Author Archives: Troy

Stressed about Savings? Divide and Conquer!

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Piggy Banks

JamesCube (Pixabay)

Trying to decide what to do with the money you have can be stressful.  There are plenty of people willing to “help” you invest your money, but they rarely agree on how.  Just leaving it the bank doesn’t seem right, but neither does losing it all in the market.  I have found that dividing my money into two parts reduces the stress and gives me confidence.

Protection vs. Opportunity

There are two very different points-of-view when it comes to investing money.  It’s possible to look at money as something to protect for some point in the future.  It is also possible to look at it as an opportunity for gain.  Both perspectives have benefits, but they require that we invest in different ways.

When we look at money from a protection point of view, we want to make sure that we don’t lose it.  Our concern is not about future gains, but about having something at a specific time.

When we look at money from an opportunity point of view, we are willing to wait in order to get a big gain.  We’re hoping to use money in order to get significantly more, but we can’t really control the timing of it.

These two points of view, are at odds with one another.  Like the old saying goes, you can’t have your cake and eat it too.  We can’t protect something and risk it at the same time.  When we choose opportunity, we also choose to risk not having our money at a specific point in time.

Many of the professionals in the financial world are more focused on opportunity than they are on protection.  It’s good to keep that in mind when you seek help.  If your intention is to protect, you probably won’t need professional help.  With a little education, you should do just fine on your own.

Insurance vs. Investments

Those who intend to preserve their money are better off thinking about it like they would insurance.  That’s because when you preserve, you are saving what you’ve already earned.   You’re just making sure that it’s there for you when you need it.  A preservation mentality is helpful when you are saving for specific things.  Those things might include maintaining or buying a car.  Other things include buying a house, paying for college or for paying for retirement.  Preservation is good for those things that you already know that you will probably need.

When you want to use your money to take advantage of growth opportunities, insurance doesn’t really make sense.  That’s because you’ve accepted the risk that your money won’t necessarily be there at a specific point in time.

Promise vs. Potential

When we make a decision about where we put our money, we need to decide whether we care more about having a promise that our money will be available, or that we have the potential to gain when opportunity arises.

These kinds of financial arrangements are at odds with each other but they both have their place.  If there was no potential for gain, there wouldn’t be a way to have something to preserve.  If there was no place to save your money, how could you keep what you have gained for a time that you need it?

Determine Your Timing Related Risk Capacity

When I say “timing related risk,” I mean the kind of risk you expose yourself to by not having money when you need to use it.  Considering your timing related risk capacity is a good way to decide whether you should preserve or speculate.

source: nattanan23 (Pixabay)

If you don’t have any savings at all, then you are at risk whenever something doesn’t go right.  You really don’t have any capacity for timing risk.  If you have no extra money and your car’s transmission fails, you would immediately be in financial trouble.  It’s important to have emergency savings and not having it definitely qualifies a timing related risk.

There are other timing related risks you may have.  Retirement is an important one.  You can calculate the amount of time that remains before you plan to retire and the amount of money you might need for the rest of your life from that point.  These projections expose a risk.  If your retirement money isn’t there when you need it, you will probably suffer.  Other things have timing related risk too, like buying a house, paying for college or paying for family vacations.

When we think about risk, we need to consider what we would feel like if our money wasn’t there when we need it.  If the money you are thinking about isn’t going to be needed for a particular time in the future, then opportunity investing is probably a good idea for you.  If you know what the money is intended for, then preservation investing would probably be a better idea.

A Helpful Separation

I have found it helpful to separate my money into two distinct parts.  One is the part I intend to preserve as savings.  That part includes my emergency savings, the part of my retirement savings that would pay for my basic retirement needs and any other amount of money that I would rather preserve than take risks with.  These may include funds I intend to use as an inheritance or a donation.

The other part is for investments that I believe will eventually be profitable.  For these investments, I accept that I don’t know when they will be profitable and I am willing wait.

