Ep. 068 - Setting a Financial Finish Line for Savings

Episode Transcript

Austin
“How much is enough” is one of the most challenging questions to answer. What does it look like to trust Jesus and set finish lines for our savings? Today we discuss when it is time to slow down or stop saving for the future.

Spencer
Finish lines. We get to keep talking about them this episode, the next episode, and this is really building off of what we've been sharing with respect to budgeting; with respect to our spending finish line, now we get into one that's even a little more provocative: how much do we save and at what pace, and is there a finish line on savings?
This is almost heretical in the financial services space, to have a financial advisor say “You might not need to save anymore,” “You might not need to keep investing, you know, for the future.” It's one of those, elements that almost every financial advisor would just, you would hear, say, “Just keep doing it, keep doing it, keep doing it.”
But actually, that doesn't line up your wealth with those core values that you have in following Jesus, if you save too much, which is a possibility. So we'll talk about [sic] this time and then maybe even more provocative next time we get to talk about how much to save to pass on to your heirs, and how we submit ourselves to the Lord in the midst of that.
So in light of that, how do we think about this, Austin; setting finish lines for our savings?

Austin
Yeah, absolutely. Well, I think we come back to “What is the finish line?” And it just means when we think about savings, it is once we hit that target, we don't put any more in savings, like you're saying. But it doesn't just mean “Then I get to put more in my pocket to spend.” Maybe we want to accelerate giving, whether that's giving to church, charitable institutions or accelerating gifts to your family during lifetime.
That's what we really want to stop and say. This isn't just a pause to be able to give you more money to spend. The Lord may say, “Spend a little bit more,” but we want to say, “Okay, we're not necessarily trading, stopping savings for just the sake, because I don't need to, but it's “Okay, how do I then reallocate those resources to be able to use them within my lifetime?”
And I think the wisdom here, we come back to Psalm 90, where the psalmist says, “Teach us to number our days, that we may get a heart of wisdom. Return, O Lord, have mercy upon your servant.” And so we come back to this and say we want to number our days. We know that none of us will live forever.
And so there needs to be wisdom of saying, “Okay, when do I stop setting up for an uncertain future?” All of our [sic], all of our futures are uncertain, so we really need to number our days and set our hearts to wisdom; set our hearts to asking the Lord, “Okay, what does it look like to set that finish line?”
Because what we do know, unbridled consumption; unbridled, just, accumulation of more will damage our souls. There's a certain point where we need to say, “Okay, enough is enough. I've saved enough for my lifetime. I've put enough aside for my heirs. I can now start really coming before the Lord and saying with joy and with excitement, ‘God, what do you want me to do with these resources that you've placed in my hands?
I am a steward. You are the master. Help me manage them in a way that would honor you. Help me manage them, help me use them in ways that honor and celebrate your kingdom come.’”

Spencer
Right. So as we do this, we're kind of stacking these concepts. So we've got budgeting, we've got to lay our spending habits, our spending intentions before the Lord. Then we get to a point where we have income that's in excess of what we need. So that naturally, we begin to be able to give more and to save more, potentially for a season.
But now we get to that point where, again, we've saved so much that we start to wonder, “Is this just building that second barn that Jesus talks about in the parable as being really damaging to the soul, like you're talking about?” So as we do that, what are some of the first things that we maybe want to pause and go back and say, what, as we have savings, if we didn't have any savings, how do we look at this in terms of sequentially building to a point where this becomes a question? What's that first round of savings look like?

Austin
Right, absolutely. And we would say before anything; as you're setting your budget, if you realize, “I don't have any money set aside in savings,” everybody needs an emergency fund. Because there will be a day where you will have medical bills. There will be a day where your car needs tires. If you lose your job and have no set-aside savings, you're going to be hurting.
And so we say, “No matter what season of life you're in, you need to have at least 3 to 6 months of an emergency savings built up.” For some of you, maybe on that shorter end, we would say six months is a really good target for most folks. Retirees, you may need closer to a year worth of savings. So that's going to depend,
but you really need to have a cash buffer built in; so that when those tires need to be bought, when in a medical emergency happens, when you need to put a new roof on, you've got some cash to do that. And then if that occurs and you have to liquidate it, build it back up. Always try to have that emergency savings.
So we're not saying, “Okay, you have no money, stop saving for the future and give it all away.” We want to say “There needs to be some wisdom here.” And so,

Spencer
So whatever season that we're in, that emergency fund is, is kind of a primary piece there.

Austin
Right.

Spencer
Once we get to the emergency fund, then how do we start to grapple with “What's my next savings towards?” It’s obviously towards the future in some way if we're saving, but how do we think about, these other future elements?

