Navigating Your Finances God’s Way

Most people don’t realize how much the Bible says about money and possessions. They may know that Jesus talks about the danger of riches or the need to care for the poor, but when they are told that the Bible has over 2500 verses dealing with money, possessions and basic stewardship principles, they are shocked.

People typically separate the financial and spiritual aspects of their lives. This separation is similar to the mercenaries who fought in the Crusades during the 12th Century. Because it was a religious war, the mercenaries had to be baptized before they went off to fight. When the mercenaries rode their horses into the water for Baptism, they held their swords high above their heads, out of the water. In effect, their swords were not baptized. They were saying that God could control their lives, but they were in full control of their swords.

Many people today hold their wallets high above their heads (out of the water so to speak) indicating that they will give their lives to God, but they remain in full control of their finances.

Yet at the very core, everything we have (including money and possessions) comes from God and it is our responsibility to care for all the blessings that God has bestowed on us, including money and possessions.

The Compass Catholic nine-week Bible study, Navigating Your Finances God’s Way helps people make the transition from “This is mine” to “It all belongs to God.”

And it does all belong to God. “To the LORD belong even the highest heavens; the earth is his also, and everything on it.” (Deuteronomy 10:14, GNT) “The world and all that is in it belong to the Lord; the earth and all who live on it are his.” (Psalm 24:1, GNT)

The Navigating Your Finances God’s Way Bible Study is nine weeks long, meeting once a week for two hours. In preparation for each weekly meeting the participants read Bible verses and do personal financial exercises.  No personal financial information is ever shared. The meetings center on discussions about the Bible verses.

The first week focuses on introductions and allowing the participants to get comfortable with each other. Prior to the first meeting, the participants read Your Money Counts, which is the discussion topic for that meeting (The eBook version of Your Money Counts is available for free from the Compass Catholic website.)

In week 2, the focus in on the difference between God’s Part and Our Part. The Bible verses for the second week help people realize that God owns everything and we can trust him to provide for our needs. We are simply his stewards.

Recognizing God’s ownership and trusting him to provide for our needs (not our wants) is one of the first steps in becoming a steward of all God’s many blessings. We are called to be faithful with what we have been given, whether it is a little or a lot, and to be faithful in every area.

When we learn and live these principles we can develop a more intimate relationship with Jesus. Having our finances in order often leads to a stronger marriage and as parents we are called to teach our children the things they need to know about living a faith filled life—which includes how to manage money and possessions.

The topic for week three is debt. The discussion centers on what is considered debt and how the cost of debt can act as a vulture to family finances. The Bible never defines debt as a sin, but being in debt is considered a curse. This week’s topics also include co-signing, credit reports and credit scores.

Honesty and Counsel are the topics for the fourth week of the study. We discuss the difference between being technically truthful without being totally honest. There is a big difference between what the church teaches about our call to honesty versus how society treats honesty.

Counsel is the second topic in week four. None of us knows everything, so when making important decisions (including financial decisions) we should seek godly counsel. Our sources of counsel are the Scriptures and Church teaching, our spouse and godly people. We must be careful when seeking counsel from someone who will have a financial gain or loss depending on our decision. We should always avoid the counsel of people who do not know God, unless we are seeking facts (not advice) from them.

In week five, the topic is generosity. We explore what the Bible, the Catechism and the United States Conference of Catholic Bishops have say about how much we have to give. The social justice aspects of giving to the poor and needy are included in this discussion.

If we truly believe that God owns everything and we are simply caretakers of what he has given to us, then it changes how we think of giving. The question to ask ourselves is not “How much of MY money do I have to give God?” The question becomes “How much of GOD’s money to I need to keep?” which is a much different perspective.

The role God plays in work is the topic for week six. Our attitude about work means viewing our work as a way to serve God and use the talents and skills he has given us. We talk about the responsibilities of both employees and employers. Other work issues are discussed, such as the benefits or negative aspects on the family when both parents are employed outside the home.

In week seven we discuss the balance between saving to care for our family and accumulating wealth simply to become rich. The purpose for savings as well as what Scripture says about saving and investing are discussed.

NOTE: (Compass Catholic Ministries provides no specific savings or investment advice—the discussion revolves around types of saving and investing vehicles and the attitude we have about savings.)

Week eight focuses on being prepared for a crisis, as so many crises have a financial impact. Why bad things happen to good people is a topic that is almost always discussed. Part of handling a crisis is learning to be content in whatever circumstance we find ourselves. The study also touches on the proper perspective for stewards. It’s not about giving away all our money or becoming rich. Stewardship is about being faithful in all ways, whether we have a little or a lot.

The final week of the study is week nine where we discuss eternity. “What profit is there for one to gain the whole world and forfeit his life?” (Mark 8:36) We are pilgrims on this earth, and our real citizenship is in heaven. This week sums up the other weeks in a call to action to be a good steward of God’s blessings.

The small group environment of the study builds deep friendships, a better understanding of how to integrate our faith into day-to-day life and a profound appreciation for financial stewardship.

The study is available in both English and Spanish and both have an imprimatur from The Most Reverend John Noonan, Bishop of Orlando. It’s for everyone, young or old adults; single or married; working or retired; financially stable or just scrimping by each month

Listen to the Compass Catholic podcast and learn more about this life changing experience.

Call us at 844-447-6263 or use the contact form on the Compass Catholic website today if you are interested in starting a Navigating Your Finances God’s Way study.

Middle Class Money Mistakes

According to a Pew Research study done in 2014, the middle class is defined as people who have an annual salary between $42,000 – $125,000. That is a huge margin between the low end and the high-end earners.

