Want to make significant financial progress in 2021? SMI's executive editor Mark Biller offered helpful ideas this week on Moody Radio's MoneyWise Live.
To listen, click the play button below. Scroll down for the transcript.
(And for more radio appearances by members of the SMI team, visit our Resources page.)
MoneyWise Live, with Rob West and Steve Moore, airs daily at 4:00 p.m. ET/3:00 CT.
Steve Moore: Many of us will be glad to put 2020 in the rearview mirror. Will 2021be any better? It won't take much for the new year to be an improvement, especially if you plan now to fine-tune your finances. Today, host Rob West sits down with investing expert, Mark Biller to find out how. And we'll take your calls and questions on anything (800) 525-7000. I'm Steve Moore on MoneyWise Live.
Well, Rob, our friend Mark Biller is the executive editor at sound mind investing. And he's here today with a hopeful message for the coming year. And do you know, Rob, how I knew that Mark was the guest today?
Rob West: How did you know?
Steve Moore: I could smell chestnuts roasting — whenever he gets nearby at this time of year. That's a telltale sign.
Rob West: (chuckle) Mark, welcome back to MoneyWise Live.
Mark Biller: Thanks, guys. Good to be back. I think
Rob West: Any chestnuts on the grill, maybe in the backyard?
Mark Biller: Apparently somewhere. We've got them cooking somewhere.
Rob West: Hey, I love your team. You guys are always doing great work there at Sound Mind Investing. And this time of year you've compiled an exhaustive list of important financial moves to make in 2021. And I almost don't know where to begin — there's so many of them. But I guess scripture is always a good place to look for a hopeful message. So why don't you begin there and encourage us out of God's word?
Mark Biller: Yeah, absolutely. Rob, I mean our starting point as followers of Christ is we need to look beyond the here-and-now and always maintain an eternal perspective. We need to always be "looking to Jesus, the author and finisher of our faith." That perspective was so vital in 2020, and, you know, moving forward into the new year, we can hold fast to Psalm 46, which tells us "God is our refuge and strength, an ever-present help in trouble."
You know, anytime we consider financial matters, it's always healthy to start with a reminder that God owns everything. He is still in control. Romans 11 reminds us that "For everything comes from him and exists by his power and his intended for his glory."
Rob West: Well, it's such a great reminder and I love the fact that even in Hebrews 13, when we're told that we should be content with what we have, that's connected to this idea of the promise of God — which is that he will "never leave us or forsake us." And as we camp out on these promises, Mark, it is hopeful. It's encouraging. And it's really the beginning point with every facet of our lives, but certainly this area of the financial as well.
All right, that brings us to this list of financial moves for 2021. And why don't you begin by just explaining what your team was up to? How does this list actually work?
Mark Biller: Yeah, sure. You know, we've all had the experience where we read something we might think to ourselves, that's a really good idea, but then immediately we get swept up in something else and we forget all about it. So the point of this top 10 list article was to give our sound mind investing readers — and now your MoneyWise Live listeners — a chance to easily go through a list. It has about 60 helpful financial moves that they can make in the year ahead.
Now, you know, everybody's at a different place in their financial journey. So some people are going to be more focused on steps to get started. Others may be further along and be more focused on the advanced stuff. But wherever a person is in their specific journey, they can easily just go through this list, mark the items that apply specifically to their situation, and then have right at their fingertips, a personalized Top 10 list of action steps that'll really, we think, help them make tangible financial progress in the year ahead.
And so we've put this article with the full list of all these action items, we've made it available for MoneyWise listeners at soundmindinvesting.org
Rob West: "10 Financial Moves for 2021" with Mark Biller, executive editor of the Sound Mind Investing newsletter. And I'd love to start today with that person who is maybe early in their financial journey. They realize they need to shore up their financial foundation. What are some "next steps" they might take?
Mark Biller: Yeah. You know, building on a solid foundation is so crucial. So the first big step would be to start by creating a spending plan, If you don't have one already. Or if you have one, bring your existing plan up to date. Now, a true spending plan doesn't just track what you've already spent. It needs to enable you to answer the question: "How much do I still have left in a particular spending category?"
