Will 2020 be a year of financial progress for you?

SMI executive editor Mark Biller offered ideas on how to make the most of your money in the year ahead, as he spoke yesterday with hosts Rob West and Steve Moore on Moody Radio's MoneyWise Live. He also answered caller questions.

To listen, click the play button below — or, if you prefer, scroll down for a transcript. (And for more radio appearances by members of the SMI team, visit our Resources page.)

MoneyWise Live airs daily at 4:00 p.m. ET/3:00 CT.

To ask an investing question on a future program, call 1-800-525-7000.


Transcript

Steve Moore:  Financial adjustments and goals for the new year is something we all ought to think about because the economy and our lives are always changing practically emotionally and spiritually. Next, our host, Rob West welcomes investing expert Mark Biller to discuss those today on MoneyWise Live.

Well, Rob, our friend Mark Biller is the executive editor at sound mind investing where they've been working hard on an exhaustive list of 75 — yes, 75 — potential money moves for the new year. We won't get to all of them today, I'm afraid, but the full list is available at their website, which is sound mind investing.org

Rob West:  Well, that's exactly right — and we encourage listeners to check out that article, Steve, for some great ideas they might not have thought of. This is, of course, a great time of year to begin thinking about how you want to reposition your life in a host of areas spiritually, maybe physically, but financially should certainly be on that list as well.

And to help us do that today as our good friend Mark Biller, welcome back to the program, sir.

Mark Biller:  Hey guys. Good to be here.

Rob West:  Well, let's dive in. Mark, I know we're not going to get through — as Steve said — most of these, but we'll hit some high points. Where do you want to start today?

Mark Biller:  Well, I think before we dive into the list, it's probably a good idea to start with some ground rules, some first principles. And for the Christian, that means that managing money isn't just about the return that we get on our investments or making sure that you have enough to provide for your later years. As important as those objectives are. And it isn't even primarily about how much you can give to kingdom work, as important as that is. Instead, managing money well is really first and foremost about honoring God by becoming a faithful and wise steward of what he's entrusted to us. And that involves recognizing and internalizing three important truths. That's probably a good starting point for us.

Number one is that God is the owner of everything in the universe. So Deuteronomy 10:14 tells us, "To the LORD your God belongs to the heavens, the earth and everything in it."

Second, God's ownership of all things includes us. So Psalm 24:1 tells us, "The earth is the LORD's and everything in it, the world and all who live in it."

And then third, as stewards, we have management responsibilities rather than ownership rights. So Luke 16:11 warns us, "If you've not been trustworthy in handling worldly wealth, who will trust you with the true riches?" So we think that those three truths kind of frame all of our decisions about money.

Rob West:  Yeah, a solid foundation. And, of course, it's what we talk about often here on money-wise. It's really the basis for everything we do financially. We want to apply those big ideas to the very practical moves we need to make in the new year. You actually have 75 of them. And I know they're not meant for everyone. So how should we even think about this list?

Mark Biller:  That's a great point, Rob. All 75 really aren't for everyone because everyone's situation is different. What we do is we kind of present a checklist of possibilities. So what we encourage our readers and listeners today to do is go through the list and choose the 10 items that most specifically apply to your situation. And then even within those 10 you might want to rank those 1 through 10 and just focus on say, the top three at a time — because even just focusing in on a few of these key goals can really produce meaningful improvement in a person's financial situation.

Rob West:  All right, well, we might have time to get the first one out before we take a short break and then much more to come as well. So what would be the first item that you would highlight?

Mark Biller:  Well, let's start with giving, since we're starting with the spiritual emphasis first. You know, I think a good first item on someone's list might be to commit to a given goal, even if the person doesn't really feel that motivated to give. You know, Jesus tells us, "Where your treasure is, there your heart will be also." So starting to give — even at a small level — that can really be a tangible step of faith toward allowing God to change our heart to be more in tune with his.

Rob West:  Yeah, we have a great giving tool to help you plan your 2020 giving at our website, moneywiselive.org. Just click Resources.


Rob West:  I love where we started, Mark, with the committing to a giving goal and as I mentioned before the break, we have a new tool our team has created. It's a 2020 giving plan and it's available at moneywiselive.org. Just click Resources. You'll see it right there and it'll help you think about your passions. It'll even give you some questions to ask of a ministry before you make a gift, and then give you a handy one-page tool to plan your giving both locally and nationally and even internationally in the areas and categories that are on your heart. And so if we can help you with that, it's there for the taking, and we'd love for you to use that tool.

