The start of a new year presents an opportune time to plan and reflect. As 2023 gives way to 2024, consider such questions as: “How can I strengthen my overall finances in the new year?” “Am I saving and investing sufficiently for future needs?” “Am I giving enough?” “Am I pursuing spiritual disciplines to help me be a better steward?”
This article will guide you in choosing 10 “to-do” items that can help you improve your financial health and overall stewardship in the year ahead.
[Want to print this article? We recommend using the printer-friendly PDF version.]
This year has had its share of unsettling news. Inflation, rising interest rates, runaway government spending, signs of recession, wars in Europe and the Middle East, crime waves in major U.S. cities, a shocking rise in antisemitism, an impeachment investigation of the U.S. current president, and multiple indictments of a former U.S. president.
At such times, it is helpful to recall hymn writer Isaac Watts’ memorable paraphrase of Psalm 90:
O God, our Help in ages past,
Our Hope for years to come,
Our Shelter from the stormy blast,
And our eternal Home….
A thousand ages in thy sight
Are like an evening gone;
Short as the watch that ends the night
Before the rising sun.
In the Lord’s sight, even a thousand ages — though encompassed by innumerable cultural upheavals and conflicts — are like a single night gone by. Eons of time are but a blip on the screen of eternity.
That doesn’t mean our times — and our lives — are insignificant. On the contrary! Although God is transcendent and we are finite, He knows us and condescends to help us. It is because of his unfathomable love for us that the Lord has been “our Help in ages past” and remains “our hope for the years to come.”
In Psalm 90, the text on which Isaac Watts based his hymn, Moses offers up several specific prayers as he appeals to God’s great mercy: “Teach us to number our days, that we may get a heart of wisdom…. Satisfy us…with your steadfast love that we may rejoice and be glad all our days…. Let the favor of the Lord our God be upon us, and establish the work of our hands.”
These ancient petitions are as fitting and as needed today as when Moses prayed them. You would do well to make them your own as the new year begins!
SMI’s prayer for you is that no matter what “stormy blasts” may be ahead, you will remain at peace, trusting in the Lord’s unfailing care. As a faithful steward, may you “honor the Lord with your wealth and the best part of everything you produce” (Proverbs 3:9 NLT). This article will help you in that endeavor.
Selecting Your Top 10
Below are more than 70 recommendations for improving your finances and deepening your walk with the Lord over the next 12 months. They are based primarily on articles published in the Sound Mind Investing newsletter this year. Many of the suggestions are “hands-on” tasks, while others are more “educational” (i.e., improving your understanding of a topic). A few involve pursuing a deeper relationship with Jesus by strengthening your spiritual disciplines.
We’ve placed a box next to each recommendation. As you read, put a checkmark – ✅ – next to each item that’s relevant to your financial situation, season of life, or spiritual walk. Then, go through your checked items, asking God to guide you in selecting 10 as your focus for the new year.
Assign each of the 10 a specific priority, especially the hands-on suggestions. Make your most important item #1, the second-most important #2, and so on. If you’re married, go through this process with your spouse so you can discuss the recommendations, clarify understandings, and be united in your goals.
Each suggested “action item” is accompanied by a footnote indicating where to locate the article it’s based on so you can reread the original article for additional insights. Most footnotes reference articles published in the SMI newsletter in 2023, although a few refer to articles from previous years or material from The Sound Mind Investing Handbook. If you don’t have a copy of The SMI Handbook, this is a great time to order — either for yourself or to give as a Christmas gift!
Of first importance
Faithful stewardship begins with focusing on fundamentals — both spiritual and financial. The following suggestions will help you put first things first.
Rest in God’s love. His love isn’t based on our worth or merit. Instead, it flows from the unchanging quality and attitude of His being. “God is love” (1 John 4:8). He demonstrated the full extent of His love by sending Jesus to bear our sins on the Cross.
Reflect on how you are responding to God’s indescribable gift. As you grasp more deeply the gift given in and through Jesus Christ, a powerful sense of gratitude should rise up within you — one that dwarfs any attachment you may have to the material world.
In your lifestyle, ethics, work, and your approach to investing, commit to following the precepts of Scripture. Jesus said, “Everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand” (Matthew 7:26). Become a person who builds on the rock.
