As this year draws to a close, it’s a natural time for reflection. Without meaning to sound like a politician, consider this: Are you better off now than you were at the start of the year? Financially speaking, what has gone well this year, and what hasn’t?
Ask that question with each major financial area in mind: earning, planning, giving, saving, getting (or staying) out of debt, investing, and spending. Where would you like to see improvements in 2017? What follows is a series of ideas designed to help you plan for a great year ahead.

Call it the year of surprises, and of market resilience in the face of those surprises.

The year began in volatile fashion, with the Dow Jones Industrial Average falling more than -10% in the first six weeks. Talk of an impending recession raised investor fears. That six-week free-fall was followed by a seven-week rebound, leaving the market mostly flat at the end of the first quarter, but investors bracing for a rocky year.

Next came the June decision among British voters to leave the European Union. The “Brexit” vote caught many people off guard. Prior to the vote, most surveys showed voters believed “Remain” would win. The betting markets put the odds of a Remain victory at 88%, and the final polls pointed in the same direction.

The unexpected outcome generated a swift response by markets across the globe. In the U.S., the Dow tumbled nearly 5% over the next two days. But then it bounced back, fully recovering eight trading days later, and continuing higher through the third quarter.

Of course, the biggest bombshell of 2016, at least to most pollsters and pundits, was Donald Trump’s victory in the U.S. presidential election. Most political forecasters said the signs were pointing toward a Clinton win.

As late as 10:41 a.m. on election day, Nate Silver, the statistician who correctly called all 50 states during President Barack Obama’s second election, posted his closing prediction under this headline: “Final Election Update: There’s a Wide Range of Outcomes, and Most of Them Come Up Clinton.” In his article, he gave Clinton a 72% chance of victory.

Most forecasters clung to their claims of a Clinton victory until about 10:30 eastern time on election night. That’s when Trump was “called” the winner of a successive number of swing states, including Ohio, Florida and North Carolina. Faster than the tachometer on a racecar switching gears, the needle on an online New York Times “Chances of Winning Presidency” meter flipped from Clinton to Trump.

In Silver’s last post of election night, at 2:52 on Wednesday morning, he called the outcome “the most shocking political development of my lifetime.”

A few weeks prior to election day, Charles Schwab Chief Investment Strategist Liz Ann Sonders said,

“The most unsettling [result] would likely be a ‘Brexit’-type situation, where polls suggest a clear Clinton win, but we wake up and find Trump has won.”

Of course, that’s exactly what happened. As Trump’s chances of victory moved through election night from unlikely to possible to inevitable, Dow futures fell hard, losing nearly 800 points. However, by the time the day was done, the Dow was up nearly 1.5%.

Market analysts say the market doesn’t like surprises, which explained the sharp immediate market reactions to the Brexit referendum and Trump election. But the market is just the market. It doesn’t feel surprised or elated or anything else. It’s those who ply their trade in the market narration spin room who think and feel and give their opinions. Perhaps the greatest lesson for investors in each of these “surprises” is a reminder to resist the urge to believe and act on market predictions.

Of course, God was not surprised by anything that happened in 2016, nor will He be surprised by anything that happens next. As Max Lucado has written:

The queen of England is called Her Majesty, yet she must eat and bathe and rest. The True Majesty is never hungry. He never sleeps. He has never needed assistance or attention. “He sustains everything by the mighty power of his command” (Hebrews 1:3 NLT). He has authority over the world over your world! And he has never, ever uttered the phrase, “How did that happen?”

With 2016 now mostly behind us, it’s time to look forward. What follows is our annual checklist of actionable ideas, based on SMI articles published over the past year. Each idea is accompanied by a footnote (or a link if you’re reading online) that indicates where to find more information e.g., “Oct:p146” means our October 2016 issue, page 146.

When you see an idea that seems to be particularly applicable to your situation, put a checkmark next to it. Then, go back through all your checked items, select your Top 10, rank them based on importance, and reread the associated articles. Some may lead you to set new goals for the year, while others may be important in helping you achieve existing goals.

If you’re married, you and your spouse may find it helpful to go through this process separately at first. Then, compare notes and come to agreement about which financial objectives are most important and how you will go about pursuing them.

SMI’s “Top 10” approach to planning for the year is intended to be a spiritual exercise as well as a practical one. After all, God’s Word calls us to be trustworthy in financial matters both large and small (Luke 16:10-12). Use this planning time prayerfully. Thank the Lord for His faithful provision and the lessons He has taught you throughout this year. Express your trust in Him for the future.

