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Logo of Michigan Camp Meeting 2016: The Harvest is Great

Financing Yourself- Part 4

Jeff Allen

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  • June 13, 2016
    9:30 AM
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Dear Heavenly Father Lord we do thank you for this day more and we thank you for the rain and how it nourishes and keeps things green or we thank you for the opportunity we have to come together today to learn more about finances Lord and how we can be good stewards of these finances by being educated in financial matters repay you bless our class today help us to have a great discussion and more to learn a lot in Jesus name we pray Amen will we are at the financing yourself class come right on income right on in. Today at the topic we're going to talk about is called turning drops into an ocean clearly we're going to be talking about investments and how to grow our money. Let's take a quick recap of what we looked at yesterday yesterday we talked about what stewardship is and why it's important in personal finances remember I said that planning out a five session class I stuck it right in the middle because I personally thought that stewardship is should be right in the middle of our finances so we put it right in the middle of our course we talked about organizational stewardship we talked about them how the Michigan conference in the world church are involved and how our ties and our offerings flow up and down and what they help to cover what they pay for. We talked about the Seventh Day Adventist Church structure we talked about everything every way from the local church right on up to the world church we talked about tithe uses and flow across the various different entities. And we also made sure we talked about the good financial plans incorporate stewardship plans for God's resources. Well today we're going to talk we're going to get right into it this is one of my most favorite topics and personal finance and you look at me like why would you care you don't even look like you're close to retirement age. Because I'm a nerd in these are the types of things i do we like to plan we like to. Analyze and so this is a fun topic for me. It's also a topic because I personally really really enjoy handling money I enjoy investing money I enjoy managing it and so sometimes it's important to know where things came from in retirement is one of those things where did it come from we're going to take a look at that and. The importance of it and maybe the not importance of it so let's go ahead and get started retirement facts in America U.S. News two thousand and twelve report. One in six older Americans live below the poverty line one in six. Working to retire ratio is five to one it will be three to one by twenty fifty if time should last. Forty million senior citizens today will be eighty nine million of them in two thousand and fifty there's only two hundred thirty six million people in America. The cost of assisted living is now three thousand three hundred dollars per month. Americans age fifty five and older account for twenty percent of bankruptcies in America today twenty percent. Since the financial crisis it means that we've actually had it we've seen an increase in savings but a four point three percent savings increase which is good so a terrible situation caught a lot of people's attention right. Thirty five percent don't contribute to retirement accounts though the third third of America. Age discrimination is always on the rise in the workplace to. If you ever heard some of these statistics before you ever hear it on the news. Let's begin the skill little bit deeper here where did retirement come from Zebedee know where retired this concept of retirement even came from. We're going to come from. Nobody else knew because I didn't know either this is something that I had to really dig into because I'm like you know we all play we always hear about planning for it we always hear about you need to do this you need to save this you need to save that you need to get ready for this at this age here you need to be ready for that but where did this thing even come from that we're all working so hard to get to. Well in thirteen B.C. Roman Emperor Augustus began paying pensions to Roman Legionnaires for serving twenty years this is the first known instance in history of a pension of somebody actually retiring. OK so two thousand years ago we have really our first instance of a retirement and I want to ask you something do you think that if you. You think there are a lot of people that made it twenty years. In the Roman service. So do you think there were a lot of people drawing on pensions in the Roman government probably not right I mean I can't even imagine serving twenty years and making it right. Sixteenth century European countries offered pensions to their troops look at us we've got a hundreds of years before we see you next instance of it right. But again it's the same concept it was offered to the military. Sixteen eighty for the first civilian from the London Port Authority which is basically bridges and tunnels types of things was offered a pension get this this is how it worked though he was paid half of his working income and it was deducted from the pay of his replacement. Cooler right when you love to be the replacement. Yeah. Yeah right interesting so sixteen eighty four is where we finally move into this first development type of a thing interesting though that the pay for. From the replacement paid for the retiree it sounds an awful lot like social security kind of does today right though we're not paying one to one we are paying a percentage. In eight hundred fifty half of Americans worked on a farm eight hundred fifty. We had someone in here afterwards a son either live in a house that was built an eight hundred sixty and I don't see or now eight hundred sixty so this is we're getting pretty modern here. Seventy eight percent of men worked past age sixty five eighty percent of them in eight hundred fifty. They operated under that concept of work until you die or until you can't work anymore right the family support of those who couldn't work any longer there wasn't a pension there wasn't you know the stock market was new but nobody relied on it when you couldn't work anymore your family took care of you right. The average life expectancy was only thirty eight years old so put that in perspective now to the fact that the average life expectancy is only thirty eight in eight percent of men were still working past sixty five. Was anybody really retiring. Less than four percent of Americans were actually over the age of sixty. Half of Americans were under the age of twenty. The industrial revolution comes around lady to Lady hundreds of corporate America starts demanding efficiency now. Now we have stockholders and they want returns they you better be efficient if your stock price is ever going to go up they needed a tool to replace older less efficient workers with a younger workers so you know we have the mills we have the factories it's taking muscle to move these machinery around. Older workers are no longer able to keep up with the newer. Or in faster machinery and they slow down production. And all some people acknowledge I would never slow down for a come on we all know it's true you know you can't do it an eighteen year old can do. Only twenty