We should provide for the future – that’s where we’ll be spending the rest of our lives. As Christians, there is tension when we talk about the future.
(JAS 4:13-16) “Now Listen, you who say, ‘Today or Tomorrow we will go to this or that city, spend a year there, carry on business and make money.’ Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes. Instead, you ought to say, ‘If it is the Lord’s will, we will live and do this or that.’ As it is, you boast and brag. All such boasting is evil.”
We can’t know the future, so we shouldn’t be presumptive on God’s sovereignty and make un-alterable plans.
But, God IS Sovereign. He WILL cause to happen what He wills to happen. Our plans are inconsequential to God’s plans. So, all our planning is futile anyway.
But that isn’t what scripture teaches us. Scripture teaches us to plan and to plan well so that we can fulfill God’s will for our lives.
We talked earlier about setting goals and making plans. We talked last time about making plans to get out of debt. We plan every day, and that is how it should be. Now, let’s discuss how to prepare for the future.
The future encompasses all time from the next microsecond to the infinite eternity that God knows and understands. We will spend all eternity in the future. Even though we can’t know the future, we can make various predictions.
1. Jesus will come again.
(1Thes 4:16) “For the Lord himself will come down from heaven, with a loud command, with the voice of the archangel and with the trumpet call of God, and the dead in Christ will rise first.”
2. We will live forever, or we will die forever.
(JN 3:15-17) “Just as Moses lifted up the snake in the desert, so the Son of Man must be lifted up, that everyone who believes in Him may have eternal life. For God so loved the world that he gave His one and only Son, that whoever believes in Him should not perish but have eternal life. For God did not send His Son into the world to condemn the world, but to save the world through Him. Whoever believes in him is not condemned, but whoever does not believe stands condemned already because he has not believed in the name of God’s one and only Son.”
Our first order of business in preparing for the future is to get right with God. We need to believe that Jesus is the Christ, the Son of the Living God. We need to make Jesus Lord of our lives. We need to repent of our sins and be baptized. We need to live each day for the Lord.
Our second order of business is to make that living for the Lord an all-day, every-day event. We need to make sure our families come to know the Lord, as well. We need to teach them and bring them up in the name of the Lord.
Our third order of business is to give our minutes and hours and days and years to the Lord’s service. We need to bring others to the Lord. We need to build others up in the Lord. We need to take care of others. We need to commit to His Service. We need to serve as God directs us.
To be able to serve the Lord as He directs us, we need to be able to go when and where he says, “Go.” We need to be good stewards of His resources so that when He calls us, we can make a good accounting. This means that we have used His resources to Glorify Him. We have made provisions for contingencies. We have arranged our financial lives in such a way that we can provide for others – in our family, for our childrens’ children, and for those who cross our paths with needs. We need to be able to do what God wants us to do.
Being prepared for the future does not mean accumulating riches and wealth, but accumulating what is needed for the future. God will certainly provide for our needs, but we are partners in the endeavor. If we have committed our lives to Him, and we are demonstrating that we have given our lives by our actions, then God will be much more likely to be an active provider than if we just say we are committed, but then act selfishly. Being prepared is praying and planning. It is making decisions today about actions we will take tomorrow.
(Pr 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.”
What are some of the financial futures that we should be preparing for?
Ø Future Purchases
Ø God’s Contingencies
Based on these possibilities, what do we do to prepare or provide for the future? How do we act? How do we put aside for that rainy day? There are a number of ways to prepare. We need to save, invest, manage, and protect assets for the future. We can store those assets in the following kinds of financial accounts:
Ø Checking Accounts
Ø Savings Accounts
Ø Money Market Accounts
o Home Owners / Renters
o Long Term Care
Ø Mutual Funds
Ø Wills, Trusts, and Estate Planning
Ø Tax Planning
Saving for the Future begins with saving for today, then tomorrow, then next week, next month, next year, next decade, next generation. You can’t save for today or next week without Spending Less than You Earn. That principle still remains. To have a surplus of any amount, you have to spend less than you earn.
