The 7 financial planning practices needed to get you through hard times
Recently, clients, worried by a swirl of conflicting financial news, asked me how my perspective as a Christian changes the financial advice I give. I reminded them that Sound Stewardship follows time-tested Biblical principles for financial planning that put our clients on solid ground, no matter who’s in political office or what the markets are doing.
I think they were a little disappointed that I didn’t have a secret lever or magic wand, just these seven trusty rules to follow! However, we’ve seen these principles work in hundreds of clients’ lives time and again, through all sorts of crazy times. Even more importantly, the principles are historically proven across centuries – many of which saw even crazier events than what we’re experiencing. As hard as it is to imagine, the “unprecedented” times unfolding around us feel that way because they’re new to us. Pandemics and turmoil are not new phenomena.
It’s this perspective that allows me to confidently say that following these seven principles minimizes the financial fallout of any global or family catastrophe you’re worrying over.
In the headlines, chatting with neighbors, on social media, in the financial planning office—agitation and anxiety seems to be on the rise. The world feels a little more out of control than usual, even though we never had control of much, anyway. Whether you’re worried about inflation, the long-term effects of climate change, when to buy or sell your house or car, or how political discord could disrupt your life, there’s only so much you can personally affect. As the financial thinker Carl Richards’s sketch argues, we should only focus on things that matter and that we can actually control. So what can we control? These seven things:
7 principles for financial planning in uncertain times
- Live within your means: It all starts here. Living within—and below—your means is the first step toward calming financial anxieties. My family likes to use YouNeedABudget to keep us on track, but the specific tool is less important than finding what works for you.
- Avoid using debt: Debt isn’t evil, but it does increase your risk. We encourage our clients to only use debt in certain situations (mortgages on homes that will appreciate, for example) and live debt-free otherwise.
- Build an emergency reserve: The more worried you are about the future, the better served you are by building up a substantial emergency reserve. You’ll be able to cover unexpected expenses when they arise.
- Have a long-term plan: Taking a long view of your finances can help you keep from worrying about the minutiae of today. As the Bible teaches us, we also hold our long-term plans loosely (James 4:15 – “Instead you ought to say, ‘If it is the Lord’s will, we will live and do this or that.’”) and change them when we’re led.
- Be diversified: We talk a lot about diversification because it’s the best way to spread out your risk and increase the chances of meeting your financial goals. And it lets you not freak out over daily fluctuations in the market—you know you’re covered.
- Think beyond yourself: Having a solid estate plan in place not only helps us not fear what will happen to our loved ones after we are gone—it also releases us to live more fully and generously in the present.
- Give generously: Purposeful giving is an anecdote to fear. It’s hard to obsess about what could go wrong in your own financial future if you’re focused on helping people with needs right now. Generosity is a pathway to contentment and gratitude.
When you consistently follow these principles, even huge disruptions don’t have to derail your life. Case in point: In March 2020, I got an email from one of my clients. She had been planning for years to retire in 2020, but then the pandemic hit and the market was crashing. Despondent, she wrote to me, “I guess I’m not retiring this year!” But she was wrong: She could still retire as planned — global catastrophe or not. She had a solid long-term plan, a big emergency reserve and a diversified portfolio. I was happy to tell her that following the 7 principles had paid-off during the most uncertain season in modern history.
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