S10 Ep4 Life Happens!

Simon

:: 00:06

Welcome to 'Where your Treasure Is...', the podcast where faith meets finance.

Bex

:: 00:09

I'm Bex Elder.

Simon

:: 00:11

And I'm Simon Glazier. Each episode we're going to explore how biblical wisdom can guide our everyday money decisions.

Bex

:: 00:18

We'll be looking at how we can give generously, save wisely, and navigate the complex financial realities we face.

Simon

:: 00:25

But remember, investments can go up as well as down.

Bex

:: 00:29

This is 'Where your Treasure Is...'

Simon

:: 00:30

Let's get started.

Bex

:: 00:33

If you were with us last episode, ‘Money and Me: Do I Need a Spreadsheet?’, you might be aware that we ended on a little bit of a cliffhanger, thinking about the balance of certainty versus uncertainty and how do we prepare for events that we know might happen, that we hope won't happen, but in probability some of them will happen. Simon, can you help us make sense of this?

Simon

:: 01:00

Let me give you a down to earth example, and we're going to jump in straight into something pretty heavy. Okay, let's talk about death.

Death is one of those things that is pretty certain. Unless the Lord returns first, then everybody on the planet now is one day going to die. That is certain. And what we don't know is when and how, and the consequence of that. And so, we have to have the balance between what we know will happen, what we don't know.

There are other things, though, that aren't necessarily quite so serious, and there is a level of uncertainty. People get ill: how often they get ill, how ill they get, how long they're ill for - the consequences of those illnesses are uncertain. But in a sufficiently large population, statistics will tell us that enough people are going to get ill, and some of them, it will be serious.

So, we're going to approach today's topic tackling some of those quite challenging emotional subjects but not dwelling too much on the emotional aspect of them - trying to bring some practicalities to bear and also how we can be good stewards of the resources we have in anticipation of what might happen, but what might not.

Bex

:: 02:09

And, actually, as somebody who is typically quite emotionally driven, despite the fact some of these conversations might be really hard to think about or to have, I found it incredibly helpful having some of them - mostly because then I know, actually, if that thing happens or when that thing happens, there's a level of preparation that then allows me to just deal with the emotion in that moment and have a bunch of the practical things already in place or know that they are taken care of now.

Simon, when you were describing to me earlier why we start with the biggest things that can happen, it reminded me a bit of an analogy sometimes people use with calendar planning - which is, if you've got a vase and you've got some rocks, you put the biggest rocks in first, then your medium sized ones and then all the pebbles. And if you do that, everything fits in. But if you get all the pebbles in first, you going to struggle to fit in your big rocks.

So, big rocks in mind, we are going to start with death. Simon, how do we plan for that uncertainty?

Simon

:: 03:17

So, death has a degree of certainty to it - we know that - but for the majority of people, death happens quite late in life; let's put it in that respect: at quite an age. And the question we need to ask ourselves is, ‘What is the impact of the death of an individual?’ And that impact changes over time. And as we measure that change of impact, our response also changes.

So, take for example myself in fifty years’ time: I'm approaching the best part of 100 years old; I have lived a fantastic life; I have lived life to the full; my family have all grown up and I've got grandchildren, maybe even great grandchildren. In that moment, it's quite likely that I'm going to die relatively soon. Okay, but the implications are relatively low. The impact on my family is not huge. They've grown up; they're independent. I've paid off my mortgage; I'm living off pensions, really. When I'm gone, nothing really happens. People will miss me; they'll be sad. But the financial implication isn't negative. In fact, it might even be positive if I leave an inheritance.

Let's reverse someone's life to the very other extreme, and the worst sadness of the death of a baby, the death of a child - emotionally terrible, but financially, actually again, there are very few implications. There's not a loss of income; there's not a debt to be repaid.

And between those two extremes, what we find is a journey where the impact of our death varies. So, I might pick on you just now, Bex, and say, you know, what happened if you were to die today? Think about who is impacted, who loses out?

Well, on a financial level, potentially nobody. If you don't have debts, if you don't have a mortgage, then all that's happening is your income that was covering your needs stops and your needs stop, and nothing changes.

But take it a step further. Maybe in a few years’ time, if you're married, if you have young children and you're working and then you die unexpectedly, what happens in that moment is your income stops. Maybe there's a mortgage with a big debt on the house, maybe there's a car loan, maybe there's credit cards, maybe there's a personal loan. And suddenly those who are remaining have to pick up the slack somehow. And maybe one income isn't enough to support that lifestyle that you have created for yourself - one person who now can't work because they have to spend all their time looking after the children.

