Capitol Purchases, Investing and
Insurance
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Baby Step review:
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Tithe
$1000 in the bank emergency fund
Pay off all debt but the house
3-6 months in the bank
15% into Roth and pre tax retirement
College Funding
Pay off home early
Build wealth
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Introduction: Realize How Things
Demand Our Attention and Time:
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I.
We need to Know the real
purpose of Stuff:
A.Human ingenuity and invention originally created
material stuff to make our lives more simple &
enjoyable and participation in building that stuff
led to increasing affluence in society.
B.The world’s way:
1.See
2.Desire
3.Acquire, even at any cost
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C.
God’s way:
1John 2:15 Love not the world, neither the things
that are in the world. If any man love the world,
the love of the Father is not in him. 16 For all
that is in the world, the lust of the flesh, and the
lust of the eyes, and the pride of life, is not of the
Father, but is of the world.
2. Luke 12: 31 But rather seek ye the kingdom of
God; and all these things shall be added unto
you.
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3. Now affluence and culture has driven
demand past practicality and the stuff being
bought is actually demanding more and more of
our time, rather than less and less of it:
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2Tim 2:4 No man that warreth entangleth himself
with the affairs of this life; that he may please him
who hath chosen him to be a soldier.
(entangle) = things that take us away from our
mission – the Great Commission
The purpose of our resources is to free us to do
more for Christ, not less.
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1. Phil 3:8 Yea doubtless, and I count all things but
loss for the excellency of the knowledge of Christ
Jesus my Lord: for whom I have suffered the loss
of all things, and do count them but dung, that I
may win Christ
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III. How to make big purchasing
decisions biblically.
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A. Determine what constitutes a large purchase?
It’s between you and the Holy Spirit.
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Good Rule: Anything that costs more than 1 whole
day’s gross income for your family.
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2. Can I really afford this and completely avoid
being in bondage?
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D. Seek and Search the facts:
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List all of the needs and wants of the new item.
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Search the internet and become an expert on the
item that you want to buy
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Read the online reviews of the item. – Realize –
fish and bones
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Consider value – not just price – what is the best
product for the money:
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At the end of the first day go home with Nothing
EXCEPT the information gathered.
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V. The wise consumer
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A. Everything comes down to one simple
question: Are you a wise consumer?
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1. For a Christian to be able to look God in the
eyes and say that they spent God’s money wisely,
they must become informed before they purchase
a major item.
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VI. Home
Purchases
A. Everyone is
against you
getting a low
price- both
realtors are on
a percentage
commission.
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B. Financing Considerations
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1. Most a Christian should spend is 30% of
spendable income on housing!!
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2. 28% bracket pay $1000 in interest get only
$280 back on taxes - $720 wasted = avoid
interest payments - pay off fast.
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3. 15 year loan costs $77,760 less than 30 year
mortgage on $100,000 loan.
15 year Principal: $100K Interest:
$61,640
30 year Principal: $100K Interest:
$139,400
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VII. Car purchases
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A. Almost every new car sale in America is
based solely on wants not needs
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B. Can buy any quality you want to pay for:
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Luke 14:28 For which of you, intending to build
a tower, sitteth not down first, and counteth the
cost, whether he have sufficient to finish it?
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C.
Four types of car characteristics – all cars a
compromise between these 4 characteristics.
Comfort - Rolling living room
as transportation
Economy – Low cost of transportation
Utility – Perform functions other than transportation
Performance – FAST & FUN Transportation
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G. Watch out for Dissatisfaction
and huge profit from Pretenders:
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VII. Major appliance purchases
Buy quality – avoid extra warrantees (do your research well so you
won’t need them)
Refurbished at great prices do exist. Scratch and Dent do exist.
Failures normally occur in first few hundred hours (burn in) or when
completely worn out.
Play one store against another (salesmen want the sale personally
so actually on your side if competing with another store)
Check Craig’s list – God blesses the wise shopper!
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IX. Investing
We have also seen that God is not against
prosperity:
Pro 8:20 I lead in the way of righteousness, in
the midst of the paths of judgment: That I may
cause those that love me to inherit substance;
and I will fill their treasures.
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B.The first requirement for investing is a right
heart:
1. God has given us a little here, to test our
faithfulness so that if faithful he can give us much
greater riches to us in His kingdom.
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C. Legitimate reasons for a
Christian to invest:
1. To further God’s work:
2. Current Family Responsibility:
3. Future Family Responsibility
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D. Wrong reasons to invest same as wrong reasons to covet
money:
Greed – desire to have more and more –
wrong focus
Envy – keep up with the Jones’s next door
Pride – desire to be elevated above others
Ignorance – following other mis-guided people
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E. Investment wisdom
1. #1 rule find a teacher not a salesperson to help guide
you.