Pray resolutely about how to use your God-given wealth for eternal gain. The Lord calls believers to participate in the unfolding of His plans and purposes. In response to the Holy Spirit’s leading, we can use the temporal currency of this world to advance the everlasting Kingdom of God.
Invest time in studying what Scripture says about money and material possessions. The #1 financial mistake Christians make is ignoring biblical wisdom about financial matters and looking to secular advice instead. By allowing yourself to be guided by biblical teaching, you’ll guard against imprudent and unwise choices that inflict financial self-harm.
Embrace the idea that effective financial management is an act of love. The primary purpose of our lives is to love God and our fellow human beings (see Matthew 22:36-40). Therefore, we are to manage money in a way that reflects that love. Make love for God and others your prime motivation for planning wisely and living within your means.
To live out the Christian life — in financial matters and everything else — rely on God’s Spirit. Only by submitting to the Holy Spirit’s leading and availing ourselves of the Spirit’s power can we bear fruit as God intends, including in our stewardship. Indeed, the most critical stewardship verse in the Bible may well be Galatians 5:16: “So I say, live by the Spirit, and you will not gratify the desires of the sinful nature.”
Invest in your health. Faithful stewardship isn’t solely about finances. We are called to be stewards of our health as well — spiritual, physical, and relational. Are you nurturing your bond with Christ daily? Are you eating a healthy diet and getting regular exercise? Are you strengthening your ties with your spouse and children? Are you fostering good relationships with relatives, friends, and neighbors? Don’t neglect these critical aspects of your overall stewardship.
The world around you
We live within the context of laws, regulations, and policies we didn’t necessarily choose, such as tax-related statutes, regulatory requirements, and Federal Reserve policies. These things shape what is wise at any given time — and even what is possible.
Being a faithful steward doesn’t require being an expert in such matters, but it’s wise to have a general grasp of how these things touch your financial life.
Improve your understanding of the problems and policies shaping today’s economy. Inflation has driven prices higher in almost every area of the economy. At the same time, economic indicators continue to trend downward, signaling that a recession may be ahead, which likely would negatively affect the stock market.
Learn why the 2023 banking crisis occurred and be aware of its ongoing impact. One result of the crisis is a pullback in bank lending, making it tougher for businesses and individuals to get loans. Tighter credit conditions typically lead to a slowdown in business expansions, fewer new businesses, and, eventually, an ebb in consumer spending.
Become informed about the rapidly expanding level of federal debt. Government debt — driven by massive spending and rising interest rates — is at the highest level ever recorded, raising concerns about the U.S. government’s ability to service its debt and meet other obligations.
Strengthening your foundation
Before risking money in the stock and bond markets, build an adequate contingency fund. A savings reserve is necessary for handling unexpected expenses. Many financial planners recommend building a fund equal to three to six months’ worth of living expenses. For helpful ideas on how to build your savings, see Chapter 3 of The Sound Mind Investing Handbook.
Invest time in understanding what a budget is and how it can help you. Many people have such an aversion to “living on a budget” that they never even consider using one. A budget is merely a “cash-flow plan” that empowers you to be more intentional about your spending, resulting in more money being available for what matters most to you.
Document where your money goes. Once you develop a cash-flow plan, it’s critical to track how well you’re doing. We suggest an “old school” approach initially, such as a pencil-and-paper process. Once you’re up and running (and refine your plan), you can move to a web- or app-based system to track your spending.
Review your budget numbers regularly. A cash-flow plan isn’t a “set it and forget it” thing. Comparing your plan to actual expenses will show which areas need tweaking.
Commit to giving generously even if you’re paying off debt. Getting out of debt, especially consumer debt (credit cards, car loans, etc.), is crucial for long-term financial stability. However, debt repayment shouldn’t take precedence over “firstfruits” giving (Proverbs 3:9). That may seem counterintuitive, but giving is a sign of trust — a concrete expression that you believe God knows your needs and will provide.
Now that student-loan payments have resumed, explore your repayment options. After a three-and-half-year hiatus, federal student-loan payments started up again in October. However, people with school debt have various repayment options, including consolidating loans, getting a longer payoff timeline, and even (in some cases) loan forgiveness.