If you are on the low end of the income level, you are probably struggling to make ends meet, you have little to no savings and you can’t afford any frills.  If you are on the high end of the spectrum, you probably have a little bit of savings and can afford some of the nice things in life.

But whether you are on the low end or the high end, you may be making some mistakes that are not beneficial to your financial future. Here are some topics to consider if you want to improve your financial health.

The first thing that everyone needs to work on is ditching the debt. You want to be in a position where you are totally debt free—no credit card payments, no car loans payments and no mortgage payments.  Getting rid of the mortgage is a long-term goal but paying off the consumer debt should be priority number one.

If you were going to be charged an extra 15%-21% for everything that you buy would you still buy it?  Probably not. But people who use their credit cards and don’t pay them off at the end of the month are doing just that by paying interest. You get absolutely no benefit from carrying a balance on your credit cards and paying interest. It only provides added costs, more debt, and lots of stress when it’s time to make the payment.

The second most common mistake people make is not having an emergency fund. Personal finance experts stress the importance of having an emergency fund to cover unanticipated expenses and avoid long-term financial damage.

If you were suddenly hit with an unexpected $500 bill, would you be able to cover it? If the answer is no, you’re not alone. Nearly six in 10 Americans don’t have enough saved to cover an unplanned $500 expense, according to a report from Bankrate.com. When the unexpected expense occurs and there is not enough ready cash to cover it, the credit cards get whipped out and you go further into debt, paying even more due to interest charges.

An emergency fund is money that has been saved and reserved for emergencies. It needs to be in a liquid account (checking or savings not a retirement plan) so you can access the cash immediately when needed, with no penalty for early withdrawal. The money is never touched except for emergencies.

We encourage people to start with a minimum of $1,000. For most people, this is a goal that will take several months to achieve.  But even if you only have $400 in your emergency fund when you need it, you will avoid $400 in debt for that emergency. After you get a $1,000 saved in your emergency fund, increase it to one month’s income, then three month’s income. The goal is financial protection from all the unexpected expenses that are looming in your future.

The third mistake people make is spending without a plan.  If the money comes in and goes out and you have no idea where it went at the end of the month, how do you know that you are spending money on what is most important to you and your family?  

A lot of mistakes can be avoided if you just stop, think and evaluate how, when, where and why you are spending. Proverbs 21:5 tells us “The plans of the diligent are sure of profit, but all rash haste leads certainly to poverty.” Spending without setting priorities is certainly a way to run head first into financial chaos.

The fourth mistake is not taking advantage of an employer match on retirement savings. To avoid this mistake, invest enough in your 401(k) to maximize your employer match. Always, always save the maximum that your employer will match—it’s free money!

Along with not maximizing your employer match, the fifth mistake is delaying retirement savings until later. You may think that saving for retirement will be easier once the car is paid off, or after the kids graduate from college or when you get that long-awaited raise. But the key to a healthy retirement fund is to start early and save consistently, even if it’s a very small amount. That way you can maximize the magic of compound interest, where you’re earning interest on both what you have saved and the interest you’ve previously earned. Compounding the interest on your savings helps your savings grow exponentially over time.

The sixth mistake is spending too much on cars. A car is a depreciating asset and the newer it is, the faster it depreciates. An average car loan these days is five years or 60 months. An average payment on a car loan is $500. If you start when you are 20 and buy a new car every five years with a $500 monthly car payment, over your driving lifetime of 60 years, you will spend about $360,000 on car payments. And that calculation does not include the interest you could have earned if you had saved and invested that monthly car payment.

The seventh mistake is absorbing any extra money into your day-to-day spending. If you get even a small financial windfall or an increase in your salary it will disappear quickly if you just spend it.  Instead, allocate the additional money to emergency savings, retirement savings and to a worthy cause.

And that brings us to the eighth mistake, which is thinking you don’t have enough money to be generous. Everything we have is a blessing from God.  It is all too easy to bemoan what we DON’T have. When we think this way, it is easy to rationalize why we can’t give any money to charitable causes. Yet if we really believe that everything we have is a blessing from God, then when we are generous we are simply giving back to God what is already his. We need to look for ways to praise God and be grateful for what we DO have, and one of those ways is to be generous.

Taking time to think and plan your spending is the best way to avoid these common mistakes. It’s not glamorous and it may not be fun, but steady plodding keeps you on track. Proverbs 21:20 tells us “Precious treasure remains in the house of the wise, but the fool consumes it.”

What You Need to Know if You are Buying a Car

After a home mortgage, car loans are the largest debts most people have. More than 70 percent of all the cars on the road are financed. Car debt is one of the biggest roadblocks for people on their journey to true financial freedom.

It’s especially dangerous because most people never get out of car debt. Just when they get to the point of paying off a car, they trade it in and purchase a newer one with credit.

Unlike a home, which usually appreciates in value, the moment you drive a car off the lot it depreciates in value. It’s worth less than you paid for it by the time you hit the first intersection. If you had to sell it, you couldn’t get enough to pay off the loan.

The average price of a new car, considering all models, is about $33,000 and the typical monthly car payment is just over $500. In our Navigating Your Finances God’s Way Bible study we advise that the average expenditures for ALL transportation costs should be between 10%-15% of your net spendable income (salary, minus payroll deductions, minus giving = net spendable income).

Transportation costs include the car payment as well as insurance, gas, maintenance, tolls, parking, etc. If the total of all transportation costs should not exceed 15%, the car payment should not exceed half of that or 7% of your net spendable income, which means your net spendable income needs to be $86,000 in order to properly budget for a car payment of $500/month. And that’s only for one car. If a family is making two car payments the salary needs to be higher.

In our opinion, the most reasonable financial position is to buy a certified used car. If the average price for a new car is $33,000 and a 3 year old used car is worth only 50% of the new price, then it stands to reason a used car average price should be about $16,000.