Mark, let's begin to move our way through this list and tell us what you have next.

Mark Biller:  Okay, well, next up we've got a set of three items that kind of go together that are critical to establishing a firm financial foundation. So first of the three is establishing an emergency savings reserve. And if you're just starting on this journey, that might mean gradually building up to say $1,000 in a bank savings account. If you're a little further along in your financial journey, it might mean expanding your emergency so that it covers three to six months of living expenses. But in either case, this emergency savings is what keeps unexpected financial events from becoming crises that push us into using debt.

And that's kind of a good segue to the second piece of this, this three-part section. And that is that along with building our emergency savings, we've got the priority of attacking any debt that we do already have. Bible warns us about the dangers of debt. We talk about it here on MoneyWise a lot. So making a firm commitment to pay down debt in the year ahead is definitely another good goal.

And then the third one is that in order to make progress on either of these first two goals, either establishing emergency savings or paying down debt, you know, the reality is that 99 out of 100 people are going to need to create a spending plan or a budget. And knowing where your money's going and directing it intentionally using a budget is a very financially mature thing to do regardless of your current financial situation.

Rob West:  Yeah, that's exactly right. A spending plan removes the guilt of overspending, gives you financial peace of mind, and as we've said, really that plan is the basis behind living within your means, which is the key to every financial success. All right — and knowing Sound Mind Investing as I do, I'm guessing you have some investing moves on your list and let's go there next.

Mark Biller:  Yeah, absolutely. The first one in that section would be something that surprisingly, at least to us, most people never actually get around to doing — and that is writing out a personal investment plan. Now when you do that, that plan should state your objectives, your strategy, your asset allocation, how much you're going to be investing monthly. You know, a well-thought-out, long-term plan is absolutely vital to help keep your emotions in check when market events make you uneasy. Now you won't be surprised to hear that we've got a lot of other specific investing items on the list, but since those tend to be kind of specific to each person's situation, uh, those might be best left for listeners to read in the article online.

Rob West:  Yeah, very good. 

Steve Moore:  Let's jump to our lines and go to Buffalo, New York — and Anne, what's your question today for Mark Biller and Rob West?

Caller:  Oh, yes. In regards to my 401(k), I'll be retiring in a couple more years that just wondering how would I take my 401(k) money to make charitable contributions, and plus take that money to make money off my 401(k). As I'm still living, I want to make more money off of it.

Rob West:  Anne, thanks for that question. So you have a 401(k), not an IRA. You're looking to try to make charitable donations from that 401(k), but you also want to keep it invested. Mark, what are your thoughts?

Mark Biller:  Anne, you have a couple of choices really. And some of it will depend on your employer and what their policies are. But one option that we like a lot for a lot of people is once you do retire, rolling your 401(k) into an IRA gives you a lot of flexibility. It continues to keep that 401(k) money invested and compounding on a tax-free basis. But instead of being limited to the options within the 401(k) plan, you can invest in pretty much anything depending on where you roll that to. So if you roll it to a Fidelity or Schwab [account], you have a very wide range of options for investing.

Another reason that we like that IRA option, you mentioned giving from the 401(k) money and when a person hits age, 70 and a half, they start having to take required distributions from their 401(k) or IRA money. Well, the government has in recent years has allowed people to give directly from their IRAs using what's called a QCD, a qualified charitable distribution. That's a great way to have that income bypass your tax return. And that's important because that can keep your taxes lower on other income sources you have like social security and any other income.

So I know that's a lot for this answer, but in short, rolling that money into an IRA at retirement and then down the road at some point you might look into maybe Googling "qualified charitable donations" or "QCDs" to see how that works. We have some articles about those on the soundmindinvesting.org site that can give you some information.

So that would be where I would start. How about you, Rob?

Rob West:  Yeah, I love that. And I think that's exactly right. The QCD is a great opportunity once it gets to the IRA. But Anne, I appreciate you thinking about being generous and, and we appreciate your call today.

Mark, you talked about writing out a personal investment plan that states your objectives, your strategy, your asset allocation. I can't underscore this enough. You know, we're 11 years into a bull market. We know a bear market always follows a bull. We just don't know when, but this is a great time to really think about is your age and your objective and your risk tolerance in line with your current investments. Could you weather a downmarket assuming you have the right time horizon or are you too aggressive?

Talk through some of the questions and thoughts we should be thinking about there as we reevaluate our allocation.