Focus on savings vehicles benefiting from the recent rise in interest rates. Rising rates are “good for savers” — generally speaking. But some savings vehicles become less attractive when rates rise — at least in the near term. Mortgage-backed Ginnie Mae funds, usually a solid option for savings not needed for three years or more, are an example.
Learn why — for some people — tax-free money-market funds may provide a better return than taxable funds. Although state and local municipal funds pay a lower “advertised” rate of return, they are free from federal taxes. After taking the tax benefits into account, a tax-free fund may yield a better return than a taxable fund. It depends on your marginal tax rate.
Developing your investing plan
Face your fears, overcome your inertia, and start investing! Don’t wait for the “perfect time” to get started. Now is the time to start. Making regular investments over a long period — no matter what the market is doing today — will enable you to build a healthy nest egg.
Follow an investing process that makes it easy to do the right thing. By the “right thing,” we don’t mean always making the most profitable decision. (That would require knowing the future!) Instead, we mean employing a process that minimizes the emotional wear and tear that afflicts investors.
Build a “portfolio” of mental models. Much of investing success depends on “investor psychology” — that is, how you think about what’s happening in the markets and how successful you are at preventing unwise emotional reactions. Adopting time-tested mental models — including “Be an investor, not a trader” and “Follow the signals, ignore the noise” — will form a practical framework that guides your decision-making.
Choose a broker that’s right for you. SMI has long recommended the nation’s two leading brokers, Fidelity and Schwab, as excellent options. But E-Trade and Firstrade now offer pricing and fund availability that make them solid choices, too. Low-expense Vanguard may be a good option as well, depending on which SMI strategy (or strategies) you want to implement.
Educate yourself about the difference between “passive” and “active” investing. Passively managed funds — i.e., index funds and most ETFs — don’t attempt to outperform market indexes or other benchmarks. (SMI’s Just-the-Basics strategy uses passive funds exclusively.) In contrast, actively managed funds attempt to “beat the market.” Because each approach — passive and active — has strengths, SMI uses both types of funds in our Fund Upgrading strategy.
Become acquainted with the cyclical nature of the economy and the markets. When people feel optimistic, they tend to borrow and spend freely, and providers of capital are ready and willing to lend. But economic optimism and its related financial behaviors eventually reverse — sometimes quickly. Investing markets are affected, often swinging from one extreme (euphoria) to another (deep fear). Not getting carried away with either euphoria or fear is crucial to becoming a successful long-term investor.
Be emotionally prepared for downturns and uncertainty. One of the most difficult aspects of investing is holding fast to your investment philosophy. Many investors start well, but then — because of psychological hurdles, negative market developments, or bad advice — they abandon their investment plan and undermine their long-term performance. Successful investing requires patience.
When making assumptions about future returns, take time-tested “valuation” measures into account. Is a particular stock (or group of stocks) worth the price? That’s difficult to answer precisely, but certain measurement tools can help.
Study market history, so you can persevere through volatile periods. No one knows the future, but if nearly a century of market history is any guide, there’s only a small likelihood of losing money in the stock market over periods of five years or more — and an even smaller likelihood of losing money over 10 years.
Be realistic about year-to-year returns. Newer investors often expect their portfolio to grow by the market average of roughly +11% each year. But only rarely does an “+11% year” occur. Instead, returns are distributed across a wide range of ups and downs. It is nearly impossible to achieve the type of long-term results most investors want without enduring short-term volatility along the way.
Learn why bear markets are a boon for younger investors. For investors with long time horizons, bear markets are periods of opportunity. Shares are “on sale” during downturns, thus enabling investors to get more for their money.
Become a dollar-cost averaging investor. “Dollar-cost averaging” (DCA) describes investing the same amount of money at regular intervals — for example, investing $300 every month. For DCA to work, however, one must maintain the discipline of making systematic investments, regardless of market fluctuations.
Focus on factors that can improve your long-term results. Although the precise rate of return you earn on your investments is outside your control, you can control other variables that can make a big difference. Building a strong financial foundation by reducing debt and building an emergency savings reserve is crucial. Other key factors you can control include how much you save and invest — and for how long.
If you are using SMI’s Fund Upgrading strategy, learn how its selling discipline works. SMI ignores the most common reasons for selling: management changes, high expenses, and fund turnover. Instead, we focus on a fund’s momentum, which is a gauge of performance over the past 3, 6, and 12 months (weighing the recent months more heavily).