2. KISS – Never invest in anything that you do not
completely understand
3. Never invest solely for tax savings – always a bad return
4. Never ever invest borrowed Money
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5. Diversify – big word – means spread out your
investments
6. Should probably have 5-10 investments once we
get going
Ec 11:2 Give a portion to seven, and also to eight; for
thou knowest not what evil shall be upon the earth.
Pr 11:14 Where no counsel is, the people fall: but in
the multitude of counselors there is safety.
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7. Investment Choices We Have:
Cookie Jar = 0 risk and 0 return
(actually loose 2% per year to
inflation)
Savings account /CD’S = 0 risk
and 1.7% return (actually loose
per year to inflation)
Mutual fund = some risk, 12%
per year return average
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Individual Stocks- Higher risk, most people make
very little
Vegas – High risk, Most people loose
Day traders - Ultra High risk, very few who do not
loose
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Women – much
too
conservative
Men – often
take too many
risks
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F. When and where to Invest
If plan to use money in less than 5 years = Saving
(Wedding, TV, Car, House, Vacation….)
If more than 5 years = Investing (Retirement, Kids
College, dream home…..)
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If investing must get over 3% return to break even.
Must get 2% to keep up with inflation + 1/3rd more
to pay the taxes on any growth.
Most savings and money market accounts yield too
low of a return to ever make true progress.
Single Stocks = too much risk for most people.
Mutual funds = ownership of a tiny part in many
companies – spreads risk
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Investment % example
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H. Retirement Investing – this is
a MUST do for everyone!
IRA – invest now, pay no tax now but pay taxes
on withdrawal (assumes lower tax rate once
retired). Almost any investment eligible
Roth IRA – Pay tax first, invest, all growth tax
free! Almost any investment eligible.
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401K – employer offered retirement savings plan.
Investment options normally selected by employer.
Choose same as above for mutual funds. There
are maximum limits on income.
401K’s are a GREAT deal if Employer matches! =
match – instant free money
Roth 401K – same as 401K but pay tax first, then
grow tax free. Fewer limits on earnings (max
amount – any income). Employers can match. High
Limit – $19K - $25K / earner!!
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G. College Investing for kids
Traditional mutual funds – just
like above
401K – now withdrawal
allowed for education – but
cuts retirement multiplication
529 college savings account –
State tax free – not federal tax
free
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X. Investment Stupidity to Avoid
A. Insurance - Never invest with an insurance
company, never buy insurance from financial
institutions.
B. Commodities and Futures = get rich quick.
Either win or lose all. Better chance playing black
jack.
C. Day Traders – 70%-90% losing money =
gambling addicts.
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XI. The Purpose of Insurance
1. #1 assumption = all wealth belongs to God – it
is all under his control – so we are to treat others
money (including the insurance co) the same as
our own.
2. All through the Bible, God teaches faith and
provision & not protection.
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C.
But God also instructs us to foresee evil
and avoid it:
Pro 27:12 prudent man foreseeth the evil, and
hideth himself; but the simple pass on, and are
punished.
D.
We are also to bear all of our own burdens:
Gal 6:4-5 But let every man prove his own work,
and then shall he have rejoicing in himself alone,
and not in another.5 For every man shall bear his
own burden.
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E.The purpose of any insurance is to transfer
risk.
F.The test of do we need insurance – could you
alone provide for the unexpected loss yourself?
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D.
Life Insurance
Wrong name – it is really DEATH insurance
What is the purpose of insurance = to transfer risk?
It is not for investment!
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First type: Term Insurance.
a. Term gets it’s name because it is purchased for a
specific length or Term of time.
b. 10 years, 20 years 30 years level cost insurance.
c. You pay a certain amount / month and if die
family gets face amount
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Second Type: Cash Value insurance.
a. It is an investment inside and insurance
policy
b. 75% of all insurance sold is this type
c. It is what the insurance industry pushes –
because HUGE profit.
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Cash Value – best case for a 30 year old.
$100 per month to spend
Can get $125K of Cash Value Insurance
@ 40 years old – will have $20,000 in cash value
(invested + 7% return)
@ 60 years old – will have ~ $41,000 (invested +
7% return)
If die all your heirs get is the $125K – Insurance Co
keeps your cash!
Your family doesn’t get the $41K back! Your
investment is lost.
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b.
20 Year Level Term Insurance for same 30 year
old.
$100 per month to spend
$125K insurance costs only $7 per month
$93.00 per month available to put into a Roth IRA
At 60 years old = $327,000 + additional $125K
insurance if you die
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c. But – this is not enough insurance!
$125K at 10% per year = $12,500 per year – wife
and kids can’t live on that!
You really need 10 times your income
If make $40,000 – need $400,000 insurance so
when wife withdraws 10% per year she gets your
whole $40,000.
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e. Your Best Plan:
Never cancel any insurance until you are absolutely
certain that the new insurance is in force – OK to
overlap 1-2 months to be sure.
If you have Cash value insurance, apply for and buy
Term Insurance instead.
Once Term is in force, cancel Cash Value, pull out
and apply cash to debt snowball….or invest it if
debt free!
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