We talked briefly last week about making savings in your day-to-day purchases and living. Let’s discuss how you can save something each day. Take another look at the Found Money List from the last chapter.
We focused last week on taking those savings and paying off your debt. Should we cover that again? Do any of you need convincing that you can really do it?
At the same time you are saving to pay off your debt, you need to be saving for the future events we talked about above. Part of your discipline in spending less than you earn is to save that surplus for the future. I like to think about our financial management as delaying a purchase today so we can make a better purchase in the future. With debt, you are committing tomorrow’s income for the purchase you are making today. I’d rather not spend tomorrow’s income on yesterday’s purchases by having debt.
So begin to save a little bit each day, each week, each month. Do it systematically, and with a plan. Put it away by the plan.
You should plan to put aside several months of your living expenses for emergencies. With the recent layoff announcements and realities, having 3 or 4 months of your expenses set aside should reduce your stress environment a great deal. Even in good times, you should keep this emergency fund active and available.
You should plan to set aside enough money for major purchases you future holds. All cars need to be replaced sometime. You may want to purchase a house. Your refrigerator or washing machine will give up the ghost one day. Your roof will leak.
You should be saving regularly for your childrens’ education. You should be saving for your education. The excuse that having too much money saved up means you are disqualified for financial aid should not be the deciding factor on whether you are saving towards a college fund. Save it and stay out of debt.
You should be putting aside money for your holidays and vacations.
You will stop working a regular job someday. You need to have a retirement fund to keep that someday from being some time in your 80’s when you die. Social Security, if it is still around, will not keep you in the manner to which you have become accustomed. Your company pension or 401k plan will certainly help during retirement, but unless you start when you are young, they won’t be enough, either.
You should have a benevolence or contingency fund. You will use this to fund extraordinary requests from others in need. You will travel to the Mission field with this fund.
These days, it really isn’t hard to open a “savings account”. They just go by a number of names other than savings account. Most accounts have minimum amounts you must deposit, however, and that is sometimes a problem. Here is how to get started.
Save your pennies, nickels, dimes, and quarters in a jar, can, piggy bank, or bucket. Save them until you accumulate 20 or 30 dollars, and then take them to the bank.
Open an interest-bearing checking account. “Hide” that 20 or 30 dollars in the balance by “spending” it on your savings goal. Hide the interest you earn each month. Hide other amounts as you designate them. Quicken and other computer financial management programs can manage your savings goals for you in the same manner.
When you have accumulated enough in this hidden expenditure, write a check to the financial institution of your choice for a money market account. Money Market accounts pay better interest than your checking account, and are more liquid than a CD.
As your Money Market balance grows, branch out with that financial institution and invest in some no-load mutual funds. Pick a balanced fund at first. Expand into growth funds and other styles as you accumulate.
Keep up the savings flow – Save, deposit, hide, transfer, invest.
There are as many ways to invest as there are people. If you work with financial advisors, the plans you can get from them are as varied as the landscape. But the thing you will find in common is that you should be investing your savings, not hoarding them. You can invest in solid, blue-chip stocks and bonds, precious metals, commodity options, stamps, art, antiques, or your education and career. Some of these are better than others.
Money market accounts, CD’s, and the like are essentially loans you are making to the bank. You put your money on deposit with them. You certainly have access to every dime of the funds, but the bank uses those funds, as well, to make loans to other people of companies. You are technically loaning the bank your money for their use. And of course you are well compensated for that service!
The stock market deals mostly in common stocks. Common stocks are actually certificates of ownership in a company. Common stocks are bought and sold, or traded, by individuals or institutions over the counter, in an organized exchange, or directly with the company in question. The most common venue for these trades is in the New York Stock Exchange, or the NASDAQ Exchange. The financial news you are most likely to hear in the news is about these two exchanges. The Dow Jones average is a selected group of stocks. Their price fluctuations each day have been tracked over the years and represent a more or less common picture of the overall health of the exchange. There are other indexes that try to track health of other sectors of the market.
