Matt 7:31-34 speaks clearly of God’s promise to provide for our(Christians) needs. So let me ask you, is God keeping His promise to you? Is God providing for your needs? ☐ Yes, ☐Almost, ☐For the most part, ☐Pretty much, ☐Sometimes, ☐Most of the time, ☐No. I want you to go look at your cash flow sheet (I’m not calling this a budget anymore) and study it for a moment. Are there any things on it that you could do without? Could you survive on less? Could you cut 10% out of your expenditures and survive? Could you cut out 25% and still survive? We’re talkin survival here. Could you cut 50% out of your living expenses and SURVIVE? I have an idea that this is more like what Jesus had in mind in Matt 7 when He promised to provide for our NEEDS.
Given His promise, does that mean we don’t need to be saving something for a “rainy day” (you young people have probably never heard that expression)? Well, how about saving for a rebuilt transmission or the deductible on a trip to the emergency room or a million and one other financial surprises that are going to happen in your life. Certainly He knows all about them and when they will occur and how much they will cost, etc. If you have been following along over the last several months, you know that He does provide for these surprises and He does it through our wise (smart) use of His money and other resources. Do you remember what our job is as Christian stewards/servants/slaves? Of course you do. We are supposed to be managing His money for His glory.
Before we go any further with this discussion, however, let’s make sure we are all on the same page. Saving, to paraphrase Mr. Webster, is putting aside, storing, building up a pile of money. Did you read the passages I suggested way back in week one? Prov 6:6-8, Gen 41:25-36, Luke 12: 16-19, and Ex 16:13-21? These passages tell us that saving is a wise thing to do. It’s common sense. Anybody can do it (even an ant). For some, it may be a seasonal thing. It could even be a life or death matter. It requires planning and discipline. It can also be done for the wrong reasons. There is an exactly “right” amount for each of us.
I know you’re having trouble making ends meet (another old people’s expression) but there is a really easy way to get started saving. Here’s how. Get out your cash flow statement and label each item on it according to whether it is a NEED (N) or a WANT (W). For example, food, rent/house payment, clothes, deodorant, FICA, taxes, electricity, water, etc. would all get an “N”. However, vacations, movies, going out to eat, bottled water, cell phones, Starbucks, tanning and toenail parlors, etc. would all get “Ws”. Right away you say you see a problem. Not everybody has the same “NEEDS” do they. Rather than getting into a discussion about what constitutes NEED, I think I will leave this up to the Holy Spirit and how He speaks to each of us individually about NEED. Now add up all the Ns and all the Ws. Subtract the Ns from your GROSS INCOME. The result from this subtraction is what we are going to call your SURPLUS. Save it. You will no doubt have a category on your cash flow statement labeled “miscellaneous”. We often abbreviate this MISC. It stands for “money I spent carelessly”. Quit spending money in this category and save it too.
The first thing you start saving for is EMERGENCIES (referred to above as financial surprises). It’s part of your plan to make wise use of God’s money. You all remember what planning entails, simply deciding in advance what to do, how to do it, etc. So how much should we save? That depends on what kind of emergency we might have. It costs $2500 to rebuild a transmission. How much would it cost to SURVIVE till you find a new job when you get fired (total of the Ns per month times the number of months you will be unemployed). You get the idea. Every “expert” has his/her opinion on how much. I’m no expert but I do have an opinion, at least $1500 or three months (survival) living expenses. The second thing some of you will want to save for is required by seasonal employment. Some jobs/businesses require more time and effort during some months than others. Certainly all you people in the farming and construction business are aware of this phenomenon. You deal with it of course the same way you deal with emergencies. See, I told you this would be easy!
OK, now that we have this steady flow of SURPLUS to deal with each month, what should we do with it? Where should we put it? We should put it in a safe place where we can access it easily and quickly in an emergency. Where will God’s surplus be safe from fire, storm, theft, etc. and still be easy to get at in time of need? Banks and credit unions offer a variety of accounts that provide for such safety and access can be instantaneous depending on the type of account. They all will even pay a little interest when you let them store God’s surplus. I would suggest that you establish a separate account for your emergency savings. Although we aren’t really concerned about the little bit of interest you will earn, you should shop around and inquire about the different types of accounts. There’s a lot of competition in the banking business these days so interest rates do vary as well as services and convenience.