In 2017, we pray that you will strengthen your financial “house” by building it ever stronger on the solid foundation of God’s Word. That way, you’ll be prepared no matter what surprises come in the year ahead. The inevitable rains of life may fall, the streams may rise, and the winds may blow and beat against your house, but it will not fall because it has its foundation on the rock (cf. Matthew 7:24-26). SMI exists to help you build your financial life on the solid rock of God’s Word.

Put first things first

If you’re not careful, managing money can become all about the practical how much to put into savings, how much to spend on the next vacation, and whether to replace an aging car.

In fact, managing money is a highly spiritual activity. That truth can be seen in the sheer volume of Bible verses on the topic. Those who have counted them say the Bible contains over 2,000 verses about money and material things more than those pertaining to any other topic with the exception of the kingdom of heaven. Jesus even went so far as to name money as God’s chief rival for the human heart (Matthew 6:24).

How do you make sure money doesn’t begin to occupy too large a place in your heart or mind? Spend time with God through prayer and reading His Word. Follow God’s encouragement of Joshua: “Keep this Book of the Law always on your lips; meditate on it day and night, so that you may be careful to do everything written in it. Then you will be prosperous and successful” (Joshua 1:8).

Here are some more specific recommendations.

Stay committed to the single most important principle of wise money management. There are many financial “rules” bandied about formulas for how much to invest, what percentage of income to devote to housing costs, and more. For Christ-followers, there is one overarching principle that vastly overshadows all the rest. It is so basic, so fundamental, that it risks being overlooked. And yet, it is so essential that it alone marks the difference between financial plans that prosper or perish. What is this all-powerful principle? It is putting God’s teaching first in all financial matters, seeking to understand and then faithfully follow biblical instruction on managing money.

Make the daily choice to stand on solid ground. The voices of our culture are pervasive and persistent. If you’re not intentional, they can become persuasive in guiding your choices financial and otherwise. Making the ongoing choice to stand on the solid rock of God’s Truth, not the sinking sand of our culture, will make all the difference.

Cultivate a stewardship theology. Even those who earnestly seek a biblical perspective on financial matters can find themselves succumbing to errant teaching. Somewhere between the extremes of poverty and prosperity theology, the balance of stewardship theology can be found.

Build confidence in God’s promises. Your life will reflect the decisions you make. How closely you align your decisions with Jesus’ claims and promises depends on how much confidence you have in His teaching.

Look for God’s open doors, and dare to walk through. At times, God opens a door and invites you to walk through into the unknown. It feels risky. It would be far more comfortable to stay where you are. Whether you venture forth will determine the kind of life you live and the kind of person you become. What door do you sense God inviting you to walk through?

Enjoy God’s favor. God rejoices in doing you good. Did you know that? Is that your daily experience? Perhaps you need some encouraging reminders found in Scripture.

Level 1 Strengthening your foundation

Grow in generosity. The Apostle Paul encouraged people to “excel in this grace of giving” (2 Corinthians 8:7). For older people who’ve been traveling the journey of generosity for a long time, there’s a uniquely advantageous way to do so via your IRA.

Search for yield in all the right places. With historically low interest rates, many savers have been tempted to reach for yield in unwise ways. One prudent method is to build a CD ladder.

Find the motivation to get out of debt. Getting out of debt is a great goal, but depending on how much debt you have, the journey can quickly get discouraging. That’s why, before beginning, it’s helpful to be clear about your reasons for getting debt-free.

Fix your debts. Once you’re clear about why you’re pursuing a debt-free life, it’s time to put a plan together. An overlooked first step is surprisingly simple and effective. It’s to fix your payments at least on the “amount due” this month, rather than your credit card company’s preferred declining “minimum due” amount.

Consider loan consolidation. Nearly three-quarters of recent college graduates have more than a degree to show for their studies. They have debt, and a lot of it. So much, in fact, that more than 40% of federal student loan holders are struggling to repay. If that’s you, loan consolidation or refinancing may be helpful.

Be cautious about tapping home equity. It’s relatively easy to borrow against the equity in your home, whether through a home equity loan, a home equity line of credit, or a cash-out refinance. But just because it’s an easy (and in most cases, tax-advantaged) way to borrow, doesn’t mean it’s wise.

Invest in your marriage. Money can be a volatile topic for married couples, but it doesn’t have to be. The approach you take to talking about money can be as important as the financial decisions you ultimately make.