Expand your knowledge of bonds and learn more about SMI’s Bond Upgrading approach. The bond market is suffering its worst run of performance ever. Bond Upgrading, however, has minimized losses by steering Upgraders toward bond options less hard hit by rising interest rates.
Learn what’s involved in selling one fund and buying another. Broker policies and government regulations affect the selling and buying of traditional mutual funds and ETFs. Some sell/buy transactions execute almost immediately. Others can take several days. Become familiar with how the system works so you’ll know what’s allowed and what to expect.
Study how “fund distributions” affect share prices. Newer investors are sometimes shocked by a sharp single-day decline in the share price of a fund they hold. However, the drop may not reflect a loss. Instead, the fund may have distributed dividends, interest, or capital gains to its investors.
Take full advantage of your employer-provided retirement plan. If your company offers a retirement plan, contribute at least enough to get your employer’s total matching contribution (if available). Be aware that many employers auto-enroll their workers and select a “target-date fund” as the default investment. Such a fund may be a good option, but find out if other choices are available.
Broadening your portfolio
Become a “diversified” investor. After investing for a while, it’s time to expand your knowledge base. Learn how bonds and bond funds work (they’re a bit less intuitive than stocks/stock funds). Also learn about “alternative” investments such as commodities and real estate. In addition, “diversify” your use of technology by becoming proficient with your broker’s smartphone app in addition to the website.
As you save for retirement, diversify your tax-treatment options by using both traditional and Roth accounts. Traditional accounts and Roths are taxed differently. Putting some of your money in a Roth will reduce your post-retirement tax bite. Tax-free income from a Roth also could help a surviving spouse by easing the tax burden of being thrust into the “single” filing status.
If you are eligible for a Health Savings Account, investigate how you can use an HSA as a “super IRA” for retirement savings. Health Savings Accounts are triple tax-advantaged: No taxes going in, no taxes on account growth, and no taxes when money is withdrawn for “qualified health expenses.” Using an HSA to its fullest potential, however, requires careful planning and excellent record-keeping.
If you’re at the stage of life where bonds should be part of your portfolio, learn about gauging bond risk. Knowing a fund’s “duration” can help you project how performance is likely to be affected by interest-rate changes.
Add Sector Rotation to your portfolio, but understand the risks. At any given time, companies in a particular sector of the economy perform better than others. Targeting a portion of your portfolio to a “hot” sector can be profitable. But a particular sector can decline suddenly, too. You can manage the risk by using an approach such as SMI’s Sector Rotation strategy, which has a well-defined selling discipline.
Deepen your knowledge about investing in gold. The price of gold often defies expectations! The unpredictability of gold is why SMI uses a “tactical” approach, following objective signals that tell us when to add gold — via a gold ETF — and when to sell it. (Some investors may desire to hold a small allocation of physical gold. If you’re so inclined, read SMI’s overview of the best ways to buy/sell/store gold.)
If you’re interested in investing in real estate, learn about the “crowdfunding” approach. The federal JOBS Act of 2012 has given rise to web-based “crowdfunding” platforms that connect builders/developers with small investors who take an equity stake in projects or, in some cases, lend money for projects. Such investments carry significant risks, however.
Looking toward retirement
Start making later-life decisions when you’re in your 50s. Recent research suggests that the optimal age range for making wise financial choices and avoiding mistakes is age 53-54. That “sweet spot” is a good time to make or update a will, and perhaps hire a financial professional (using SMI Private Client is one option) to guide you through crucial financial decisions that come with aging.
Designate a trusted friend, family member, or professional (attorney, accountant, banker) to handle your financial affairs if you can’t. A legal instrument called a financial power of attorney (POA) authorizes someone to act as your “agent” in paying bills, filing taxes, and managing retirement accounts.
Study the steps for converting a “traditional” retirement account to a Roth IRA. Understand the downside as well as the upside of a Roth conversion.
Weigh carefully the “lump sum or annuity” question. With some workplace retirement plans, employers offer retiring employees a choice: “Do you withdraw to get your money from the account via a one-time payment or as a series of guaranteed monthly payments?” Each option has pros and cons.