Austin
So what we're really looking at here is that “long term savings,” that retirement savings. Now there's going to be short-term elements. We all know that our cars are going to break down. Cars are expensive purchases, homes are an expensive purchases. And so I think you can always be, if there is a big thing on the horizon; maybe you want to take your family on a really special vacation. Set aside money for that, but that doesn't necessarily come into this “Lifetime Savings” bucket.
Those are things that are future expenditures that you need to plan for. So that when it occurs, that you have that capital there to be able to deploy it. But what we're really looking at is these retirement savings numbers of, “Okay, I'm looking out to that moment in time where I cease paid work,” doesn't mean you cease working.
If you remember our interviews with Jeff Haanan, retirement isn't just a season where work ends. It may be a season where paid work ends, but we always work alongside with God in this lifetime that He has given us. And so it's, “Okay, maybe I have stopped, paid work and now I need to draw on those lifetime savings.” That's really where we're getting here.
And I think this is where it becomes really challenging with an annual income or monthly savings-, monthly spending, those are a little bit easier to say, “Okay, what's my cap?” Because I can see what's coming in. I can know what's going out. It's not based on some future rate of return and rate of inflation, a rate of withdrawal.
And so we're planning for an uncertain future. And so what we really recommend is; as financial advisors, we’d say you really need to work with a financial professional here to start determining what those finish lines are; determining, “Okay, what is a conservative rate of return that's going to make sure that you have some assets through life.”
But on the flip side, we don't want to put our trust in those savings. Our trust always needs to be in Jesus. He is, was and always will be our Provider. And so I think the question here; we were doing a little seminar at church, and one of the participants asked, “How do we know when we've hit that enough?”
And we've kind of started talking through it. And he's like, “You know, I kind of think about this,” and he says, “It's kind of a little uncomfortable. It's that point where, ‘Okay, my savings is enough, but I'm kind of a little bit uncomfortable with it.’” I think that's a really good place to be in some ways. We don't want to be overly comfortable with that nest egg or that emergency savings.
We want to continue to place our trust in Jesus. So what's that area where maybe it's not, you've got 100% probability of success that no matter what happens, you're going to have resources? Now, we know that we can't predict for everything because Armageddon could happen or nuclear war or any of these things, but in a rational set of circumstances.

Spencer
Right. So as we think about that too, planning for a period of time where we don't have paid income is challenging as well. Because if we retire, let's just say, for example, at age 65, we could be retired for one day and then we go home to Jesus. We could be retired for 40 years, and then we go home to Jesus.
That's a really difficult planning process because, you know, if you came to us and said, well, I think I'm not going to use these resources for 20 years, but I'm going to need them in 20 years or so. Say, okay, well, let's build a portfolio that would give you the, stack kind of the odds in your favor to help meet those goals that you have.
And it might be a little more aggressive because we have 20 years. If we had 20 days, we'd say, well, let's just keep those funds probably in a money market account or at the bank so that there's no fluctuation there, because we know you're going to need them in 20 days. Well, that that really is the opportunity set that we have as we approach, a season where you're not getting paid, you probably need to have some assets that you've saved.
But there are folks that we sit down with who all of their core needs are going to be met through Social Security. They may have quite strong Social Security income. They may have paid off their home. They may have, paid off, you know, vehicles and those kinds of things. And we look at it and we say, well, actually, not having saved a whole lot, you know, you do have to, be reliant on Social Security income, which, you know, nothing is certain in the future.
But there's a high likelihood of success, even with out having saved, you know, much in that set of circumstances. So we want to understand we want to convey how wide, the potential range of outcomes, you know, can be here and not pigeonhole us into saying, well, you've got to have a certain amount saved.

Austin
Because just like to your point, if we've got two individuals that are both 50 years old and one of them has 500,000 saved, and one of them has maybe, let's say, a million saved, one of them wants to retire at 50, the other wants to retire at 70. Those are two very different circumstances, and their Social security may be enough to cover their expenses.
But if you've got a 20 year gap, that you need income for, well, there's a vastly different level of what we need to do. And so for anybody we would say there's certain variables that we need to account for. How many years is it going to be until you retire? After you retire, what do you expect your longevity to be?
What is maybe an inflation assumption? Economist targeted at 2%. But since 1975, social security cost of living adjustments have been closer to 4% annually. And so what is going to be that loss of purchasing power? What investment rate of return do you expect? You kind of put all of these in a bucket and you mix it all up.
And a plan for one person and a plan for another are vastly different. And so how much is enough for the one that has 500,000 and wants to retire at 70, versus the one that has a million and a half and wants to retire at 55? They're going to be very different and enough is very different between them.
But what we want to say is you have to ask the question of what is enough, Because then let's say you are that person that has half $1 million in savings. You're 50. You want to continue to work as long as God gives you life. Well maybe we look and we say actually you've saved enough. What we project in inflation, what we project with rates of return.
You don't need to put any more in savings. So now what would you want, How do you want to honor God with those resources? Are you going to accelerate gifts to the kingdom? Are you going to accelerate gifts to family? But again, if we don't have that understanding of how much is enough, if we don't have that understanding of when I can stop saving, our propensity is going to be to continue to save, it's going to be to continue to set aside, or continue to spend on myself.
And so I think that's why this is a really provocative and important question to be asking, because it's counterintuitive, it's counter to the build the biggest barn you can.