Mission accomplished??????????????? No, not quite. We are all set and ready to deal with emergencies but we still have all this surplus coming in every month. What should we do now? By this time you are accustomed to living at the survival level so just let those surpluses keep coming. There are three things we could do with them: 1) spend them, 2) give them away and/or 3) invest them.
Let’s start by talking about investing. That is, “laying out money or capital in business with the view of obtaining an income or profit.” “Converting into some form of wealth other than money, as securities or real estate, with the expectation of deriving income.” That’s what Mr. Webster says about investing but what does the Bible say about it. Gen 3:22-23 identifies the first investor and got this whole thing started. Prov 21:20 chastises us for spending everything. Prov 13:22 tells us that God approves of us leaving an inheritance. 2 Cor 12:14 tells us it’s OK to help our kids out financially. 1 Tim 5:8 does not place a time line on family provision. And finally Matt 25:14-30 tells us that God expects us to be serious about investing His money and that we better do a good job. Many (most? all?) Christian authors on this subject would encourage us at this point to become completely debt free before we begin thinking about investing. To the extent that we have outstanding debt that is costing us more in interest than we can earn in safe, low risk investments, I would certainly agree. If you have credit card balances that cost 15-20% (and most credit cards charge this kind of interest) then by paying those balances down you will automatically earn 15-20% interest. Clearly a no-brainer (I hate that expression but it applies here) not to mention the peace of mind it can provide. Once you get your credit card balances paid off, then begin to look at your other debt with this same idea in mind. Depending on your circumstance, it may be advantageous to maintain some kinds of debt.
When we get to this spot, we can do one of two things to continue investing. We can invest God’s surplus in a business of our own making or we can invest it in an already existing business. All of you self employed people understand about investing in your own business. You do it to earn a profit and an income to provide for your family. The rest of us aren’t brave enough to start our own business and we work for someone else (for the same reason).
The reason we invest our growing surplus rather than leaving it to accumulate in our savings account at the bank or credit union is that we hope to earn a greater return than the interest paid on savings accounts. You notice I used the word “hope”. When we step beyond the financial safety of our savings account we take on a degree of risk (that the business we invest in will falter or fail). That’s true for our own business as well as someone else’s business. Usually the greater the prospect for profit/return on an investment, the greater the risk associated with the investment. Matt 25:14-30 explains that God rewards wise/good investors and punishes poor/bad investors.
There are four basic reasons we invest our surplus in the hope of a greater return:
- Old age. There comes a day in everyone’s life when he/she can no longer work unable to work) to earn a living. I’m not there yet but I’m getting closer every day and I’m really starting to feel it. This is NOT retirement. When this day arrives, we must have some means of support. My wife’s dad referred to this as having enough money put aside to “see him out”. Everybody hopes they will have enough “put aside” that they can live off of the interest being earned and not touch the principal but most end up needing some or all of the principal as well.
- College education. There are a lot of kids graduating from college today with debt of as much as $40,000 (or more). Not everybody has that much debt when they graduate but most have some. Call me crazy but I don’t think that’s necessary. This could be one reason to invest God’s surplus, to help your kid(s) with college costs. The kid(s) could also work for some of it. What if it takes a couple more years to get through, so what. They have the rest of their lives (70 years or more) to live. This could also be a time for learning a strong work ethic which future employers (after graduation) will love.
- Inheritance. Is the story of the prodigal son an endorsement of providing an inheritance for children? Or is it a condemnation of such? Prov 13:22 tells us that a good man leaves an inheritance to his children. God Himself left an inheritance. But what if we can’t or don’t want to? I don’t see any Biblical condemnation for those who can’t or don’t want to.
- Give it away. We could give away the earnings from our investments (or even some of the principal). God would be so pleased and it would certainly be glorifying to Him (depending where/to whom you give it).
Once we have set aside enough to meet NEEDS in the future, then a little help for kids through college and then a little inheritance for the kids, how about just giving all of it away from that point on. Or does nobody ever get to that point? Randy Alcorn has written a book that deals extensively with this issue, Money, Possessions and Eternity. I suggest you all get a copy and read it. On average, the most we can hope to earn over the long haul is around 8-10% if we do a good job of investing. I think you would agree that God can multiply His surplus at a far greater rate than 10% if we would let Him. The question is at what point are we willing to really and truly trust Him?