Investing in the stock market seems like a risky thing to do, and it is. This past year, some investors lost every dime of their money in the dot-com crash. Many pension accounts have lost 15, 30, or 50% of their value over the past year. Relying on the stock market for your future shows the reality of the James 4 passage – “If it is the Lord’s will…” But investing in the stock market over a long period of time has been demonstrated to be one of the best returns you can get. The key is to invest regularly, consistently, and for the long haul. Following the latest hot stock pick is not investing, it is speculation, gambling, playing, but it is not investing.
One of the ways to look at the current state of the market is to see that most of the stocks are now on sale, and who doesn’t like a good sale now and then?
A Mutual Fund is a company that buys and sells stocks or bonds for itself, and sells you a share of that investment pool. The funds are regulated and managed by professionals. A mutual fund generally invests in a wide variety of sectors and companies, thereby spreading any risks. Unfortunately, they also spread any upside. Their returns are historically similar to that of the stock market.
You should generally not begin investing by buying individual stocks, unless you are getting stock in the company you work for. Begin by investing in a mutual fund. There are thousands of funds. Open a copy on Money Magazine and you’ll find ads for all kinds of them. You’ll want to research these funds and choose solid performers. Use the Morningstar rating as a guide to their worth.
Real Estate is another area for investing. Your primary residence is the first investment you should make. Additional rental units can be accumulated as you save the required funds. However, don’t invest in real estate unless you want to be a landlord. If you have someone else manage the property for you, your returns are eaten up by their fees.
You should take advantage of every tax-free option available to you. Congress has designated the IRA, 403(b) and the 401(k) plans as ways for individuals to shelter some investments for their future. Since these plans let you accumulate without paying taxes along the way, you can achieve greater growth over the years.
The IRA comes in several flavors, and you should invest maximum money in an IRA each year. Most people qualify for an IRA, but many people can’t take advantage of all the features of an IRA. For instance, with full qualification, you are able to deduct the amount you invest each year from your taxable income. All of the earnings in the IRA are protected from income tax. This allows your IRA to accumulate faster and farther than without those tax breaks. In a regular IRA, you begin to pay tax on the earnings when you begin to with draw it.
The Roth IRA is a special type that does not allow you to deduct the investments from your taxable income. However, the earnings are protected from income tax – forever. All of your withdrawals from a Roth IRA are tax-free.
The Education IRA allows you to accumulate funds for education. You are able to make withdrawals earlier than allowed with a traditional or Roth IRA. The earnings are protected.
The 401(k) program is a retirement vehicle that everyone should be using to the full extent possible. Typically, your company 401(k) plan allows you to withhold a certain percentage of your income, up to 30% maximum. Most plans have the company making matching donations of some amount to your account. Typical would be a 50% match, or a 100% match up to 8%, or some other sort of matching program. Most of these matching funds are “vested” over a 5-year period. This helps the company ensure your longevity with them.
Since the money you invest in the 401(k) plan is deducted from your taxable income, your overall tax bill goes down when you participate in the plan. Since most companies have some sort of matching program, you get extra money for free. It’s like getting a raise that those who don’t participate don’t get. Since all of the earnings accumulate tax-free, your balances get larger, faster. Sign up for your company’s plan as soon as you can. Deduct 2, 5, 10% -- up to the maximum allowed.
Most IRA’s or 401(k)’s allow you several choices of how to invest your funds. One choice to avoid is a tax-free Annuity. This is an insurance device that allows you to avoid taxes. But since your accounts are accumulating tax-free, anyway, you don’t need to have an Annuity as an investment vehicle in these accounts.
Investing is your active way to provide for the future. It requires that you have a surplus. It requires that you spend less than you earn.
Insurance is one of the ways you provide for the future by spending a small amount to provide a large protection. Insurance is a gambling game. You pay premiums to a company which is gambling that they never have to pay off. You don’t have any return on your premiums unless you have a loss. You are gambling that you will have a loss larger than your premiums. This is weird.
The real value in insurance isn’t that you get a good return. The value is that should something extraordinary occur, there are backup funds to help you through the troubles. Insurance is for income protection.