Invest in your kids. If you have children, it’s largely up to you to teach them about money since personal finance is often not taught in school. To raise the next generation of wise money managers, embrace three parenting roles: the gatekeeper, the teacher, and the role model. In addition to specific instruction, your kids will benefit by hearing stories of their ancestors who persevered in the face of obstacles. If your kids are college-bound, one way to keep their education costs down is to help them figure out what they want to study. After all, one reason college costs so much is that many kids don’t know what they want to do with their lives and end up changing majors, which extends their schooling. If you do a good job teaching them about money, they shouldn’t need financial help as adults. However, if they do, a counter-intuitive response may make all the difference in their financial life and yours.

Decide whether home ownership is right for you. In our culture, our home is our castle. Historically, owning a home has been central to “the American dream.” Still, owning isn’t right for everyone. Run some numbers to see if owning or renting makes the most sense for you.

Maintain enough but not too much insurance. No one likes to spend money on insurance, but everyone’s glad to have it when they need it. One form of insurance you can probably skip is car rental insurance. Find out before starting your vacation by doing a little research on what protections you already have. Disability insurance is a bit different. You probably do need it, but and this is an important caveat you may already have some degree of coverage.

Level 2 Developing your investing plan

Put a plan in place. The Bible affirms planning (Proverbs 21:5). But that doesn’t mean your investment plan needs to be complicated. It could even be simple enough to fit on one page as long as it adheres to six core principles, which include taking a long-term, patient approach.

Control what you can control. Planning is one important step toward successful investing, but then you’ll need to implement your plan. Because many factors can affect your results, investing can seem overly risky to the uninitiated. However, of the eight factors SMI has identified that impact your investing results, seven are under your direct control.

Choose your strategy. The SMI strategy that’s easiest to implement is the appropriately named Just-the-Basics strategy. While Vanguard is our go-to source of funds for this strategy, it can be implemented with Fidelity or Schwab funds as well. While JtB offers simplicity, Sector Rotation offers aggressiveness. By choosing funds that concentrate on specific sectors, you get the potential for increased returns, but also the reality of increased volatility, especially with a particular type of sector funds: leveraged funds. That’s why we recommend using Sector Rotation with no more than 20% of the stock portion of your portfolio.

Invest consistently. You’ll also need to decide how much and how often to invest. One of the time-honored effective strategies for handling those decisions is a process known as dollar-cost-averaging (DCA).

Rebalance your portfolio. Assuming you began the year with your portfolio allocated to the types of investments appropriate for your time frame and risk tolerance, chances are good that those allocations have now changed because of the different results generated by different investments. The beginning of a new year is a perfect time to rebalance those allocations back to your intended levels.

Be intentional about coordinating your use of tax-advantaged and taxable investment accounts. If you have both types of investment accounts, how you use each one can have a significant impact on your taxes. Mutual funds offer unique challenges for those using them in taxable accounts. Be sure you know how taxes are treated by mutual funds so you don’t pay more tax than necessary.

Be a thoughtful consumer of market news. We often counsel people to simply tune out much of the market news, especially if you find yourself emotionally hooked by dramatic headlines. But if you’re going to tune in to the news, do so in an informed way. For example, understand one of the most important factors that impact market movements: corporate earnings. Another point to keep in mind as you hear reports about the financial markets is that there are many ways to define “the market” and an index to go with each definition.

Think in terms of cycles. The economy and the stock market tend to move between periods of strength and weakness, years of plenty and years of famine. It’s helpful to keep the cyclical nature of the economy and the market in mind, refusing to become overly complacent in good times or overly pessimistic in bad times.

Level 3 Broadening your portfolio

Understand SMI’s strategies. In a world of increasing automation, where decisions about how much to invest and how are being delegated to various systems, there’s a danger of automating your thinking. SMI is designed to serve knowledgeable, in-the-game investors. As such, those following our Fund Upgrading strategy will want to note that we simplified the asset-allocation process used in the strategy in 2016. No matter which strategy you use, remember that we can’t promise to outperform the market every year. However, long-term followers of SMI strategies should be very satisfied with their results.

Take both sides in the passive/active debate. To read the rhetoric, you’d think you have to choose to be either an investor in passive (index) funds or actively managed funds. With SMI, you don’t have to choose since we use both types.

Make plans to deal with the changing nature of bonds. While SMI largely dismisses efforts to predict the market’s future direction, it doesn’t take a crystal ball to see that interest rates are likely to head higher over the next few years. That casts doubt on bonds’ ability to cushion the blows of a market downturn as they have in the past. After all, rising rates tend to be bad for bonds. That’s what caused SMI to completely reconfigure our bond-selection process in 2015 with the introduction of Bond Upgrading. While it may require a little more work than our previous approach of maintaining fixed allocations to certain bond funds, our research shows a clear advantage.

