Faith in Financial Planning
It has been a while, so let’s get back to the Fruits of the Spirit in Galatians 5:22-23 ESV:
But the fruit of the Spirit is love, joy, peace, patience, kindness, goodness, faithfulness, gentleness, self-control; against such things there is no law.
Faithfulness is another one of those words used in so many different ways that the meaning can be confusing. At least it is to me. For example, saying “I have faith in God” sounds right to me, but saying “God is faithful” sounds weird. Are people saying God has faith in us?
If you look up the definition of faithfulness, you’ll get something unhelpful like “the quality of being faithful.”
I remember doing vocabulary as a child and my teacher would have never accepted that definition. We had to look at the synonyms below the definition and create a better one. As irritating as it was I have to admit it did help me learn and understand my vocabulary words.
The synonym that helped me understand faithfulness was trustworthiness. Now, if someone says “God is trustworthy,” then that makes perfect sense to me. Of course, it would be hard to be a Christian if you didn’t think you could trust God and His plan for your life.
The Fruits of the Spirit help us learn to be like Jesus and faithfulness (or trustworthiness) is a great trait for us to develop. Think about how wonderful the world would be if we were all trustworthy! Plus, our example could provide more opportunities for us to teach others about Jesus. I don’t see any downside to being trustworthy.
Faith in Financial Planning begins with your Financial Planner.
Honestly, if you cannot trust me, then I prefer you find a different financial advisor. There has to be a certain level of trust in the relationship between the client and the advisor.
Of course, there were (and probably still are) bad people in the financial services industry that tarnished the reputation for all of us. Advisors have stolen from their clients. Fortunately, many of those bad apples have been thrown in jail. It’s easy to see why people are naturally skeptical of the financial services industry.
The Financial Planning Association, of which I am a member, has started the legal process in order to prevent others from calling themselves Financial Planners. Currently, almost anyone can use that title. For example, insurance is definitely a part of a financial plan. However, an insurance agent may be an expert in insurance only, so they should not be offering comprehensive financial planning.
Have you ever noticed that doctors have their own specialties? My general doctor is great, but I hope he refers me to a surgeon if needed instead of doing the surgery himself. Financial planning is similar in that we have specialties as well.
I am more focused on long-term, goal-oriented planning. This means I look at current and future resources while using them to develop a plan. Hopefully, we can find the balance of enjoying today while planning for tomorrow.
Faith in Financial Planning continues with the client.
Financial plans cannot be implemented over night. For a plan to have the best chance of being a success the planner must be able to trust the client as well. A financial plan is a like a map. It can be read and completely memorized, but you’ll never reach your destination without taking your required steps.
I can write a perfect financial plan for you, but it won’t matter if you cannot be trusted to implement the plan. This is especially important in retirement planning.
Let’s say we estimate your retirement needs to be $75,000 per year for 20 years. Unless by some miracle you already have enough money saved, the calculations in your financial plan will include you making consistent deposits into your retirement account. As your financial planner I am trusting you to make those deposits.
The benefits of consistent deposits can be seen through Dollar Cost Averaging.
Fortunately, many of us do this without realizing it in our 401(k). Each month a percentage of your salary goes into your 401(k) account. That money is then invested in your account at different prices.
As the cost of investment varies, your money can buy more or less shares each month. Over your career, your monthly deposits into your account should accumulate into a retirement nest egg. Your return on the account is calculated by your average share purchase costs over time, which hopefully gives us a higher rate of return.
Time is definitely a factor in the calculations, so we cannot wait for perfect conditions in the market. We also cannot wait until there are less expenses, debt, or fewer things you desire to purchase.
The more we delay in plan implementation, the further we can be from reaching our goals. Personally, I think small, consistent deposits over time are much easier to handle than large deposits later in life. Not to mention changing your desired lifestyle because of lack of resources can be depressing!
Faith in Financial Planning ends with the markets.
After the client and advisor develop trust in their relationship, then both parties have to place a little trust in the stock market.