Think through what would happen if your hoped-for retirement date coincides with a bear market — and prepare accordingly. You can’t control what the market does or when, but you can have a plan. An “investment plan,” aided by planning software such as MoneyGuide, can help you model how various bear market scenarios might affect your portfolio.
Plan realistically in light of Social Security’s deteriorating financial situation. The Social Security Administration won’t be able to pay full retiree and survivor benefits as of 2033 — just 10 short years away. When Congress acts to shore up the program, it likely will put in place a combination of higher taxes and reduced benefits.
Make a plan to cover the financial risk of living for many years beyond retirement. One way to plan is to purchase a “deferred income” annuity that doesn’t begin paying until age 75, 80, or beyond. Of course, the tradeoff is you might be able to generate more income while maintaining access to your principal by investing on your own.
Prepare for post-retirement “financial shocks.” Many people are ill-prepared for non-regular expenses that occur during their retirement years. Such expenses often involve mobility-related house upgrades and general home repairs.
When preparing for retirement, consider more than the math. Having enough money is only one aspect of transitioning well to retirement. “Meaning” and “purpose” are involved too. Think beyond what you are retiring from and plan for what you are retiring to.
Seek the Lord about how He wants to use you during your retirement years. You’ll likely retire from a particular job at some point, but that doesn’t mean you should retire from service to the Lord. He may want to “employ” you in a new capacity or vocation.
If you’re at least 70½, learn how to give to a charity from your IRA while getting retirement income in return. Federal law now allows retirees to make non-taxable IRA withdrawals to fund a “charitable gift annuity,” a vehicle that combines a charitable donation with a lifetime annuity.
Children / Work / College / Technology / Insurance
Be intentional about training your children to be wise and faithful stewards. Our consumer culture tells us the key to happiness is to have more material goods. Christian parents can present a different “narrative” — specifically, that God owns everything, and we are called and empowered to be productive with what He entrusts to us.
Learn about the revamped process for applying for federal student aid for college. There’s a new FAFSA form and new formulas for 2024-2025. For some families, the changes will mean less financial aid, and for others, more aid.
If you have children in college, pray for them unceasingly. The secular college environment is antagonistic to biblical values. Pray that your children will work hard, practice self-denial, and demonstrate personal integrity. Pray, too, they will come to a faith in Christ that is truly their own.
Develop a deeper understanding of how your faith relates to your work. As a caretaker of God’s creation, seek to understand how sin has affected your workplace, focusing on areas in which you have influence. Led by the Holy Spirit, find ways to redeem your “corner of creation” so that it more closely resembles God’s intentions for renewal and hope.
If you use payment apps to reimburse friends or send cash gifts, know the risks. Apps, such as Venmo, Cash App, and Zelle are convenient and helpful. But because any money sent arrives almost immediately, funds forwarded to the wrong person are usually irretrievable. Payment apps are also inviting targets for con artists who convince people to send instant (and irretrievable) payments for merchandise that doesn’t exist.
Expand your liability insurance coverage. Liability coverage offered under homeowner and auto policies is often insufficient. Additional liability coverage, purchased via an “umbrella” policy, picks up where those policies leave off.
Carefully consider whether you need disability insurance. If your income is derived primarily from paid work (as opposed to investment income), a disability policy may be a wise purchase. If an illness or injury were to keep you from being able to do your job for an extended period, payments from disability insurance would replace a portion of your income.
An enduring shelter
What “stormy blasts” may be ahead in 2024? No one knows. But, thanks be to God! We have a shelter: Jesus Christ, who “loved us and gave himself up for us” (Ephesians 5:2).
Markets may stumble and kingdoms may fall, but Jesus “is the same yesterday and today and forever” (Hebrews 13:8). By looking to Him, we can “run with endurance the race that is set before us” (Hebrews 12:1-2 NKJV), and eagerly await the day when the Master says, “Well done, good and faithful servant!” (Matthew 25:21).
Unless otherwise noted, Scripture quotations above are from the Holy Bible, NEW INTERNATIONAL VERSION®, NIV® Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.TM Quotations noted as NLT are from the Holy Bible, New Living Translation. Copyright © 1996, 2004, 2015 by Tyndale House Foundation. Those marked NKJV are from the New King James Version®. Copyright © 1982 by Thomas Nelson. All rights reserved.