I picked up on three things Mr. Arends mentions in the video:

1.  Don’t be shocked when the unexpected occurs. As in soccer upsets and shocker moments, there will be such moments in the stock market and even in everyday finance.  Don’t let these moments rattle you.  Rather, continue sticking to your plan and also do what you can in preparing to withstand such shocks.  So, if the market takes a dive, diversification and staying calm will help you.

2.  Speaking of diversification, the World Cup is the one sport that gets us thinking outside of the US.  Every portfolio needs to have an international component which simply helps in further diversifying and helping withstand US economic impacts.

3.  The least interesting tip was around the rules of the game.  You can’t always depend on the referees to come through for you, but neither can you depend on the SEC to do everything (so says Brett) on the regulation front.  I suppose even the SEC isn’t a perfect organization either since the recent economic problems saw large financial organizations with questionable practices.

Overall, the idea of gleaming tips from a sporting event such as the World Cup is a great idea.  What other ways can the  World Cup help people on the personal finance front?

I’ll note as you travel out on The Crown Money Map you’ll find that destination 5 tells you to begin investing wisely.  Investing in dividend paying stocks can be yet another way to build wealth.  However, if you choose to invest in indivdual stocks you need to commit the time and effort to thoroughly research your potential investments.  Overall, individual stock investing is more risky than mutual fund investing.  Zach does mention dividend paying mutual funds in this post which you’ll definitely want to consider if you’re at the investing stage of your journey.

It is not easy to work for a paycheck. Even for those that own their own business, the hours spent ensuring that everything is working perfectly can be challenging. However, income investing can be the solution for many.

Income investing is the ultimate source of passive income. You invest time or money upfront to create or buy something that will yield dividends for life. The best examples are stocks that pay dividends. Dividend paying stocks free up your life as they pay you an income in the form of a dividend payout. If the company is strong, the value of your initial investment increases.

You have to be careful to pick the best stocks that pay dividends. The best results come from companies that have a strong balance sheet. Find companies that have a low debt ratio. You do not want a company that pays dividends from debt.

Be wary of companies that pay more dividends than they earn. They may be paying dividends from debt or their assets. Such a situation may not last for long and they may end up cutting their dividends to stay afloat.

Canadian dividend stocks make excellent income investing vehicles. One of their major advantages is that they provide tax advantages for the investors. Thanks to the Canadian dividend tax credit, some low-income earners do not pay tax on Canadian stock dividends. In the long run, you may be better off investing in tax free investments than government bonds.

Look for Canadian stocks that have a good history of paying dividends. Most Canadian stocks that pay dividends pay between 2% and 6%. While higher dividend rates may sound good on paper, they represent a higher risk. If you are a conservative income investor and planning for the long term, choose lower yielding stocks as they are likely to pay off.

Key items to focus in on are the dividend growth rate and payout ratio. When a company reduces its dividend it indicates that growth for that stock is slowing or expected to slow down in the future. It also reduces the yield, which is ultimately why we wanted to buy that stock in the first place. Look for dividend stocks that have a dividend growth rate of 5% or higher.

The payout ratio is important because it measure the percentage of net income paid out as a dividend. If a company has a payout ratio of 100% then they are paying all of the income out to shareholders. In rare cases that is being done on purpose, but in general we want to find stocks with a payout ratio under 60%.

Most of us do not have enough capital to invest to live on . However, it is important to make a start. One of the ways to do this is to use ETF’s such as he iShares Canadian Dividend Index Fund. This allows you to make small investments in dividend yielding stocks with the little funds you have.

Dividend reinvestment plans or DRIP’s are another great way to build your income-investing portfolio. In this case, instead of receiving your dividend payment, companies allow you to buy more stock. You can also invest in dividend mutual funds. These will invest in dividend yielding Canadian stocks and pay regular dividends.

The goal of income investing is to reduce your reliance on working for a living. It may be difficult to build a Canadian dividend stocks portfolio but the rewards mean more time for your family.