percent of the population is still in the farming business now. Moving to the cities when the factories. Urban workers no longer have the family support in the old age right. They left them in the farms. One nine hundred twenty S. rolled around mandatory retirement with small pensions begin to creep in. Solves the efficiency problem right and it clears conscience's Well let's set something aside for these older folks so they'll mosey on we'll get em out of the workforce we'll give them a little something to go that'll make them happy right and then we can get those young people in here working. Is better to get a small pension than to get just get pushed out of a job right we don't have age discrimination laws yet nothing like that so you're looking at it is it better to get canned altogether or to take a little bit of something in step aside. Culture starts changing Great Depression hits one nine hundred thirty S. are less than one hundred years out now extreme unemployment right extreme unemployment sets and Social Security Act of one nine hundred thirty five passes it's meant to be an economic stimulus to remove older workers from the work force OK. We need the efficiency corporate America is teamed up with who the government they're helping right we need to get these workers out so we can get more efficient so our stock price can go up. If you spend the benefit money on consumption this here's the Win Win the you know businesses are lobbying government are saying let's get this thing in place will give them some money and then what are the what are the older folks can do with it when they retire they're going to spend it back on consumption and it's going to. Complete this nice big circle of money always turning. Post World War two one nine hundred forty S.. Retirement begins to look upon beacon looked upon as desirable right see those Welcome to federalist Las Vegas sunny Florida all these places that are attracting people now right. World War two big. World War two employers begin to offer fringe benefits so we start seeing the pension pop up surfacing health insurance pop up. Insurance companies get on board to start making money right there's always somebody there to make money when times are changing right. Easy Street. The golden years these are where these terms are coming from right the culture starts changing to let people think that not only is it OK for you to be old but it's good to leave the workforce enjoy those golden years it's the American dream of her retirement is the American Dream two things right owning a house and retiring the American dream. Retirement is a fairly recent cultural phenomenon it really is if you think about it we have six thousand years of Biblical history OK in one hundred years of it we've had this retirement concept as we know it today only one point six percent of our world time has never even seen retirement as we know it today. It's new we don't but we've never really stopped to think about where did that come from. Like to read a bible text with you if you brought your Bible but you to get our going take a look at Luke Chapter twelve. We have it up here on the screen to Luke Chapter twelve. Versus sixteen to twenty one. Twelve sixteen to twenty one then he spoke a parable to them saying the ground of the certain rich man. Mule that point to flee this is Jesus talking and he thought within him self saying What shall I do since I have no room to store my crops it's got so much stuff he doesn't know what to do with it. So he said I'll do this. I'll pull down my barns and build greater in there I will store all my crops and my goods and I will say to my soul soul can you picture him saying it Sol you have so many goods laid up for many years take your ease eat drink and be merry but God said to him fool this night your soul will be required of you then whose Will those things be which you have provided so is he who lays up treasure for himself and is not rich toward God. What do you think. Good story. Was the rich man trying to retire. Is trying to stop working. Faith and finance a book right here published by the North American division page one eleven it has been stated by some observers that to retire at age sixty five or earlier to a life of ease is the devil's alternative to heaven if a person is quitting work to spend his accumulated assets on himself. What do you think. I can tell you the main person contributing to this book is retired now. It is. How is retirement pitched in the news to us all the time now. Traveling vacation my favorite is the one where it's must be Fiji or something like that and shared and you know. I do anything just joins on being alone no grind no office no work. Yeah reminding myself that. I'm looking for the now we're. Sitting disease yeah. Yeah from doing nothing right. Thirteen months is the average retirement eight after summer tires from general camp. Well. Yeah when you disengage from from from wife doesn't work does it. Let's take a look at a couple biblical retirements you know I'm always this is why I tell ya it's a topic I find so interesting so you know I've gone I've researched it I see where it comes from now I see how it's been ingrained in our culture but so what does the Bible have to say about retirement and how do people use retire in the Bible right how did Adam retire in the Bible how long did he live. So I will say he was old feeble and frail when he died now were great to the end right what about Noah how old was no when he was building the ark. Yeah. Yeah hundreds of years old still working hard and preaching to you. Did he ever write. Off into the sunset. Now. But about enough here's a real fun retirement. I have until. He was taken by God right that he retire on this earth no what about Alija. These are our Bible greats so we're looking at Bible greats retirement's right now. What it is why did you. Take it my God What about Moses. Moses was in such good shape that he walked up the mount himself and died right. What about John the Baptist. Was the old. Young he was beheaded right. What about the apostles most of them are martyred. Right. Here's our Bible greats How did all of them retire they were all in active service for the Lord or in their. Right to the end right to the end. Say look here Matthew chapter six. Thousand nine hundred twenty one flip back to Matthew. Chapter six one thousand to twenty one we read this yesterday or read again today do not lay up for yourselves treasures on earth where mom and rust destroy and or thieves break in and steal the lay up for yourselves treasures in heaven were neither MOF nor rusty stroy and where thieves do not break in and steal for where your treasure is there your heart will be also. So should we be pursuing the multimillion dollar retirement accounts. Ed Minister home. Get this book right here to one of my most favorites you might today have had a capital of means to using case of emergency and to aid the cause of God If you had economize as you should every week a portion of your wages should be reserved and in no case touched unless suffering actual want or to render back to the giver in offerings to God. So now we have these conflicting feels like it's almost a conflicting opinion right. We have guidance saying you should be storing up something but is this guidance saying we should be storing up and Leslie that we should be hoarding so that we're ready for this great day of ease. Not