Be Prepared

Excerpt Adapted From: The Financial Shepherd®
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

Abraham Lincoln once said, “If I had eight hours to chop down a tree, I’d spend six sharpening my ax[e].” The point is that the will to prepare is as important as the will to succeed because success comes when preparation meets opportunity. 

Our goal through this book is to prepare you for your future role as a Financial Shepherd and to help you gain the following characteristics: 

a. Confidence- The ability to lead, and not just blindly follow; to finally feel refreshed and full of faith that your financial future will be better than it has ever been. 

b. Direction- For many this will be the first time that you are fully aware of where you’re going and how to get there. This financial map will provide direction and guidance and give instruction on how to navigate the hills and valleys that lead to success.  

c. New capabilities- Many people cannot obtain wealth because they are unaware of all the blessings of God. Ignorance is no longer an excuse. Stocks, options, derivatives, and mutual funds are available to God’s children to bless His people. It is time for us—that means you too—to openly receive this information and prosper. We believe that many millionaires will be created from reading this book.

The Road to Financial Independence

Excerpt Adapted From: The Financial Shepherd®
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

Years ago, retirement was almost considered a time to die. Now it is considered the optimal time to live – and for much longer. According to the National Center of Health Statistics (2007 report), a child born in 1900 had a life span of 47.3 years versus a contemporary child born in 2007 now has an expected lifespan of 77.9 years.  Therefore, many people in professional careers will live just as long in retirement as they did in the workforce. The question is: How will they survive?

Word to the wise, retirement should be a major consideration from the first day you enter the workforce—or as one colleague says—begin with the end in mind. In mapping out a strategy for retirement planning, be sure to ask (and answer) the following questions in conjunction with a financial planner who’s qualified to advise you on various options for long-term retirement investment plans:

  1. When do I want to retire?
  2. What does retirement mean to me (full-time travel and leisure, part-time work, full-time volunteer/service/missions, etc.)
  3. How much money do I need to fund my ideal retirement?
  4. How will I pay for retirement?  
  5. How will I cover health care expenses or unexpected medical costs?
  6. What is my lifestyle going to be like; will I increase or decrease my standard of living? 
  7. Where do I want to live? e.g. closer to family, in a warmer climate, or near specialty medical centers?
  8. Do I want to keep my home, purchase my dream home, or downsize to something smaller and more economically feasible?
  9. How would I like to manage the estate planning process to bequeath my possessions after I die?
  10. What professionals do I have in place that can assist me with retirement and estate planning to accomplish my long-term financial goals?

As you think about how to answer these questions, keep in mind that there are three primary ways to pay for retirement:

  1. Employer-based plans (retirement savings plans, company matching retirement funds, etc.)
  2. Government-based plans (Social Security)
  3. Personal plans (independent wealth, residual income, inheritance, etc.)

Learn the Lingo

Excerpt Adapted From: The Financial Shepherd®
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

Many times we hear that the market trades up 40 points or down 40 points on any given day. These comments reflect the importance of the overall stock market in determining the price behavior of individual stocks or bonds. Some experts feel that this is the key and major factor in determining the securities selection (buying or selling). They feel that the stock market is what matters most, not individual securities. Others feel that the individual company is the only factor when buying a security. Analyzing these various forces in the stock market is known as technical analysis.

We feel that studying the market is only one element in the security analysis process and it is helpful in making decisions.

For example, think about the fall of 2008. There were some companies that remained profitable and their outlooks remained bright. In fact, there were even a few banks that hardly felt the “financial meltdown.” However, their stock prices still fell because the overall stock market fell. Therefore, it is important to watch the overall outlook of our economy; it’s important to see the big picture and keep both short-term and long-term goals in mind. 

There are many types of technical analyses available, but here is a list of the most common ones: 

  • Charting
  • Market Volume
  • Breadth of the Market
  • Short Interest
  • Odd Lot Trading*

I could write a book on technical analysis because of its profound effect on stock market determinations. However, we will cover that topic at another time – I just want you to be familiar with the term and its relevance to the industry. 

