that $50,000 mark.

Shawn (10:02):
That’s right.

Bob (10:02):
If you’re buying a truck, it can hit the $100,000 mark.

Shawn (10:06):
Alright, number five, giving. Acts 20:35, “In everything I did, I showed you that by this kind of hard work, we must help the weak, remembering the words the Lord Jesus himself said, ‘It is more blessed to give than to receive.'”

Bob (10:20):
I think it’s important when we think about giving that we have this as part of the financial strategy because there’s nothing that releases materialism more than giving.

Shawn (10:31):
Amen.

Bob (10:31):
And we’ve got to learn to be good givers. I think it’s just sowing into other people’s lives as well. Number one thing you can do, and we had a program on this recently, materialism.

Shawn (10:47):
That’s right.

Bob (10:48):
Spoke about that giving is the number one way to get rid of that materialistic type of thinking, which is so strong here in America.

Shawn (10:56):
That’s right. So giving strategies – how you want to give. It could be cash, which is by far the most common, but non-cash giving such as appreciated assets like stocks, real estate investments, those are ones that people can give far more than they can with cash. So it’s one of those things that definitely look into. It doesn’t mean just cash out of the savings account.

Bob (11:19):
And we’ve had entire podcasts about that. All the different types of ways of giving. So far, we’ve gone through just the first 5 of 10 ideas and keys to financial planning. So now we’re going to get into once we’ve gotten past that. We’ve got the cash flow down, we’ve got the debt down, we’ve got the giving down. Now, we’re going to step into number six, which is investing and having investment goals and strategies.

Shawn (11:46):
That’s right. So, what’s the first thing that you would do under this one, Bob?

Bob (11:48):
The very, very first thing that you want to do is have a written investment strategy.

Shawn (11:53):
That’s right.

Bob (11:55):
Shawn, I’ve mentioned this many times. I’ve never met anybody that’s doing this on their own that actually has a written investment strategy. If you don’t have a written investment strategy, your emotions are going to get the best of you. I mean, one of the things that you’ve got to have in there is do not allow emotions to dictate my decisions.

Shawn (12:14):
Yep, that’s right. That’s why it’s important to have that written down so you know what the strategy is. You know what your goals are, because otherwise you’re going to hear something on the news. You’re going to get some hot tip from somebody and you’re not going to know, “Is this really in alignment with what I’m actually trying to do?”

Bob (12:33):
If you want to go to our website to www.ChristianFinancialAdvisors.com, you can look at our investment strategy and that could be an example.

Shawn (12:40):
Feel free to build your own off that.

Bob (12:42):
And as a Christian, it’s very important also that we’re not yoaking ourselves with companies that do things that go against Christian values. And we’ve talked all about Biblically responsible investing many times here, which has to do with staying away from the evil and supporting the good.

Shawn (13:01):
In the kids’ language, right? Today, Bob, it’s woke. So you’ve been investing non woke for how many decades now?

Bob (13:10):
Three as a matter of fact. And also when you’re thinking about investing, you want to do what’s called a bucket strategy. This has been if you just again, Google “bucket strategy” to come up, but this is where with your investing, you break it down into different categories for your investments from short-term goals to midterm goals to long-term goals.

Shawn (13:31):
Yeah, so maybe like your short term of the next one to three years, and you’ve got maybe 5-8 years and then 10 years plus, just as an example.

Bob (13:40):
I was just thinking when we were doing this, now we’re about to get into our last four. If I was hearing all this and I was thinking I was going to do all this myself, I’d be starting to become overwhelmed.

Shawn (13:52):
Could be, yeah,.

Bob (13:53):
But we’re here. We’re here if you need us for any of that. So number 7 is risk. You got to think of risk in your financial plan, and you need to devise a risk management plan. And that will basically come up with two ideas here. Two things that you need to look at. One is insurance. That’s your home, your life insurance, health, disability, income replacement in case of accident, premature death, cancer, health insurance.