Spencer
Well, and this is counter to both trajectories that we would see would be typical for clients. Because most clients that we sit down with, they either tend to be savers and they just save, save, save, save, save. They've done that for 30 or 40 years. They may have saved more than they need, and we may be encouraging them to increase their level of living and giving so that we accelerate, maybe building the kingdom and accelerate building those relationships and such.
The other side of things sometimes, though, is we see that clients are, have a, have a higher, desire to use those resources through time and don't save as much. And so in both sets of circumstances were invited to lay this before the Lord and say, well, it's not me that's making this decision. It's the Lord that's making the decision.
I'm trying to listen to him and imperfectly implement. But either tendency can take us down a path where we're taken away from the Lord. But if we lay it before him, and we put this in concert of a budget, and you know, spending caps and these different pieces, then, we participate with him, rather than going afield in one way or another.

Austin
Right. Well, I think what we come back to, even with clients that save up really well, there's kind of a constant fear in the back of their mind that it won't be enough. And, I think we need to bring those fears before the Lord as well. We need to allow him to alleviate us of our fear that maybe I might be needy on a brother or a sister.
Maybe I might be needy on the church to come in and help me with something. It's okay to be someone that is needy. And I think that that is so counter to our culture. Now, we want to be diligent. We want to be wise. Proverbs talk about setting aside money on a regular basis so that in the future we can provide for we can allow God to use those, grow those, and that we would have resources.
But again, we don't want to trust in them. We want to be able to have those places where we can draw on. But our trust is always in the Lord.

Spencer
Well, and we even see in the early church, in Paul's letters to the church in Thessalonica that he says, if you don't work, you don't eat, you know, among us. So there's, there is an expectation that we're going to contribute, we're going to work hard, that we're going to be, you know, diligent in that way. But to your point as well, we see Jesus commending the widow that has two mites for giving all that she has to the Lord.
So we see Jesus, if anything, saying, you know, use those resources now for kingdom purposes, we see him, really criticize the rich man who just builds that second barn. And, and we see that throughout his teaching. He's, if there's anything he's leaning in the direction of, living simply using those resources for the kingdom, making those very, very lavish, generous gifts and much more skeptical of, you know, building that second barn.

Austin
Right. And so how do we go next? What do we do? I think this is really where we come back again and again and again to James 1:5 to all these places where we have talked about before, and we just say, Lord, what would you do with my spending? What would you do with my savings? How would you have me use this?
What is that number that I say, God, you've provided abundantly and enough, and now I get to participate with you in Kingdom work. We ask brothers and sisters in Christ to pray alongside of us. We talk about our needs and desires, our spending with people that we trust, with people that are going to challenge us. I think we need to get outside of our own mind palace and invite others in to say, hey, can you pray over this with me?
And then just continue to regularly reassess. Maybe life circumstances have changed. Maybe you had enough for 30 or 40 years, but now a doctor is giving you, a diagnosis where you may only have 5 or 10 to live. Okay. How does that shift your priorities? Do you now accelerate giving to other places?

Spencer
Well, and even on the other side, I'm thinking, you know, there's a local businessman who did incredibly well, business, sold business, had tens of millions of dollars. And, you know, as he got into his retirement years, he and his wife prayed. They felt like the Lord was saying, you need to have made, you know, the vast majority of the gifts of these resources during your lifetime.
Well, they were granted longer than expected lifetimes. They had given away basically everything a few years before they passed away. Is that a tragedy? Not at all! They had used the resources and passed them on for God's kingdom. They still had a small amount that they could give in the last couple of years of their lives. But what a gift.
You know, they were given extra time, but as stewards they felt like, well, this is the path that the Lord has put us on. So if they expected to live to say, 90 years old and they had given away almost everything by 90, probably had, you know, more, mental faculty to even be able to do that in their 70s and 80s rather than when they got into their 90s.
Most people have just more energy, you know, earlier in life in those times. So, you know, even in that, it's okay if we get to the end and we have less, you know, there than maybe we would have anticipated on a straight line path.

Austin
Right, right. So in all of that, Spencer; clients, we would say, if you have questions about how to set a financial finish line with your savings, if you want to talk about how to either save more, save less, what does it look like once you've hit those numbers? We would love to have that conversation with you. And next time we'll talk about what does it look like to
set finish lines for your heirs and until then, take care and we'll see you next time. If you found this episode valuable, share it with a friend and subscribe on your favorite podcast platform so that you don't miss the next episode.

Disclaimer
This content was provided by Second Half Stewardship. We are in Knoxville, Tennessee and you can visit our website at www.secondhalfstewardship.com. The information in this recording is intended for general, educational and informational purposes only, and should not be construed as investment advisory, financial planning, legal, tax or other professional advice based on your specific situation. Please consult your professional advisor before taking any action based on its contents.