The upside is that you’ll have lower monthly payments or maybe no payments at all. You can probably afford a better model at a lower price than if you were buying new. And those first few dents and dings won’t be as painful with a used car.

You always run the risk of buying someone else’s lemon, but that can be mitigated by buying a certified used car. These are usually 2-3 years old with low mileage. Some certified used cars may still have some of the original factory warranty left. Plus, these used cars come with certifications from factory trained mechanics covering from 150 to 180 point inspections. The cost is higher than a non-certified used car, but it is definitely lower than what you would pay for a new car. Be sure to read the fine print to understand what you are getting.

As you begin to contemplate purchasing a car, you’ll need to consider the purpose of the vehicle. If your family has outgrown the sedan, you may want to consider a minivan. If your job, or choice of recreation dictates off road capabilities, you may want to consider a truck or SUV. In addition to deciding which type of vehicle you need, you should also write up a list of car options you simply can’t live without, such as automatic transmission; power steering and brakes; good gas mileage; or adjustable seats.

It will also be helpful to write up a second list of options that would be nice to have if you happen to run into a vehicle that comes equipped with those features, but lack of those features would not be a deal breaker. Some of those features could include: bluetooth, body style, color preference, air conditioning, cruise control, and sound systems.

You also need to be aware of how much car you can afford based on your finances. Some people purchase a used car outright; others plan to finance. Either way you’ll need to determine how much you can afford to spend. In addition to the cost of the car, be sure to factor in the expenses that you may not have considered yet such as title transfer and registration fees, and in some states, smog or emissions certification.

In addition, your insurance rates may be affected with a newer car, so check with your current agent or go online to get a quote. If you plan to buy an older car, or are willing to buy a car that may need maintenance or repairs right away, set up a special fund for those probable expenses.

Once you determine how much money you can spend on purchasing a used vehicle, it is time to start the next step to car ownership which is to do some research.

We always recommend seeking counsel before making any financial decision. Proverbs 20:18 says “Plans made with advice succeed; with wise direction wage your war.”  Buying a car and haggling over the price can sometimes feel like waging war!! 

Talk to family, friends and co-workers to see which vehicles they have been happy with. Their experiences (good and bad) are purely anecdotal, but they may help you decide which make or model might work best for you.

Take a look at the general types of vehicles currently for sale, what features are available on what makes and models, and what kinds of vehicles you can afford. Spending some serious time at this stage of the process is important to making an informed decision on what type of car you’ll be narrowing your search for, so don’t skimp on the time you dedicate toward your future vehicle.

There is certainly no shortage of used cars being offered for sale by individuals, especially in larger cities and through the car selling websites and auctions online.

A major difference between buying a used car from a dealer and a private party is the degree of warranty available. Few, if any, individual sellers offer any type of after sale warranty, while dealers cars range from “as is” to limited warranties to certified vehicles that come with extended warranties.

There are many websites that provide great resources by year, make and model on such things as safety records, frequency of car repair, maintenance costs, comparison reports, and gas mileage figures. Here are some of the best places to get car info on the Web: Edmunds.com; Cars.com; U.S. News Best Cars; Kelley Blue Book, and TrueCar.

When you find a car you are interested in, be sure to request that the seller provide you with the Vehicle Registration Number (VIN) for that car. Each car manufactured is issued its unique VIN and the records of that vehicle follow it throughout its lifetime. For a minimal fee, online services can locate the records for that particular car and send its vehicle history report to you, including: if the car has a clear title; if the car has been salvaged; if the car has been involved in a serious accident; how many times the car has been sold; the original sale date; and if there have been any recalls for that car. Investing in a VIN search can save you a lot of headaches (and money) down the road.

When you are car shopping, spend some time considering your options, discuss the idea with your family and friends, do some window shopping and PRAY for God to help you make a wise decision.

Lots of people get confused between the function of a car, which is to take you from Point A to Point B and the status of driving a new car. In 1 John 2:15, we read “Do not love the world, nor the things in the world.” So make a car buying decision based on your need for safe reliable transportation and nothing else.

Navigating Your Finances God’s Way

Most people don’t realize how much the Bible says about money and possessions. They may know that Jesus talks about the danger of riches or the need to care for the poor, but when they are told that the Bible has over 2500 verses dealing with money, possessions and basic stewardship principles, they are shocked.

People typically separate the financial and spiritual aspects of their lives. This separation is similar to the mercenaries who fought in the Crusades during the 12th Century. Because it was a religious war, the mercenaries had to be baptized before they went off to fight. When the mercenaries rode their horses into the water for Baptism, they held their swords high above their heads, out of the water. In effect, their swords were not baptized. They were saying that God could control their lives, but they were in full control of their swords.

Many people today hold their wallets high above their heads (out of the water so to speak) indicating that they will give their lives to God, but they remain in full control of their finances.

Yet at the very core, everything we have (including money and possessions) comes from God and it is our responsibility to care for all the blessings that God has bestowed on us, including money and possessions.

The Compass Catholic nine-week Bible study, Navigating Your Finances God’s Way helps people make the transition from “This is mine” to “It all belongs to God.”

And it does all belong to God. “To the LORD belong even the highest heavens; the earth is his also, and everything on it.” (Deuteronomy 10:14, GNT) “The world and all that is in it belong to the Lord; the earth and all who live on it are his.” (Psalm 24:1, GNT)

The Navigating Your Finances God’s Way Bible Study is nine weeks long, meeting once a week for two hours. In preparation for each weekly meeting the participants read Bible verses and do personal financial exercises.  No personal financial information is ever shared. The meetings center on discussions about the Bible verses.