And so, your need for preparing for death changes over time.

And if I gave you that broad brush approach: when you're single, almost no need to prepare as you have young family; dependence as they're growing up - as the level of debt in your life is relatively high, the need is greater; and then, in later life, perhaps as you're approaching retirement, family's grown up, debts are paid off again, the situation can turn to a no need or even positive.

So, think about in your life right now - what's the impact?

Bex

:: 06:20

And as we plot where we are on that graph, I suppose we then take actions accordingly.

And so, if we are in a phase where, actually, our death would have a huge financial impact on those around us, then we need to make sure our wills are up to date. We might want to consider life insurance, or when we take out a mortgage, we might want to have insurance that whoever is responsible for the mortgage that if they were to die, that the debt would be covered.

There's lots of different routes we can use, which I'm sure we can all explore in our own time, but understanding where we are on that graph helps us to know what level of protection we need at any given moment.

Simon

:: 07:01

And thinking back to the last episode, we spoke about being deliberate and being diligent.

When you're looking to buy maybe that first house or a bigger house to make space for a family, taking on a car loan, the thing you don't want to have to think about is, ‘Oh, I've also got to pay for this insurance and that insurance, and that additional cost.’

I remember being a young lad, doing some school homework around the cost of running a car and speaking to my own dad and saying, ‘So, Dad, what does it cost to run a car? ‘ And he broke it down for me - all the things associated, not just buying the car and running it in terms of fuel, but then the insurance and the maintenance and the road tax:

‘Hang on, this is really expensive.’

‘Yes, it is. Life is expensive!’

The most valuable asset that most of us have is our future earnings capacity. If we're in work, then that income we generate is the thing that supports our lifestyle going forward. And if that income stops due to death, for example, and there are other reasons, then our lifestyle can no longer be supported, the things that we feel God has called us to do.

And it feels wrong to jump into decisions without taking into account all the potential considerations: what happens if in the future…

And so, we start with death as the biggest one, but then we might look at, for example, serious illness or long-term illness and the implications of that.

Bex

:: 08:26

And I suppose there are similar implications here in terms of when you take out that protection when you're in that part of your life that we described where other people are financially impacted by that.

And ultimately in terms of timing, we need to put some of those measures in place before we become seriously ill because our insurance premiums are not going to be the same if we already have a diagnosis or we may not be able to get insured.

As somebody who's self-employed, I maybe need to think more about income protection if I'm off for a long period of time versus if you know you are in a job when you maybe have six months paid sick leave and, and six months unpaid - those are different decisions, depending on your life set-up.

Simon

:: 09:12

And there's a very big difference between anticipating what happens in the event of death and what happens in the event of illness - because in the event of death, you're not there anymore; you are no longer one of the people in need.

But in the event of illness, actually, it might be you that has the greatest need - if you can't work anymore, if you have to spend a prolonged period of time in hospital, but your mortgage is still to be paid, your rent is still to be paid, you still have to pay for food and you have to cover the utility bills, let alone if you have family and debts to cover.

For those that are single in early life or in later life, the need to insure against illness still exists. Now take an example of driving a car. So, most of us will know that if you want to drive a car legally, then you have to have car insurance. Now, the reason for that is because it impacts other people if you crash into them, but it also impacts you. It is too late to apply for car insurance after you've had the crash because the insurer isn't going to give you money when you haven't been paying your premium. And it's just the same with us: we have to take out these insurances in advance of the need, with the hope that we never have to claim.

Nobody wants to take out insurance because you're hoping you're never going to claim. It's one of these situations where you hope never to need it, but you're so glad you have it if you do.

So, there are two mindsets at play here.

Number one: ‘Insurance is bad! Why am I paying for this thing? It's awful because if I never claim on it, it's a waste of money and if I do claim on it, something bad has happened to me!' - a very negative mindset.

Or you can have the positive mindset: ‘Insurance is brilliant! If I get to the end of my mortgage and I haven't died, “Fantastic, I haven't died!” And if I do die, “Great, I had insurance; I can pay the mortgage off, and my family can live in the house forever!”.’

So, my encouragement is somehow to turn the mindset into, ‘Insurance is actually a good thing,’ - for your benefit and the benefit of others… but it does come with a bit of a faith dilemma as well.