So how do you do that? Well, one item in our list is to investigate the online platforms that can help you develop and implement a budget. And that would, of course, include the new MoneyWise app, which is based on the envelope system of budgeting that SMI has touted for many years.
Rob West: Well, that's a great next step. And really, I think a key piece of that financial puzzle, if you will — and using the MoneyWise app to do it, whether you are in the Apple app store or the Google play store, you can download it for free. We'd love for you to check it out.
Mark, the next category is "developing your investing plan." And actually, as the calls are rolling in Steve, it looks like this first caller is directly related to this particular category, so maybe we had to go there next.
Steve Moore: All right. Let's jump in Cleveland, Ohio. K, how can we help you, sir? You're on MoneyWise.
Caller: Hi, thank you for taking my call. I want to know for 2021 — the stock market is so high, the interest rates are so low, and in my case, I'm debt-free. I don't have any credit card debt or any, any other type of debt, and I have monthly savings and I also have a safety net of up to one year of my income saved up. And I'm holding everything in cash. Is the stock market's still the primary investment venue? Or is there anything else? And how do you navigate this? Especially because you're earning money with your hard work and you really don't want to lose by doing something risky. So can you give any suggestions?
Rob West: Wel, Mark can weigh in, but first K, let me just encourage you. You're making some really smart moves here, you know, in terms of the financial foundation we were talking about, you have a really solid one: a year's worth of emergency reserves, and no debt, which is great. The surplus that you have is any of that going into a company-sponsored retirement plan or any type of account like that, or is it all just being built up in the form of cash?
Caller: Yeah, I am already putting about 10% in my company-sponsored 401(k) and I also max out my IRA every year.
Rob West: Very good. And what do you have built up in cash beyond the one year's emergency fund? Do you already have some money that you've put aside?
Caller: It would be about $30,000, I should say, in cash.
Rob West: Right. And what do you have in the way of monthly surplus that you could add to that $30,000?
Caller: About $1,500.
Rob West: Okay, $1500 a month. Mark, what are your thoughts?
Mark Biller: Yeah, I think, you know, anytime you're evaluating this type of decision, K, I think the starting point beyond those questions that Rob just asked is examining what's your timeframe for this money? Is this money that you are planning to invest and then able to leave it invested for several years?
Caller: Yes. I don't see any big expenses coming up in the near future. Maybe 15, 20 years? Maybe 15 years. 10 years. Yeah. That timeframe. Yes.
Mark Biller: Well, that's great. I mean, I definitely would say to anybody, who's asking a similar question here that unless you have at least a five-year and preferably longer — more like seven to 10-year type of timeframe — you're right that a lot of investments right now do look expensive. And unless you have that kind of a longer-term timeframe that does present short-term risks to investing with the stock market, for example, at the levels it's at today.
Now, if you've got that kind of a longer timeframe, then you can implement some strategies like dollar-cost averaging, which is just starting to put money in on a regular basis — not putting everything you have in right up front, but maybe you decide that whatever of that portion that you want to invest, maybe you say I'm going to invest a 10th of that each month over the next 10 months, or some kind of interval like that, that reduces the risk of putting a whole bunch of money in the market and having it immediately drop on you because that is tough psychologically. And that way also, you know that even if you put some money to work and it does go down in the short term, you're going to be able to add money at those lower prices.
And that's where that "averaging" part of dollar-cost averaging comes in. You're buying more shares at these lower prices as you go through any dips that may come in the years and months ahead. So dollar-cost averaging, if you have a long-term timeframe, can really help reduce that short-term market risk that you're worried about K.
Rob West: The only other thing I would add, K, is, you're ripe to consider your financial finish lines. I mean, we should all be thinking about this, but certainly somebody in your situation, you've already got a year's emergency reserves. You've got no debt, 10% going to company-sponsored plan plus fully funding your IRA with $1,500 a month surplus beyond that. You need to be asking yourself, "What is my financial finish line?" — both in the form of lifestyle and accumulation. Lifestyle is your income, accumulation is your balance sheet. So how much is enough with regard to how much you're spending on your lifestyle, and what is that cap beyond which you'd say I'm going to give everything else away?