The first week focuses on introductions and allowing the participants to get comfortable with each other. Prior to the first meeting, the participants read Your Money Counts, which is the discussion topic for that meeting (The eBook version of Your Money Counts is available for free from the Compass Catholic website.)

In week 2, the focus in on the difference between God’s Part and Our Part. The Bible verses for the second week help people realize that God owns everything and we can trust him to provide for our needs. We are simply his stewards.

Recognizing God’s ownership and trusting him to provide for our needs (not our wants) is one of the first steps in becoming a steward of all God’s many blessings. We are called to be faithful with what we have been given, whether it is a little or a lot and to be faithful in every area.

When we learn and live these principles we can develop a more intimate relationship with Jesus. Having our finances in order often leads to a stronger marriage and as parents we are called to teach our children the things they need to know about living a faith filled life—which includes how to manage money and possessions.

The topic for week three is debt. The discussion centers on what is considered debt and how the cost of debt can act as a vulture to family finances. The Bible never defines debt as a sin, but being in debt is considered a curse. This week’s topics also include co-signing, credit reports and credit scores.

Honesty and Counsel are the topics for the fourth week of the study. We discuss the difference between being technically truthful without being totally honest. There is a big difference between what the church teaches about our call to honesty versus how society treats honesty.

Counsel is the second topic in week four. None of us knows everything, so when making important decisions (even financial decisions) we should seek godly counsel. Our sources of counsel should be the Scriptures and Church teaching, our spouse and godly people. We must be careful when seeking counsel from someone who will have a financial gain or loss depending on our decision. We should always avoid the counsel of people who do not know God, unless we are seeking facts (not advice) from them.

In week five, the topic is generosity. We explore what the Bible, the Catechism and the United States Conference of Catholic Bishops have say about how much we have to give. The social justice aspects of giving to the poor and needy are included in this discussion.

If we truly believe that God owns everything and we are simply caretakers of what he has given to us, then it changes how we think of giving. The question to ask ourselves is not “How much of MY money do I have to give God?” The question becomes “How much of GOD’s money to I need to keep?” which is a much different perspective.

The role God plays in work is the topic for week six. Our attitude about work means viewing our work as a way to serve God and use the talents and skills he has given us. We talk about the responsibilities of both employees and employers. Other work issues are discussed, such as the benefits or negative aspects on the family when both parents are employed outside the home.

In week seven we discuss the balance between saving to care for our family and accumulating wealth simply to become rich. The purpose for savings as well as what Scripture says about saving and investing are discussed.

NOTE: (Compass Catholic Ministries provides no specific savings or investment advice—the discussion revolves around types of saving and investing vehicles and the attitude we have about savings.)

Week eight focuses on being prepared for a crisis, as so many crises have a financial impact. Why bad things happen to good people is a topic that is almost always discussed. Part of handling a crisis is learning to be content in whatever circumstance we find ourselves. The study also touches on the proper perspective for stewards. It’s not about giving away all our money or becoming rich. Stewardship is about being faithful in all ways, whether we have a little or a lot.

The final week of the study is week nine where we discuss eternity. “What profit is there for one to gain the whole world and forfeit his life?” (Mark 8:36) We are pilgrims on this earth, and our real citizenship is in heaven. This week sums up the other weeks in a call to action to be a good steward of God’s blessings.

The small group environment of the study builds deep friendships, a better understanding of how to integrate our faith into day-to-day life and a profound appreciation for financial stewardship.

The study is available in both English and Spanish and both have an imprimatur from The Most Reverend John Noonan, Bishop of Orlando. It’s for everyone, young or old adults; single or married; working or retired; financially stable or just scrimping by each month

Listen to the Compass Catholic podcast on Breadbox Media and learn more about this life changing experience.

Call us at 844-447-6263 or use the contact form on the Compass Catholic website today to get help in starting a Navigating Your Finances God’s Way study.

God Marriage & Money

While talking about money may not be considered a romantic thing to do when you are engaged to be married, not talking about money may lead to divorce, which is definitely not romantic! Joint discussions about the family finances need to happen early and often in order to build and maintain a strong healthy marriage.

Think about how much of your time is occupied by money in your day to day routine.  Every minute is somehow connected to money. You are either earning it, spending it, managing it, or using something on which you spent money. There aren’t very many activities that do not somehow relate to finances. 

When a couple gets married they each bring assumptions and preconceived notions about money into their marriage. He thinks $1,000 in debt is horrible. She thinks $10,000 in debt is normal. He wants to lease a car and get a new one every 2 years.  She assumes they’ll buy a good used car and drive it till the wheels fall off. He thinks they will only use cash and buy what they can afford. She thinks they can use credit cards and buy whatever they want. He wants to fly by the seat of his pants financially. She thinks they need a formal budget.

All of these assumptions, and many more, will come up at some point in a marriage. Maybe right after the honeymoon or ten years down the road, but financial assumptions will come up someday. And unresolved financial differences will cause problems sooner or later.

Communication about anything makes that topic a shared concern between the spouses, and money falls into this category.  Without planning and a sense of direction, discussions about money can lead to arguments and finger pointing–definitely not a good communication method!

This means finances need to be discussed in an honest and open way without playing the blame game. One of the reasons we encourage couples to develop a spending plan is to take away the emotion and help them focus on facts. Instead of saying “you always overspend,” the conversation can be much more non-threatening, such as “Our entertainment budget is over the limit let’s talk about what happened.”

Having a spending plan helps you and your fiancé focus on the overall vision and plan for your money and once you do that, the small day to day discussions take care of themselves. It’s about making a plan, and sticking to it together.

Information gives you power over your finances. Not talking about money, not making a plan and not coordinating as a team makes you a victim of your finances. If you control your finances, they will never control you or your marriage.

