Click below to listen to Episode 97 – How To Make Good Financial Decisions

97 – How To Make Good Financial Decisions

Refreshments at Christian Financial Advisors Reception

Learn how to avoid costly, financial mistakes.

In episode 96, we talked about 21 common costly financial mistakes that we see people make. In this episode, we are going to break down different ways to avoid making these mistakes when it comes to major financial decisions. Examples of major financial decisions include items like buying a new car, moving, buying a new or second home, or taking out a college loan. Basically, this is any financial decision that goes above and beyond the normal daily, or even monthly, monetary decisions that we make.

In order to be best prepared when it comes to large financial decisions, we have divided our process into three different areas:

  • Emotional Side – This should carry the least amount of weight. However, for most of us, we let our emotions guide our decisions.
  • Spiritual Side – Does our decision honor God and have we sought his wisdom?
  • Factual Side – Does this financial expenditure make sense when it comes to pros, cons, and placing the actual facts down on paper?

HOSTED BY: Bob Barber, CWS®, CKA®
CO-HOST: Bailey Theaker

Mentioned In This Episode

Christian Financial Advisors
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Bob Barber, CWS®, CKA®
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Bailey Theaker
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EPISODE TRANSCRIPT

[INTRODUCTION]

Welcome to “Christian Financial Perspectives”, where you’re invited to gain insight, wisdom and knowledge about how Christians integrate their faith, life and finances with a Biblical Worldview. Here’s your host Christian Investment Advisor, Financial Planner, and Coach, Bob Barber.

[EPISODE]

Bob:
So in our last podcast, we talked about 21 costly financial mistakes people make. And today we’ve got part two of this series, how to make good financial decisions. So, if someone is needing to make a major financial decision soon, this is a great podcast. I mean, this is for you, too, either one, and I think we’re always having to make financial decisions, aren’t we Bailey?

Bailey:
I’m excited to hear about it because last time we talked about all the things not to do. And so I think this will be helpful to learn what to do now. So Bob, when you are talking about those big financial decisions, what kind of decisions are you referring to?

Bob:
Well, it’s the big ones and it’s buying that new car cause nowadays at the price cars are, that’s definitely a big financial decision. I’ve got a Ford Explorer and you’ve heard me talk about this on several podcasts and I’m approaching a hundred thousand miles. I remember, I think I paid 37k for about five years ago and I went and looked at some new ones with a V6 because I pull a trailer. They’re like $55,000. That’s a big financial decision. And I look at that and I think, this is for sure a losing deal. I know that this thing is going to drop 30% in the first year. And over the next three years, I know it’s going to drop probably 50% in value. So, I don’t think that’s a real good financial decision for me, but yeah, but that’s one of the big ones. I think that’s one of the biggest decisions today because the cars have gotten so expensive. Of course, buying a home is another one. The third one that I’m going to mention, I think you dealt with that a little bit, didn’t you, just recently?

Bailey:
Well, it’s been about a year. I’ve been here a year.

Bob:
Yeah. Oh man, time flies, doesn’t it? I can’t believe you’ve been here that long. This is because we’ve been having so much fun, but it’s changing a job and tell our listeners what this involved a little bit in your life so they’ll know what kind of decision you had to make.

Bailey:
Yeah. Well, my husband and I both were on full-time staff at a church in Houston and we had some friends who were moving to San Marcos to plant a church and they asked if we wanted to be a part of that. And there was a part of me that thought no, absolutely not because we had job security and we had roots planted and we kind of knew where we were going. But it became pretty clear pretty fast that that’s where God was leading us to. So in that transition from moving from Houston to San Marcos to be a part of this thing that we didn’t really know what it looked like, we had to take into account a lot of the things that you’re going to talk about in this podcast.

Bob:
Yeah. I mean, changing jobs is such a big deal. And so many times it does involve moving to another city. So yeah, we’re going to give you lots of things that you need to think about. Taking on lots of new debt too, is another big financial decision, like for college and are you really going to be able to make the funds back because of that? And college debt’s one of the biggest things that people have today. And another one that I’ve noticed over the years that is a big financial decision, especially I guess for a lot of our older clientele, is doing a major remodel on their home. I mean that can run easily fifty to a hundred thousand dollars or more. And is that a good decision? So those are a few of the big decisions that I was talking about in the program, when I was thinking about making the program, Bailey, and I know this list, there’s probably 200 people that are listening to us right now on this podcast. And they’re like, well, you didn’t mention mine. All this still will apply to any big financial decision that you’re making.

