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FINANCIAL FREEDOM WORSHOP
Session 7
Developed from the books Your Money Map: A Proven 7 Step Guide to True Financial Freedom and The Total Money Makeover.
REVIEW
- This is our last session today.
- We started the workshop by helping you form a budget.
- Following a balanced budget and working through the destinations slow and steady will bring you to today’s location eventually.
- If you are not at this point yet, let today give you hope for the time when you will be.
THE ROAD TO FINACIAL FREEDOM
MONEY MAP
Destination #1
- Begin using a spending plan
- Save $1,000 for emergencies
Destination #2
- Pay off credit cards
- Increase savings to one month’s living expenses
Destination #3
- Pay off all consumer debt
- Increase savings to three month’s living expenses
Destination #4
- Begin saving for major purchases (home, auto, etc.).
- Begin saving for retirement.
- Begin saving for children’s education.
- Begin saving to start a business. (If this is a goal for you.)
DESTINATION #5
- Buy an affordable home.
- Pay off your mortgage.
DESTINATION #6
- Home mortgage paid off.
- Children’s education funded.
- Confirm estate plans are in order.
- Begin investing and increase giving
- The first two parts of this Destination are basically a check list.
- Check it off it you have completed these.
- The last two are action plans which we will focus on this week.
- When you reach this Destination of being debt free including the house, you have entered the top 2% of America (Ramsey).
2 Kings 20:1
“This is what the Lord says: ‘Put your house in order, because you are going to die’.”
ESTATE PLANNING
- Does everyone need a will?
- The only person that can get by without a will is someone that owns nothing and has no family.
- Everyone else needs a will!
- Most of us will be the most wealthy in our lives at the point of our death. We have a house and a car that we don’t need plus other belongings.
Dying without a will
- “70% of Americans will die without a will” (Ramsey).
- If you die without a will, the state decides how to distribute your assets and even who will be the guardian of your children.
- Dave Ramsey says, “A will is a gift you leave your family or loved ones. It is a gift because it makes the management of your estate very clear and light-years easier.”
- Estate planning is not merely a financial or legal matter; it is a spiritual exercise we work out in God’s presence and for His glory.
Note about prepaid funerals
- “Preplanning the details of your funeral is wise, but prepaying is unwise” (Ramsey).
- One woman at age 39 decided to pay $3,500 for a prepaid funeral.
- If she would have invested that $3,500 in a mutual fund ...” at the average age of death the mutual fund would be worth $368,500! (Ramsey).
- Proper planning for retirement or investing will more than pay for a funeral.
- Preplanning is good, but not prepaying.
Select the next stewards of God’s money
- After wealthy John D. Rockefeller dies, his accountant was asked how much he left. The accountant responded, “He left it all”.
- 1 Timothy 6:7 “For we brought nothing into the world, and we can take nothing our of it.”
- You have only three choices for who will receive your estate:
~ Your heirs
~ Non-profit organizations
~ Government
Providing for your heirs
- Proverbs 13:22 ‘A good man leaves an inheritance to his children’s children.”
- Train your children to be wise with money before you die.
- The inheritance should not be distributed until they have been trained.
- Proverbs 20:21 “An inheritance gained hurriedly at the beginning will not be blessed in the end.”
- If you are able, consider giving part of your inheritance away while you are still alive.
- It is one way to guarantee it goes where you want it to.
- One man gave his children their inheritance a little at time at ages 21, 30, and 35.
- His hope was that they would learn from their mistakes and become wiser with their money.
- You can also gage how each of your children will handle money and decide how much or if they will get more in the future.
- How much will you leave your family?
- Some have limited it to only cover the costs of college and vocational training.
- Other choose to leave it all to their children.
Consider holding a family conference
- Few areas have more potential for harming family relationships than squabbles over inheritance.
- Someone asked Jesus, “‘Tell my brother to divide the inheritance with me.’ Jesus replied, ‘Watch out! Be on your guard against all kinds of greed.’” Luke 12:13, 15
- It gives your heirs the opportunity to hear from you - your heart, your wishes.
- It also gives opportunity to ask questions.
Review your estate plan then get help from an attorney
- On an old episode of Home Improvement, Tim the tool man Taylor, who had three teenage sons at the time, was approached by his wife to review their will. He didn’t see the need for it. She read a line of their will, “In the event that we should have children ...”
- It’s wise to review your plan every three years, perhaps sooner if you or your family experiences significant changes.
- Once you decide what you want to do with your estate, see an Attorney to draw up the documents.
BEGIN INVESTING
Find a balance of investing and giving.
- “Money is good for fun. Money is good to invest. And money is good to give. Most anything else you so with it doesn’t represent god mental or spiritual health on your part” (Ramsey).
- “You should be doing some of all three as you go through the” destinations (Ramsey).
- We need to balance our investing with giving.
- Jesus told a parable of a farmer that had a bumper crop.