We encourage couples to have a clearly defined money management system all the way from who handles the mail to who pays the bills and who balances the bank and credit card accounts. Without a well thought-out operational plan, things fall through the cracks

Open communication with no blame and shame is required through regular money dates. The day to day spending should be reviewed weekly. The budget needs to be reviewed monthly (or more often if you are just starting out.) Long term financial goals such as buying a house, saving for retirement, replacing a vehicle or a large scale home improvement projects should be reviewed every 3-12 months.

A sure way to derail your financial plans is to involve your parents in your finances, either by asking for loans or because mom and dad keep funding your lifestyle.

Jesus said, “A man shall leave his father and mother and be joined to his wife, and the two shall become one flesh” (Matthew 19:5). When you marry, you are to leave your parents in order to become financially and emotionally independent from them.

It is dangerous to a marriage if the couple is financially dependent on mom and dad, because that dependency gives mom and dad every right to judge how, when, where and on what you spend money. A young married couple needs to learn how to work together as a team without the involvement of wither set of parents.

There is a definite correlation between couples’ happiness, and having their financial goals aligned. Many financial experts promote the use of separate fund–yours, mine and ours–but that can be dangerous to a marriage as it builds walls between the spouses. And in order to have financial goals aligned, the money must be considered ‘ours’ or there will be arguments and accusations. Find ways for you both to be equally engaged in all money decisions.

The money in a marriage and all the responsibilities that come with money need to be shared by both spouses–no matter which one works or who makes more money.

So, whether you like or not, how you communicate about money and how you handle money as a couple has a huge impact on your marriage

The God Marriage & Money book from Compass Catholic Ministries will help you discuss these and many more topics related to finances in marriage. The book provides detailed topics for you to share, such as how much debt and savings you have; your credit reports and credit scores; and your attitude about giving, spending and saving. Start your marriage off on the right foot and have the “money talk” now!

Finding a Financial Planner (part 2)

Last week’s blog was about the background work you need to do when you are looking for a financial planner. This week’s blog is about interviewing a potential financial planner. As a reminder, be sure to interview at least 3 people before determining which financial planner is right for you.

The first thing you want to discover relates to their practice in general terms, such as their investment and client philosophy and previous work experience. Most financial planners have a typical type of client and financial situation they like to work with, so it is important for you to understand how their preferences relate to you. You want to be sure the services they offer to match your needs.

After you learn the basics, find out more about their qualifications. Anyone can call themselves a financial planner, so be sure and ask if they are recognized as a certified financial planner. A CFP designation means they have passed a rigorous test administered by the Certified Financial Planner Board of Standards. The CFP designation also means they must commit to continuing education on financial matters and ethics to maintain their designation. The CFP credential is a good sign that a prospective planner will give sound financial advice.

Ask for the code of ethics they follow. Certified Financial Planners are held to the CFP Board’s Code of Ethics, which requires them to act as a “fiduciary.” In short, this means the planner has pledged to act in a client’s best interests at all times. This point is critical and should be a deal breaker if a prospective planner is not a fiduciary.

If an investment professional is not a fiduciary anything they sell you merely has to be suitable for you, not necessarily ideal or in your best interest. The difference between ‘best interest’ and ‘suitable’ is an important fine line for you to consider.

Request a copy of the ADV form which is used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. These forms are available to the public on the SEC’s Investment Adviser Public Disclosure (IAPD) website at http://www.adviserinfo.sec.gov/.

There are two parts to the form. Part 1 requires information about the business, such as ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees.

Part 2 contains information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel.

After you have checked out their credentials, the next important fact to understand is how they get paid. Financial advisors deserve to get paid for managing your money and since you are paying the bill, you need to understand how it works.

There are several pay structures they may use. They may be paid based on commission for certain products. In this case, they could have an incentive for steering you to certain financial products in order to maximize their commission, which may not be in your best interest. They may not be the most unbiased source of advice if they profit from steering you into particular products.

The second method of payment is a flat rate. You might pay them a flat fee, such as $1,500, for a financial plan or their fees may be calculated on an hourly basis. If you’re young and don’t have a lot of assets, a planner who charges by the hour could be most appropriate as they are usually the best fit when your needs are fairly simple.

The third way financial planners make money is being paid a percentage of your portfolio. This fee may be calculated quarterly or annually. It is often 1-1.5% of all the assets—investment, retirement, college-savings and other accounts—they’re minding for you. This method means the more your money earns for you, the more it earns for them so they have an incentive to keep your portfolio growing.
When talking about fees, you also need to find out how you pay for their services. Are the fees deducted from your account? Are you expected to pay by check? How often?

As you learn more about their practice and qualifications, ask about the types of investments they would recommend to someone in your circumstances. This is a good way to match the list you made earlier (see part 1 of this blog) to what they actually recommend.
If they start bragging about beating market averages, run away – no one can do that on a regular basis. And anyone who’s trying to beat the market may be taking risks that you don’t want to take. Always be wary when you’re being pitched an investment by someone who stands to earn money from that investment. Where is that profit coming from? That’s why it is important to understand how financial professionals are compensated.

Ask how much contact they normally have with their clients. Some planners hold an initial planning meeting and then only meet with clients once a year. Others might have quarterly meetings.

Generally, financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses. Nor can they give investment advice unless registered with state or federal authorities, so be sure to clarify who your main contact will be. It doesn’t give you much confidence if you interview one person and decide you’d like to work with them only to have another person handle your accounts.