And I think the same is true in terms of how much you're accumulating in terms of your investment goals. How much is enough there? And at what point do you say, "I'm going to stop saving and accumulating because I have enough" — and that's between you and the Lord. And then, "I'm going to give that away." Because I think ultimately we begin to simplify our financial lives when we pay off our debt and we cap our lifestyle. We're not paying any more taxes, you know, and then it's just a matter of continuing to increase our giving at that point.
So I think these are great thoughts for you on the investing side for Mark. But also I just challenge you on the "finish line" conversation as well.
Steve Moore: Our topic today, of course, is investing — whenever Mark Biller joins us from Sound Mind Investing.
We're also addressing a list of financial moves for 2021, which is just one of a couple of different articles available to you as a MoneyWise listener when you visit them online, which is soundmindinvesting.org.
Rob West: Mark, you were just sharing with K, our caller in the previous segment, some of the keys to investing God's way — and that is creating a written investment plan, making sure you have the appropriate asset allocation, making sure you're properly diversified, not taking on too much risk, and even thinking about the types of accounts you're opening as well.
You know, one thing we didn't talk about, but I know you mentioned in the article, is just being careful what you're consuming in the way of financial media and input that perhaps might move you up on that emotional level, if you will. Talk to us about how we need to be thinking about the media were concerned.
Mark Biller: Yeah, absolutely. So, you know, in addition to the nuts-and-bolts of creating an investing plan, we talk quite a bit about that at Sound Mind Investing — and really on these MoneyWise programs as well, we touch on that quite frequently — you know, we've got a number of steps in our lists that deal with the mental side. So you've got the practical investing plan side, but then you've got this whole other mental side of being an investor. And, you know, an example there would be training yourself to take market turbulence in stride. We certainly saw in 2020 how difficult that is and how hard it is to stay calm and stick with your plan when the stock market is so volatile like it was earlier in the year.
But to the specific point of what you're consuming, you know, none of us are immune to the inputs that are coming at us. And so if we're constantly focusing on things like — and not to pick on any particular spot — but, you know, the CNBC type content, you have to understand that you are you're the product with that financial media content. They are trying to keep you riveted to that screen so that they can fill the 24 hours a day, seven days a week of programming that they need to put out there, and so they can sell their ads and all that.
So just understand the dynamic and don't be naive to it thinking that they're there to help you as an investor. That's really not the game. The game is to keep you there. And what keeps you in that seat is either really exciting greed-oriented content on one hand, or really scary, fearful type content on the other. So they're going to push those fear and greed buttons to try to keep you coming and keep you riveted to that content.
So you just have to be aware of that, because that's kind of the enemy of that "inside out" process that we're really trying to encourage you toward as an investor. You know, you don't want to be an "outside-in" investor where you're taking all that input and then reacting. You want to be an inside-out investor where you need to go and you have an investing plan based on what your needs are. And then you're executing that plan and an inside out fashion
Rob West: Mark one of the sections that you address is this whole area of retirement — a lot of specifics, like revisiting your Medicare choices and looking at long-term care and potentially the newer short-term care insurance options. A lot of that is covered. But what else do we need to consider as we look at retirement?
Mark Biller: Yeah. So there are, there are a lot of items on the list in this general area. Another big broader area is the idea of setting your house in order, which means getting your affairs set up so that your spouse or other loved ones can handle financial decisions, investment decisions, that sort of thing if something were to happen to you.
One of the biggest items on the list for our SMI readers related to retirement planning is considering whether to use the financial planning software tool that SMI members have access to. We have a lot of members that fall into the category where they don't necessarily feel like they need to have an advisor managing their investments, but they recognize they benefit from going through the type of retirement-oriented financial planning process that an advisor would often take someone through. And so the software tool is kind of a nice option for those folks who aren't working with an advisor and it can be really helpful. And a lot of SMI members use that. So the Top 10 list article has an item in it for this tool which contains a link to more information about that if that sounds appealing to anybody who's listening on MoneyWise today.