Lack of a Match

With the recent economic down turn, many companies ended the company matching contribution. For some people this meant a loss of income up to $16,500 annually. That stinks. So did people stop contributing? Surprisingly they haven’t. Studies have shown that this had little effect on whether people continued to contribute. But should it have? I say likely yes. Here’s why…

Limited and Expensive Funds

The vast majority of 401Ks have a limited amount of funds to invest in. This is because 401Ks are typically managed by one investment firm. For instance, if Fidelity manages your 401K, then you will get to choose from around 5-10 Fidelity mutual funds for your portion of the portfolio invested in stocks. Some Fidelity funds are great. But wouldn’t you rather have a choice of funds from Fidelity, Vanguard, Schwab, T Row Price, and other investment firms? Sure you would. The more options you have, the more likely it is that you will find a low cost fund to meet your needs. Review your company’s 401K expenses with BrightScope.com.

It May Not Be the Best Tax-Advantaged Account for You

Another reason to consider moving away from the 401K is because the Roth IRA exists. The Roth IRA and the 401K have exactly the opposite tax treatment. A Roth IRA uses after-tax dollars to fund the account, while the earnings grow tax free. When you do a qualified Roth IRA withdrawal, you don’t have to pay any taxes. This makes the Roth IRA a great product for young people, who will likely be in a higher tax bracket when they retire. Also, a Roth is also not tied to your employer, and can be opened at any mutual fund company, online stock broker, or even at a bank. Thus, your choice of funds and other investment products greatly increases just by using a Roth IRA.

To sum all of this up, if you have a company match with your 401K, at least contribute enough to get the full match. If, however, you are young, have limited choice with your 401K, and you don’t get a match, then strongly consider starting your retirement investing with a Roth IRA. Once you reach your annual maximum of $5,000, then go back and start putting money into the 401K. And who knows, maybe by then the match will return.

This post was provided by PT of ptmoney.com.

The rich rule over the poor, and the borrower is servant to the lender (Proverbs 22:7).

On the other hand, you’re losing out on the magic of compounding interest and risking not growing your investments as much.  If you don’t have as much saved in retirement this could mean you work longer, or don’t have adequate funds to have the lifestyle you desire in retirement.

So, what do you consider when trying to determine if you should still invest while in debt?

Realize investing can slow down your debt payment plan

While investing is obviously very important, it can slow down your debt payment plan.  Your goal above investing should be to get out of debt.  When you get out of debt you have more money to build your emergency savings, or invest to build your retirement nest egg.  If you were to max out your retirement investing you’d most certainly slow down or even stop your debt pay off.  You have to take a measured approach and make sure you’re still making forward progress in paying off debt if you decide to invest.

Invest enough to get employer matching

Don’t throw away free money if your employer offers to match your 401(k).  Again, invest up to the minimum to get the match as long as you can still make forward progress in paying off debt.  But avoid the match if you can’t pay extra on debt or meet your emergency savings goals.  Personally, I hate to see anyone lose free money, so I would recommend a lifestyle adjustment to insure you can invest the minimum and still make forward progress on other goals.

There is one other consideration here.  If you’re not automatically vested to get your employer’s match you need to consider how long you will be working for your employer.  You may want to work on the debt first if you’re not planning to be with your employer long enough to become vested.

Yes, your mortgage is considered debt, but don’t pause investing to pay off your mortgage

Remember, your mortgage is considered debt.  It’s often referred to as an investment and can be in many cases, but at the end of the day you still owe money.  You should max out your retirement investing before paying extra on your mortgage even though it’s considered debt.  In my opinion, you shouldn’t start investing in real estate and other non retirement investments until you’re able to pay extra on your mortgage each month.

Interest on debt versus the average return on investments

You also have to think about whether or not you have high interest debt versus the average return you will receive on your investments.  You’re losing money if the return on your investments is less than what you’re paying in debt interest.

However, there is an emotional and spiritual advantage to paying off debt even when logic and numbers doesn’t make sense.  Truthfully, we don’t know God’s plans for us for the future, but we do know debt is slavery.  The opposite of slavery is freedom.  That being said, you should consider continuing to pay off debt, even if it is lower in interest than the average return on your investments over time.

Final thoughts

Today, our family is paying off remaining car debt and investing enough in retirement to get my employer’s match.