Odd lot trading is a term that you need to know. As a matter of fact, the impact of this phrase is one of my motivations for writing this book. I remember early in my career speaking to a seasoned veteran Wall Street trader, and he told me he used odd lot trading as a way to diversify or sell a security all together.

Understand that many people and most institutional investors buy stocks in even lots (multiplies of 100). However, small investors may not be able to afford even lots so they but in lots smaller than that multiple – which are called “odd lots.”  For example, if you wanted to buy stock in XYZ company, and it costs $203 per share, usually an investor would buy at least multiples of 100 shares; so let’s say 500. That would cost ($203 x 500) $101,500 plus trading costs. But what if you wanted this stock and only had $2,000; then you could only buy nine shares ($1,827 + trading costs). That would be considered an odd lot trade which frequently works against small investors and puts them at a disadvantage. 

Adding insult to injury, small investors are notoriously wrong in their timing of buying a security for a couple of reasons:

  1. Small investors usually get crucial information last (too late).  
  2. They usually wait until the news is great before they buy.

Remember, when it comes to investing, the goal is to buy low and sell high.  When the news is great, it’s usually about something that has already happened – and that is too late. As a Financial Shepherd, your responsibility is to get in the game, learn the lingo, and stay in the game until you win. 

As we said previously, what goes up must come down. Conversely, what goes down will also eventually come back up. Decades upon decades, we’ve seen that the market ultimately corrects itself – even in the face of huge trade and financial deficits and uncertain economic times. It is fairly certain that there will be more down days ahead, but when these days arrive, they open up huge opportunities to invest. The lesson I want you to remember is to keep saving so that you can invest like the professionals and take advantage of these good opportunities when they come along. When the market corrects itself, the pros win and win big – and you can too! 

Looking for an Advisor? …Seek Quality

Excerpt Adapted From: The Financial Shepherd®
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

The person needs to know more than you about a particular area of expertise, otherwise, you could do it on your own. The individual should have more than just training from a company, but also should have some type of designation. There are many designations that advisors can simply pay a fee for and have it on paper to make them look more credible. You want to make sure that they have accreditation and designations where extensive training and continuing education are involved. Within the financial realm, the most creditable designation is the CFP, or Certified Financial Planner. In addition, if someone is going to manage your money, they should also be a registered investment advisor. Another designation is the RFC which stands for Registered Financial Consultant and requires more continuing education than most others. Regarding finances, the point is not just about getting a designation, it’s about continuing to learn and evolve as the financial world around us evolves. If you want to hire an accountant, then they need to be a signed fiduciary, or a Certified Public Accountant (CPA).  If you need an attorney, make sure that individual specializes in the area of law that you need. For instance, you should not use a personal injury attorney to complete your estate planning or a defense attorney to close your real estate transactions.

Most people think that all financial planners are “certified,” but this isn’t true. Anyone can call himself or herself a “financial planner.” Only those who have fulfilled the certification and renewal requirements of the CFP Board can display the CFP® certification marks. When selecting a financial planner, you need to feel confident that the person you choose to help you plan for your future is competent and ethical. The CFP® certification provides that sense of security by allowing only those who meet the following requirements the right to use the CFP® certification marks.

Here is some helpful information to know: CFP® professionals must develop their theoretical and practical financial planning knowledge by completing a comprehensive course of study at a college or university offering a financial planning curriculum approved by the CFP Board. CFP® practitioners must pass a comprehensive two-day, 10-hour CFP® Certification Examination that tests their ability to apply financial planning knowledge in an integrated format. Based on regular research of what planners do, the exam covers the financial planning process, tax planning, employee benefits and retirement planning, estate planning, investment management, and insurance. Finally, CFP® professionals must have three years minimum experience in the financial planning process prior to earning the right to use the CFP® certification marks. As a result, CFP® practitioners possess financial counseling skills in addition to financial planning knowledge. As a final step to certification, CFP® practitioners agree to abide by a strict code of professional conduct, known as CFP Board’s Code of Ethics and Professional Responsibility, that sets forth their ethical responsibilities to the public, clients and employers. The CFP Board also performs a background check during this process, and each individual must disclose any investigations or legal proceedings related to their professional or business conduct. (Certified Financial Planner – Board of Standards, Inc. website.