Less Stress

By taking your savings and setting it aside as something you intend to preserve, you don’t have to worry about how much money it makes.  As long as it keeps up with inflation, it will still be there for you.  The rest you can use to do some investing.  That’s the part you may want to have an investment professional help you with.  If things don’t go quite as well you expected them to go, you can rest assured that your savings is still intact.

Thinking of Retirement as Standard of Living Insurance

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Professor Zvi Bodie of Boston University said something that really shaped my thinking about retirement savings.  He said that we should think about retirement savings more like we think about insurance.  When I tried that, I realized that it caused me to challenge the advice about retirement that I often hear and read about.  It exposed something that I was seeing that I knew didn’t seem right as I was planning for retirement.

Assurances are not Guarantees

Fund managers want you to invest in their products, but they don’t give guarantees.  They are careful to have disclaimers so that we understand that we could actually lose our money.  That’s worth taking time to consider.  Professor Bodie says that these management companies are in a far better position to understand risk management than the common person, yet they refuse to guarantee that you will even have your retirement savings when you need it.  They give assurances, but they refuse to give a guarantee.  Professor Bodie says that the reason they don’t give a guarantee, is that they can’t.  Instead, they leave the risk of the investment with the person who is least knowledgeable about what they are doing.

A good thing to ask ourselves is: “Why can’t they give a guarantee when they are managing the money?”  The answer is: “Because the investments they use are risky and they know it.”

Professor Zvi Bodie does a great job of explaining the problem here in his video:

Is it really Savings?

I think that there is terminology that retirement fund salespeople should not be using.  They often refer to the money that we put into mutual funds or the stock market and other volatile investments, as our “retirement savings.” In my opinion, the money we are putting into those kinds of investments are actually “retirement ventures.”  Since no one is committed to maintaining a specific amount of money in those accounts, I don’t think that it can legitimately be called: “savings.”

When we use the word “savings” we naturally think of money in a piggy bank or money in a banking institution.  In those places, our money is insured in some way.  Our piggy bank is locked in our house and our bank accounts even have deposit insurance from the federal government.  We naturally expect that when we return to our bank, we will find the same amount or more than we left in it, but that’s not how most “retirement savings” accounts work in my experience.

Unfortunately, we need to be on guard when money managers use the term: “savings.”

Guaranteeing our Savings

There are ways to guarantee savings, and some of them come at a cost.  We know that insurance has a cost because many of us have insurance for other things like healthcare,  our cars or a house.  Insurance costs something because someone else is bearing a risk for us.  When we think of something as important as our retirement, doesn’t it make sense to insure that it will meet our basic needs?  Sure there are things in retirement, like golf or fancy vacations, that we don’t really need.  I’m not talking about that necessarily, but what about food and medical needs?  What about the power bill or visiting family for Christmas?  Do we want to become a burden on our adult children when it can be avoided?

Zvi Bodie brings up an interesting point in another place.  He suggests that we consider the fact that we are willing to pay $1000 for fire insurance for our house even though it is very unlikely that our house will burn down.  The chances are very small, yet we still pay for it.   That’s because we believe that the seriousness of not having a house outweighs the fact that it is unlikely to happen.  What good a house if I am unable to live in it in because my retirement savings has disappeared?  It doesn’t really make sense to protect the house and not protect my income.

Two Categories of Retirement Funds

Thinking about retirement in this way leads to dividing our retirement funds into two parts.  One part is the part you reasonably believe you can’t do without in your old age.  The other part is for things that you hope for, but that are not critical to your survival.  When we divide it up like this, and get insurance for the critical part, it can lead to peace of mind knowing that our critical retirement needs are guaranteed to be there for us.

Guaranteed Retirement Options

When it comes to ways to guarantee the critical part of your retirement, you might be imagining a large piggy bank or perhaps a bank CD.  If you have been reading my blog, however, you know what I think about that.  Both piggy banks and CD’s are not usually inflation protected, which means that they are not a guarantee.  They fail to be a guarantee because you don’t know what the contents of your piggy bank will buy in 30 years when you need it.

There have been CD’s that were “inflation-linked” in the past but I have not seen any in the last few years.  Hopefully, demand for them will increase and they will be offered again in the future.