all but we should be preparing for a day when we can no longer work right. Same book The means you have earned has not been wisely and economy economically expended so as to leave a margins would you be sick and your family deprived of the means you bring to sustain them your family should have something to rely upon if you should be brought in to straighten places you know this is someone like to me as retirement is not sudden like something where we should just stop what we're doing all together kick it up retirement to me as a lot more like an encore career write. An encore career for the Lord. Maybe we've been so blessed that we don't necessarily need to work for an income. But we should be doing something for the Lord right. You know absolutely. Yeah. Right yeah For in six they usually were until you hit age sixty five and can draw on Social Security or age seventy seven if you want to wait till you know full retirement age every week you should lay up. By in some secure place five or ten dollars richer this was written the early one nine hundred STIS claimer here in five or ten dollars. Not to be used up unless in case of sickness with economy a place you may place something in interest with wise management you can save something after paying your debts. So we don't live in the day anymore where we have the we're live on the farm we don't live in the day where your kids can really take care of you anymore Kenya there we. Not really have to go to work right that's the day that we live in the day and age we live and it's not the eight hundred fifty S. anymore so it's wise in the council we have is that we should be storing up something so we can take care of ourselves. When it comes time when we can't do that anymore right and having something set aside that can help us with that. What should we do what are we to do about all this what are your thoughts. Should we never retire. Now go ahead. I think that you should stay busy if you retire so many people you know they feel that they're not useful and then they die and you have to have a. Yeah absolutely. Yeah I think it helps me right. Now. Right to go by the thousand dollar Lazy-Boy. Well. I'm a committed to sometimes decided. He would. Have this kind. Yeah you willing to use the one time. Yeah to. As good as a. I think in the near There's an age stigma out there in places don't want to hire older workers right sometimes you get there in the face and I just. Yeah absolutely you know I think if we have that kind of a mindset we're saying you know we're going to retire from a job we're just seeking to pay bills and we have enough now the Lords blessed us and now it's time to start that encore career for the Lord right. So here's my plug anyone that's retired. There's all sorts of stuff to do in your church right. If you're retired you should be like the leader at the next evangelistic series right definitely serious help I'm sure your vacation bible school could use help right. That's only five days a day left over it. There's all sorts of things to do you can work it can't meeting you can worry campus Sabol we have a greenhouse there's endless amounts of things we can do for the Lord's work right. Let's go back to the Dave Ramsey's seven baby stuff that we've been talking about all week OK. Step one was what started that one thousand dollar emergency fund right we've talked about that we've talked about that we talked about paying off all debt we talked about that on Tuesday using the debt snowball we talked about building up three to six months of expenses and savings why so that we're prepared in case a job loss comes right or something really mammoth a major medical problem. Step for investing fifteen percent of household income into Rock Fire isn't pretax retirement is fifteen percent a lot. For some of us right. Big size. What's that. All right not a fire that has gone. Well. Yeah it's a big number. Yeah. While we're working we're able. Right. In this is the right you know this is a recommendation fifteen percent from Dave Ramsey other people say ten some people say you might not anything if your employer's putting something into an account for you if you have a pension already so it's just kind of meant to be. Kind of like a just a base level marker really that. Yeah. Yeah. Yeah yeah. Yeah absolutely you know being you know being out of that being in a place where we're making sure that we're already exercising systematic but now once more that was our twenty dollars phrase from yesterday systematic benevolence Step five college funding for the children why do you think college funding for the children would come after setting money aside for retirement. Yeah. Right you know when you get old and you can't work anymore. There's a college education for your kid pay for that. Maybe if you can if they're doctors right. And they're willing to help out we've already seen culturally that the kids aren't helping parents anymore so really relying on an old mindset that's not necessarily working anymore. Paying off the home early and then building wealth and giving like crazy. So let's take a look at this investing fifteen percent of household income we're going talk about some investment terms and if we have questions feel free to just interrupt and ask away because I know this is a topic that has a lot of what does this what does that how does that work what does that. And I will do my best to help answer those questions for you we can invest in cash right just a bank account. We can invest in money market funds you know what a money market fund is but you've heard of it before you know what it is. Yes a money market fund we quite that to being the same thing as cash but it's not cash it's a fun where we're putting our money in with a bunch of other people's money and then the fund manager is going in there buying very short term debt OK real short term debt stuff that's thirty days or less usually OK so the government actually issues debt that you know they say all right give me a million dollars I'm going to borrow from you for thirty days in a paper is there is there a one percent OK so in money market funds don't pay a whole lot either there's very little risk right. Bonds What's a bond. Government bonds. So a government bonds where the government says I need to borrow money for thirty years give me million dollars and I'm going to pay two percent I'm serious that's what's. New is three or four maybe three but it's not much. And Japan I think they're paying like Germany the German the German bund I think is paying like two percent on a fifty year bond right now. You can also have corporate bonds right you have corporate bonds eighteen T. says you know we need to do a big infrastructure upgrade we're going to sell our bonds are going to pay you five percent because we're not the government we're a little bit more risky so we're going to pay a little bit better give us your million dollars We're going to pay five percent for twenty years fifteen years whatever the term of the bond is OK. Stocks What's a stock. Buying shares of a company What's a share what does that mean. Buying a piece of the company what does that mean. Means you're an owner you're buying an ownership interest in the company that's all stock is is just a means that you represent. You know if the company has a thousand shares of stock OK issued in you buy one hundred of them how much of the company do you own. Ten percent