Bailey:
Yeah. And I think if it feels big to you, then it probably is. So even if it’s not on our list, it can be exhaustive. Bob, I know when we were talking about it earlier, we kind of broke how to make these decisions into three categories, being emotional, spiritual, and factual. Would you describe a little bit what those look like?

Bob:
Well, the emotions, you kind of helped me come up with that one because as we were going over these three areas, these three categories that break into financial decisions, emotions probably carry, many times, the most weight – emotions and feelings. They carry, many times, the most weight, but they should carry the least amount of weight when it’s making a large financial decision. But like you say, most often it carries the most. And then we have the spiritual side of the decision. And as Christians, we really want to honor God with the financial decisions that we make. You’ve heard me say that all financial decisions for a Christian should be spiritual ones as well. And I know that when we break out of God’s will, it is not a good thing. And when we’re not going with scripture, it’s not a good thing. So I really want my financial decisions, and I would think those that are listening to us today would want to put a lot of weight on that one too, on the spiritual side of it. And then the third one that should carry a whole lot of weight, too, is the factual side of making a financial decision and really putting all the facts on paper before you make that decision.

Bailey:
Yeah, that’s so good. So starting with those emotional factors, what would you recommend as the best course of action to start on a big decision? What part do you think emotions play in that?

Bob:
So Bailey, while emotions do deserve the least weight in decision-making, like I said, most often they take up the most. I really think that we need to remember this scripture from 2 Corinthians 10:5, “That we should demolish arguments and every pretension that sets itself up against the knowledge of God and take captive every thought to make it obedient to Christ.” So those thoughts that we have in our head and those emotions and feelings that get in there, we need to be very careful about allowing those emotions to guide us. Do you remember me pointing out the four spiritual laws to you the other day from Campus Crusade? And we used to give out the four spiritual laws. And I remember in the four spiritual laws how they said for a Christian, you should not allow your feelings to dictate to you, but you should allow the facts. So when it comes to emotions, here’s some things I want you to write down and write down why you really want what you want. Like we were talking about the new car or we’re talking about the remodeling, write that down. Why? It’s the why. Why do you really want it and write down how your vulnerability could affect making that decision. You and I were talking before this about when you go into the new car dealership, right? And you’re saying you’re very vulnerable. I used to be vulnerable, but I’m not any longer. And I don’t let my emotions play in it at all, but they play on that vulnerability. So write down how you’re vulnerable, and knowing how you’re vulnerable will help you to not make that decision based on emotions. And write down reasons you now no longer feel good about what you have. Why do you not feel good about the home that you’re in? Because you’re saying you need to remodel it. Is it because you’ve been watching HGTV so much that your cabinets are just not the right color that they’ve been showing. All you got to do is hang around a few years, it’ll rotate back. HGTV, especially, are all about getting you to constantly buy new paint, buy new cabinets, buy new countertops, buy new furniture because advertising is what pays for it. That’s an example. Like, well, everybody else has it. I’m seeing it all on TV. Now I need that. Well, that’s a vulnerability. And that’s trying to make you feel like you’re no longer good because you don’t have the newest and best thing. And those are reasons that you should really write down why you no longer feel good about that. Like that car. Maybe that car has just got 70 or 80,000 miles on it. And it’ll go to 300,000, but you don’t feel good because they came out with a newer model and you think you need that newer model and you think that’s going to build your self esteem, but that’s not where your true self-esteem is built because after you get the payments for the car and you see how much it’s going to depreciate, that’s not going to feel very good. And it could a financial decision negatively also affect a relationship with someone that you care about? And many times, it can.

Bailey:
Hmm. I know for me personally, that I often feel led by my emotions. It’s the first thing that I notice in any kind of decision making or situation so that’s just really helpful. I had a counselor, a mentor of mine, tell me that it’s sometimes helpful to do a brain dump before you make any big decision, not just financial. And that means just like getting a piece of paper and dumping all of your thoughts onto it, all the things that are kind of coursing through you. Get that all out on paper, because that’s the stuff that can often guide us. So I love those four prompts that we could get down on paper and kind of get them out of our system. So what about the spiritual side of things, Bob?