Social Security

One obvious form of retirement insurance is Social Security.  It is inflation protected and it’s definitely something to consider when thinking about your critical retirement savings.  Social Security is likely to go through some changes in the future, but I expect that something very similar to it will be available for a long time to come.  There’s more about this investment in the article: Possibly the Most Popular Inflation Protected Investment.

Company or Government Pensions

If you happen to have a job that offers a pension that adjusts your payments for inflation, you are in a good position.  When I say pension, I mean the old fashioned kind that doesn’t require that you manage the money and that does provide a written guarantee.  Pensions that don’t adjust for inflation, are helpful but they don’t guarantee that you won’t run out of money to pay your expenses in the distant future.

Be Careful With Insurance Annuities

Other insurance products are provided by insurance companies by way of inflation adjusted annuities.  I would just make sure that the inflation adjustments are connected to actual inflation and not a flat percentage increase each year.  It’s important to understand how much you are paying for that insurance up front too.  Beware: Insurance companies use the word “guarantee” in a similar way that fund managers use the word “savings.”  Make sure you know what they are actually guaranteeing.  Guaranteed percentages are not the whole story.  You also need to know the exact amount of principal the percentage is calculated against.  If the principle goes down with something other than inflation, it’s not much of a guarantee.  Also remember that if the guarantee isn’t in writing, it’s still not a guarantee.  Insurance companies do and have gone out of business.  Zvi Bodie recommends splitting up your funds between companies.

Home Equity

The Equity in our homes really is a form of inflation protection.  Because a house is a physical thing that represents one of our important needs, it’s automatically inflation protected.  Its value goes up with inflation because a house is still a house no matter what the value of money is.  Just having your home paid off is big part of insuring your retirement.

This presents an option for those who have no heirs or have no other choice.  Many of us spend our lives paying the bank to own a house.  The tables can be turned.  It is possible to sell the equity to the bank and have them pay you to live in your own house.  That’s what is called a reverse mortgage.

Once again caution is needed.  Make sure to read everything in any contract to make sure that the bank isn’t taking too much for themselves in the deal.  They may woo you with assurances that the remaining equity will go to your heirs, but I am told that this is often not the case because of high fees.  Again, there’s no guarantee.

Another thing to consider is selling your house to your heirs, with permission to continue living in the house as long as you can.  Working a deal with your loved ones could be a practical option and it can be a win-win situation with them.

Inflation Protected Bonds

My favorite option is to use Treasury Inflation Protected Securities and I Bonds for savings that I want to insure.  I do have to do a bit more work myself, but fees are low or non existent.  These are just boring government bonds that usually don’t make a whole lot of interest, but they do one thing very well: they protect long-term savings from inflation and that’s what I’m looking for when it comes to protecting the critical part of my retirement savings.

Further Reading

How to Buy an I Bond
If you are ready to get some I Bonds right now and protect some of your savings, I’ve made some step-by-step instructions to help you set up your Treasury Direct account and purchase your first I bond.

The Effects of Inflation

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Hamburger with fire background

Meditations (Pixabay)

Whether intended or not, one of the bad effects of a government-regulated monetary system, is that it creates a disconnect between money and the real things we need to buy.  Take food for instance. If we were use hamburger gift certificates instead of the money we use today, we would know that we would get the same amount of food for our money today as we would after leaving the certificates in a box for 10 years.  Somehow, we’ve managed to mess up our monetary system such that it is significantly more difficult to depend on it for real needs… like eating or clothing ourselves.

Let’s consider the effects of inflation using terms that we can actually eat.  Let’s assume that you had put a 10 hamburger certificate under your mattress in the year 2000, only let’s also assume that someone has allowed inflation to eat your hamburgers without your permission over time.  How many hamburgers do you think you would be able to buy today with an inflation adjusted 10 hamburger certificate?  By 2017, your 10 hamburger certificate would only buy you about 5.68 hamburgers.  This is quite typical, inflation is usually eating away at our savings.  There’s a website that makes it easy for you to see how the costs of things have changed over time as a result of inflation.  It provides a calculator that allows you to enter your own dates and amounts and see the effect for yourself using the government inflation data.

