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David S. Royal, Chief Investment Officer, Thrivent

As I write this, it’s a steamy midsummer day in Minnesota. My wife and I just dropped off our two boys at a weeklong church camp in the northern part of the state. As usual, the drop-off was filled with little bits of advice from the two of us.

The exchange made me think about the things I’ve taught my children and specifically what I’d like them to learn about money and personal finance.

As parents, none of us gets it right every time, so it’s a good idea once in a while to consider those things that, by grace, may have turned out well. My boys and I play a lot of golf together. I started them young and taught them to play without taking any practice swings – a routine I picked up a few years ago when I had the chance to play a few holes with a professional golfer. After watching me hit a mediocre shot, he asked, “Why did you take those two practice swings? Your first swing was the best of the three.”

Being wise with money, like one’s golf game (for those of you who are golfers), is a lifelong journey. When we think about what we’d like our children or grandchildren, nieces or nephews, or other young people to learn, there tends to be a lesson, or at least a helpful reminder, for each of us adults as well.

I’d like to share three lessons that I’ve learned myself and found to be helpful:

1.  Invest first, then spend

You may have heard the expression “pay yourself first.” I generally agree with that notion but would prefer to rephrase it for a couple reasons.

The idea, of course, is to invest an amount each paycheck or month before you do anything else, whether paying bills or spending on either necessities or discretionary purchases. But while it sounds good in principle, there are exceptions.

First, there are situations in which the best investment one can make is to pay down expensive debt. No investment can guarantee you an 18 to 20% return, but that’s essentially what you get when you pay down credit card debt at those rates.

The second reason I would rephrase it is that I don’t like the idea of paying “myself.” When I save, I’m often saving for my family or to be generous and support causes I care about in the future.

The point is to prioritize investing over spending. Set a reasonable goal for an amount to set aside each paycheck or each month, then pay bills and spend what’s left over. The lesson I learned as I began my professional career was as much about how I would feel about spending as about investing.

When I got out of school and began my first permanent position, I would spend much of my first paycheck each month on rent, and then determined an amount to invest in a diversified mutual fund each month out of the second paycheck. The saving became a habit after a while, and I increased the amount annually as I was able.

But what really amazed me was how I felt about spending money. If there was something that I really wanted to buy, if I had enough left over at the end of the month, I would buy the item without regret. I found it liberating to invest first and then have the freedom to spend later, and that’s the lesson I’d impart to my boys and others.

2.  Consider your "personal beta"

“Beta” is an investment measure that assesses the volatility of a stock as compared to the overall stock market. A stock that tends to move up and down in line with the overall market would have a beta of 1.0. A stock that tends to be more volatile than the market would have a beta of more than 1.0, while a stock that tends to be less volatile than the overall market would have a beta of under 1.0. Considering your own “personal beta” means taking into account the volatility of your total financial situation.

If you have a stable job with a predictable income, then you may have the ability to tolerate more investment risk if your basic needs can be met out of your regular salary. Conversely, if your income is volatile and hard to predict, you may want to take that into account in assessing your appropriate level of investment risk.

It can be a good idea to also consider the industry in which you work. For example, I work in asset management. It’s generally good for an asset manager when the market goes up and less favorable when the market goes down. I’ve got a fair amount of “beta” already embedded in my job, so I invest my personal portfolio somewhat less aggressively than I would otherwise.

If you work in an industry that is more economically sensitive or cyclical, then you may want to allocate your investments to limit your exposure to economically sensitive or cyclical stocks and bonds.

This may sound a little complicated, which brings me to my final suggestion.

3.  Get the help you need

While many of our investors are self-directed, going it alone is not for everyone. A financial professional who gets to know the details of your or your family’s financial situation – as well as your “personal beta” – can help guide you along your financial journey. The financial professional can take into account a broad range of potential needs, including saving for retirement or other goals, protecting your assets and income, or devising a strategy to provide income in retirement.

But it’s not just the technical stuff with which an advisor can be of help. It’s all too easy as an investor to let your emotions take over and become your own worst enemy. It can feel good to buy when the market is rising, and it can feel like a relief to sell when the market hits turbulence. It can be difficult to maintain the discipline to stick to a long-term asset allocation strategy.

A financial professional can give you an objective perspective in making investment decisions. I’ll be honest, I often find it easier to manage other people’s money than my own. When managing money for shareholders, our decisions are driven by in-depth, top-down economic analysis and bottom-up stock selection and credit analysis.

When managing one’s own money, it can be harder to set emotions aside and approach investing from an analytical perspective. A financial professional can help provide you with an objective point of view.

I look forward to getting out on the golf course with my boys again soon and offer them some more useful advice on both their swings and their financial futures. I also wish each of you the best in your financial journeys and in doing whatever it is you personally love with those you care about.


David Royal is the chief financial officer of Thrivent and president of Thrivent Mutual Funds.