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By Bob Barber, CWS®
Proverbs 21:5 “The plans of the diligent lead to profit as surely as haste leads to poverty.”
The Rule of 72 is a mathematical formula I think everyone needs to know and understand when it comes to investing. This rule is extremely powerful and can be used to determine how often a lump sum will double or compound. It’s important to know how the Rule of 72 works because it can mean the difference in having tens of thousands, or even hundred of thousands, of dollars over a lifetime of investing and saving, as well as what it can cost you when taking premature withdrawals from an investment portfolio.
The formula works like this: 72 divided by an annual “average rate of return” of an investment equals the “amount of years” the lump sum invested will double.
Examples:
1) A $10,000 investment making an average annual rate of return of 2% would double to $20,000 in 36 years:
72 / 2 (percent) = 36 (years)
2) A $10,000 investment making an average annual rate of return of 6% would double to $20,000 in 12 years:
72 / 6 (percent) = 12 (years)
$40,000 in 24 years and $80,000 in 36 years
3) A $10,000 investment making an average annual rate of return of 8% would double to $20,000 in 9 years:
72 / 8 (percent) = 9 (years)
$40,000 in 18 years, $80,000 in 27 years, and $160,000 in 36 years
You get the picture. The better the annual average rate of return you can make, the faster an investment can compound and double, and those extra doubles really mean a lot over an extended period of time.
You can use the Rule of 72 in so many different scenarios, like how much a lump sum could grow to at a certain average rate of return over many years or what it could monetarily cost you in lost returns by withdrawing money from an investment growing at an average stated rate of return to buy a depreciating asset.
Example: Let’s say you withdraw $30,000 from an investment portfolio to buy a new car. If the $30,000 you withdrew was averaging a rate of return of 6%, over the next 12 years that would lower what would have been in your investment portfolio by $60,000 or in 24 years $120,000. What would the car be worth in 24 years? I bet not anywhere worth that.
Personally, understanding how the Rule of 72 works and applying it to just about every financial decision I have made over the last 30 years has not just meant tens of thousands of dollars but tens of hundreds of thousands of dollars to my net worth. I learned the Rule of 72 when I was very young, and I still remember to this day the “light” going off in my head of what it could mean to my future if I applied it. I’m so thankful that I did and that someone taught me the Rule of 72 years ago.
My hope is that you will apply this rule to your own financial decisions as well, stay disciplined, and stick to the plan because it’s worth it.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row top=”20px” bottom=”20px”][vc_column][vc_column_text]
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By Mary Jo Lyons, CFP®
Clients often ask us “Exactly what is Wealth Management?”. Most don’t think of themselves as having wealth. Wealth Management is a concept advisors use to articulate the financial principles and strategies they use as they work with clients.
Wealth management is a discipline that incorporates financial planning, investment management, tax planning, and financial goal setting. It’s a holistic approach to coordinate and correlate all the moving pieces and parts of your financial life to provide solutions that are both appropriate and suitable.
In a true Wealth Management approach, which is what we offer at Christian Financial Advisors®, clients develop a deep and trusting relationship with their advisor. We work with you to understand your entire financial picture, your goals, your priorities, and what matters most to you. We lay out your options and discuss the pros and cons of each approach. We serve as a financial advocate and trusted fiduciary.
Your situation is unique and we customize our approach to fit your needs. Financial leadership is about guiding the conversation. The currency of leadership is communication. We ask meaningful questions to uncover any particular family, financial, social, or emotional needs that we must understand in leading you on this journey. As your trusted advisor we help you develop a clear and compelling financial vision for your family. When necessary we consult with other trusted subject matter experts and engage with your attorney and accountant.
At Christian Financial Advisors®, we work with our clients on 15 Wealth Management Issues. These key issues are critical to the financial well being of most successful families. Not all of them will apply to every situation. We take a disciplined approach to addressing these issues to help our clients create and growth wealth, protect and preserve the wealth you have, transfer excess wealth during life and at death according to your estate planning wishes. As Christian advisors we do this by following Biblical principles.
Wealth Management is a process and does not happen in one meeting but over the course of time. There are five required competencies for financial leadership:
- Decision Making
- Life Planning
- Goal Setting
- Cash Flow Management
- Wealth Transfer
As a financial planner, I have the opportunity to give clients a vision of what they can become financially. Money becomes a tool. My purpose is that by working towards this goal you become a better steward of your God given resources. When it comes to finances, there are many areas that are not absolute or black and white in scripture, but there are principles that can be followed.