Try it at:  US Inflation Calculator

The problem is that once money is disconnected from something real, it can change in value quietly over time.  For much of the United States’ history, our money has been buying less and less over time.  There were periods in which inflation went backwards.  Yes, that’s called deflation.  That might sound good at first, but those times are often harmful as well.  One of the most notable times that this happened in our history was the Great Depression.  If deflation is happening to money, it’s likely that it’s because people don’t have jobs or money to pay for things they need.

Whether our problem is inflation or deflation, disconnecting money from something that is real is not a very good savings plan.  In order to plan, you kind of need to know how many hamburgers you will get to eat, shoes you will get to buy or tanks of gas you will be able to fill.  Thankfully, there are still some tools at our disposal that can help us combat the effects of inflation like I Bonds and TIPS.  They’re not quite as easy as putting money under your mattress, but at least they are available.

A “Neutral” Government?

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If philosophical neutrality is a fallacy, as I previously asserted, then building a government on this philosophy is a critically serious problem.  It appears to be a trend in governments across the world and it looks like a plan forged by the powers of darkness to me.

Peace does not come by the careful application of a fallacy.  It only comes through love and proper reasoning and that will mean that those who are thinking irrationally will have to be exposed.  That exposure doesn’t feel very good and some will fight to death over it, but I know from experience that true humility brings peace when we are finally willing to admit that we are wrong.

I was reading a report from a few years ago, about a Canadian ruling that was addressing the contents of prayers before meetings.  I am told that they were warning that there are prayers that may not be legal.  This appears to be a clear case of philosophical absolutism to me.  The United States has it share of the same kind of thing, as do other countries.

We may be tempted to assert that a government should stay out of speech related issues, but in reality, how can they?  A government must assert a philosophy of some kind or else it cannot function.  It has no choice.  The problem with what governments are doing is that the philosophy they are asserting is often irrational.  You can’t rationally assert a philosophy that assumes that no philosophy should be asserted. A government built on a foundation of irrationality is in no position to bring about peace or anything else.

With great sorrow, I see the problem again in the recent speeches of both President Trump and Vice-President Pence.  Their words sound like an attempt to respect all religions and creeds, even though it is obvious that they can’t.  In many of the same speeches, they rightly express that that there are certain creeds and religions that they do not respect, such as those that kill people or promote the destruction of the United States or disrespect its constitution.  Are these not creeds and religions?  This is confusing to say the least.  That’s not what made America great.

If they intend to go back to America’s foundation, they must return to the doctrine of Christian tolerance which asserts that although Christians don’t respect other creeds and religions, they do tolerate them to a degree in civil life, because that’s what Jesus expects us to do until He chooses to deal with them Himself.  Christian tolerance is built on the concepts of free will, grace (meaning favoring others when they don’t really deserve it), and the fact that Jesus is still alive and able to take care of the wicked without our help.  Christians desire that all men will come to know Jesus by willingly accepting His offer.  This means that, according to Christian tolerance, there can be no force when it comes to individual choice either.  This is the basis for American liberty and it also happens to be non-neutral.

So why is this a big deal?  It’s because it’s this issue that leads a people toward either liberty or tyranny.  If a government doesn’t have the authority over life, liberty and personal property, it definitely doesn’t have authority over the Creator that endowed those rights.  Any government that thinks it does that is indicating that it believes it is the supreme authority in certain matters.  Even if taking God’s place isn’t intentional, that’s what is being communicated and it leaves the door open to serious future problems.  Even now we are seeing the desire for philosophical respect drive the followers of various ideas to converge against Christianity, asking that it either comply or be silenced by “civil” government.  Since Christian tolerance is the basis for our liberty,  freedom as we know it is in serious danger.  What governments must do is to acknowledge that their right to rule comes from the God of the Bible, the true One that the Christians have acknowledged.