Health insurance comes in such a variety of plans and forms that it takes whole books to explain them. Suffice it to say that if your company does not have health insurance in its benefit package, then your exposure to additional expenses for accident or illness is greatly increased. One of the ways to minimize the exposure is to have that emergency fund set aside, live a healthy life, and purchase some major medical coverage for a catastrophic illness or injury.
Life insurance comes in many flavors. The primary function of life insurance is to make a payment to your family in the event you should die before you expected to. A secondary function of life insurance is to provide a vehicle for saving or investing. Frankly, the saving function is not a very good return in most cases. You should probably consider Term insurance for the life coverage, and invest the additional you would save on your own.
Disability insurance offers coverage should you not be able to return to work after an injury. Most plans offer several months of coverage.
Auto insurance is mandatory in Oregon. But the mandatory coverage is for liability, not collision. By raising your collision deductible amounts, you will be paying smaller premiums. By eliminating the collision coverage all together, the payments go down even further. Strike a balance between the value of the vehicle and the cost of your insurance.
Home owners or Renters insurance is a package deal. It covers for loss of property from fire and other catastrophes. It covers your house and contents. Renters insurance covers the contents. Both of these policies also offer liability insurance. If you should get sued, your insurance offers some measure of financial protection.
Long Term Care insurance provides for specialized care in cases of disability or long-term illness or decline – nursing home insurance.
Your investment and other decisions will have tax implications. The decision about which IRA to invest in has tax implications. Buying and selling stocks or mutual funds has tax implications. Investing in your home or other real estate has tax implications. As Christians, we have a requirement to pay our taxes. But we have no obligation to render unto Caesar more than he deserves.
Take time to understand the tax implications of each of your financial decisions, but do not make your decisions solely on tax issues. Taxes are only one part of the decision process.
At the end of your life, your family will gather with the attorney, and your estate will be discussed… “To my loved ones, I don’t leave much because I forgot to take care of my will and estate while I was alive…”
That certainly is not the way we should be leaving our families behind. You can think of several instances where someone met the Lord much sooner than they expected to. Accident, illness, heart attack, stroke, street violence, and any number of other un-anticipated events can ruin your day.
On the other hand, we all know that unless the Lord returns, we will discard this earthly tent and go to be with the Lord, someday. If we should live out our three score and ten, or beyond, our day will come.
Both of these conditions point out that we should have legal preparations made in the event we should die or become incapacitated.
When you die, a legal matter comes into play. You are deemed to have an Estate, and that Estate must be settled. Settlement includes paying all taxes due, paying any creditors, and then distributing the balance to the heirs. The process is known as Probate. It is a well-defined process with well-known legal steps. Upon your death, an Executor will work with Probate courts to determine how your estate will be handled. The courts may or may not decide the same way you would.
The simplest way to prepare for this Probate is to prepare a will. This legal document does nothing more than make your wishes about the distribution of your estate known to all. It is binding to the courts as far as it is legal and the estate has assets to distribute. You couldn’t leave a million dollars to someone if the estate only had a thousand. You can’t direct the estate to avoid paying taxes or creditors. But for the distributable portion, a will is direction to the court about how the estate should be handled. A will does not prevent Probate, it only makes Probate more predictable. A will can be prepared without the help of an attorney, but you should probably not want to do that. There are helpful programs that can get you ready to see an attorney, but the attorney is the way to go.
If your estate will exceed a minimum amount, ($650,000 this year, but increasing over time), then you should be investigating various Trusts and other Estate planning vehicles. These trusts generally can’t avoid taxes, but they can minimize them for your heirs. You should plan to maximize your estate for your heirs.
Since we will spend the rest of our lives in the future, we need to make preparations for living there. We know that we will incur various expenses, so start saving for them now. Balance your insurance needs with your insurance risk and exposure.
Open those savings accounts and fill them up. Save for what the Lord has in store for you.
(Or, contact John & Sandi Larson via email at: email@example.com)
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