Bob:
Well, the spiritual side is truly if God owns it all and we believe it’s his, then we should pray about all major financial decisions, minor ones as well. But really these big ones and seek God’s will, and also seek wise counsel. And so prayer, that’s the most obvious. Pray about it. And I’m not talking about a one time prayer. I’m not talking about I’m going to pray for this for five minutes and I’m done, but really pray about this for several weeks, several, several months, because we’re talking about big financial decisions that involve thousands of thousands of dollars and seek wisdom from God’s word. Proverbs is just full of it. There’s 31 chapters in Proverbs and I’ve read Proverbs for many, many years. Read those 31 chapters over a month. I mean you’re talking about with a new car today making a 35 or $40,000 decision, or remodel, or are you going to go to college and take on debt? You’re talking about huge financial decisions. Don’t you owe it to yourself to take 31 days and to read through the book of Proverbs. Just read one chapter a day. I did that for year so much. So my kids were thinking, dad do you know any other book in the Bible? I said, yes I know many other books, and I go to all the other books of the Bible and scriptures, but 31 chapters in Proverbs really match the 31 days. And those days or 30 days, you just read that an extra chapter. And then seek wisdom about the financial decision from a mature Christian and not just a mature Christian, but one that’s also financially successful. We want to learn from the eagles, not from the turkeys. And I’m not saying that because you haven’t been financially successful, you’re a turkey by any means. Don’t think of it that way, but you want to get financial advice from those that have been financially successful and have done it through wisdom.

Bailey:
Absolutely. I couldn’t agree more. I know that I’ve personally tested the waters of making decisions on my own versus making decisions after seeking God’s counsel. And the difference is just astronomical. When we have access to the God of the universe, who’s at work at everything, then why would we want to do things on our own? Why would we not want to look to him for things? When we were moving here and was a really big decision for us, the tension between faith and wisdom got weighty, feeling like, okay, God, I feel like you’re calling us this direction, but also we want to walk wisely and steward our finances wisely. And so we did those things too. We sought counsel from people that we trusted and we knew. We searched the scriptures and then we just sought the face of God daily in making the decision. And it took us a while. I mean, I think it took us at least six months to finally make a decision that we were going to move. But aside from kind of the emotional side, the spiritual side, let’s move into the factual side of the nitty gritty details that go on paper. How much is this thing going to cost? What does it actually look like? This is kind of the wisdom side of things. Bob, how would you devise we get all those details in order?

Bob:
Before we get to the facts. Can I say something just about you, Bailey. You think about this. You delayed that decision until you really felt God calling you with his timing. All right. How many days before y’all were finally going to move did you find out about the job with Christian Financial Advisors?

Bailey:
Yeah. Well, it was actually, it was a crazy story because we felt like God had definitely said, this is where you’re going. And so we started to put one foot in front of the other in this direction, but we couldn’t find a place to live because every house we applied for, somebody got it instead of us. And then we had a couple job offers, but I really was holding out for this place because I was really excited about what y’all were doing here. And so we just said, okay, we’re just going to pack our stuff and go. And so I got the call. We moved on a Saturday, I got the call that I got this job the Thursday before we moved.

Bob:
Two days before you moved. Now, you think about that. If y’all had moved ahead of God and his timing, this would’ve never happened, would it?

Bailey:
Yeah. They found out about our house that same week too.