Determine how to best invest in gold. Sound Mind Investing has long maintained that it’s wise for investors to include gold in their portfolios, either in physical form or through gold funds. However, the introduction of our Dynamic Asset Allocation strategy now provides an objective way of determining when investing in gold makes the most sense. In 2016, funds that invest in shares of gold-mining companies really took off, causing some SMI members to wonder whether gold-mining funds should be included in their gold allocations. A closer look told us they shouldn’t.

Resist the urge to time the market. Whatever strategy (or strategies) you use to manage your portfolio, it’s important to stay with it in good times and bad. Trying to make changes based on shifting market conditions usually does not turn out well. A better approach is to take market turbulence in stride. That said, for those adding to their accounts each month through dollar-cost-averaging, there is compelling research that a particular time of the month is most advantageous to make your contributions. If you’re considering investing but worry that the market is at a high point, DAA might be an appropriate strategy for you.

Prepare for the bear. When a bear market finally arrives (yes, when not if, since just as surely as night follows day, bear markets follow bull markets), it would be best to have decided in advance how you are going to respond. An investing approach that has proven especially effective generally, and particularly in bear markets is dollar-cost-averaging. DCA works better with some SMI strategies than others. Fortunately, for those who are concerned about a coming bear market, dollar-cost-averaging works especially well with Dynamic Asset Allocation, a strategy tailor-made for bear markets. Market-moving “crises” (such as the Brexit vote) are unpredictable, but relatively common. Thankfully, crisis events and bear markets tend to be shorter-lived than bull markets.

Redouble your commitment to SMI. This one may sound self-serving, but we strongly believe in our investment approach and are completely committed to your long-term success. That’s why it bothers us when we lose even one member. The primary reason people give when they do not renew their membership is that they don’t have time to read all of our articles or implement our recommendations. But we all make time for what’s truly important.

Be careful about using funds not recommended by SMI. Some readers may not be able to make full use of SMI-recommended funds, perhaps because of a limited investment menu within their workplace retirement plan. If that’s you, take a look at our “Laggards List” funds that don’t deserve a place in your portfolio in 2017.

Level 4 Looking toward retirement

Develop a vision for retirement. Retirement isn’t a goal to shoot for; it’s a new phase of life to enter. Prepare by developing a vision for how you will spend your time and the role you think God is calling you to pursue.

Save enough but not too much. Among the most common regrets of today’s retirees, not saving enough nears the top of the list. If you’re not retired yet and find it difficult to save enough, learn how to overcome five of the most common savings roadblocks. Another idea to consider is not just to save more, but to give more as well by setting a financial finish line.

Understand the realities of retirement spending. As you near retirement, if you have concerns that you haven’t saved enough, take a look at the other side of the ledger: your spending. Many people find that they spend less in retirement than they did while they were working, which may help the math work in your favor.

Make your savings last as long as you do. One common and understandable fear among retirees is outliving their money. What to do? Maximize your Social Security benefits and consider three ways to make your savings last. If you still don’t have enough to live on, consider a reverse mortgage. Once seen as an option of absolute last resort, the idea has become much more appealing through several important federal regulation changes.

Be part of the college funding solution for your grandkids. New rules regarding the impact of grandparent contributions on their grandchildren’s college financial aid packages have made it easier for grandparents to contribute more to the cause.

Look for conversion opportunities. As noted earlier, a bear market appears increasingly likely, and the silver lining of downturns is that they can present a favorable environment to convert traditional IRA money into Roth IRA money.

Choose your pension distribution wisely. If you are one of the declining number of workers still covered by a defined-benefit pension, when it comes time to retire, you’ll have to make a very important decision: whether to receive the money in a lump sum or monthly payments (the annuity option). If you annuitize, you’ll also have to decide whether to base the monthly payments on your life expectancy alone or yours and your spouse’s.

Have uncomfortable conversations. One of the most unpleasant realities of growing old is that one spouse will typically precede the other in death. Of course, that’s an emotionally devastating reality. To avoid heaping financial pain on top of your emotional pain, consider in advance the financial realities of life on your own. Something we strongly encourage our male readers to remember is that we have a ministry for widows of SMI members in which SMI will pay for them to meet with a financial advisor from Ronald Blue & Company. As part of your final wishes, leave instructions as to how your spouse can make use of this assistance.


What surprises will 2017 bring? No one knows. But you can “surprise-proof” your portfolio by continuing to follow the timeless principles of successful investing we write about each month. And here’s something that should come as no surprise at all: Pursuing the 10 ideas you highlighted in this article should put you in a better place financially and spiritually at this time next year. That’s our intention and prayer.