Rob West: I love it. Mark. Just one quick thing on what you mentioned here about "short-term-care insurance" options. I know that's covered in the article. Would you just give us 30 seconds on that?
Mark Biller: Yeah. Long-term care policies have been prevalent for quite a long time, but a lot of folks don't qualify because either a medical condition — that type of thing can exclude a lot of folks from the more traditional long-term care options. So more recently, these short-term-care insurance options have come along and they get around a lot of those obstacles. So people that may have been rejected from a long-term care policy find that they can get coverage with these newer plans and that they are more affordable as well. So we had an article on that recently. People can find that on our site.
Steve Moore: Okay. Let's move along phone-wise. Marguerite, we sure do appreciate you holding on. And what's your question?
Caller: Good afternoon. Thank you for taking my call. I was listening to a financial advisor a couple of nights ago who's issuing a warning about how there's been such massive debt in this country. Just $1.6 trillion student debt alone, on top of what the government all has debt-wise. And he said there's a change coming and that it will not be back to how it was, and sort of suggesting to people to switch investments and have at least part of your investment go to gold and bitcoin because they would be more secure than the traditional investment places. I was wondering what you thought about that.
Rob West: Mark, your thoughts?
Mark Biller: Yeah, well Marguerite, we actually did a program several months ago, I guess it was earlier this summer, where we covered some similar territory and talked about investing in gold. We had written a fairly in-depth cover article on investing in gold, back in I believe it was June, in our newsletter. That article and other articles on gold are on our website for folks to check out. But I guess the brief summary there is, there are a lot of concerns about the government's policy responses this past year — and really this is something that's been going on for many years. A lot of people are concerned that with the type of policies we're pursuing that we are debasing the currency. And it's not just us. Governments around the globe are kind of pursuing these paths. And so if that does end up being the type of problem that a lot of people think it might be having some investments in real assets like gold — and we'll talk about bitcoin in just a second — will be really helpful because they are a traditional store of value.
So our cover article on gold earlier this summer in the SMI newsletter discussed that whole issue as well as how do you go about investing in gold? What are the best ways to do it? And we laid out some of the options there.
Now I would draw a little bit of a distinction between gold and bitcoin. Gold has been around for 5,000 years as a form of money. Bitcoin has been around for 12 years. We don't really have time to go into what bitcoin is — and I don't want to sound too negative because I'm one of these people who say it's ridiculous, it's going to fail all of these types of things. But I would just caution folks that bitcoin really falls into the category of being a "speculation." And I say that because the ups and downs of bitcoin have been so extreme through its history that you really need to be able to weather a lot of volatility, much more than in the precious metals or even, frankly, the stock market.
So that is definitely — I wouldn't say everyone should stay away. But I would say that you should only be looking at bitcoin through the lens of this is more speculative money: "If I were to lose all of it, I would be okay with that because I'm taking an asymmetric risk with a lot of upside but also recognizing this could actually lose everything that I put into it." And that's not where most people are coming from when they look to invest for the future.
So I hope that helps, Marguerite. It's not that it's completely forbidden. It's appropriate for some folks who can take the risk. But you just really need to understand what you're getting into there.
Rob West: Well, Mark, we really appreciate you stopping by today. We've covered a lot of ground, but there's a lot we didn't get to as well. So I know folks can check out your article.
Just one quick word on bonds, especially in this low-interest-rate environment. What about for those folks who are in that retirement season? Can you give us just 30 seconds or so on what they should be looking at in terms of fixed-income options?
Mark Biller: Yeah, unfortunately, it's a tough area right now. Rates are very low. We've seen, in the past month or two, we've seen rates starting to rise, which is bad for bond prices generally. So fixed-income is a tough area right now.
We still need bonds in most portfolios to give us some stability there, but it is hard to see them earning the types of returns they have in the past. So it's worth entertaining some other options as alternatives — dividend-paying stocks, those types of things — so we can lessen our reliance on bonds.
Rob West: Very good. Well, Mark has always incredibly practical and biblical Merry Christmas to you and the team. My friend, thanks for stopping by.
Mark Biller: Thanks, guys. Merry Christmas.
Steve Moore: God bless and thanks to you. We'll be right back.