You may want to ask for a sample financial plan. Financial plans will vary based on the planner and the company. You may get overwhelmed with 40 pages of facts and figures or you may think that amount of detail is not enough. Be sure that what they provide will meet your needs.
As the meeting ends there’s one last question you want to ask yourself: Did they seem interested in you or did they do 90% of the talking? If they asked about you, your life and your goals that’s a good sign. If they bragged about their qualifications and expertise, and how much money they can make for you, they may be more interested in getting your business than in helping you reach your goals.

When in doubt, do more homework and make sure that the person you choose to work with is right for you from a lot of different perspectives and angles. Don’t let someone con you into working with them just because they promised to make you rich. Nobody can make that promise and keep it.

While choosing the right financial planner is important, ultimate peace of mind comes from the confidence that all money is God’s money, and that God alone is our true provider and protector.

What’s the One Thing in Your Box?

I am in the middle of an interesting books right now titled Half Time, authored by Bob Buford. It talks about that time in each of our lives when we step back and decide to keep going in the same direction we have been headed or we decide to make a change.

It’s that moment when we look into the mirror and stare into our own eyes and ask “Is this all there is?” It’s a conscious decision to move from seeking success to finding significance. It happens in different ways, and at different points in life for each of us, whether we are 35, 55 or 75; whether we are high powered executives, desk jockeys or mechanics.

One of the most interesting things I read in the book is a challenge Mr. Buford was presented with when he was making the decision to move from the business world into ministry. He was counseled to figure out what was in his box.

The premise is that you have an empty box in front of you. You need to fill the box with the ONE thing that is most important in your life. What motivates you more than anything else? What gives your life meaning? What is your driving force?

Putting ONE thing in the box means a lot of stuff gets left out of the box.

Our boxes are often filled with a lot of stuff we love, which is relatively unimportant in the larger scheme. Thinking about the box and the one thing is very counter-cultural. Our whole world surrounds us with the idea that the more we have, and the more we get, and the busier we are, the happier we’ll be. Our world would have us cram the box full of what the world considers important (money, possessions, power, significance).

For any Christian we would certainly hope that our motivating force is God and that is what we would put in our box.

But our box may be so full of everything else that God is squeezed in to a corner among all the minutia that fills our box, or he is left out of the box entirely.

But if you have God in you box as the only thing that really matters, do you really need anything else?

In John Chapter 17 we hear the prayer of Jesus. He is acting as an intercessor and praying to the Father regarding the disciples that he is leaving behind as well as the disciples that will follow him in the future. He is asking for unity between the Father and the disciples, just as Jesus and God the Father were in unity.

This chapter of John’s gospel echoes the phrase “Be in the world but not of the world.” Being in the world means we are to be salt, light and leaven to those who need to hear the message of salvation. Not being of the world means we have the proper perspective between what is all around us and what is really important. Being in the world means we can use material things to fulfill God’s mission for us but not let those material items take on more importance that they deserve. Being in the world but not of it, helps us realize that the things of this world have no long term significance.

Material goods are only valuable if they help us serve the purpose God has for us. That doesn’t mean we have to drop out of the world, but rather that we must put worldly things in their proper perspective. We are able to separate the material goods we have from our sense of self worth.

We must never become too much at home in this world, or we will become ineffective in serving the God who made us. Peter wrote, “I urge you as strangers and sojourners to keep away from worldly desires that wage war against the soul.” (1 Peter 2:11)

We are part of the Pilgrim Church on earth. Pilgrims are unattached. They are aware that that excessive accumulation of things can be a distraction. Material things are valuable to pilgrims, but only as they facilitate their mission. Things can entrench us in the present world, acting as chains around our legs that keep us from moving in response to God. When our eyes are too focused on the visible, they will be drawn away from the invisible.

For Lent, I encourage you to figure out what’s in your box. Are there so many items in your box that you are distracted? Does the box contain the one thing that facilitates your journey to God? Is the item in your box helping or distracting you from the destination of your pilgrim journey?

Find an empty box. At the end of each day write down a summary of your day. Where did you spend your time? Where did you spend your money? What did you think about the most? Where did you use your talents? What was your focus during the day?

Do that for one week. The following week, take one piece of paper out of the box each day and cross off those items which are not helping you on your pilgrimage. Do this for several weeks and you will slowly change your habits so that there is only one thing in your box. And that will be what is most important to you.

To save or Not to Save – That is the Question

piggy-bank-1595992_1280Today’s blog title is a take off on a scene from Shakespeare’s play Hamlet. In this scene, Prince Hamlet was contemplating the meaning of life.

Today’s blog contemplates the reason for saving.

The savings rate of the average American has hovered around 5% for the last several years. The personal saving rate is the net amount of money saved as a percentage of your disposable personal income (gross income minus deductions and, in our opinion, also minus giving.)

But according to Nerd Wallet, a savings rate of 5% is far too low. Most financial planners advise their clients to save between 10% to 15% of their disposable income for emergencies, retirement and other needs.

Saving takes a conscious effort, dedication and hard work. But having an emergency fund or fully funding your retirement is well worth the effort.

Proverbs 21:20 tells us, “Precious treasure remains in the house of the wise, but the fool consumes it.” Saving can be hard work, but spending every penny you make is simply foolish. Too many people think they will get to a point sometime in the future when saving will be possible. They live each day looking to an uncertain future without making a concerted effort to make saving a priority.

Every little bit you save will help build your nest egg, so start with whatever you can do, even if it is a very small amount. There can be a huge difference between saving small steady amounts on a regular basis versus waiting until you have one big lump sum to save.

One of the exercises we do in the Compass workshops is to make a deal with the attendees. We ask “Which would you prefer, a lump sum of $1,000 right now or a penny a day doubled every day for a month?” Most people look at $0.01 and compare it to $1,000 and take the thousand dollars. The interesting thing is that a penny a day doubled every day for 31 days will net over $10,000,000!