Bob:
I mean, so many times when things are delayed and we’re not feeling a peace about it, if you don’t feel a peace about it and you’re not ready to go, there’s a reason for that. The Holy Spirit is guiding you. And we had just found out about two or three weeks before that, that Kirsten was going to go into the ministry. And so just the way this whole thing worked out, I see that timing. I’m glad that you listened to God, by the way, because the timing works. So, we got a lot of facts that we’re going to go through. We’re going to go through about 10 or 11 of them. And this is the longest process when it comes to making a financial decision after you’re praying about it, and while you’re doing this, continue to pray, continue to ask for wise counsel. And like I said, get those emotions out of it. So the first thing is you need to write down the actual decision that you’re thinking about on a piece of paper or nowadays, in a notepad. I mean, I do so much what I do in a notepad. I don’t write a whole lot down on paper anymore, but I do it on my notepad, on my iPhone, actually, many times at 1:30 in the morning when I can’t get sleep, I’m looking at those decisions. So write that down. And then you’ve heard this for so many years, but it’s still is just, it’s such good, common sense. Write down what the advantages of that decision, of making that decision to buy that new car, or to buy that new house, or to take that new job. What are the advantages? And then what are the disadvantages of that financial decision that you’re thinking about? I want to emphasize here. I am not telling people to not go buy a new car. I’m not saying to don’t do your remodel. Think about the advantages. Remember what you and I were talking about this the other day, the advantages of a new car may maybe because your old car is just not safe anymore. You told me you had an old clunker and you did not want to go up and down Interstate 35 with the fear that that car could give out when you’re in the middle of 35. Well, that would have put your life in danger. So, there are reasons to buy another vehicle. There are reasons to do a remodel. Many times your air conditioning is giving out and your appliances have had to be repaired 10 times and it’s getting beyond the cost that it’s worth any more. So I see those advantages, but the disadvantages are there too. And like you mentioned, in buying a new car, the disadvantages are the depreciation is just so massive. I mean, who wants to go put their money into something that’s guaranteed, guaranteed, to drop by 30% in the first year and by 50% by the third year. That’s a crazy investment. So vehicles are not an investment. By the way, I’m going to say right now, and you heard me say this the other day, there are no good deals when it comes to buying a vehicle. People say, I got a good deal. No, you didn’t get a good deal. It’s a depreciating asset. You did not get a good deal. And there’s no good deals when it comes to depreciation, a depreciating asset. But those are the first two things I think that are very important is just write that down and the advantages and disadvantages.

Bailey:
Yeah. And the third thing that you could write down, and I think this kind of gleans off of number two of writing down those pros and cons. After that, ask yourself the question, is it totally necessary that I make this purchase or that I make it the way that I’m thinking about making it? I mean, not having AC in your car in the middle of Texas when you have to commute an hour to work is probably not really doable for you.

Bob:
You might die from heat exhaustion. Yeah.

Bailey:
So that might be a necessary purchase, but ask yourself that question, is it necessary? And number four being, can you live without it? Do you actually need this thing in your life, or is it really a want?

Bob:
Let’s get back to the new car thing. Ask yourself is it totally necessary to buy a brand new car? Or could I buy one that’s two years old or three years old that’s already had that major depreciation taken out of it and is still a very good vehicle. And the answer to that is yes, without a doubt. The fifth one is can you afford the additional ongoing cost that’s going to come with that financial decision and is it going to fit within your budget without taking away from somewhere else? I’ve had an entire podcast on this. We talked about this in our last podcast. There’s only four places to spend money. Everything fits within live, give, owe, grow. Live, give, owe, grow. Now we’re always going to owe taxes, but when it comes to debt, as an example. If you raise your debt or you didn’t have any debt and you had to go into debt to afford it, now somewhere, something’s got to give. Your giving is going to have to go down or your living is going to have to go down or your growing, investing for the future. Somewhere one of those four is going to get affected because there’s only four pieces to the pie, and if you make one piece bigger, the other pieces are going to get smaller. Does that make sense?

Bailey:
Yeah, absolutely. That makes total sense. And that kind of leads into number six. Will this decision put you in more debt? This is a decision, totally presume on the future. I know I had a friend tell me kind of way back in the day before I got a credit card or anything and really started making adult decisions that well debt is just part of life and so you should just assume that you’re going to be in debt forever. And this person was in school and paying for college and had a car payment and that’s just the way that they lived their life. And I thought, Oh no, I really don’t want to live owing things to people all the time. And so as little debt as possible is just way, way, better, way more relieving. And so the question of will this put me in more debt, something to think about.

Bob:
Debt is bondage, and like Proverbs says, “You become a servant to the lender,” especially, and we shouldn’t be a servant to anybody but Christ, but you become a servant to that lender when your debt is too high. This comment that debt totally presumes upon the future. That’s a comment from Ron Blue, who’s very well-known in the Christian community for financial advice. I’ve had Ron on several of my podcasts. Ron’s about, I don’t know. I think he’s like 75 or 80 now. And he was the founder of Kingdom Advisors, this large nationwide group, I heard last it’s up to over 4,000 members now of Christian, financial planners and advisors, but he’s the first guy I ever heard say that, that when you take on more debt, you’re presuming upon the future. And really, none of us know what the future holds. Some of our last ones today, are there additional ongoing costs from the decision that you didn’t have before making that decision, like a second home? I’m pointing to myself here. We’ve had a second home, several of them, and I’ve had large and I’ve had small and then large again. And I’m ready to go back to small because the larger the home, even though it’s completely paid for. And like, we put it on VRBO, and it’s rented, but still there’s a lot of ongoing costs with owning a first home or even a second home. I mean, Bailey, right now y’all rent, and I know y’all probably want to buy. And I think that that’s a good thing to buy a home, but you’re going to have costs when you do that that you didn’t know about. I mean, insurance, taxes, maintenance, things will pop up. And now when something pops up and something goes wrong, you can just call your landlord and he’ll come fix it. Air conditioner goes out, he’ll fix it. Dishwasher goes out, they’ll fix it. Water heater goes out, they’ll fix it. You own a home, air conditioning goes out. Who fixes it? That’s on you.