There are 5 observable symptoms of Stewardship:
- Giving in proportion to income
- A controlled, debt free lifestyle (more cash flow, vs. more stuff)
- Taxes paid with integrity and thanksgiving
- Spousal unity, husband and wives set financial goals together
- Accountability
Good financial advice always has its roots in Biblical wisdom. In financial decision making there are numerous emotional traps. A trusted advisor will help you navigate those to avoid emotional drivers. When you think emotionally, you can’t think rationally.
Life is all about decisions. Decisions determine destiny. Everything we do while living on earth has eternal consequences. We should always ask ourselves “What would God have me do?” Your use of money reflects your goals, your values, your priorities and your spiritual convictions. By making good financial decisions, you bring balance into your life. This allows you more time for what matters most, relationships.
Purposeful planning helps with accountability which leads to peace of mind. Now that is true wealth.
If any of you lacks wisdom, he should ask God, who gives generously to all without finding fault, and it will be given to him. But when he asks he must believe and not doubt, because he who doubts is like a wave of the sea, blown and tossed by the wind.
James 1:5-6 NIV
A man of understanding will acquire wise counsel.
Proverbs 15:27 NASB[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row top=”20px” bottom=”20px”][vc_column][vc_column_text]
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It’s Supply and Demand
By Bob Barber
Texans who have lived here a long time (my family has been here six generations) know that ever since they can remember, oil has played a large part in our economy. It’s hard to drive in any direction in Texas for an hour or two without passing a oil pump jack (like the picture).
From the Barnett Shale in north Texas, to the Haynesville Shale in East Texas, to the Eagle Ford Shale in South Texas, to the Cline and Wolfcamp Shales in West Texas’ Permian Basin – Texas is swimming in recently-discovered oil and natural gas reservoirs.
Just 2-3 years ago, hundreds of Texas families who had never had wealth were seeing $100,000 to $1,000,000 checks come in overnight. It was like winning the lottery. For some it lasted a few years, but for others it was very short lived.
Will we ever see the boom days of a few years ago? I believe yes, we will, because this has happened in Texas many times in its history. But, as always, the booms seem to disappear as quickly as they come. And now with the tremendous supply we have, which we did not have just a few years ago, it may be many years, if not a lifetime, before we experience another oil boom in Texas like many of us just experienced.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row top=”10px” bottom=”10px” bg_color=”#163463″][vc_column][vc_column_text css=”.vc_custom_1475772510925{padding-top: 5px !important;padding-right: 10px !important;padding-bottom: 5px !important;padding-left: 10px !important;}”]
Check out other articles from our October 2016 Newsletter
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Is A Financial Crisis Imminent?
[/vc_column_text][vc_single_image image=”6112″ img_size=”full” alignment=”center” onclick=”custom_link” link=”/2016/10/06/is-a-financial-crisis-imminent/”][vc_column_text]Is a future financial crisis imminent? See what Bob has to say about “doomsday” and a future investment strategy.[/vc_column_text][vc_btn title=”LEARN MORE” style=”custom” custom_background=”#163463″ custom_text=”#ffffff” shape=”square” align=”center” i_align=”right” i_icon_fontawesome=”fa fa-arrow-right” link=”url:%2F2016%2F10%2F06%2Fis-a-financial-crisis-imminent%2F|title:Is%20A%20Financial%20Crisis%20Imminent|” add_icon=”true” button_block=”true” css=”.vc_custom_1475776716410{padding-top: 10px !important;}”][/vc_column][vc_column width=”1/3″][vc_column_text css=”.vc_custom_1475776616536{padding-bottom: 10px !important;background-color: #e8e8e8 !important;}”]
Will Oil Prices Increase Again?
[/vc_column_text][vc_single_image image=”6157″ img_size=”full” alignment=”center” onclick=”custom_link” link=”/2016/10/06/will-oil-prices-increase-again/”][vc_column_text]Oil has played a large part in our Texas economy. What does the recent oil boom & recession hold for the future?[/vc_column_text][vc_btn title=”LEARN MORE” style=”custom” custom_background=”#163463″ custom_text=”#ffffff” shape=”square” align=”center” i_align=”right” i_icon_fontawesome=”fa fa-arrow-right” link=”url:%2F2016%2F10%2F06%2Fwill-oil-prices-increase-again%2F|title:Will%20Oil%20Prices%20Increase%20Again|” add_icon=”true” button_block=”true” css=”.vc_custom_1475776632195{padding-top: 10px !important;}”][/vc_column][vc_column width=”1/3″][vc_column_text css=”.vc_custom_1475776541126{padding-bottom: 10px !important;background-color: #e8e8e8 !important;}”]
Corporate Trustees & Estate Planning
[/vc_column_text][vc_single_image image=”6155″ img_size=”full” alignment=”center” onclick=”custom_link” link=”/2016/10/06/corporate-trustees-and-estate-planning/”][vc_column_text]Is inheritance always a blessing? Learn more about setting up your estate plan efficiently when it comes to your beneficiaries.[/vc_column_text][vc_btn title=”LEARN MORE” style=”custom” custom_background=”#163463″ custom_text=”#ffffff” shape=”square” align=”center” i_align=”right” i_icon_fontawesome=”fa fa-arrow-right” link=”url:%2F2016%2F10%2F06%2Fcorporate-trustees-and-estate-planning%2F|title:Corporate%20Trustees%20and%20Estate%20Planning|” add_icon=”true” button_block=”true” css=”.vc_custom_1475776573957{padding-top: 10px !important;}”][/vc_column][/vc_row][vc_row top=”20px” bottom=”10px”][vc_column width=”1/3″][vc_column_text css=”.vc_custom_1475772710345{padding-bottom: 10px !important;background-color: #e8e8e8 !important;}”]
Your Family Legacy. Preserved.