While the penny exercise may be unrealistic, it is a good way to illustrate how a small amount can grow exponentially.

Here’s another example of exponential growth. If a person saves $2.74 per day they will have $1,000 in a year. In 40 years, at 10% interest, the $2.74 per day will grow to over $500,000. If they wait just one year and only save for 39 years, the difference is over $50,000 less!

Compounding your savings makes a huge difference and is based on three variables: the amount you save, the interest rate you earn, and the length of time you save.

1. The amount you save depends on your income and spending. Learning God’s way of handling money will help you focus on being a conscious spender so you can find ways to save.

2. The interest rate you earn has a huge impact on how quickly your savings will grow. An interesting fact about savings is how long it takes your money to double. It’s called the rule of 72. Take the number 72 and divide it by the amount of interest you are earning, and the result is how long it will take your money to double. If you are earning 3%, your money will double every 24 years. If you are earning 6%, your money will double every 12 years.

3. Time is the third factor. Answer this: Who would accumulate more by age 65: Danielle who started saving $1,000 a year at age 21, saved for eight years, and then completely stopped; or Matt who saved $1,000 a year for 37 years starting at age 29? Both earned 10% interest.

Interestingly, at age 65, Danielle who saved a total of $8,000 has $427,736 while Matt who saved $37,000 has $363,043. Danielle saved $29,000 less and accumulated $64,693 more.

As you can see from this example, since Danielle started earlier, it made a huge difference in the total amount over a long period of time.

1 Timothy: 16-19 gives us good advice about our attitude toward gathering riches:

“Tell the rich in the present age not to be proud and not to rely on so uncertain a thing as wealth but rather on God, who richly provides us with all things for our enjoyment. Tell them to do good, to be rich in good works, to be generous, ready to share,
thus accumulating as treasure a good foundation for the future, so as to win the life that is true life.”

We need to guard against the human tendency to be proud of our wealth. When we accumulate assets we have a tendency to place our confidence in them. Someone once observed, “For every ninety-nine who can be poor and remain close to Christ, only one can become affluent and maintain a close relationship with Him.”

It is human nature to cling to the Lord when it’s obvious that we have no place else to turn. Once people reach financial freedom, however, they often take the Lord for granted because they no longer think they have as much need of him.

When you have financial resources, the tendency is to turn to your money to solve problems, instead of first praying and seeking the Lord. We tend to trust in what we can see with our eyes, rather than in the invisible living God. We need to remind ourselves that wealth is completely uncertain, and can be lost in a heartbeat. The Lord alone can be fully trusted.

Sirach states it well, “Use your wealth as the Most High has commanded; this will do you more good than keeping your money for yourself.” (Sirach 29:11, GNT) By saving and investing with a godly attitude, and balancing saving with generosity, we can live the fulfilling life God intends for us now.

Cosigning is Bad for Your Financial Health

writing-1149962_640Many people gladly cosign a loan thinking they are doing the right thing by helping someone out of a difficult situation. Cosigners are usually friends or relatives who sign loan papers for someone who’s not able to get a loan on their own merit.

It seems like a good idea at first. You may be trying to help your daughter or son go to college. You may be assisting someone who is trying to purchase a home. Or maybe your brother needs to replace his car. Whatever the reason, cosigning is always done with the best of intentions.

You may think your only responsibility is to sign the paperwork and as long as they pay the loan back everything should be great, right?

Maybe not!

When you cosign you are agreeing to pay the loan in full if the person you cosigned for does not pay. You are legally responsible for the debt. By co-signing, you have promised to pay off the entire loan if the borrower does not pay.

Cosigning is required by a lending institution when a person applies for a loan and their credit score and credit history indicate they are a poor loan risk. The lending institution requires a cosigner to guarantee the loan. In other words, the lending institution with millions or billions of dollars in assets will not risk making the loan because they do not think the borrower can pay back the loan.

When you cosign you become fully responsible to pay the loan if the original borrower cannot do so. If the borrower makes late payments or does not make payments per the loan agreement, it is reported on YOUR credit report. You are risking what ever assets you have to guarantee the loan for which you are cosigning.

Therefore, if the borrower pays 30 days late, the late payment appears on your credit report. Your credit report will get a negative hit and your credit score will be affected. One thing most people do not consider when they are co-signing is that if the borrower defaults, your credit could be affected for at least seven years.

Cosigning means you get all the problems that come with debt and none of the benefits since you do not have possession of whatever the person bought. Your daughter or son may have a college education and your friend may have a house and your brother may have a car but you have the debt.

Proverbs 17:18 says “Senseless is the man who gives his hand in pledge and who becomes surety for his neighbor.” The Bible is telling us that we have no sense if we cosign.

The statistical truth supports the Bible. Rather than the original borrower paying their own loan, you, the cosigner will most likely end up paying for the loan. If you agree to cosign someone else’s loan, statistically the odds are against you. Various sources indicate the borrower defaults on approximately 75% of cosigned loans so before cosigning a loan you should think twice. In the end, you will be grateful you took the time to think about it.

Bankrate.com defines the following top ten reasons to avoid cosigning:

  1. All the risk, very little reward
  2. The lender will sue you first if payments are not made
  3. You may need to sue the other responsible party if payments are not made and you get sued
  4. The person you help will be happy, but you have a lot to lose
  5. Cosigning and financial issues can destroy friendships or family relationships
  6. You are 100 percent liable for the loan and it could be a significant amount
  7. You could face tax consequences if the debt is settled
  8. If you need a loan, the cosigned debt on your credit report may have a negative on the approval of your loan
  9. You are fully responsible to make the loan payments if your co-signer defaults
  10. To ensure protection you need to monitor the payments your cosigner makes

Cosigning means you are paying on something you don’t own, the relationship with the other person has probably been ruined, your credit has been wrecked and your financial future is in jeopardy through something you could not control. Doesn’t really sound like a very good deal, does it?

