Be wary of investing in the bond market
I’ve been following your plan, and I have my emergency fund in place and am investing in mutual funds. Recently, a financial planner recommended bonds to me. What is your opinion on this?
I don’t recommend bonds at all right now. I’m not a fan of them, and I don’t own any. The bond market is almost as volatile as the stock market, and it doesn’t pay nearly as much on average.
On top of all that, bond prices work at an inverse of interest rates. In other words, as interest rates rise, bond prices go down. Long-term interest rates are still really low. If you were to buy a bunch of bonds right now, and interest rates went up even one per cent, you could lose a lot!
I recommend mutual funds and good growth stock mutual funds. There are always some bonds mixed in with a growth and income fund, and I’m not opposed to that to some degree, but it’s not my favourite. So, if I were ever going to buy bonds — and I’m not going to — it definitely wouldn’t be right now. It doesn’t take much of a move in interest rates for bond prices to go down dramatically.
My wife and I go to a small church where we tithe. The church is continually asking for contributions to other charities and causes, and we don’t have the money to give to them all while we’re sticking to our budget and getting out of debt. The worst part is that we get pretty aggressive pushback when we say no. What can we do?
I don’t react well to that kind of pushback. I would probably be nice a couple of times, but after that my response might sound something like, “Mind your own business.”
Seriously, I’d probably be a little gentler than that. But basically when it reaches that point, they’re saying, “I want your money.” And that’s really over the top. If it goes even further, and it becomes a question of you “digging deep” or not having enough faith, I might get ungentle in a hurry.
Your first job is to provide for your family and take care of those kinds of responsibilities — which is a very scriptural stance. Once you’ve done that, then you’ll hopefully have the financial ability to move beyond tithes and into offerings, which are completely different concepts. Tithes are first fruits off the top, while offerings are from surplus — meaning that you and your family are doing well financially.
Another thing to consider is this: Does this church turn every impulse they have into pressure to donate or buy something, because they didn’t plan for this kind of stuff in the church budget? I’d start having a problem with the leadership if this turned out to be the case, because it’s a sign they’re not planning and leading well.
Hopefully, you can explain to these folks the reason why you can’t contribute to additional things at the moment and they’ll understand. If not, and it were me in your shoes, I think I’d have to find another church.
Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books. The Dave Ramsey Show is heard by more than 8.5 million listeners each week on more than 550 radio stations. Dave’s latest project, EveryDollar, provides a free online budget tool. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.