you don't ten percent the company so you have ten percent a stake in the profits ten percent stake in the losses totally So what happens if there's ten you know one hundred million shares and you own a hundred shares how much of the company on. The A very little but what he really cares about what you say Right yes. To the question is there a standard of how many shares of the company can sell of itself right now here's a here's a real fun thing suppose there's a thousand shares outstanding and you own those hundred so you own how much percent of the company ten now it's suppose company needs to raise capital they need to bring money in they want to grow they issue another thousand shares and it gets bought up not by you how much do you now own of the company. Five percent. So that works they bring money in in the concept is they're going to bring that money and they're going to invest it and they're going to make your five percent much more worthwhile now because the company going to be worth more hopefully when they make their investment that's the risk that comes with owning a business right the investment might not pay off. Yeah. Actually. They do it all the time and I want to know the who is. The issue they split they buy back yeah whole nine yards Apple is a real big company and that's been a real big family of buying shares back OK Same concept now two thousand shares outstanding you own one hundred shares right so you have five percent right Apple has so all much money actually this is real they have more money than any company in the world basically other than. The state owned company in Saudi Arabia for their oil company they bring in so much money from i Phones i Pads Macs mac Pad Pro blah blah blah. That they have. Billions of dollars they don't even know what to do with it to make the shareholders more valuable so what do they do they go into the open market in they buy shares back so what's that going to do to the price of your shares you know there's less of it out there now. Your ownership goes up it now makes your shares more valuable right. So. It's a good point. Jill this is there anything we should be looking at when it comes to stock regarding sin stocks of ever heard of a sin stock before the name a company that would be considered a sin stock. MORRIS But wires Yeah I don't know if you can but I don't know if it's Philip Morris a stock it might be called. Him or the name of them now but yeah same concept of I think might be Budweiser some like that. Yeah. So should we as Christians be buying stock in trying to make profits off of a company. That is going completely contrary to something that we would see you listed right on our bet his mill certificate right. Now probably. Definitely not. Going to ask about mutual fund OK. I don't know. Yet we're headed there. Let's talk about them in just a manner. Let's look we'll talk about that in just a second any other questions on stocks and while we're at it. Well technically you can't buy stock in Myer because they're a private company but. Would you buy stock in a Wal-Mart been. So it's your question Would you ever buy be able to buy gas in America if you don't want to support a gas station because every gas station sells well. I think. Let's keep moving alternative investments we've seen cash money markets bonds stocks alternative investments or call alternative investments just because they're not as mainstream in the financial markets includes things like commodities gold silver futures contracts where you're saying you'll buy it in the future a certain price of that really happens it might not it's buy there's risk involved real estate farmland rental property right round properties are usually really they've really proven to be good investments for people what's the problem with a run a property of getting into it. Their nightmare something in more dollars they usually costs a lot right if you want to buy cash for a rental property you might have to shell out fifty to one hundred fifty thousand dollars of cash to buy the single investment. You want to buy something in a mutual fund or a stocks you know you can buy Apple for one hundred one dollars a share much less much easier to afford that's why they're more common a new ities annuities or a completely different type of investment similar but different Basically you have one hundred thousand dollars you turn it over to an insurance company or you can turn it over to a not for profit and they will in turn pay you an amount every single month for some on time whatever you guys agree on in the contract of the annuity five years ten years the rest of your life maybe you die then it keeps going on your spouse that's what it is they can sometimes be very very expensive that's why a lot of so they're not quite as common as I think they used to be insurance. Can be considered an investment some standards sometimes insurance is sold with an investment product mixed in with it where it's going to give you three percent for so long again things you look at as fees on those things you know it can be very expensive. Let's take a look at mutual funds OK because this is the most common way that Americans buy stocks and bonds today. Why would we buy a mutual fund Well this is actually it is actually a funny thing it's actually a survey it's a piece of pie what your three favorite most favorite types of pie and the people you know responded to but I thought the picture was actually really good for we're talking about a mutual fund is really just a pot I. So let's pretend the key line here let's say Apple is actually Apple or the company. OK now looks like I know what I was doing I picked the picture right. Apple was Apple OK So we have and we say all right maybe our pie is. Ten thousand dollars and we're willing to invest in the mutual fund so over ten thousand are pirate a forty seven percent and Apple so how much of our ten thousand would be invested in the company Apple. Forty seven hundred Not all of it right. Then we can move on to pumpkin Let's suppose pumpkin let's let's ORNGE let's say it's eight hundred eighty OK So phone carrier landlines so we put some money in eight hundred eighty we move down here to chocolate cream and we say All right let's put some money into a company you want General Motors. Let's get a car company in the mix Let's move over here to Cherry Let's buy some Bank of America Praeger to have some banking in here right. Let's move on to eval chrome let's buy some General Electric right yeah they make turbans they make things for planes that's important you know that's good who are here to pee can buy something else what should we buy next was by John. Johnson they've been around forever trying to be around a long time they keep making all sorts of these good health care things are all good all are all getting their stuff right. Who are here to lemon meringue. Who should by next filling up our pie. Anyone. Consumers Energy let's buy some consumers energy an hour after heat or house forever let's buy them they're a public company let's move over here to Key Lime we're getting down see how this works. So now let's suppose that we were wrong Consumers Energy by Saddam didn't work out economic collapse came blew him away it we lose our full ten thousand dollar investment. No we lost a small little percent maybe we lost you know me we had ten stocks in our prime he lost ten percent would you rather lose a thousand or