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Capitol Purchases, Investing and Insurance

Capitol Purchases, Investing and Insurance. Baby Step review:. Tithe $1000 in the bank emergency fund Pay off all debt but the house 3-6 months in the bank 15% into Roth and pre tax retirement College Funding Pay off home early Build wealth.

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Capitol Purchases, Investing and Insurance

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  1. Capitol Purchases, Investing and Insurance

  2. Baby Step review: • Tithe • $1000 in the bank emergency fund • Pay off all debt but the house • 3-6 months in the bank • 15% into Roth and pre tax retirement • College Funding • Pay off home early • Build wealth

  3. Introduction: Realize How Things Demand Our Attention and Time:

  4. I. We need to Know the real purpose of Stuff: A. Human ingenuity and invention originally created material stuff to make our lives more simple & enjoyable and participation in building that stuff led to increasing affluence in society. B. The world’s way: 1. See 2. Desire 3. Acquire, even at any cost

  5. C. God’s way: 1John 2:15 Love not the world, neither the things that are in the world. If any man love the world, the love of the Father is not in him. 16 For all that is in the world, the lust of the flesh, and the lust of the eyes, and the pride of life, is not of the Father, but is of the world. 2. Luke 12: 31 But rather seek ye the kingdom of God; and all these things shall be added unto you.

  6. 3. Now affluence and culture has driven demand past practicality and the stuff being bought is actually demanding more and more of our time, rather than less and less of it:

  7. 2Tim 2:4 No man that warreth entangleth himself with the affairs of this life; that he may please him who hath chosen him to be a soldier. • (entangle) = things that take us away from our mission – the Great Commission • The purpose of our resources is to free us to do more for Christ, not less.

  8. 1. Phil 3:8 Yea doubtless, and I count all things but loss for the excellency of the knowledge of Christ Jesus my Lord: for whom I have suffered the loss of all things, and do count them but dung, that I may win Christ

  9. III. How to make big purchasingdecisions biblically. • A. Determine what constitutes a large purchase? It’s between you and the Holy Spirit. • Good Rule: Anything that costs more than 1 whole day’s gross income for your family. • 2. Can I really afford this and completely avoid being in bondage?

  10. D. Seek and Search the facts: • List all of the needs and wants of the new item. • Search the internet and become an expert on the item that you want to buy • Read the online reviews of the item. – Realize – fish and bones • Consider value – not just price – what is the best product for the money:

  11. At the end of the first day go home with NothingEXCEPT the information gathered.

  12. V. The wise consumer • A. Everything comes down to one simple question: Are you a wise consumer? • 1. For a Christian to be able to look God in the eyes and say that they spent God’s money wisely, they must become informed before they purchase a major item.

  13. VI. Home Purchases A. Everyone is against you getting a low price- both realtors are on a percentage commission.

  14. B. Financing Considerations • 1. Most a Christian should spend is 30% of spendable income on housing!! • 2. 28% bracket pay $1000 in interest get only $280 back on taxes - $720 wasted = avoid interest payments - pay off fast.

  15. 3. 15 year loan costs $77,760 less than 30 year mortgage on $100,000 loan. 15 year Principal: $100K Interest: $61,640 30 year Principal: $100K Interest: $139,400

  16. VII. Car purchases • A. Almost every new car sale in America is based solely on wants not needs • B. Can buy any quality you want to pay for: • Luke 14:28 For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?

  17. C. Four types of car characteristics – all cars a compromise between these 4 characteristics. Comfort - Rolling living room as transportation Economy – Low cost of transportation Utility – Perform functions other than transportation Performance – FAST & FUN Transportation

  18. G. Watch out for Dissatisfaction and huge profit from Pretenders:

  19. VII. Major appliance purchases Buy quality – avoid extra warrantees (do your research well so you won’t need them) Refurbished at great prices do exist. Scratch and Dent do exist. Failures normally occur in first few hundred hours (burn in) or when completely worn out. Play one store against another (salesmen want the sale personally so actually on your side if competing with another store) Check Craig’s list – God blesses the wise shopper!

  20. IX. Investing We have also seen that God is not against prosperity: Pro 8:20 I lead in the way of righteousness, in the midst of the paths of judgment: That I may cause those that love me to inherit substance; and I will fill their treasures.

  21. B. The first requirement for investing is a right heart: 1. God has given us a little here, to test our faithfulness so that if faithful he can give us much greater riches to us in His kingdom.

  22. C. Legitimate reasons for a Christian to invest: 1. To further God’s work: 2. Current Family Responsibility: 3. Future Family Responsibility

  23. D. Wrong reasons to invest - same as wrong reasons to covet money: Greed – desire to have more and more – wrong focus Envy – keep up with the Jones’s next door Pride – desire to be elevated above others Ignorance – following other mis-guided people

  24. E. Investment wisdom 1. #1 rule find a teacher not a salesperson to help guide you. 2. KISS – Never invest in anything that you do not completely understand 3. Never invest solely for tax savings – always a bad return 4. Never ever invest borrowed Money

  25. 5. Diversify – big word – means spread out your investments 6. Should probably have 5-10 investments once we get going Ec 11:2 Give a portion to seven, and also to eight; for thou knowest not what evil shall be upon the earth. Pr 11:14 Where no counsel is, the people fall: but in the multitude of counselors there is safety.

