While financial planning will help a person or family make ends meet and anticipate periodic large purchases like a car or a home, Stephen Mathis believes such planning is ultimately a matter of stewardship for the Christian.
Mathis, executive voce president of the Missouri Baptist Foundation and a Certified Financial Planner, finds inspiration for divine help from places in the Bible like Proverbs 3:5-6. “God promises that if we look to him, he will direct our plans,” he paraphrased. “He will give us wisdom and insight when we sit down and plan.”
How believers use this most effectively is relying upon God to work through us on each day’s decisions and other activities, he explained.
“Do the work of planning,” Mathis emphasized.
Approach the task of wisely managing financial resources realizing it is a matter of Christian stewardship, he explained. “God is the owner of all that we have — possessions, talents, all that we are.”
A life-long task
Mathis believes it is never to early either to begin planning and developing disciplines that enable families to not only get by but to develop financial security and making generous Christian giving an important part of the financial plan.
At a younger age, people are not only getting income and expenses to match, but begin the process of securing transportation, setting up a household and possibly anticipating adding children to the family.
One benefit of effective planning is as necessities of life are acquired, individuals and young families can make such decisions “without becoming unduly burdened with debt,” Mathis said.
As families add children, financial needs grow, he said, both to provide food, clothing and shelter for the child (or children) and to anticipate educational needs years later.
Mathis is quick to acknowledge that financial pressures and needs are sure to change as a person moves through young adulthood, median adulthood and into senior and retirement years. But he also acknowledges that budgeting and other planning is done best when it anticipates the larger scope of life.
“I don’t think you are ever too young to think about retirement,” he said. “It will be much more successful for you to start at an early age and gradually increase” what you regularly set aside.
Many churches provide an amount equal to 10 percent of staff salaries into retirement accounts, which Mathis believes is a good minimum.
Accumulation of financial resources is an emphasis for younger and middle adults, while during retirement years the emphasis changes to carefully spend what has been accumulated by the time of retirement and the final years of life.
Every phase of life calls for the person or family to live within its means, he said. “but always there is a forward-looking aspect.”
The critical work of planning is only effective if families work the plan and stick with it, Mathis said.
“Without the discipline of doing the work of budgeting at every step, the impact of planning is limited,” he explained.
Participating in a money management course such as Dave Ramsey’s “Financial Peace University,” materials promoted by Crown Financial Services or others can help not only with learning about budgeting, and managing or eliminating debt, but providing motivation and accountability for following through from a Christian perspective.
Going through the process of budgeting helps a person begin to understand what his financial situation really is, Mathis aid.
“[Budgeting] will make achieving your financial goals increasingly easy,” he said. “It will tell you what ability you have (to purchase) a car, a house or other major purchase.”
“Bring all of that into the dialogue with prayer,” he added. “Answers to what is God’s direction suddenly become clear.”
Imagine that God is asking questions like a financial counselor, he said, such as:
- “What are your after-tax earnings?”
- ”What do you still owe on the last car you bought?”
The idea is not far-fetched, he believes. “If God is your ultimate counselor, he might ask you some questions,” Mathis said. “He does this in Scripture.”
One planning-at-every-stage-of-life aspect is in the field of investing itself, Mathis maintains.
Earlier in life, families are usually in a position to absorb more risk in making long-term investments, such as for college expenses for children or for their own retirement. Even so, most would do best at diversifying investments to include a variety of instruments that over the long term would balance each other but provide steady growth while managing risk.
Diversify investments according to your goals and the time frame for reaching a goal, whether that is purchasing a home, starting a business, sending children to college or beginning retirement.v “When you are young, you do not want to place all of your eggs in one basket,” he said.
Managing those investments is still key because a strategy for investing toward a need 10 years away will include adjustments to reduce risk when that need is two or three years away, he advised.
Investments range from the most conservative, such as savings accounts and certificates of deposit with fixed interest rates and maturity dates, to higher risk and more aggressive strategies like investing in stocks, mutual funds, real estate and others.
Investors, even those with limited expertise, may benefit from the services of financial counselors to help them make appropriate investments.
Choose such professionals carefully, and don’t be afraid to ask direct questions up front, Mathis advises.
For instance, find out how charges for such services are calculated. Does the counselor only sell products and investments offered by his (or her) company, or is he able to seek investments from broader sources. How does he calculate charges? Are they per transaction, per the amount being invested, per the type of investment?
Another approach is a certified financial planner who contracts at an agreed-upon price to do a financial plan with investment recommendations. A financial professional “should be very forthcoming about how they are compensated.” he said. An investor should demand a disclosure of the cost for each investment.
It is not only appropriate but also critical to seek references and to ask for credentials, Mathis said. Any investor will be well served to secure an advisor he can trust.
In every life stage, ask what tax-sheltered or tax-deferred benefits are available to investors. Examples are Individual Retirement Accounts (IRAs), tax-sheltered annuities, college savings programs like Missouri’s MOST program and Health Savings Accounts.
“Ask, ‘Is there a tax-advantaged way of doing that?’” Mathis said.
Every person or family needs an estate plan, an essential part of every financial plan, Mathis said.
For a young family that either has children or plans to do so, an estate plan is critical, he said. “Should tragedy strike the family and children lose their parents, lack of such a legal document that provides for the care of the children places a decision such as custody in the hands of the courts and therefore the state.
At every stage of life thereafter, a will can be updated to ensure a family’s wishes are protected, he said. “An estate plan is a financial protection tool that accompanies you at every stage of life,” in the case of disability or in the case of death, he said.
And a good estate plan can have a positive financial impact. Good estate planning can also ensure that proper care is taken to maximize a person’s desire to protect funds to benefit causes that might otherwise be neglected.v It can be constructed to provide the power and authority for a trust to be created to make provision for others individually or for causes important to the deceased.
“You need people set up who can step in and protect your interests.”