ten thousand on a gamble one thousand right so this is what's called diversification never heard that word it's another ten dollar word you were diversifying our investment portfolio we're buying all sorts of different things with it and that's what a mutual fund is now this is simple and most mutual funds don't only have ten stocks in them they'll have hundreds some of them will have thousands of stocks and. You can have bond of mutual funds where it can invest in domestic international municipal do not mean this a poll bonds or governments. Yeah yeah cities townships local governments usually states these are municipal bonds. Corporate bonds we talked about that's eighteen T. that's Verizon that's Wal-Mart those are the you know these are the big companies. If you don't like any of that you can buy an international bond fund maybe you want to invest in companies that are overseas. Hondas Toyota those are companies domiciled in Japan overseas. Stocks Now we can have all sorts of different stocks too never heard of all the nice terms for this you can have large cap mid-cap small cap international reeds and specialty you blown away at There's there's no end of the amount of stuff we can buy. Large cap but doing a large cap stocks one would look like. Large companies right the term tells it the cap says large capitalization mean they have a huge portion of the market that's what capitalization means this is your Wal-Mart they have a large percentage of the retail market right this is your Verizon they have a huge portion of the cell phone market yet. The question is there a difference between picking tends to actually really like in buying the ten stocks or buying a mutual fund what do you think. Wiser difference. OK So the mutual fund what it does is taking everybody's money so we let's all say we all decide to invest a thousand dollars together OK and we'll say our PI appears our mutual fund OK you give it to me to manage OK so I'll be the manager on the fun you give me what we're getting here we pry would put in about twenty eight thousand dollars probably into our mutual fund we go in we buy all the different stocks that we talked about OK and we would all own a percentage of the mutual fund now OK that makes sense. So is there the question is is there a difference if you just went bottom line yourself. You'd be investing you'd only have your own money you wouldn't be in someone else's pool that's really the only difference but yes you could go. You could buy the individual stocks and you could mimic any mutual fund you want to do it privately difficult it would probably cost them a lot of money because you're going to have to pay for each trade and transaction whenever you buy it on a resell in the portfolio gets out of balance if you're going to sell and pay fees on that and that's why most people stick with a mutual fund because it's much easier and it costs less because everybody's doing it right. Mid-cap funds what would a mid-cap fund look like. He's in your middle market companies he's a ones we don't hear of as often they oftentimes have experienced good growth and they're still growing OK So my question is Is Wal-Mart really still just knocking down doors growing like crazy is Microsoft now really they've kind of saturated the market right now they just generate a bunch of cash because they have good products. So their stock prices probably are going to go crazy but a mid-cap company they're still growing right small cap lot of times these are the companies that are very small they have the most potential to grow the most right there new or Usually they also have the most potential to do what fail. So they're also the considered some of the most risky. International stocks yen same concept you could have international large to mid-cap small cap but most international funds are just sold as that today international funds and they have large mid and everything mixed in with them and these are the companies that aren't listed in the U.S. is in your hand as you Toyota's Nestle. Nestle Nestle the private company but yeah that's at them. Air Bus them you know Boeing's competitor they're out of France. Sorry I missed it R.E.I. T. real estate investment trust it's a real estate investment trust so what they don't know what a real estate investment. Yes as it looks and it smells just like a stock and what it usually is the trust and you're buying shares in the trust just like it's a company and that trust takes your money in they invest in different real estate ventures this is where. A lot of big companies storage units that you would store stuff at. That would be realists like a real estate type a company molls a real estate investment trust put on a lot of shares and mall properties commercial properties health care facilities and believe it or take a foreigner ship interest in the actual facility or they'll take a debt interest meaning they'll issue those companies debt and they're going to get money back in exchange what people like about real estate investment trust is that usually Pez good income coming in so has a higher yields you'll be getting five percent on it possibly. But a IT sector specific meaning it's only really tied up in real estate so you have more risk. About why. Are you I.T.. You can talk to your personal financial planner you can buy em open market I think pretty much. I think any major brokerage company offers some sort of a real estate investment trust fund whether be Vanguard Schwab J.P. Morgan. Yeah you can buy a. Lot of people like reach because they think it's an alternative to actually buying real estate in general so you're not going to be the landlord you're going on a share. Specialty funds meaning maybe they're just focused on one thing a lot of specialty funds nowadays are focused on just the oil market. The list by companies that work in the oil industries or the work just in the health care industries so it's a it's a bet now that that industry is really going to have better growth than the rest of the market load versus no load ever heard these terms of for the mutual fund load versus no. Does anyone know the difference can explain it. What's a load fund. Yeah. Yeah it's I think it's like a sales tax so to get into the mutual fund the mutual final say all right you're going to invest your thousand dollars if you want to only shares there's a charge to get in five and a half percent you pay it right away out of the thousand dollars so how much are you actually investing then ninety four thousand five hundred or one thousand four hundred fifty right. Yeah pretty close. So that's what you'd be investing no load funds they don't do that and I'm not going to give the arguments on which one is better which ones not better usually a load fund is a managed fund. Meaning you actually have somebody like when we talked about our situation your Give me your money and I'm going to manage it on my going to do it for free because I just love everybody so much no I'm going to ask for a fee out of you so I might get paid that part of that commission that sales load feed or there might be an ongoing fee which every mutual fund has an ongoing annual expense fee usually a managed fund can run anywhere between point five percent up to one and a half two percent the counter to that is an index fund so everybody falling asleep yet I told you there be a lot of terms here today right in index fund an index fund is basically