People have studied market movements since human beings developed the ability to trade. Obviously, a cow is larger than a chicken, so they had to decide how many chickens were equal to the value of a cow.
Fundamentally, today’s stock market still acts the same way. There has to be a willing buyer and a willing seller. They then negotiate a fair price for the trade. Instead of carrying around a bunch of chickens, we use currency instead.
Unfortunately, the market doesn’t always act like it’s supposed to, so there are risks to investing. Sometimes these risks can be anticipated and mitigated with tools, such as diversification. There are occasions, however, where market moves make absolutely no sense at all.
For example, prior to the pandemic and even during the pandemic, the markets were soaring. People were throwing money at the market as everyone was trying to “get rich quick.” My clients and I were frustrated because our portfolios weren’t flying as high as the overall market.
Of course, they wanted to make lots of money, but I actually hoped the market would drop. I wanted my clients to get more bang for their buck with their deposits, so we could use Dollar Cost Averaging. Most of my clients have a time horizon of at least 15 years, so a drop can be beneficial to them.
Secretly, I also wanted the market to drop because it didn’t make any sense. It was going too high too fast and we were in one of the longest bull markets in the history of the United States. Everything that I have learned since I became interested in finance was screaming at me saying, “Something isn’t right!”
Honestly, I was starting to not trust the market.
It was hard for me to tell people to invest in the stock market when I didn’t trust it myself. Stock prices were rising for no reason other than “all of the other prices were rising.”
That argument sounds like when our parents tell us not to use drugs or alcohol and we say, “It can’t be bad because everyone else is doing it.” Peer pressure has no place in investing. History has shown us over and over again that the disciplined investor usually ends up being the wise investor.
Why would this time be any different? There is so much more technology available now and everyone can be an investor. Wall Street is no longer reserved for men in top hats like something we saw in Charles Dickens’ A Christmas Carol. Investment styles have changed, but the fundamentals are still there.
This year has been a stinker for the stock market and I think we’ll still have to endure some pain. However, I have hope because my trust has returned in the market. Finally, we may be experiencing a typical downturn in the economic cycle!
For the long term investor, this can be a great opportunity to get more bang for your buck. For the short term investor, hopefully, your advisor has you in a less risky allocation. If not, send me an email and I’ll gladly work with you!
Conclusion. Faithfulness in financial planning involves trust in the advisor, client, and the market.
Life is not easy for anyone. We can blame our bosses, spouses, or political leaders for our troubles, but it really goes back to Adam and Eve. We live in a fallen world and the only way to endure it is having faith in God.
Jesus said, “In this world you will have tribulation. But take heart; I have overcome the world.” (John 16:33).
I believe we can take that statement to the bank because God is faithful. Again, that means He is trustworthy.
Now if we have our trust in God and His plan for our lives, then shouldn’t we have a little faithfulness in all parts of our lives? God knows our timeline, so it makes sense that we accumulate resources in part of our life and put some away for later. We’ll just have to find the balance between enjoying today and preparing for tomorrow.
I realize people have a tendency to affiliate investing with greed, but I disagree. I encourage you to read the Parable of the Talents in Matthew 25. The servants who invested were rewarded, while the one who hoarded the money was punished.
Investing for the sole purpose of getting rich can bring trouble because we’re treating money as a false idol. I would say investing with a purpose, such as retirement, is encouraged because we’re putting our faith in what we believe is God’s plan. If God wants you to live for 90 years, he probably has a purpose for you that you cannot do if you’re still a slave to your paycheck.
No, I cannot guarantee that you’ll be able to reach every goal in your financial plan. However, try starting with faith in God. Then have a little faith in yourself, your financial advisor, and the markets. After that, maybe you can take advantage of the opportunities God has planned for you.
When Jesus returns, He won’t be interested in your bank account. The best part is that you won’t either! We won’t need money. All we’ll need is to hear Jesus say, “Well done good and faithful servant.” (Matthew 25:23)
With all of the trials we face in life there is one thing we can cling to: Our God is faithful. If we trust Him, we’ll get to where He wants us to be.
Email me and let’s get to work!