Other brands of neutral thinking have already been used in the west and have failed quite miserably at critical times.  Recall that Neville Chamberlain attempted to bring peace in his time using a method that would allow the UK to respect Hitler’s choices.  President FDR signed a peace agreement with Japan in a similar gesture right before we entered the war.  It’s important for us to remember how well those things worked out.  How about those Israeli peace agreements?

It’s important to ask ourselves: What good is peace if freedom is taken away?    There is a way for peace and freedom to coexist, but it depends on Christian philosophy, because that’s the only way they fit together without the government becoming an irrational tyrant.

 

Purchasing Health Insurance?

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If you are looking to purchase health insurance, and you are a Christian and go to church on a regular basis, I highly suggest that you look into Christian Healthcare Sharing.

Healthcare sharing between Christians is actually better than insurance in many ways.  It’s a huge group of people who are committed to sharing each other’s medical bills.  In a very real way, it’s a strong move back to what God intended Christians to do.

What got me looking for insurance alternatives was a move my company made to force us to an insurance company that was known to be participating in abortion.  I could not bear the thought of having even one cent of my premium used for someone else to have an abortion.  My move to Christian Healthcare Sharing was fundamentally a conscientious one, but I was also interested in it would cost.

I was surprised to find out that even with the significant amount of help my company provided, it was still a pretty good deal to go with Samaritan Ministries and that was a couple of years ago.  Some have recently reported a $500 per month reduction in cost.  I researched about four different ministries and Samaritan was the one that best aligned with my beliefs and my goals.  The thing that really stands out with Samaritan is that the organization doesn’t even touch your money at all.  You send your money directly to those who have needs, every month.  All Samaritan Ministries does is to direct your payments.  They keep track of where the needs are and whether or not they are legitimate and within the scope of the Samaritan Ministries Guidelines that all members must agree to.

I’ve been a member now for over two years and as Samaritan Ministries has grown, it has added new options.  There are options for young healthy members who don’t really want to spend much money, as well as options for the big family that really needs to know that all their emergencies will be met.

There’s even an option to share a few dollars more per year to have needs met should they exceed $200,000.  Needs in the millions have been successfully shared.  When you have that kind of commitment from other Christians, it is a very comforting thing.  It’s comforting to know that you are following God’s pattern in the Bible for how Christians should help each other.  It’s also critical to know that you are not participating in things that grieve God’s heart.

I encourage you to go to Samaritan Ministries and check it out and tell them that you heard it from Troy Taft.  That will help me too.  Thank you.

You can also check out the videos of what members have to say about Samaritan Ministries.

Tree Ring of Truth

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If you watched the debate between Ken Ham and Bill Nye, you may remember that Bill Nye used tree ring evidence to support the idea that there was not a global flood 4,000 ago.  He said that they found evidence of a tree that was dated by humans to be 9,500 years old.

Beside the fact that there’s a big difference between 10,000 and 5,000,000,000 (the supposed evolutionary age of the earth, a problem that wasn’t really addressed), he was playing on a childhood belief that there is only one tree ring per year on a tree.

A little research into the science of tree dating reveals that it is a well known fact that, sometimes, trees produce more rings than one in a year.  I wouldn’t throw away your belief in a young earth based on Bill Nye’s arm chair analysis.

To learn a bit more about the assumptions that go into dating trees, see these articles:

Do Tree Rings Disprove the Genesis Chronology?

Evidence for multiple ring growth per year in Bristlecone Pines

Remember, evidence isn’t proof because scientists can be wrong.  Even when something is likely to be true, it doesn’t mean that it is true.  Sometimes, unlikely things happen.  In this case, it wasn’t even unlikely.  Sometimes, trees produce more that one ring a year, and scientists already know this.