saying look I don't think the manager can do that good of a job I don't think they're going to beat the market because really that's what we're paying for right we want the manager to put something together better than what we can come up with right I don't think they can do it I would just rather just have them buy everything out in the market just buy it all and that way when I turn on the news and I hear that the Dow Jones went up two percent I'll know that my set my portfolio went up two percent today to that's what an index fund is it just tracks index in an index or something like that. Jones Industrial Average the S. and P. five hundred the Nasdaq we've heard those terms before right so all is doing is just buying all the stocks that those indexes are tracking in the same exact proportions and then that's what you're getting your portfolio so the S. and P. five hundred what is the five hundred stand for five hundred stocks there's five hundred stocks in the Standard and Poor's five hundred that's what the index is looking at the largest five hundred stocks in America so if you buy an S. and P. five hundred index fund you're buying all five hundred shares in that in the proportions if you want to just they may make these two they make a the Dow a Dow Jones fund the Dow only has thirty stocks in it you just buy those thirty stocks in that fund now be it so if the Dow goes up or percent you know I mean I look at your portfolio to know you went up a percent today OK Usually the fees are much much lower on an index fund I mean I'm talking maybe five basis points that means point zero five percent. So a lot of people get really interested in index funds. Tax sheltered versus non-tax sheltered there's so much to learn about investments is why it's so cool right. Now and snoring it that's good so you have a four zero one K. a four zero three B. for fifty seven what do all these mean they sound so tricky and complicated right you know the secret about what for a one K. means is just a section in the I.R.S. tax code it's just Section four zero one subsection K. that's how it gets its name pretty clever right. Yeah that's it. Yeah Medicaid doesn't mean thousands so it doesn't mean you have to invest four hundred one thousand dollars to have a four zero one K. for a three B. So a four zero one K. is just the IRA subsection Internal Revenue Code that is used by a for profit entity for their employees to invest their OK for business for over three B. is just the IRA's sub section and subsection for a not for profit. For fifty seven. Is just the iris section for usually a governmental entity meaning you work for a governmental entity a lot of times it can be a school it can be a municipality it can be a township it can be a state for fifty seven for fifty seven is can also be used and not for profits and for profits it's not as common but it is possible Ok sometimes you can get both but that's generally what they're used for. Roth IRA What does Roth mean is roff in that a weird word Roth must stand for something right. It's just the senators name who sponsored the bill for the and for the for the plan as is last name RA that's it. Which I would have invented a several other going around calling the investment the an IRA But anyways you have a Roth IRA in a traditional IRA a Roth IRA means you get your paycheck everything's normal hunky dorey you get your money right OK then you go around and you invest some money with that money OK you've already paid all your taxes and I invested OK What's cool about a Roth IRA is that you've already paid the tax on the income you put in the Roth IRA and the government is never going to tax it again as long as it grows this is why Roth IRAs are very very popular a traditional IRA works the other way you get the money. It works the same way as the ROTH It's a little different you put the money in and then at the end of the year when you're doing your taxes you're going to say I put five thousand dollars in and they're going to do it when you do your ten forty takes returns can duck that amount from your income in essence you will not pay taxes on that contribution so you'll get more back at the end of the year in your taxes. But when you go to take the money out of the account who's going to want their cut the government's going to want their taxes right so really what you're looking at Roth or says traditional is pay now or pay later it's really what it comes down to and there are strategies involved in. Using both in Iraq you. Know it knew that. Nothing Yeah so if you take the rough suppose that you make fifty two thousand dollars a year as the average American we talked about the other day right and you put five thousand six thousand dollars as the current Iris maximum you can put into a Roth IRA you put in six thousand every year for thirty years you know you end up with a lot of money right. Six thousand and then it's grown you don't have to pay tax on any of that when you start taking it out and what's also nice about Iraq is that there's nothing called the required minimum distribution an arm deep you don't have to take one if you invest in the traditional IT age seventy the government says All right we've given you a tax break long anough long enough we want to get our tax money so at age seventy and a half they start saying you must start taking money out of this thing and I think it's the first year it's like three and a half percent you must take it just fine if you don't have twenty million dollars sitting there right now you're paying an exorbitant amount of taxes right so the government will get their taxes one way or the other so if you're going to if you're in a low tax bracket now usually Roth is really good it's going to grow tax free if you're in a high tax bracket now usually the strategy is to put more into these pre-text type of investments so you can save taxes now and possibly pay fewer taxes when you actually retire. What if you don't take what. They are empty. While the government will they know your balances in the assess a nice penalty for you for not doing it yeah plus plus plus the tax there has to get it our Social Security numbers on everything nowadays. So you can invest in anything you want right you can invest in the bonds or you can invest in stocks with it yeah and you can buy the straight man you can buy the Street stocks or you can buy the bond you to refine and to buy the stock mutual fund so it's kind of like an umbrella kind of star at the top and you filter your way. Now it makes sense I mean you're out on the board you feel like you know. Your money. What's the difference between gambling your money and investing your money when you think. You know when there are. No benefit coming out of money. When you invest in something especially socially responsible. Somebody. Think that the things. You're buying usually are buying an ownership interest in an entity that's producing something whether good or service right when you gamble it's pure speculation. When you're playing roulette and they spin the wheel and they throw the what you call a little thing ball a little dice dice a ball whatever and you put all your money on number thirty six hoping for thirty six to come up and it comes up at fourteen what you get nothing and you have the yeah. Yeah. What's up. Now yeah most Christians don't go gamble right Mike I say all the. This is a question I have. A friend of mine was retired