Shawn (14:22):
The most common one that we see where people aren’t properly covering their risk is disability for that income replacement.

Bob (14:28):
Yeah, it is.

Shawn (14:30):
Sure. Most people have some sort of life insurance, pretty much I believe at most if not almost 100% of people. I know there’s a few that have home and auto insurance as well, but that disability is statistically so much more likely that you might need it. And it could be as simple as you’re injured and just maybe you can’t work for 6 months, 6-12 months. It doesn’t mean you’re permanently disabled.

(14:53):
But that is something definitely I would encourage everyone to look at. It is more expensive than life insurance. By its very nature, it’s more likely statistically that the insurance company is going to have to pay you on it, but that’s where that emergency savings comes in. Where if you have that at least six months, the longer you delay that disability income from kicking in for that insurance, the less costly it’s going to be. And so you balance it with the savings and then only if you’re not able to work for too long do you have to dip into that insurance then.

Bob (15:24):
And it comes under risk. Also, you want to look at not just insurance, but how do you own things?

Shawn (15:30):
So your asset ownership.

Bob (15:31):
So if you have a rental home or any kind of rental property, you want to have that in a limited partnership in a different type of name and never put more than one property in a limited partnership because then you’re exposing both properties. When one thing happens to one property, they’re going to get the other property.

Shawn (15:49):
Same thing if you own your own business and you have company cars, you have trucks, or maybe you’re in service industry or something and you have some of your staff members that are driving your vehicles around. You want to make sure you don’t have that as a sole proprietorship because you’re just exposing everything you have. And if somebody gets hit by that car, runs into it, and then they try to sue you for everything.

Bob (16:11):
Shawn, we watch TV and our airways here in Texas are just all about the attorneys that are constantly, well, recently we were in Washington state and Oregon State and both states had all the same advertisements and then we went to Colorado, same advertisements. So they’re everywhere. They’re always looking to sue somebody. And that’s why risk is so important, when you think about it, in your financial plan. So now we’re down to the last three, which, well, this is a big one.

Shawn (16:38):
Number 8 is taxes. Use annual income tax strategies to lower taxes. So for example, deferring income in years you’re in a high income tax bracket is one way to help with that.

Bob (16:50):
And that means if you have a bonus, maybe you could defer that bonus if you’re going to have a lower income the following year.

Shawn (16:57):
Or maybe see if the company would pay you half the bonus in December and half the bonus in January.

Bob (17:02):
Right.

Shawn (17:02):
So another one, lumping deductions over several years like property taxes and giving to surpass the standard deduction. So that one, if I remember correctly, Bob, is the one where you go ahead and pay your taxes, say in January for the previous year, but then as soon as you get your tax bill for the next year, you pay your property taxes before the end of December.

Bob (17:22):
That’s right. So you lump them in the same year.

Shawn (17:24):
You pay in the same year.

Bob (17:24):
Because that standard deduction is, as we know, is around 25,000 – 27,000. And unless you get over that, you’re not going to get to deduct anything. Now with property taxes, the limit is $10,000, at least under the current tax laws.

Shawn (17:37):
That plus if there’s some giving and other things that you could do to surpass the standard deduction. Another one is give from appreciated assets over cash when possible.

Bob (17:45):
Always, always good idea.

Shawn (17:47):
Maxing out qualified plans like from a 401k, TSP, 403b, SEP IRA. However, this should be balanced with the consideration of tax diversification within one’s investment portfolio. While you may get a tax deduction, you are a partner with the US government on every dollar that you have in pre-tax retirement accounts. So just got to be strategic, thinking about the long term, and acknowledge that the delayed gratification tax benefits may be in one’s overall benefit for the long term. And again, it gets a little complicated, so we’re not giving you a very specific thing. We’re not a CPA in this case, but just trying to give you things to think about.

Bob (18:28):
Well, like I’ve mentioned before, many times I very seldom, if ever, have met anyone that’s in a higher tax bracket when they’re retired. So I believe in taking the maximum deduction that you can. And it’s amazing how many people do not max out their 401k, TSP plan.