• Is investing slowing our debt pay off down?  Sure, but we’re getting free money, or employer matching.
• Are we maxing out our retirement?  Absolutely, not.  We wouldn’t be able to pay off debt if we were maxing it out.
• Do we plan to pay off our mortgage debt before increasing or maxing out retirement investments?  Absolutely, not.  Paying off our mortgage will be a longer road, so we’ll max our retirement first.  We’ll also insure we can pay extra on our mortgage before we stretch our investing to real estate and other non retirement investments.
• Is the interest on our debt more than what we’re earning on our investments?  No, but we choose freedom and faith in God’s plan for our lives versus making minimum car payments.

So, what about you?  Are you investing while still in debt?  If so, please share your reasons why in the comments.  Is there anything else you should consider when trying to make this decision?

Foundation of financial stability

But why do you call Me ‘Lord, Lord,’ and do not do the things which I say? Whoever comes to Me, and hears My sayings and does them, I will show you whom he is like: 4He is like a man building a house, who dug deep and laid the foundation on the rock. And when the flood arose, the stream beat vehemently against that house, and could not shake it, for it was founded on the rock. Luke 6:46-48

The strongest structure will not stand on a weak foundation.  A structural example of this is the Leaning Tower of Pisa. Although intended to stand vertically, the tower began to lean soon after its construction because it was built on a poorly laid foundation.  Our financial foundation are the principals of biblical stewardship and giving.  Once this foundation is laid, you have the potential to build wide (diversity) and high (wealth, profit and increase).

The pillars promote a balanced and diversified approach to financial stability.  Conventional wisdom dictates you should not put all your eggs in one basket. Using the pillars as an example, it may be tempting to build the savings pillar without any regards to insurance.  A medical problem could wipe out months, even years of savings.  The Bible also supports diversification:

Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth. Ecc 11:2

Let’s take a closer look at some of the building blocks that make up the 3 pillars.  In the diagram, I placed savings in the middle because it is the load bearing beam.  If you are beginning to build, I recommend starting here.

Savings

Sure you could save money like grandma used to by stuffing it under a mattress, but there is absolutely no security in that!  Find a bank or credit union that is backed by the FDIC or NCUA respectively to insure your money.  Build an emergency fund large enough to match your situation and comfort level.  The personal finance experts cannot agree on the amount.  Some advocate 3 months of expenses, and others advocate as much as 9 months.  Consider the following factors and set a goal/amount that works for you.

• Risk tolerance
• Stability of income stream(s)
• Number of income streams
• Number of dependents
• Other assets

Savings should be secure, low/no risk and accessible when needed.  Traditional savings accounts at a brick and mortal bank or an online high yield savings accounts are appropriate for an emergency savings stash.  As your savings accumulates, check to see if you are eligible for a money market account. Money market accounts work like regular bank accounts except they have higher interest, a minimum balance, and a low limit on the number of withdrawals allowed per month.  This is an excellent fit for an emergency fund as interest will accumulate.

Another building block in the savings pillar is the certificate of deposit (CD).  CDs have a fixed term and typically a fixed-rate.  There are withdrawal penalties, so this is something that should not be considered for an emergency fund.  Generally, the larger the principal deposit and term length, the higher the interest rate.  CDs attract conservative savers and investors because of their low risk.  However, the return is low for the amount of time your money is held up.  The CD laddering strategy attempts to alleviate this.  The idea is to start several CDs at the same time at varying lengths (example: 1yr, 2yr, and 3yr).  As the CD matures, it would be reinvested at the 3-yr term (highest interest rate).  Eventually, all the CDs will be invested at the 3-yr term, however one would mature every year.  Giving you a bit of flexibility.

Insurance

Insurance is like bitter pill.  We take it because we know it’s good for us, but no one really wants to.  However, having insurance is the responsible thing to do, and in some cases it is required by law.  There is insurance for everything under the sun!  The key is to make sure you have enough of the right kind of insurance.

Probably one of the most popular insurance decisions will be whole or term life insurance.  Term insurance is the cheaper of the two.  It provides coverage for a predetermined amount of time (eg. 30 years).  Whole, or permanent life insurance is open ended, providing coverage as long as you pay the premiums.   They also accumulate a cash value.  Generally speaking, there are better mechanisms than a permanent policy.  If you are disciplined in your investments, you may not need to rely on a life insurance product to save for you.  To see where you line up, use bank rate’s insurance calculator.