Bex

:: 11:15

First of all, I wanted to comment on, ‘Fantastic I haven't died!’, being a great sentiment that we can all celebrate, even on the worst days. But I was struck by that faith dilemma of. I've heard some Christians have the view of, ‘Well, why do I need insurance?’ because actually I'm trusting God and so if my house burns down, then God will have it covered, whatever that looks like.

Simon, how do you approach that dynamic?

Simon

:: 11:43

Sometimes, the phrase, ‘too heavenly minded to be any earthly good’ comes to mind. My personal opinion is that the Lord has given us the means to make wise decisions with our finances. And sometimes that means insuring against things that might happen to us because they do happen to some people and some of those people will be Christians.

If God has given me the means to afford to buy a car, to buy a house, then has he also given me the means to afford to pay for the insurances to go alongside it, to make sure that provision is being made in the event of my death or illness, rather than me thinking, ‘You know, what I'm going to do: I'm going to take control of my money, spend it how I want, and if something happens to me, then other people - Christians, family, the church, God - they can be responsible for fixing my problem.’

And I don't think that's particularly what the Lord wants.

There is a dilemma: we can be too fatalistic sometimes and worry about this stuff and have no faith. But if you look at the entire Christian population, I can guarantee you that sometimes some of them become ill, some of them die early, some of them are made redundant, some of them have accidents and emergencies, some of them face divorce, some of them have to move jobs and relocate. These things do happen. They might happen to you. So how do we prepare for them in a wise and balanced way?

Bex

:: 13:09

And speaking of that, the next item on our list is, again, one that can have a major impact on us as individuals, on our family, but it's perhaps one that we can't insure against in the same way - so, Simon, how would we begin to plan for the potential of redundancy?

Simon

:: 13:27

So, redundancy is one of those highly recognised stressful circumstances.

You're in work, you're earning, and we have a natural mindset - a status quo bias - that says, ‘You know what, this thing that is happening to me right now will continue to happen. I will stay in this job. I will stay earning this money.’

And people often make life decisions based on those choices: ‘I've got an income. Great! I can now afford to spend this money and I can afford to commit to keep spending this money into the future.’

And, actually, it is possible, to a degree, to insure against redundancy, but it's not as cost effective, often. It's one of these things you never want to happen and think about: ‘I don't want to insure against this thing that I don't want to think about, so why should I?’

There are those who are in more risky workplaces in terms of the chance of redundancy. There are those who work in environments where there's lots of turnover of staff.

And so, think about the job that you're doing, the industry, the sector, the profession that you're in. How reliable is your job going forward? Should you make decisions in life anticipating that one day the income might not be coming in?

Do you not make those big commitments just now? Do you set a bit more aside into your savings for the longer term for those emergencies, just in case?

Do you make a decision with your other half, if you have one, that you both shouldn't look for work in an environment where there's a chance you could both be made redundant? Is there a way of having one more secure job, even if the income is lower?

Do you seek a job that pays the most but comes with the highest risk? And, if so, why are you making those deliberate choices? It's a really difficult one to plan for, but it still does happen.

So having some resilience, some money in the bank - not maximising your commitments with every penny that you earn, not living in a state of perpetual debt - can increase the chances that if something like that happens to you, you do have the means to get through for a short period of time until you can find another job.

Bex

:: 15:31

And that really comes back to some of the previous conversations we've had about emergency funds. And I suppose the level of risk determines how many months your emergency fund needs to cover.

As somebody who is self-employed, the advice given is often to have three months’ worth of your spending saved aside just in case you have a couple of rubbish months or you're ill, or whatever it is. And I suppose that figure changes, depending on the level of risk and how much your income contributes to your overall household's spending.

Simon

:: 16:07

And think about where you put the money that you might set aside for an emergency. I think I mentioned earlier - putting money into a pension is a great idea for long term planning, but terrible when it comes to emergencies.

So maybe having money in the bank is a good idea - but money in the bank, sometimes you can get your hands on a bit too easily!

So, is there some kind of barrier that you can put between yourself and your money to make it a little bit harder to get your hands on, apart from in an emergency? And the kind of things I'm thinking of here is a bank account that comes with a term that you have to access - you know, a 90-day account or a one-year account. The interest rate might be a bit higher, but it's harder to get your money out. You can, but with penalty… but in the event of an emergency like redundancy, the penalty might be worth paying.