Mark Biller:  You know, it's ironic that the longer a bull market runs and we've had a very long one, the more aggressive and the more confident tend to get because they've been getting good returns for so long. They kind of forget the fear of the other side of the cycle. So as you say, it's a great time to be re-evaluating and saying, "Do I have a mix of investments that I could live with if the next few years did give us a repeat performance of the market going down 20, 30, even 40%?" And if not, it might be time to lighten up on stocks and increase bonds and other less risky investments. Putting that in writing while you're not under emotional pressure now can really help you when your emotions start kicking down the road.


Rob West:  Well, one [suggestion] that really caught my eye — before we get back to some phone calls here — is something that many, many people fail to do and it has to do with real-estate planning and wealth transfer. Tell us what that is.

Mark Biller:  Yeah, so it to be clear here as we talk about this one, Rob, this is for folks who already have a will established. If you don't have a will, it's vitally important, especially if you have children. But what we're talking about in this specific item, Rob, is that in addition to a will, we encourage people to prepare a "letter of instruction" for your family, for your other heirs. And this kind of goes hand in hand with the will. The will covers the necessary legal stuff, but the separate letter of instruction is what helps your heirs, your family, understand your wishes about more personal matters.

So in addition to that, it can also, of course, have some logistical help of where certain documents, our insurance policies, tax returns, other important stuff. And it really is just a great way for you to take one final step of easing the burden on those who are coming along behind you to try and pick up the financial pieces after you're gone, to make it as easy as possible for them to understand where you're coming from and where everything they're going to need is located.

Steve Moore:  Let's go back to where our lines. Fort Payne, Alabama. Mike, thank you for your patience, sir. What's on your mind?

Caller:  Hey, I appreciate you taking my call. I am fixing to be 57 years old as of Wednesday. I have $100K in my 401(k). My wife has about $125 [thousand] in hers. We have three small businesses. Two are debt-free, one is paying points so that I don't have to put anything in it. I have a little bit of mad money that I'm invested in right now, some stock. About 23% in one stock and 19% in one of them as of Friday. [I'm] looking to invest and take the profits — take half the profits and reinvest and take the other half the profits and just be a "secret Santa' to somebody. My son is a travel welder. He will have probably $100,000 in the bank by the time, I'd say, middle of the summer. He's 26. I like to help him with his investing too. I'm a little more risky than he is. He is as tight as a banjo string. He doesn't like the idea of losing it. I'm a little more flexible.

Rob West:  Michael, let us weigh in on that. Appreciate that background. Mark, your thoughts?

Mark Biller:  Yeah. Well, you know, I like the idea that Mike threw out there that he's got his 401(k) investing. He's got a little bit of "mad money" on the side. You know, overall we generally like to think of people and encourage people to think of their investing as one big portfolio. But if you're going to have some riskier investments, it's not a terrible idea to kind of have those mentally segmented so that you're following maybe little more traditional investing plan in the 401(k)s and so forth. So yeah, I think it's good that he's got that separated out.

It's also, you know, very important what he's talking about with his son and recognizing the risk tolerance of the individual. You don't want to go beyond that or it's going to be hard to stick with a plan. At the same time, at age 26 with a long investing horizon out ahead, generally, we would encourage people to maybe take on a little bit more risk than what Mike is describing. You know, we've got a broad range of different strategies that fit different folks from the more risky to the less risky. You can read more about those on our site. But those are my initial thoughts.

Rob West:  Very good. Appreciate that. Mark, we're about out of time. Let me ask Anna Marie's question for her. She's ready to retire. She's got someone telling her she should take her pension out and invest it. Another is saying leave it there. Give us a quick sense of how you encourage folks to process this lump sum versus lifetime payout option.

Mark Biller:  Yeah, that's an important one obviously — and a lot of times it does come down to the terms that are being offered by the company. That can be a little bit difficult to interpret on your own, so that can be a decision that even if you're not planning to work with an advisor on a permanent or long-term basis, that it can really be worth going in to see somebody to run the numbers to see what the implied rate of return is for the pension that's being offered to you — and to see if you think you can do better investing that in a different way with the lump sum.

Rob West:  Well said, Mark. And I think that's where some wise counsel comes in. To find a Certified Kingdom Advisor in your area, go to moneywiselive.org.

Mark, thanks so much for these 10 Most Important Financial Moves for 2020. Really want to encourage our listeners to go check out this article. It's very helpful. And thanks for being with us, my friend. Merry Christmas.

Mark Biller:  Merry Christmas to you as well.