All you self employed people know what it means to invest in your own business so I’m not going to say anything else about that. There are essentially only two ways to invest in an already existing business. We can actually buy part of the business or we can lend money to the business.
When we buy part of a company we become an owner and our ownership is represented by shares of stock. We become stockholders or shareholders. The price of the stock is determined by the value of the company divided by the number of shares of stock outstanding. One of the ways we earn a return on investment in the stock of the company is when the value increases. The familiar expression “buy low, sell high” simply means purchasing stock and then selling it at a higher price than it was when we bought it. In order to realize the return, of course, we have to actually sell the stock. Naturally when we buy stock we watch to see what happens to the price after our purchase. When the price goes up we tell all our friends about how much money we mad (but we don’t really make it until we sell it at the higher price). The second way we earn a return from our ownership in a company is when the company decides to share its profits with stockholders by declaring a dividend. When that happens, the total dividend declared by the company is divided by the number of shares of stock and then we get our proportionate share based on the number of shares we own. Of course we have to actually own the stock at the time the dividend is declared. As you might imagine there’s an entire industry out there comprised of thousands of individuals and organizations dedicated to guessing at how successful companies will be in the future and what impact it will have on the price of their stock and decisions associated with the declaration of dividends. That’s not to say there isn’t a lot of very sophisticated analysis that goes on but in the end nobody really knows what is going to happen and what the impact will be.
The second way to invest in an already existing company is to lend it money. This is done by purchasing bonds issued by the company. Governments can also issue bonds. Bonds are fundamentally IOUs. They are promises to pay back the money loaned plus a specified amount of interest at a given date in the future. Most bonds are issued in denominations of $1000.
There are two primary enemies of investing: taxes and inflation. When we “buy low and sell high” we must pay taxes on the profit. These are referred to as capital gains taxes. We must also pay taxes on any dividends received. We know the attitude toward taxes expressed in the Bible but there are two exceptions permitted by the IRS in our modern day. If these earnings (capital gains and dividends) are made within a traditional Individual Retirement Account (IRA) or a 401K, the taxes on earnings are deferred to a later date (not necessarily an advantage). If the earnings are made within a ROTH IRA, they are free from taxes. Naturally, the IRS has placed restrictions on how much of this sort of thing they will permit.
The other enemy of investing is called “inflation”, that is the gradual increase over time in the general level of prices. Another way to say this is the gradual decline in the purchasing power of money. Every month the US Bureau of Labor Statistics calculates what they call the consumer price index (CPI). The CPI is an attempt to measure changes in the prices paid for a defined market basket of goods and services purchased by urban consumers (87% of the US population). Let’s say our investments are earning 8% return annually but every year, inflation reduces the purchasing power of God’s money at the rate of 3%. God’s investments are taking eight steps forward and three steps back each year.
There are two basic kinds of inflation: cost push and demand pull. When a company providing goods and services experiences increases in the cost of its materials, or labor, or taxes, or utilities, or packaging, or shipping, what can they do? In the short run, they can absorb some of these increases but eventually they will have to increase the prices they charge for their products and services. As this increase in costs is experienced by more and more companies, the general level of prices is force upward. Depending on which costs are increasing, inflation may be occurring at a different rate in some sectors of the economy than others. Demand pull inflation occurs when the supply of particular goods and services falls short of demand. When demand for some goods and services exceed supply, prices get bid up over time. Although inflation is usually portrayed in the media as a bad thing, on a personal level there is something we can (must) do about it. We can purchase less of any given item when the price goes up. We can purchase a lower quality of the same item. Or, to the extent possible, we can substitute other lower priced items. The only good thing I can think of with regard to inflation is in the repayment of debt. We usually repay debt on a dollar for dollar basis and the value of each dollar declines over time. Thus, we repay loans over time with dollars of lower value. The banks and loan companies of course are wise to this situation and charge enough interest to cover the declining value of the dollars and then a little extra to make it worth their while.
This whole concept of investing is driven by a single fundamental phenomenon called compounding. It applies to every area of saving and investing. Even though the bank doesn’t pay much interest on our emergency savings account, when we leave the earnings in the account, they themselves earn interest. It’s interest earning interest on interest. It just goes on by itself without adding any new money. The earnings grow at an accelerating rate over time. The same thing can happen when earnings from stock and bond ownership are reinvested in additional stock and bonds. Eventually, we will reach an age when we need to spend the earnings in a given year (simple interest) to provide for our needs. You have heard the term “fixed income”. Simple interest provides a fixed income.