Building and/or Restoring Credit

Excerpt Adapted From: The Financial Shepherd-
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

In building or restoring credit, the goal should not be to have no credit at all, but rather to use your credit wisely. Use credit as a resource, not as an emergency reserve fund. Credit not only affects your purchasing power but it can affect getting a new job or getting life insurance to protect your loved ones. The goal is to achieve a high credit score of 720 or above. There are several easy ways to help build up your score.

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Retirement Planning: Index Investing

Excerpt Adapted From: The Financial Shepherd-
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

A contemporary consideration for modern-day retirement planning is the idea of longevity risk. Due to longer life expectancies and advances in modern medicine, people are living longer than ever. In some instances, they are outliving benefits designed to help them survive and thrive during retirement. Corporate re-structuring has resulted in fewer employer-matched investment funds and fewer generous benefits packages. Many types of previously held financial entitlements are no longer in existence, and the burden of responsibility has shifted from employer to employee.

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Un- American Dream

Excerpt Adapted From: The Financial Shepherd- 
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

Affordable education used to be an accessible rung on the ladder that led to economic success and upward mobility. However, “affordable education” is a paradox in the new millennium. On average, a high school diploma guarantees nothing more than the promise of a mediocre life marked by a low-paying job in a society where minimum wage does not support an individual’s ability to provide for his or her family. Across the nation, college tuition rates have outpaced salary increases, and many families simply cannot afford to educate their children without going further into debt by taking on student loans or taking out second mortgages on their homes.

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Introduction to The Financial Shepherd

Excerpt Adapted From: The Financial Shepherd- 
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

Have you ever wondered why some people have SO much money, and why others have so little? What makes the super-rich any different from you? For anyone who has ever wondered what the difference is between the “haves” and the “have-nots,” you may have just found your answer. Regardless of how much money you have or don’t have, the journey to financial success begins with understanding and accepting how you think about money, how you feel about money, and what you know about money. Once you achieve a realistic assessment of where you are financially, there are specific steps and proven strategies that can propel you toward accomplishing positive financial goals and securing financial freedom.

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Blessed to Be a Blessing

Excerpt Adapted From: The Financial Shepherd-
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

Although we have touched on this subject in other chapters, we want to take a moment to expound on a particular verse: Proverbs 13:22 – “A good man leaves an inheritance for his children’s children, but a sinner’s wealth is stored up for the righteous.” Proverbs 13:22a, provides an excellent example of a Financial Shepherd. What is clear about this verse is that the wise man leaves a legacy. More often than not though, that legacy does not involve the riches and wealth we tend to think about when we talk about an inheritance. Often the legacy comes in the form of wise counsel and seeds of faithfulness. As the children of Israel benefited from Abraham’s faithfulness, and Solomon benefited from David’s wise counsel, so too do we have to be prepared to leave an inheritance of righteousness. Most parents want to see their children become more successful than themselves, so they instill in them wisdom from their own life’s lessons and other intangible instructions for success. If you were provided with this type of legacy from your own parents, the wisest decision you can make is to work to ingrain the same teaching in your own children, grandchildren, nieces, nephews, and cousins. Truthfully, your children aren’t just those that were born to you or reared in your household, they include those that follow your instructions and those that are impacted by your decisions as well.