retired next year he says you can't go law retired. So what's more the stock were. Not. Always going to go up and. I wish I could answer that question for you. And then if and if I could answer that question you would all be investing with the right. Yeah. You're going to go right right so I would have a really hard time. Into into the stock market. What we have to what we have to. Look at over the course of you know hundreds of years as this is just the theory of investment OK. Is that over time over the course of last several hundred years we've always seen stocks gradually performing this uptick right where I was growing companies are always attempting to grow they're always trying to grow and when a growing company grows they add value right to you the shareholder. That's the concept of investing it's no different than if you started your own business right if you started your own business are you speculating would you say that you're truly gambling if you're trying to start your own business. I wouldn't think of I wouldn't I wouldn't think I was if I thought I had a really good idea to bring to the marketplace right. Now. No not at all. Yeah yeah. So so what you see happening in the stock market and this is what happens is you see these kind of things happening right so you these this is generally over the course of the last two hundred years in the United States this is what we've seen and I'm not saying that you know we're right here in there were about to see this happen you know that's the risk that we have with investing but I will say this if you don't try to invest in something that's going to grow faster than what's called inflation meaning when your money is you know that because the government's actively printing money and making your money worth less and less right if you can do better than that then you're actually losing money with your money and you'll never never be able to retire. When you. Would you look at the sometimes. This is the Belgian. Was. What. Was. The question is you know you listen N.P.R. you listen the news in the say the Dow Jones today was off three hundred points. Well site what does I mean. If you look right now I think someone had it I think that though Jones closed it what's called like seventeen thousand seven hundred something yesterday so if we say it's off three hundred points it went down three hundred points so now it's worth seven hundred four. Yeah seven hundred for that number is only a representation it's just an index it's just attempting to value the stocks that are inside of that index those thirty stocks. That's the market value of those stocks brought down to a number that's not you know. One something trillion trillion dollars You know. For you. Right now. The question is would you suggest buying low would you also just you know buying here selling here buying here selling here right now is. That so. My question to you is how do you know when down is down. Like when do you when do you know how do you know that you know you're like oh wow it. Is down but then maybe it's going to go down further we don't that's why we don't now so the now my feeling on that is now we're starting to speculate because now we're starting to gamble when our taking the chance saying we think this might happen I think the ball might land on thirty six in real. So. I wouldn't I would. But you know I don't deal in investments all day long either there are people out there that will think they can get that but I don't you know. And then you better hope that they give you really good returns because they're probably charging a really good fee to try and do it. You want something for that that's why mutual funds are so nice right you don't have to worry about buying Wal-Mart low because the mutual fund includes Wal-Mart low already but it might have Chevron high because oil prices are high oil is low maybe Exxon's low now so you're Ciro is buying the market in whatever the market in general is doing you're taking a lot of that risk out of buying low selling high you just buying the average you know just getting you're getting your fair share. You. Risk. Lower What do you have to say about investing low risk moderate risk high risk what do you think a low risk investment would be. Lower than that lower risk than a bond. Bunk put in your bank account right is going to go up Marinelli is going to go down better not. If it does we do have the government insuring it that they say they'll step in with more printed money to help you out you know. What would be the next higher risk now we're moving into bonds right if somebody promised to repay you the General Motors have Bonzo when they declared bankruptcy. They did every most every company in corporate America has bonds out it's part of their finance treasure you think those people get repaid. And Miss not. Know they file for bankruptcy and when they reamers from bankruptcy they were a new company the old company gets. Behind to settle the debts most of those people still haven't been paid in the ones that you are accepting about fifteen cents on the dollar bonds are not risk free Next up we move into stocks now you own the company the nice about Bonzo's if the company goes bankrupt you might get fifteen cents on the dollar if you on the common stock you probably get nothing because there's a reason the company failed right. After that we move in a very speculative investments gold silver platinum. Who knows what direction those things are going to go. You know if the government keeps printing money hopefully the price of gold goes up because they tend to be an inverse relationship but you don't know. We're running out of time while this is a big topic right any other questions are going to keep moving and we can talk afterwards penny stocks penny stocks Why do people like Penny stocks because you can buy tons of shares for four cents a share right she way we've never heard of that company before. Or what they do or who's the management or what's direction they're headed. That's why that's why a lot of people don't get rich off penny stocks right. But a lot of people sell programs to get rich off penny stocks. Let's keep going here not tech sheltered you could have a trip ical brokerage account meaning you don't have any sort of you know it's just you're after tax money you're going to invest it it's going to grow and when you sell it Uncle Sam still going to get a cut on a lot of people use brokerage accounts after they filled up their taxable account space in their Ross base so what you got to do afterwards. Savings accounts certificates of deposits they have no take shelter on them your bank account produces thirty dollars of interest they send you a nice little card in the mail in late January it says You mean you have to plug it in in your taxes and pay tax on it right that's not tech sheltered Personally I think just operator kiss. KISS Keep It super simple right. They have these nice things called target date mutual funds out nowadays you can buy in through Fidelity Vanguard any of the big brokerage houses Schwab offers and you basically pick a date when you're thinking you're going to retire they have a fun call the target date twenty thirty fund and it will invest in that fund in it will gradually shift from stock allocations down to more Bond allocations down to inflation protected securities into cash so that when you get close to retirement you're not set like