  26. 7. Investment Choices We Have: • Cookie Jar = 0 risk and 0 return (actually loose 2% per year to inflation) • Savings account /CD’S = 0 risk and 1.7% return (actually loose per year to inflation) • Mutual fund = some risk, 12% per year return average

  27. Individual Stocks- Higher risk, most people make very little • Vegas – High risk, Most people loose • Day traders - Ultra High risk, very few who do not loose

  28. Women – much too conservative • Men – often take too many risks

  29. F. When and where to Invest If plan to use money in less than 5 years = Saving (Wedding, TV, Car, House, Vacation….) If more than 5 years = Investing (Retirement, Kids College, dream home…..)

  30. If investing must get over 3% return to break even. • Must get 2% to keep up with inflation + 1/3rd more to pay the taxes on any growth. • Most savings and money market accounts yield too low of a return to ever make true progress. • Single Stocks = too much risk for most people. • Mutual funds = ownership of a tiny part in many companies – spreads risk

  31. Investment % example

  32. H. Retirement Investing – this is a MUST do for everyone! • IRA – invest now, pay no tax now but pay taxes on withdrawal (assumes lower tax rate once retired). Almost any investment eligible • Roth IRA – Pay tax first, invest, all growth tax free! Almost any investment eligible.

  33. 401K – employer offered retirement savings plan. Investment options normally selected by employer. Choose same as above for mutual funds. There are maximum limits on income. • 401K’s are a GREAT deal if Employer matches! = match – instant free money • Roth 401K – same as 401K but pay tax first, then grow tax free. Fewer limits on earnings (max amount – any income). Employers can match. High Limit – $19K - $25K / earner!!

  34. G. College Investing for kids • Traditional mutual funds – just like above • 401K – now withdrawal allowed for education – but cuts retirement multiplication • 529 college savings account – State tax free – not federal tax free

  35. X. Investment Stupidity to Avoid • A. Insurance - Never invest with an insurance company, never buy insurance from financial institutions. • B. Commodities and Futures = get rich quick. Either win or lose all. Better chance playing black jack. • C. Day Traders – 70%-90% losing money = gambling addicts.

  36. XI. The Purpose of Insurance 1. #1 assumption = all wealth belongs to God – it is all under his control – so we are to treat others money (including the insurance co) the same as our own. 2. All through the Bible, God teaches faith and provision & not protection.

  37. C. But God also instructs us to foresee evil and avoid it: Pro 27:12 prudent man foreseeth the evil, and hideth himself; but the simple pass on, and are punished. D. We are also to bear all of our own burdens: Gal 6:4-5 But let every man prove his own work, and then shall he have rejoicing in himself alone, and not in another.5 For every man shall bear his own burden.

  38. E. The purpose of any insurance is to transfer risk. F. The test of do we need insurance – could you alone provide for the unexpected loss yourself?

  39. D. Life Insurance Wrong name – it is really DEATH insurance What is the purpose of insurance = to transfer risk? It is not for investment!

  40. First type: TermInsurance. a. Term gets it’s name because it is purchased for a specific length or Term of time. b. 10 years, 20 years 30 years level cost insurance. c. You pay a certain amount / month and if die family gets face amount

  41. Second Type: Cash Valueinsurance. a. It is an investment inside and insurance policy b. 75% of all insurance sold is this type c. It is what the insurance industry pushes – because HUGE profit.

  42. Cash Value – best case for a 30 year old. $100 per month to spend Can get $125K of Cash Value Insurance @ 40 years old – will have $20,000 in cash value (invested + 7% return) @ 60 years old – will have ~ $41,000 (invested + 7% return) If die all your heirs get is the $125K – Insurance Co keeps your cash! Your family doesn’t get the $41K back! Your investment is lost.

  43. 20 Year Level Term Insurance for same 30 year old. $100 per month to spend $125K insurance costs only $7 per month $93.00 per month available to put into a Roth IRA At 60 years old = $327,000 + additional $125K insurance if you die

  44. c. But – this is not enough insurance! $125K at 10% per year = $12,500 per year – wife and kids can’t live on that! You really need 10 times your income If make $40,000 – need $400,000 insurance so when wife withdraws 10% per year she gets your whole $40,000.

  45. e. Your Best Plan: Never cancel any insurance until you are absolutely certain that the new insurance is in force – OK to overlap 1-2 months to be sure. If you have Cash value insurance, apply for and buy Term Insurance instead. Once Term is in force, cancel Cash Value, pull out and apply cash to debt snowball….or invest it if debt free!

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