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The Need for Retirement Planning

Excerpt Adapted From: The Financial Shepherd-
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

For much of the 20th century, retirement in America was traditionally defined in terms of its relationship to participation in the active workforce. An individual would work full-time until a certain age, and then leave employment to spend a few years quietly rocking on the front porch. Declining health often made retirement short and unpleasant. Retirement planning, as such, typically focused on saving enough to guarantee minimal survival for a relatively brief period of time.

More recently, however, many individuals are beginning to recognize that for a number of reasons, this traditional view of retirement is no longer accurate. Some individuals, for example, are voluntarily choosing to retire early, in their 40s or 50s. Others, because they enjoy working, choose to remain employed well past the traditional retirement age of 65. And many retirees do more than just rock on the front porch. Retirement is now often defined by activities such as travel, returning to school, volunteer work, or the pursuit of favorite hobbies or sports.

However, this changed face of retirement—with all of its possibilities—does not happen automatically. Many of the issues associated with retirement, such as ill health, and the need to provide income, still exist. With proper planning, these needs can adequately be addressed. So, ask yourself, ‘What exactly do I need and how much money will it take to comfortably retire?’

Retirement in the new millennium now encompasses many more complex issues than it did decades ago. When most of us were growing up, the terms Social Security and retirement were practically synonymous. The process was fairly straightforward: graduate from high school, maybe go to college, then get a job and stay there for 30 years while paying into the Social Security system; then retire, relax on a front porch swing, and collect a monthly payout in return for your years of dedicated service. Well, that is no longer the case, and complete reliance on an under-funded Social Security system that’s heading toward bankruptcy is certainly a risky proposition. Here’s why:

Social Security is a system of social insurance benefits available to all covered workers in the United States providing added protections against the societal pressures of advanced age, disability, and poverty. The program was initially launched in the mid- 1930s as part of President Franklin D. Roosevelt’s New Deal package. The benefits are funded primarily by payroll taxes paid by covered employees, employers, and self-employed individuals, and they kick in at age 65 (or reduced benefits at age 62). The goal of Social Security has always been to provide a secure future for American workers. Ironically, that sense of “security” is slowly eroding because of an imbalance of more retired workers from the Baby Boomer generation receiving benefits from the system versus the number of current workers paying into the system. Additionally, economic downturn, decreased interest rate earnings, and escalating inflation rates have weakened the value of the dollar over time. It is quite possible that Social Security as we’ve known it for decades might no longer be in existence in the not-too-distant future. Successful financial planning for retirement will require an investment strategy much more comprehensive than Social Security – but at least it’s a start.

To qualify for Social Security benefits, a worker must be either “fully” insured or “currently” insured. Eligibility for “insured” status is earned by acquiring credits based on wages or self-employment income during a year. In 2010, an individual had to earn $1,120 in covered earnings to receive one credit and $4,480 to earn the maximum of four credits for the year. Americans workers become fully insured by earning 40 credits or by working 10 years in covered employment. The following benefits are available for fully insured workers:

  • Worker’s benefit – Monthly income for a retired or disabled worker.
  • Spouse’s benefit – Monthly income for the spouse or former spouse of a retired or disabled worker.
  • Widow(er)’s benefit – Monthly retirement income for the surviving spouse or former spouse of a deceased worker.
  • Child’s benefit – Monthly income for the dependent child of a deceased, disabled, or retired worker. The child must be under age 18; or 18 or 19 and a full-time elementary or high school student; or over 18 and disabled before age 22.
  • Mother’s or Father’s benefit – Monthly income paid to a surviving spouse who is caring for a worker’s dependent child who is under age 16 or over age 16, but disabled before age 22. If under age 62, the spouse of a retired worker receives the same benefits.
  • Parent’s benefit – Monthly income paid to the surviving dependent parent or dependent parents of a deceased worker.

Still, no matter how you look at it, the derived benefits from the Social Security system do not meet the ever-increasing costs of living and rising levels of inflation. Government-subsidized benefits alone are simply not going to be enough.

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