you would be in two thousand and eight all stocks boom and all cells and I can retire OK it's shifted the risk for you over the course of your working life. If you do it with an index fund you can get these things at twelve basis points super cheap. Risk profile mutual funds these are sometimes known as life strategy funds the side people taking pictures a lot of times these are of what your funds are calling you I want to vest in a growth fund OK that's just what you call it you know it's called a growth in. The Janice growth fund it's going to invest mostly in stocks it's going trying to grow your money you can invest in moderate or conservative you invest in conservative it's going to be more of those bond type of funds. Less risk it's going to be more conservative but you're not going to have the potential to earn as much. The key trick is to diversify mix the stock and bond allocations and get a good get a good allocation going. College funding for children I know I totally told you we talk about this I'm running out of time but I want to move through here quickly with you how do you do it how do you do it. Scholarships I was going to give you some ideas on here you can always get scholarships I picked up a scholarship I didn't even apply for in college and I got a free year. They're out there college credit done before college you can do this what's called their doing or omit you can do this even as a home school student do enroll in the low. Can college pick up some college credits you can do it's called A.P. which is Advanced Placement you can take tests at home you know with A.P. calculus A.P. statistics A.P. college English all these different things and you get college credit before you actually go to college at a fraction of the price. I did dual enrollment when I was in school I had a year of college done before I graduated from high school in the school paid for it. Which is nice too kids can pay for some of it right. Here invest if that's for the kid they should probably invest a little bit of it in themselves right I remember paying for that myself the rest of it a non-working spouse could return to work temporarily right if you have to have all the kids are older so good job at target. You could use investments special kinds of investments we'll talk about that a minute you can cash flow it meaning maybe you make enough money in your budget that you can help write checks every month and of course as always loans not really the most popular. They are there let's talk about using investments you can use what's called Coverdell Education Savings Accounts These are called E S A's they work similar to like a rough Ira you put money into it after tax or after you get your paycheck. You can put two thousand dollars a year in a grow tax free and then you can use the money in the account to pay for college five twenty nine plans are very very similar to the E.S.A. except they have much higher much much higher maximums in when you put money in if you invest for your state's five twenty nine plan you can actually get a state income tax bracket so I personally like to use the Michigan five twenty nine plan for kids because I'm getting a you know I'm saving four point two five percent on taxes on the amount that I contribute save a little bit it's a little bit more like an enhanced investment return built in. Savings Bond series I an easy if you use these types of savings bonds I wouldn't recommend it because the rates are so poor on them but you can't. Do these and the interest if you cash them out for education they'll be tax free. So again cashflow you can suspend if you want to use it with cash flow only you can suspend other savings goals during college if you need to. Plan to pay off your home before the college years could you imagine if you didn't have a house payment right when your kids get to college makes it much easier to write a check for a thousand dollars a month make a plan now though don't wait until you get their private school costs are going to thirty two thousand dollars in two thousand and fifteen two thousand and sixteen these are big numbers we have a plan if you want to help pay for your kids to go to college determine what to look what it will cost in the future and how to fund it you might have to combine a lot of these different methods to make it work that's why I said a couple days ago you don't just have to have a big pile of money to do it it might take six different methods teamed up to get there. And determine what types of colleges are options for you. Pay off the home early we're here anywhere in the homestretch here how you can pay extra each month just paying an extra one twelfth every month can take four years off of a thirty year mortgage. One extra payment per quarter so making fifteen or sixteen payments a year basically would take a lemon years off of a thirty year mortgage. You can refinance to a lower rate in a lower term you might be able to go from a thirty year to a fifteen year mortgage and you might not even change especially in today's interest rate environment where you can get into a fifteen year for about two point seven percent. You can pay a thirty year mortgage like a fifteen year mortgage so you just you know you get a thirty but you pretend it's a fifteen pay it like that and you pay it off in fifteen years Azza flexibility lots of ways to do these things or you can save it all up and pay off it all once if you want to if you're worried about putting extra money in the house put it in a savings account when you get to that you know that point where the savings account balance equals the mortgage balance to pay it off and once we're strong. And I was. Downsize to. Her Every want to live in a you're right you're here you're. Just heading. Evan us home three hundred three do not falter be discouraged or turn back the night or taste the night indulgence of appetite save your pence and pay your debts when you can stand forth a free man again owing no man anything you will have achieved a great victory. And I am out of time I'm actually going to stop here there are other great resources if you want to know about investing low cost investing Boggo has guide to investing is a great faith in finance is great for providing a framework for it evidence home of course is excellent for keeping everything in perspective in life right. So that's it and if you have any questions feel free we can we can talk about it OK. Let's a whole sorry let's have a quick closing word of prayer and then I'll let everybody go only one minute late we got down early the other day as it all evens out right do you have any father Lord we do thank you for today we thank you for the great questions that everybody had today in the word we pray that we would be wise stewards with investments or that our focus would always be on you and not live a life of ease or in that huge brokerage account a huge bank account would never be our goal but that her goal would always be Heaven and more that you would guide us every day with our finances help us to make decisions that are wise for you in Jesus' name we pray. This media was brought to you by audio for years a website dedicated to spreading God's word through free sermon audio and much more if you would like to know more about audio verse or if you would like to listen to more sermons lead to visit W W W audio verse or.

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