Believing in Science

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The evidence for God’s existence is everywhere.  The same evidence is used by both atheists and evolutionists.  This evidence is found in biology, geology, chemistry, astronomy, paleontology, physics and everything else.  The most obvious evidence for God’s existence is the Bible.  It’s hard to top a written document that explains things, but somehow, this most obvious evidence, is often ignored.  This demonstrates that the problem isn’t evidence, it’s how that evidence is being interpreted.  Because evidence has to be interpreted, there is absolutely no way to do science without a faith.  Allow me to restate that.  If you must interpret scientific evidence, then your method of interpretation, or faith, is a prerequisite.

Let’s consider “faith” in “the law of cause and effect.”  We must “believe” in the law of cause and effect, or doing experiments wouldn’t be possible.  When we do an experiment, we naturally “believe” that the experiment is the cause and that the result is the effect.  If we didn’t then we couldn’t do any science at all.  We must also “believe” in the existence of “laws of nature.” Isn’t that what science discovers?  If there were no laws in nature, why do science?   Somehow, we “know” that nature has laws.  We make these assumptions and these assumptions form our faith.  The sum of all of the things we believe or “take for granted,” is what we call a “worldview.”

Requiring evidence for a worldview is not rational because your worldview tells you how to interpret evidence.  The Bible provides us with a worldview.  Requiring evidence for it would never prove it, because any evidence would simply be reinterpreted by the worldview of the person considering the evidence.

Did you know that there is a mathematical model for the geocentric (earth is the center instead of sun) view of the solar system?  I am told it is possible to chart the movement of objects in the sky using this model with success.  The model, however, is extremely complicated.  If one insists on the fact that the earth is the center of the solar system, the evidence can be interpreted that way.

I am also told that at one time, Galileo tried to convince the skeptics of his day that the moon wasn’t a perfect sphere, as Aristotle had stated.  He had them look into his telescope and see that the moon was covered with craters and valleys.  They refused to believe their own eyes!  They stated that there must be an invisible crystalline sphere that  covered the moon, filling in its valleys and craters.

These examples demonstrate the limit of evidence.  It cannot prove anything, ultimately.  It can confirm a person’s ideas but it is amazingly inconclusive when faith is involved, and faith is always involved.  Why couldn’t the earth be the center of the solar system?  Why couldn’t there be an invisible crystalline sphere around the moon?  Evidence alone won’t prove the point!  If you try to live by evidence without faith, you will always be easily confused.  I tend to believe the simplest answer, if God doesn’t say otherwise.  The Bible tells us that God is a God of love and hides things for us to discover.  It makes sense that God’s science would be fascinatingly simple.

The faith problem explains why so many evolutionists and atheists disregard the best evidence of God.  They find ways, based on their faith, to disregard things, like the Bible.  It is consistent with their faith to re-interpret evidence, but to so and then act like others shouldn’t, is very inconsistent.  I find that, in general, evolutionists and atheists don’t actually want evidence for God or the Bible, they already have faith in something else that causes them to use the evidence the way that they want.  They may think they are being “neutral,” even though that doesn’t exist, but they are merely holding to their worldview.  If something disagrees with their worldview, they simply create a new possibility, based on the unknown, and reinterpret the evidence.

Bible believers actually have a more strict position.  Unlike evolutionists, I can’t just make things up.  God’s words are pretty clear and never change, and I have to stay consistent with them.  It is true that when I don’t understand something I use conjecture, just like the evolutionists, but I try to stay within the confines of what God has said.  I’m not asking evolutionists for evidence, though, because I am aware that the real issue is that evolutionists have an opposing faith.

I have a good reason to believe in God and science.  Evolutionists and atheists don’t have a good reason to believe what they believe.  The demand for evidence is just being used as a way to suppress the fact that what they believe doesn’t make sense.  Take the “law of cause and effect” for instance.  How can evolution explain the existence of a law like that?  If things change randomly, what’s to stop the law of cause and effect from changing randomly?  As far as I can tell, evolution doesn’t provide a rational framework for the existence of any law.  In order for an evolutionist to believe in science at all, they must irrationally rely on biblical assumptions.  The Bible says that the earth was created by a Person who never changes and makes laws.  Because of that, I have a real reason to believe in science.  Evolution, however, cannot rationally support the worldview that must be assumed in order for science to exist.