Bailey:
That’s on you.

Bob:
Yeah. Water heater goes out, you fix it. I’m talking to you to everyone, they may not know it, but we’re doing a podcast on a Friday. So I’m in my place in Rockport. And my light went out on our pool down here, guess who fixed it? Me. Guess what? They started getting in and trying to fix the light. And because there’s a lot of sand down here, the pipe had broke and they had to go into the foundation down five feet because they couldn’t get the wire to go through. So a little, couple hundred dollar light ends up being a couple thousand dollar light. Those are the kinds of things that you just got to think about that are going to hit you from nowhere with financial purchases, especially a second home, or even even your first home. And what are the longterm financial costs of the decision and is it really worth it? Would it be better to wait for another time to make that decision and are there alternative, less costly options? Like I said, can you rent cheaper than owning it? I’ve had a couple of clients, they’re looking at buying an RV as an example. That’s another major decision nowadays. And you talk about something that loses value, a huge amount of value. And now there’s, I think it’s called RVrentals.com. Well, instead of going and buying a 100k RV, you can go rent it for three months for $9,000 at $300 a day. And the depreciation, you’re going to put out $9,000, but if you’d have bought it for a hundred thousand, it’s going to depreciate by 30k. So, you’re better off and you don’t have to worry about all the things that can go wrong either. So, there’s things like that. And you just always gotta think about what’s this financial decision going to look like years from now? Remember when we did the rule of 72 program, the podcast? And if you haven’t heard of, I’d invite you to go back and listen to that rule of 72, but you take $30,000 out and that’s not going to buy you much of a car today, but you take $30,000 out to go buy a car, that money is no longer growing, and my compounding interest, that money’s not going to double to $60,000 in say 10 years or 12 years.

Bob:
And it’s not going to double from 60 to 120. So you think about 20 years from now, that $30,000 car you bought is going to be worth 5-6k. But if you kept the money in there, it’d be worth 100k or more. Now, I’ll put this statement in here. There’s no guarantee of future returns. Past performance is no guarantee of future performance, but historically that’s what would happen. So, what’s that financial decision going to look from now? So, man, there’s a lot here to making good financial decisions, and I hope that we’ve helped you, as our podcast listeners. I hope we’ve helped you in making that next financial decision, make it be a good one. Like I say, if it’s not you that’s faced with this, maybe somebody that has to. Most of us know someone that’s coming along to that fork in the road, and they’ve got to make that decision, and it’s a financial one. I would encourage you to tell them about this podcast and have a listen to it. And as always, we always put the script of the podcast right behind the podcast on our website at christianfinancialpodcast.com, and it has all these different things that we’ve been talking about.

Bailey:
Yeah. Well, I know that that all those prompts and questions can feel somewhat overwhelming, but thankfully you don’t have to do it alone. We’ll have this podcast up on the website with all of those so you can reference back, and you can always give us a call at the office at (830) 609-6986, and we are happy to help.

Bob:
And you can always also go to christianfinancialadvisors.com. That’s all for today.

[CONCLUSION]

That’s all for now.

We invite you to listen to all of our past episodes covering many financial topics from a Christian perspective. To make sure you don’t miss any of Bob’s upcoming episodes you can subscribe to Christian Financial Perspectives on iTunes, Google Play Music, Spotify, or Stitcher. To learn more about integrating your faith with your finances, visit ciswealth.com or call 830-609-6986.

[DISCLOSURES]

Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors, also known as Christian Financial Advisors, a registered investment advisor. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the host, Bob Barber and his guests. Bob does not provide tax advice and encourages you to seek guidance from a tax professional. While Christian Investment Advisors believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.