- “If I have no place to store my crops ... I will tear down my barns and build bigger ones, and there I will share ALL my grain and my goods ...’ But God said to him, ‘You fool! ... This is how it will be with anyone who stores up things for himself but is not rich toward God ... For where you treasure is, there your heart will be also’” (Luke 12:16-21, 34)
- Jesus called the farmer foolish because he saved everything.
- He did not balance saving with generous giving.
God’s principles of investing:
- Is getting rich wrong?
- The Bible says the love of money, not money itself is evil.
- What is your motivation in building wealth?
- John Wesley said, “Earn all you can, save all you can, give all you can.”
- Selfish reasons for wealth building will reveal pride and greed in our lives.
- In the Bible, many heroes of the faith, such as Abraham and david were rich.
- Margaret Thatcher said, “No one would have remembered the good Samaritan if he hadn’t had money” (Ramsey).
- Howard Dayton of Crown Ministries says, “Nothing is wrong with becoming wealthy if it is a by-product of being faithful.”
- When you arrive at this Destination, your money starts working harder than you do” Ramsey).
- Illus.: Cresting a hill on a bike.
- Here are basic Biblical principles for investing:
~ Be a steady plodder
- Spend less than you make and invest the surplus.
- The Bible says, steady plodding brings prosperity hasty speculation brings poverty” (Proverbs 21:5)
- An illustration of steady plodding is a person filling a large barrel one handful at a time.
- Nothing replaces consistent, month by month investing.
~ Seek advice
- Proverbs 11:14 says, “In the multitude of counselors there is safety.”
- Use a financial planner or investment advisor.
- Make sure to use one that understands these Biblical principles.
- “When taking advice, evaluate if the person giving the advice will profit from the advice” (Ramsey).
- Seek the advice of your spouse. They are your partner and they can often balance your “personal wisdom”.
- Men tend to focus on just the facts. Women tend to have an intuitive sense. Men, listen to your wives’ advice. Invest as a team.
- If you agree on the investing, even if you make a mistake, it will not pull your marriage a part with a “I told you so” attitude.
~ Diversify
- There is no perfect investment.
- This is why you need to diversity (not put all your eggs in one basket, or stock).
- Ecclesiastes 11:2 says, “Divide your portion to seven, or even to eight, for you do not know what misfortune will occur on the earth.”
WHEN AND WHERE TO INVEST
- When deciding where to invest, you need to consider your goals, time frame, and personal tolerance to risk.
- It is important to understand that the investments with the greatest track record for growth in the long run also carry the greatest potential for loss in the short run.
- All investments can lose value in the short erm but historically offer the best opportunity over the long term.
Less than five years.
- When you need the money in less than five years, invest in what are known as cash equivalents
- Money market funds, short-term certificated of deposits (CDs) and Treasury Bills (T-Bills).
- Money Market funds can be purchased through brokerage firms and banks.
- They usually earn more than regular bank accounts and have check writing privileges.
- Short term CD’s, issued by banks, typically mature in lengths from three months to five years.
- If the bank is federally insured, your money is insured up to $100,000.
- T-Bills are backed by the federal government and are free from state taxes.
- They mature in three to twelve months.
Longer than five years.
- The most common investment for longer than five years are mutual funds, stocks, bonds, and real estate.
Mutual Funds
- Mutual Funds receive money from investors, and they in turn invest in dozens or even hundreds or other companies.
- This is a great way to apply the Biblical principle of diversification.
- Dave Ramsey states this is the place to build your wealth.
- Some are concerned about risking their money in the stock market.
- “Ibbotson Research says that 97% of the five year periods and 100% of the ten year periods in the stock market’s history have made money” (Ramsey).
- There are all kinds of mutual finds. Some are composed of stocks and some bonds and some have both.
- Some invest in a particular industry or types of companies.
- All mutual funds are sold with a prospectus that describes the fund objective and tells you how your money will be invested.
- Choose funds with solid track records over the last 5 to 10 years, or more.
- Some finds will accept $500 to open an account and allow monthly investments as small as $50.
- Dave Ramsey’s Recommendation for Investing:
~ Put 25% of your investments in growth and income mutual funds (Large Cap or Blue Chip funds).
~ Put 25% in growth funds (Mid Cap or Equity funds or S&P Index funds).
~ Put 25% in international funds (sometimes called foreign or overseas funds).
~ Finally, put 25% in aggressive growth funds (Small Cap or Emerging Market funds).
Stocks
- When you buy a stock, you are purchasing part of a company.
- Individual stocks have great potential for profit but you can also lose a lot if the company does not perform well or, worst case scenario, go out of business and you could lose it all.
- Some people like to use this more risky way of picking individual stocks.
- There are people that their job is to pick stocks that they think will rise and sell them before they will drop in value.
- I want to share with you a method that has proven to beat the professional Wall Street stock analyst 45% of the time. For a novice with no training, this isn’t bad.
- What you do is take the Wall Street Journal and open it to the list of stocks page.
- Now tape it to the wall and throw a dart at the page and invest in that stock.
- The Wall Street Journal holds an annual contest in which monkeys do just this and they beat the “professionals” 45% of the time.