Shawn (18:46):
Yep. That should be the first thing you do. Make sure you’re doing that.

Bob (18:49):
You’re right.

Shawn (18:49):
And then the final one, using the defined benefit plan if you are self-employed or you own a business. That’s definitely one of those where you can, like Bob just mentioned, try to delay that income, taking it now for later.

Bob (19:00):
And that’s on top of a 401k and we can explain that to you, but this is something if you’re DIY doing it yourself, you want to consider. The last two. Number 9 is estate planning. It’s so important. We’ve seen many times over where the estate plan was not done properly or even done at all. We’re amazed at how many people we find have not put together their will and their durable power of attorney, medical power of attorney. So, so important that you do that and that comes within the financial plan.

Shawn (19:30):
One of the things within that, a will is kind of the most basic, but also setting up a will and a trust is something that definitely would encourage you to consider and look at. You can even do things like family limited partnership. You can set up medical power of attorney. So it doesn’t mean…

Bob (19:47):
It’s all part of it.

Shawn (19:48):
Yeah, that’s all part of it, but it’s all stuff that’s important that if you can’t make medical decisions for yourself and what if your spouse is not able to make decisions for you, it’d be good to have a backup.

Bob (20:00):
And now we’re down to our last one of the day and that is retirement planning, which is now such an integral part of financial planning. And that’s coming up.

Shawn (20:10):
We’re almost done. I know we’re going a little long on this one, but stick with us for this last part.

Bob (20:15):
And this is coming up with an accumulation investment strategy, looking at should you consider using a Roth or even doing a Roth conversion. Withdrawal strategies are extremely important when you’re retired that you don’t withdraw too much from your portfolio.

Shawn (20:33):
Great example of that, Bob, would be do you take out a lump sum each year or are you taking out that same amount but spread out over 12 months? Because that timing can significantly impact your overall performance as well. If you take it out at a really bad time for the year, it can hurt.

Bob (20:52):
I suggest taking it out monthly. And one of the things that I’m helping clients do more and more, and you want to think about if you’re doing this yourself, is think about when you first retire. We call those the go-go years. That’s really the most expensive time of retirement is you’re wanting to travel and you’re wanting to maybe buy that RV. You want to go see those grandkids. Then there’s the slow go years. That’s 76 to 85 years old. That’s one of the least expensive times of retirement years. And then there’s the no-go years, 86 to 100, but the healthcare rise, cost of healthcare, gets you there, assisted living. Now there are software programs to do all of this for you and to help you with this planning.

Shawn (21:35):
These what ifs.

Bob (21:36):
Yeah, all the different what ifs. But we understand after hearing all this, I mean even myself, I’m like I do this with the help of other advisors here with my own planning so much to it, but we know a lot of people like to do it yourself, but these are the 10 keys. You don’t want to miss any of these or you’re going to have a hole in your financial plan.

Shawn (21:59):
That’s right. If it does come down to, you’re looking for someone to help you with this because it just does seem like a little bit too much, definitely consider hiring an experienced, fee only, fiduciary based, financial advisor and planner to help you put it all together. We’re not the only ones. Yes, we’d love for you to work with us, but keep in mind we’re not the only one. Just make sure it’s a fee only, fiduciary based, so that way…

Bob (22:22):
They’re not a commission based.

Shawn (22:24):
That way they’re operating in what’s your best interest in that long-term relationship, not just trying to make a quick buck off of a product.

(22:32):
And we’re going to cover Luke 14:28-30 one more time to close, “Suppose one of you wants to build a tower, won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you saying this person began to build and wasn’t able to finish. This is what we do here at Christian Financial Advisors from a Biblical worldview day in and day out, and Bob’s been doing it day in and day out for over 30 years. So you can call or text us at 830-609-6986 or you can visit our website www.christianfinancialadvisors.com. Thanks for joining us and God bless.

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[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.