If you are going to operate a motor vehicle, car insurance is a requirement in every state.  The amount of minimum coverage varies from state to state.  A 2006 report from the Insurance Research Council estimates more than 14% of drivers are uninsured.  The penalties are hefty and not worth jeopardizing your financial stability.  Don’t do it!

Selecting the amount and type of insurance is a delicate balance between cost and peace of mind.  Not enough insurance and you may find yourself unsettled and in dire straits should a need arise.  Consequently, if you spend too much on insurance, you may not have enough to save or build the third pillar…

Investments

Unlike savings, where your money is stored in a safe, accessible manner; investments involve risk with greater potential for gain over extended periods of time.  The primary focus of investing is increasing your net worth and achieve long term financial goals.  The amount and types of investments you choose will vary according to your risk tolerance.  The market fluctuates and your portfolio graph may look like the latest thrill roller coaster.  However, over long periods of time (10 years or more), the market traditionally increases between 8-10%.

Popular investments include

• 401 (k) retirement plans – Many employers will match a portion of your contribution
• Individual Retirement Accounts
• 529 College Savings Plan – Each state’s plan is different.  Shop around!  You don’t have to select the plan in your state of residence
• Mutual funds & Exchange Trade Funds

Of course there are plenty of other entities not listed here.  This is not meant to be an all inclusive list.  When you start with a strong foundation and these 3 pillars, you are on your way to building financial stability.

What does your blueprint for building financial stability look like?  Do you use the three pillars listed?  Could you include more pillars?  Less?

Article written by: Lakita Humber Lakita is an IT Systems Administrator by profession with a passion for the things of God, worship arts, and financial stewardship. She started Personal Finance Journey as a way to help and encourage those on the road to financial freedom. She has been blessed with the opportunity to minister throughout the U.S. and Internationally as a workshop speaker and presenter. Connect with Lakita on Twitter & Facebook.

The Bible has a lot to say about money and among many areas of Biblical finance we find guidance for investing.  Christians who want to exercise wise financial stewardship in managing their personal finances can learn from important principles of steady plodding, avoiding risky investments, diversification and always knowing the status of your investments.

Definition of investing

But first, what is investing?  People sometimes confuse savings and investing.  Wikipedia provides us this definition of investing:

Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in form of interest, income or appreciation of the value of the instrument.

The most common example of investing might be in investing money into the stock market by purchasing company stock or mutual funds.  Obviously, investing for retirement typically involves such purchases.  Investing in real estate is another common example which might include the purchase of a house, or rental property.

Definition of saving

Saving, on the other hand, is different than investing.  Wikipedia also provides us a pretty good definition of savings:

In terms of personal finance, saving specifies low-risk preservation of money, as in a deposit account, versus investment, wherein risk is higher.

So, a good example of saving includes saving money for emergencies in a savings account.  Saving would also include putting money aside for future purchases such as a car, or Christmas presents.

As I mentioned, the Bible clearly gives us some principles to follow when we commit money or capital to the investment of financial instruments or assets.

Consistent, steady plodding and avoiding risky investments

Steady plodding brings prosperity, hasty speculation brings poverty (Proverbs 21: 5 TLB)

Savings, as mentioned above, is always a lower risk preservation of money.

Investing typically requires a commitment to growth over a longer period of time.  The rewards can be in the form of appreciation of the asset and building of future wealth.  It doesn’t include hasty, risky, or get rich quick schemes that often promise to make you rich over night.

The man who speculates is soon back to where he began – with nothing (Ecclesiastes 5: 13-15 TLB)

Rather, scripture tells us we have to make commitment through steady plodding, or consistent monthly investing that will take time to grow and earn a significant return.

Starting early is important, but it is never too late to start investing for the future.  An easy way to get started is to invest in a company retirement plan such as a 401(k).  If you can still make progress on your Money Map journey, invest at least any minimum amount required to receive the company match.

Diversify investments

When it comes to investing, diversification is often an important subject of the conversation.  The Bible provides us a diversification principle too.

Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on earth (Ecclesiastes 11:2).

It’s important to remember that no investment is a guaranteed return.  Home values can decrease, the stock market can experience losses and other investments can lose their value.

That’s why it’s important to avoid putting your eggs all in one basket, as they say.  As you work with a financial advisor or investing professional, they will help you diversify your investments across different financial instruments based on your investing objectives and timeline.