- Best Plan when investing in the Stock Market
~ You can’t anticipate what the market will do with individual stocks.
~ It is best to use dollar cost averaging.
~ This is putting money in the market in mutual finds every month.
~ Sometime you will buy high, sometimes you will buy low.
~ Overtime, your rate of return will equal the average of the market (around 12% over time).
~ Dave Ramsey says, “Systematic, consistent investing is the tortoise that beats the hare in the race.”
Bonds
- When you buy a bond, you loan money to a business or the government and they pay you interest.
- Generally, high quality bonds are less risky than stocks.
- But this also means they have a lower rate of return.
- It is important to realize that when interest rate rise, the value of bonds decline, and vice versa.
Real Estate
- People buy rental property for income or unimproved property for appreciation.
- The advantage is that depreciation of the property is tax deductible.
- The down side is that it may require a long time to sell.
- Another down side is the time, money, and effort it takes to rent, manage, and maintain a rental property.
- Dave Ramsey’s advice, only do this debt free.
- A mortgage on a rental house that sits empty will bankrupt you quick.
Risky Investments
- Each year thousands of people lose money in highly speculative investments and scams.
- Christians are particularly vulnerable because they trust others who appear to live by their same values.
- These are the characteristics that will help you identify risky investments:
~ It will practically guarantee and unusually high profit or rate of return.
~ It requires a quick decision with little or no opportunity to investigate the investment or it promoter.
~ It will say little or nothing about the risks of losing money.
- The strategy for avoiding risky investments is to pray, seek wise counsel, and do your homework.
Ecclesiastes 5:13-15 (On screen)
“Savings are put into risky investments that turn sour ... the man who speculates is soon back where he began - with nothing.”
Gambling and lotteries.
- Some see gambling and lotteries as a way to build wealth.
- Lotteries and gambling of all types are sweeping our country.
- The average church member gives $20 a year to international missions while the average person gambles $1,174 annually.
- Dave Ramsey says, “The Lotto is a tax on poor people and on people who can’t do math.”
- Dave also states that the average person playing the lottery spends $32 a month. That same $32 a month represents over $1 Million dollars in retirement if invested over a working lifetime. (Dave Ramsey)
- Your chances of winning the lottery are about 1 in 15 million. You’re ten times more likely to be struck by lightning.
- Reasons not to participate in gambling even for entertainment:
~ We should not expose ourselves to the risk of becoming a compulsive gambler.
~ We should not support an industry that purposely enslaves so many.
~ WWJD: We are just stewards. Does Jesus want us to gamble with His money?
FINAL DESTINATION
My retirement is funded.
- You have all the money set aside you need to live the rest of your life.
- You are financially secure when you can live off 8% of your investments (Ramsey).
- (4% eats up the rest of the 12% you earn in the stock market.)
I am free to be more generous with my time and money.
- “Giving is probably the most fun you will ever have with money” (Ramsey).
- You can now afford to help people, ministries, and organizations that mean the most to you.
- You can be a blessing to others and help those in need.
- When you’re at the point where you are living off of your investment income, you can donate your time which is the most valuable asset you own.
- Finish your life out well seeking to hear, “Well done, good and faithful servant” (Matt. 25:21).
YOU CAN DO IT!
Keith (40)
Math Teacher
and Karen (42)
McGinty
Stay-at-home Mom
As a school teacher, everyone knows that the pay isn’t great. With an income of $40,000, one adopted son, and no plans for our financial future, I knew we had to make some changes. We heard about Dave Ramey’s plan at our church, and we were so inspired that we set a goal to pay off our $50,000 mortgage in five years. We knew that to have a Total Money Makeover, vacations and fancy toys were out and we would have to tighten our budget considerably. But we were excited about what was at the finish line.
I started a few side businesses - tax prep and eBay - and was able to add about $15,000 extra income to our payment. With all of this extra income, you might think tht paying off a $50,000 mortgage would be easy to do in five years, but our plans to adopt a little girl from China were priority. The adoption costs were $17,000, and just when we didn’t think we would be able to get pregnant ... Surprise! Our health insurance did not cover childbirth, so we had an additional $5,000 added to our payments.
With a growing family, we were more determined than ever to get rid of the house payment. And praise the Lord! We did it in just less than four years! We beat our goal by a full year. That just proves is we can do this, anyone can.
Now that we are on the other side, it is so awesome. It is such a peaceful feeling to know that money does not control us. Even tough I am still a teacher, and my wide stays home with our kids ... NOW we can take those vacations and buy fancy toys. PLUS we’ve adopted another girl from China, making us a family of four on a teacher’s salary. We’re able to give freely to people and organizations we believe in that focus on orphaned children in China.
We give like never before; we save like never before; and, most importantly, we live life the way God intended us to like never before.
(Ramsey, Total Money Makeover, pg. 209).
Wrap Up - Opportunity to receive Christ
Money will buy:
A bed but not sleep
Books but not common sense
Food but not an appetite;
A house but note a home;
Medicine but not health;
A crucifix but not a Savior. (Anonymous)