[/vc_column_text][vc_single_image image=”6162″ img_size=”full” alignment=”center” onclick=”custom_link” link=”/2016/10/06/your-family-legacy-preserved/”][vc_column_text]CIS has collaborated with FamilyArc, an online family data history storage website, in order to better preserve your legacy![/vc_column_text][vc_btn title=”LEARN MORE” style=”custom” custom_background=”#163463″ custom_text=”#ffffff” shape=”square” align=”center” i_align=”right” i_icon_fontawesome=”fa fa-arrow-right” link=”url:%2F2016%2F10%2F06%2Fyour-family-legacy-preserved%2F|title:FamilyArc%20Websites|” add_icon=”true” button_block=”true” css=”.vc_custom_1475772742248{padding-top: 10px !important;}”][/vc_column][vc_column width=”1/3″][vc_column_text css=”.vc_custom_1475772615665{padding-bottom: 10px !important;background-color: #e8e8e8 !important;}”]
Why Being A CIS Client is Pawesome!
[/vc_column_text][vc_single_image image=”6015″ img_size=”full” alignment=”center” onclick=”custom_link” link=”/2016/10/06/athenas-tips-and-tricks-on-why-being-a-cis-client-is-pawesome/”][vc_column_text]See what advice, tips, and tricks Athena has to talk about this month when it comes to finance and Christian Financial Advisors®![/vc_column_text][vc_btn title=”LEARN MORE” style=”custom” custom_background=”#163463″ custom_text=”#ffffff” shape=”square” align=”center” i_align=”right” i_icon_fontawesome=”fa fa-arrow-right” link=”url:%2F2016%2F10%2F06%2Fathenas-tips-and-tricks-on-why-being-a-cis-client-is-pawesome%2F|title:Financial%20tips%20and%20tricks%20from%20Athena|” add_icon=”true” button_block=”true” css=”.vc_custom_1475772647268{padding-top: 10px !important;}”][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]
Several months ago we bought some baseball caps to give away with our company name and logo on them. On the weekends I usually wear mine on one of my weekly visits to Lowe’s, McCoy’s or Home Depot, or down in Rockport fishing. I’m constantly asked, and I quote, “What is Wealth Management?” CIS staff members are getting the same question when they wear their caps. It is not a simple answer. Wealth Management cannot easily be defined in just one sentence because it is so complex. (more…)
It is estimated by many sources, that for the last few years approximately 10,000 Baby Boomers are retiring daily in our country. This is expected to continue for at least the next ten years. (more…)
Real estate, cars, bank accounts, savings, investments, businesses, mineral rights (oil and gas, water), food, shelter, clothing, smart phones, electronics, computers, jewelry, art, collectibles, people/children that have been entrusted to our care, spouse, employees, animals, environment and the whole earth… (more…)
Over the years, and in increasing numbers, I have had clients contact me about an opportunity they have received for a fixed indexed annuity. These annuities are heavily marketed by mail, radio programs, and through free seminars at steak houses as the one-size-fits-all financial product for retirement income. I decided to share this article because there are important things to know about fixed indexed annuities before investing in them. I am not against all fixed indexed annuities. For many years I have placed a small portion of my clients’ investable assets in them if it was appropriate and fit their investment objective. But there are aspects related to fixed index annuities that concern me that I need to share.
The last major downturn in the markets was in 2008. Before that it was 2001/2002. If we repeat the 6-7 year cycle once again, could we be possibly in for another major market correction soon based on recent history? I hope not.
The last few weeks we have discussed “why” we give, which I hope has challenged you both spiritually and emotionally. In Acts 20:35 Jesus is quoted as saying “it is more blessed to give than to receive”. God did not put us here just to take and consume. Giving leads to a victorious, abundant life of joy and peace because it is hard to be selfish when you’re giving.
Spiritual and physical needs walk hand in hand.