Or think about a Lifetime ISA. If you're under forty, you can open a Lifetime ISA. It can be used towards buying your first home. You get a government bonus and if you don't use it for that, you can retire with it when you're sixty, totally tax free. But if something else happens and you need to access the money, you can do with a penalty.

And that kind of barrier to accessing your money gives you that deliberate decision: I'm setting this money aside for a purpose, not to spend on the next holiday or the next night out.

You're ring fencing it - you're accounting for it in a different way, and also being wise in the process.

Bex

:: 17:34

So, now we're moving on to still significant life changes, but perhaps ones that we're all more likely to deal with – so, we've got moving house; Simon, how do we plan for that financially?

Simon

:: 17:48

Moving house? It could be for the first time going into a house or moving somewhere bigger or somewhere smaller - just remembering all those associated costs that come with moving house.

I think the broad mindset of the world is buy the biggest house you can - you know, get the biggest mortgage you can possibly afford, add all the costs on and just pay it off over a very long period of time because your future self is more likely to be able to afford this. You'll get pay rises and therefore you can afford these extra costs.

Whereas, I think a more godly mindset is, ‘What is the purpose? Why am I buying this house? What kind of house do I need? How big is my family? How much space do I need for hospitality? What location should it be in?’

It isn't a selfish choice of, ‘Everyone needs to look at me and what a big house I have,’ but, instead, using that asset as a resource for the kingdom. In that mindset, you might think I can afford that bigger house, but I don't need it, so I'm not going to - I'm going to limit my exposure. I'm going to pay some of these costs up front, whether it's legal fees and solicitors’ fees and survey fees and valuation fees and moving fees. Oh, and then you've got to insure the house and pay for the utilities. All these costs come into play.

So, when you're moving house, the same mindset: ‘Are my costs going up? Are they going down? What are the one-off costs? What are the regular costs?’

Prepare for that in advance that you think, ‘I know I can afford this with a degree of surplus,’ not, ‘I can just afford it, assuming everything goes just right in the future.’

Let's assume that not everything goes just right - can you still be resilient and not be found in a catastrophic position because you overstretched yourself just that bit too much?

Bex

:: 19:26

And one thing that I found really helpful to reflect on is a bit of advice you've given Simon, which is, ‘How does your house or where you live help - help you meet the purpose that God has made you for?’

So, if you believe part of your purpose, part of your gifting is hospitality, then - yes, absolutely, your house also needs to be able to accommodate that.

But, actually, recognising as well when we get into that prideful line of, ‘Oh, I could get a bigger house and I could have that status,’ has been incredibly helpful to me.

The next category I want to look at is changing relationships. So, the number of people in our household or who we're responsible for can go up or down, based on marriage or having children or adoption or divorce or children moving out. How do we plan for those changes in household, Simon?

Simon

:: 20:19

So, once again we come back to this topic of certainty and uncertainty, don't we?

There are certain plans that you know are going to happen. If you're going to get engaged with the intention of getting married and you've had the conversation around having kids and maybe how many kids, then you can start to track out a plan for the future, which will generally include increased expenditure for quite a long time, to be honest, and planning for that.

What I don't want you to do is choose not to get married or not to have children because it's just blooming expensive. That isn't the reason you do or don't do these things.

But once you've made the choice to, then anticipate - let's think what is going to happen if you're going to get married.

Actually, you might find two households coming together that could be merging families together, merging finances. Suddenly, you might find yourself actually better off for a season. Can you use some of that surplus to plan for the future, to set money aside? Do you have the means of putting a bit aside to plan for education fees in the future, for university fees, for children 10, 20, 30 years down the line, depending on how old you are and when you have children, when they go to university and do they move out or do they stay at your house? So many things can happen!

And then the flip side you spoke about: what if children do leave home? Again, we can anticipate it, but are they leaving home forever? What about the situation of divorce, when suddenly conjoined finances might be pulled apart and not very neatly? Suddenly the cost of living goes up for everybody concerned.

There might be additional costs incurred for running these kind of hybrid households with children in different locations, managing holiday expenses, managing time off work.

And then what about the situation of a death in the family? What's the impact of that on those that are left behind?

So, what I don't think we can do is hoard our resources, always worried about the things that might happen and trying to make sure that we are prepared for any and every eventuality - that is too far away from a faith-filled life.

Nor should we ignore all these things and assume that God will just look after us, no matter what happens. I think we're testing God too much in that situation.