If you’re considering co-signing, think about this verse from Sirach 29:17 “Going surety has ruined many who were prosperous and tossed them about like waves of the sea.”

Cosigning can be very dangerous to your financial health.

Important Questions to Ask Your Parents

My mom thinks she has been married three times and she also thinks she has five children. In reality the only siblings from her one (60+ year) marriage are me and my sister. Sometimes all you can do is laugh to keep from crying.  

She is 96 years old and does not have many years left. Because we never know when someone will be injured, ill or incapacitated, it is important to be prepared if anything happens to mom, dad, aunts, uncles or other loved ones.

If they were incapable of taking care of themselves, where would you find the information you need to care for their affairs – financial, medical, physical and spiritual?

It can be a tough process to go through, but it’s a lot easier to do now, rather then when there is an emergency and tensions and emotions are high.

Here is a list of suggested topics for you to discuss with your parents:

  1. Location of important documents

All the documentation and information in the world are useless if you can’t find it and use it. By starting with where the information is located you can uncover which information may be missing.

Make sure your parents have a safe place to store all sensitive and private information. If they have a safe, find out where it located, and where the key/combination is kept. Also ask if they have a safe deposit box. In order to access it, your name will have to be on file with the bank.

Important information you may need includes:

  • Health Care Surrogate
  • Power of Attorney
  • Catholic Living Will
  • Health and Life Insurance policies
  • Will or trust documents
  • Deeds
  • Vehicle titles
  • Savings bonds
  • Stock certificates
  • Pension information
  • Account statements for investment, retirement and bank accounts.
  1. Account registrations

Whether your parents’ accounts are registered in one name, in both names as joint owners, or have beneficiary designations, the way they are set up determines who controls the assets and how they will transfer.

Check beneficiary designations and make sure your parents’ beneficiary designations are up to date, including up to date names, addresses and phone numbers of all beneficiaries. Be sure they’ve designated both primary and contingent beneficiaries in case their primary beneficiary passes away before they do.

  1. Key Contacts

Be sure you have the names, addresses, phone numbers, websites, etc. for any professionals involved in your parents’ financial and medical lives. This list should include:

  • Financial planners
  • Investment advisors
  • Brokers
  • Lawyers
  • Insurance agents
  • Accountants
  • Doctors (general and specialty) as well as other medical professionals.

In addition to professional contacts, ask your parents about personal contacts such as friends, extended family, priest, etc. and how to reach those people.

You may know some of them, but you probably don’t know all of them.

  1. Power Of Attorney

Everyone should have a durable power of attorney appointing someone to make financial decisions for them, if they are no longer capable of doing it themselves.

The Durable Power of Attorney allows the designated agent to file the parent’s income tax returns, withdraw funds from the parent’s IRA or other retirement accounts for the parent’s care, deal with credit card companies or insurance companies, make deposits and write checks on the parent’s bank account, and more.

If access to a bank account is intended, it may be necessary to complete a separate Durable Power of Attorney at the bank, using the bank’s form and completing a signature card that puts your signature on file.

  1. Health Care Proxy

A health care power of attorney (proxy) is a written document which designates someone to make health care decisions on their behalf.

If your parents don’t have a health care proxy, the court system intervenes and will appoint a legal guardian, who may not follow your parents’ wishes.

The list of their doctors, and other health care professionals and health insurance policies we mentioned earlier will be needed. Be sure you have member ID numbers, long-term care policies, and any medications they may be taking.

  1. Catholic Living Will

A living will is a written document which sets forth a person’s wishes and gives instructions about health care when the person is unable to make those decisions.

As Catholics, health care decisions should be made in the light of our Faith. Morally correct decisions are based on our respect for the sanctity and dignity of life and acknowledge our dependence upon God. Our decisions must be rooted in the recognition that each of us is the steward of the gift of our life. This is a way to profess our Faith and help to ensure that the decisions about the care we receive when we cannot speak for ourselves are made in accord with our religious beliefs.

  1. Electronic Assets

Everyone has some sort of electronic assets.  Be sure you get details, including URLs; User IDs; personal identification numbers (PINs) or passwords; security questions and answers. Your parents should keep this information in a safe place you can access.

  1. Disposition of Personal Items

Do they have any special directions regarding how their assets are to be distributed (especially tangible personal property like jewelry, art, books, collectibles, furniture, etc.)?

Unless it’s unusually valuable these items are not covered by a will, so it is important for them to document anything they have promised to someone or anything they want to pass along to a specific individual.

  1. Final Arrangements

Though it’s probably the toughest question to ask, find out what your parents want for final arrangements. Review if they have a cemetery plot or prepaid mortuary arrangements. Do they have a preference regarding burial or cremation?  Are there special readings and songs they want at their funeral Mass?

This is one of the most important and possibly one of the most difficult discussions you will ever have with your parents and it is very easy to put it off. However, there can be a bright side to this process.  Sometimes in doing a review such as this, the old letters and pictures get pulled out as well as some ancient family history and stories. Use this time to rejoice in your family and celebrate the lives you’ve shared.

Don’t wait until it is too late. Those who accept this and face it will be far better prepared to deal with it when the time comes. Our death or illness may be many years away but it will come sooner or later. Isaiah 38:1 tells us, ”In those days, when Hezekiah was mortally ill, the prophet Isaiah, son of Amoz, came and said to him: “Thus says the Lord: Put your house in order, for you are about to die; you shall not recover.””
The Compass Catholic Set Your House In Order Bible is a great resource to use for these discussions.