Know the status of your assets

It may be easy to work with a trusted financial advisor and turn over all of your investing decisions and the management of your portfolio. However, that’s generally not a good idea.  Why?  While you may be working with a trusted financial advisor, scripture tells us we still need to know the condition of our assets or investments at all times.

Be sure you know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations (Proverbs 27:23-24).

It’s a good idea to meet with a financial advisor a few times of year (maybe more depending on your life stage and goals) to review your investment performance, his or her investment strategy and discuss any changes to your goals or objectives.

Final thoughts on investing principles in the Bible

To wrap up, we need to use the Bible has our investing handbook.  While it won’t tell us which stocks to choose or how much we should invest, there are plenty of qualified personal finance advisors who can help you make those specific decisions.

Remember, the Bible provides principles for managing money.  If you invest and follow these Biblical financial principles you can be certain you’re managing your resources wisely and investing in the far greater reward which is your relationship with God.

What do you think about these Biblical principles for investing?

A recent Crown Financial Ministries Biblical Devotional points out we do have responsibility in this area of spending or investment management!

Boycotting products is good stewardship. It is spending God’s money in a manner that would be pleasing to Him and not supporting companies that use their profits to sponsor questionable programs.

“Make my joy complete by being of the same mind, maintaining the same love, united in spirit, intent on one purpose.” (Philippians 2:2 NASB).

A steward’s mindset

How does a financial steward view money management?  A financial steward knows money in his or her possession only comes from God.  People can’t earn it under their own accord; God does the providing.  Therefore, financial stewardship is all about managing wisely the resources God has provided which includes money.  Having a purpose or plan for money and taking steps to avoid wasteful spending is pleasing to God under this principle.

A Christian strives to grow his or her relationship with Christ and to also be Christ-like in daily living.  If we purchase products that could harm us, others, or that may be misaligned with Christian values, we may be inhibiting our ability to be Christ-like or united in spirit according to the scripture and devotional.

Beyond the obvious, I think the challenge can be in knowing when we’re making such purchases or perhaps investments.

We certainly all have a choice to make at our local grocery store when it comes to purchasing inappropriate material or things that can be harmful to our health and to our relationship with God.  Without throwing out all the examples, such items are created by companies that typically aren’t thinking along the lines of bettering society or the expansion of Christian values.

Moral investing decisions

What isn’t as obvious and more difficult to use good judgment is when we invest our money, perhaps in our company 401k, and mutual funds.  When purchasing mutual funds we don’t directly purchase company stocks that are in the fund.  The fund manager makes these purchases for us, but it is still our investment.  Therefore, unless we’re paying close attention, there may be company stocks in our mutual fund for companies we would typically avoid supporting.

So beyond the trip to the grocery or convenient store, should we be concerned with what stocks our fund contains?  Some would say yes because they feel it’s a component of financial stewardship and being like-minded with Christ.  Others would be less concerned because of the indirectness of purchasing stocks in the mutual fund.

Most people, me included, don’t spend a lot of time analyzing every company in which a fund invests.  Truthfully, if we did spend the time identifying all the companies and reviewing their websites, we still might not be able to identify immoral activities occurring with a company’s mission or product.  And at the same time, these companies are probably not going out of their way to make this information widely known to the public.

How to make moral investing decisions

But the subject of product boycotting, including investments has got me thinking that there may be more I can do here.  After all, I do want to be the best financial steward I can be and I certainly don’t want to invest in a company that produces for example, pornography that draws people further away from God and wrecks havoc on families.

I came across a resource that can help when it comes to making moral investing decisions. Moral Moneyis focused on helping people be Biblically responsible investors.  It helps people build a portfolio of companies that only support Christian values.  I noticed on their website they have something called the “Integrity I-Dex” which is a benchmark for Biblically based portfolios.  Companies are screened for their involvement in things that go against Biblical Christian values.  If you want more information, Christian PF conducted an interview with Moral Money.

Final thoughts

Whether you are for or against boycotting products, I think there is something to think about and consider here.  More conscious spending or investment decisions can help put a stop to furthering the growth of companies with immoral missions.  While investing decisions may be more challenging, we can see through organizations like Moral Money, it is possible to do some screening to help with decision making.

What are your thoughts about boycotting products of questionable companies and perhaps mutual funds that include stocks of such companies?

Photo by dooley.