But, for each of us, it is discerning - it is holding ourselves accountable, having wise conversations with trusted people. What provision is right for me, for us, in our current situation? Being deliberate and then following through; being diligent with your work towards preparing for the worst… but also anticipating that the worst doesn't always happen.

Bex

:: 22:46

So, we come to our final category, which I like to think of as everyday emergencies. So, these are the things that in the long term actually are quite small in the grand scheme of things, but in the short term are super unexpected.

They're expensive; they're stressful! And I'm thinking of things like car crashes or car breakdowns, travel emergencies, your boiler or your heating unexpectedly packing up.

Simon, how do we plan for those?

Simon

:: 23:19

So, I think in the average household we can be pretty assured that there are going to be some everyday emergencies.

And it's not that you can get through life and none of this stuff ever happens to you, unless, of course, you're always buying brand new stuff and replacing it regularly – which, in itself, probably isn't very good stewardship. So, it's the one place you can be assured there are going to be unexpected costs from time to time.

Now, when I speak to younger people who are just getting going with their finances, I might often say, ‘Look, it's OK to have no provision straight away, but what would you do in an emergency? Would you dip into the use of a credit card or an overdraft? Do you have parents or friends that you could borrow money from?’

In the short term, that might be all the resilience you have to begin with.

But if you've been going for a few years and you've been working and you haven't yet set aside any money at all, then that is suggesting to me that you're not being deliberate about planning for the uncertainty of the future.

You shouldn't spend every penny you've got every month you earn it and not set anything aside, because there will be times when something goes wrong.

And having that buffer isn't going to fix the problem straight away, but it's going to make it not worse quickly, if that makes sense - ‘I can fix that. I've got the reserves; I'm going to spend the money I've been saving up to fix this problem and then rebuild up my emergency fund, rebuild up my rainy-day fund.’

An important thing, though, is to make sure that in an emergency, do use your emergency fund. Some people save, save, save, and then never spend it, even when the opportunity has arisen.

That's why it's there! It's to make you resilient. It's to make you not have to depend on other people. And, in fact, it might mean that other people can depend on you. If your friend, if your relative, comes to you and says, ‘Look, this thing has just happened,’ you can say, ‘Well, actually I can help you out with that because I've been preparing and it hasn't happened to me; it's happened to you.’

So that's the idea of, yes, having three months money set aside - that is a really big target for some people, so set yourself an objective and begin to work towards it. How much would be a comfortable amount in your life? What kind of emergencies might you face that you can be prepared for?

And of course, you're trying to do that at the same time as spending money on the things that you feel called to and being generous and paying for the insurances and saving up for a deposit on a car or a house or a wedding and future children's costs - there are so many things that your money could go on!

Only by having a broad picture of your financial position - what you spend money on, what you want to spend money on, what kind of lifestyle you want to see going forward - can you begin to allocate funds appropriately that you can look back one day and go, ‘I'm glad I made those choices. I feel it was in line with God's will for my life.’

Bex

:: 26:05

And that is the reality, isn't it? There are so many things we could spend or save our money for, and we just don't know what all those things are!

And the other reality is that one day we will die and that we can't take money with us. And so that's what we're going to be looking at in more depth next episode when we talk about, ‘Money and Me - The Great Giveaway’.

Simon, any closing thoughts on today's episode?

Simon

:: 26:33

My only closing thought at this stage is that, on my timetable, ‘The Great Giveaway’ is actually episode six, and we've got ‘Money and Me - Let's Talk!’ in episode five!

Bex

:: 26:42

I'm getting ahead of myself. I got too distracted by the game show-type title!

Simon

:: 26:47

You did, didn't you!

Bex

:: 26:48

And wanted to lean into that!

So, now you know what's coming up, the next two episodes - and you can look forward to that. What is it you like to say, Simon - ‘anticipatory excitement’?

Simon

:: 26:59

Oh, I love that phrase! I'm not sure it is one of mine, but I'm going to have it now!

Bex

:: 27:02

Take it, run with it and we will see you next time for ‘Money and Me - Let's Talk!’.

Simon

:: 27:07

Let's talk, indeed!

Bex

:: 27:09

That's it for this episode of 'Where your Treasure Is...'

Simon

:: 27:12

Thanks for listening. Let's keep learning to be good stewards of all we've been given.

Bex

:: 27:16

See you next time!