Volume 3 – Your Money Answers: Tithe, Husband Spending, and Bankruptcy for Christians
May 5, 2011
Volume 5: Your Money Answers – Income Generating Tips
June 16, 2011

Finance is a tool that will benefit you. When the tool is used, it does wonderful things. If you allow it to master you, it will bring pain, frustration, and disappointment.  Mastering the tool of finances will bring you into the abundant life. Here are a few questions from readers concerning investments.

Question – What are bonds or bond mutual funds and how do I incorporate them in my portfolio?

Great question, bonds allow you as a bond investor to lend certain amount of money to a company, bank or government agency for a predetermined time in exchange for income. The company will pay you interest in exchange for your investment. Bonds are used to finance major projects such as parks, recreation facilities, and highways. Companies use bonds to finance research and development of major products. 

Typically bonds can be invested for as little as $1000.  Bonds can be used in a retirement account to avoid fluctuations due to the stock market. For instance, many investors switched their investments to bonds to avoid loses during the stok market crash in 2007.. Bonds are especially useful when a person is in the later years of his or her working career. Good bonds are safe and will give you stability. Bond mutual funds are a collection of bonds similar to mutual funds. Bond funds ensure a steady flow of income because they do not take on much risk.

Question – I have insurance; how much do I need and what type should I purchase?

Determining the type and amount of life insurance can be secured through an insurance agent. There are many types such as term life, cash value or permanent life. Term life is a temporary insurance specifically for a number of years (10, 20 or 30). Term life is popular and low cost.

Another popular policy is permanent life insurance. It is a policy to build wealth while living. Permanent life has two components. The first is the death benefit and the second is the cash value of the policy. The cash value enables the life insurance companies to make policy loans available to the policy holder. It is a savings account that allows wealth to accumulate from a portion of your monthly premiums. Payments of this insurance can be twice as much as term due to the fact the policy never expires.

The last question is how much should I purchase. Work with your agent to determine. A simple rule of thumb is to buy five to eight times your current income.

To determine your amount consider these questions for starters:

  • How much income should I replace for my family when I am no longer living?
  • What are the unresolved bills and debts?
  • How can I ensure financial success for my children and grandchildren?

 As Proverbs 13:22 states, “A good man leaves an inheritance to his children’s children.  

Question – What is the best stock tip for me to gain some extra money? 

Don’t buy.  Stocks can sometimes encourage a short term get rich mentality rather than having a long term focus. I encourage others to do these things before buying stock:

  • Get out of credit card debt
  • Fund your emergency fund
  • Contribute consistently to an IRA or 401K
  • Secure the appropriate amount of insurance

Stocks can be considered risky and too narrow focused. The objective of any investment should be to seek diversification (Ecclesiastes 11:2), have a long term focus (Luke 14:28), and become a continuous investor (Proverbs 28:20, 22). Stocks can be a complement to your investment future. Acquiring mutual funds may give you the best opportunity to double your growth rather than having individual stocks.

This week money perspective – Taking control of your money will help you to become a smarter investor.

P.S. Encourage your friends and family by sharing this column and invite others to ask questions about their money. Send questions to Twitter @CDDukes, cedricdukes@gmail.com or visit the contact page at www.cedricdukes.com. Cedric Dukes, speaker and columnist, is the author of Hostile Takeover – Manifesting God’s Plan and Purpose for Your Finances. To look at previous columns, go to www.cedricdukes.com

Have a good day,

Cedric Dukes

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