Before I close, I want to share a cute little thing I learned a while ago called the “Rule of 72”. When you divide 72 by the interest rate on an investment (of any kind), the answer is the number of years it takes to double the money in the investment. For example, if our emergency savings account earns 3.5% interest, it will take 20.6 years to double our savings. On the other hand, if our investment portfolio earns 7% annually, it will take just 10.3 years to double in value. I suppose there are other such cute rules but this is the only one I know.
Well, that’s all for this time. We are going to continue with our discussion of investing in the weeks ahead by considering more specifically how to do it. Now, don’t get all excited. I’m not going to tell you which stocks/bonds to buy/sell nor am I going to tell you how to do a Terradactile spread in the corn futures market. We will be sticking with just the basics.
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Prov 6:6-8 Go to the ant, O sluggard, Observe her ways and be wise, 7 Which, having no chief, Officer or ruler, 8 Prepares her food in the summer, And gathers her provision in the harvest. NASB
Gen 41:25-36 Now Joseph said to Pharaoh, “Pharaoh’s dreams are one and the same; God has told to Pharaoh what He is about to do. 26 The seven good cows are seven years; and the seven good ears are seven years; the dreams are one and the same. 27 And the seven lean and ugly cows that came up after them are seven years, and the seven thin ears scorched by the east wind shall be seven years of famine. 28 It is as I have spoken to Pharaoh: God has shown to Pharaoh what He is about to do. 29 Behold, seven years of great abundance are coming in all the land of Egypt; 30 and after them seven years of famine will come, and all the abundance will be forgotten in the land of Egypt; and the famine will ravage the land. 31 So the abundance will be unknown in the land because of that subsequent famine; for it will be very severe. 32 Now as for the repeating of the dream to Pharaoh twice, it means that the matter is determined by God, and God will quickly bring it about. 33 And now let Pharaoh look for a man discerning and wise, and set him over the land of Egypt. 34 Let Pharaoh take action to appoint overseers in charge of the land, and let him exact a fifth of the produce of the land of Egypt in the seven years of abundance. 35 Then let them gather all the food of these good years that are coming, and store up the grain for food in the cities under Pharaoh’s authority, and let them guard it. 36 And let the food become as a reserve for the land for the seven years of famine which will occur in the land of Egypt, so that the land may not perish during the famine.” NASB
Luke 12:16-21“The land of a certain rich man was very productive. 17 “And he began reasoning to himself, saying, ‘What shall I do, since I have no place to store my crops?’ 18 “And he said, ‘This is what I will do: I will tear down my barns and build larger ones, and there I will store all my grain and my goods. 19’And I will say to my soul, “Soul, you have many goods laid up for many years to come; take your ease, eat, drink and be merry.”‘ 20 “But God said to him, ‘You fool! This very night your soul is required of you; and now who will own what you have prepared?’ 21 “So is the man who lays up treasure for himself, and is not rich toward God.” NASB
Ex 16:13-21 So it came about at evening that the quails came up and covered the camp, and in the morning there was a layer of dew around the camp. 14 When the layer of dew evaporated, behold, on the surface of the wilderness there was a fine flake-like thing, fine as the frost on the ground. 15 When the sons of Israel saw it, they said to one another, “What is it?” for they did not know what it was. And Moses said to them, “It is the bread which the LORD has given you to eat. 16 This is what the LORD has commanded, ‘Gather of it every man as much as he should eat; you shall take an omer apiece according to the number of persons each of you has in his tent.'” 17 And the sons of Israel did so, and some gathered much and some little. 18 When they measured it with an omer, he who had gathered much had no excess, and he who had gathered little had no lack; every man gathered as much as he should eat. 19 And Moses said to them, “Let no man leave any of it until morning.” 20 But they did not listen to Moses, and some left part of it until morning, and it bred worms and became foul; and Moses was angry with them. 21 And they gathered it morning by morning, every man as much as he should eat; but when the sun grew hot, it would melt. NASB
Prov 13:22 A good man leaves an inheritance to his children’s children, And the wealth of the sinner is stored up for the righteous. NASB
Gen 3:22-23 Then the LORD God said, “Behold, the man has become like one of Us, knowing good and evil; and now, lest he stretch out his hand, and take also from the tree of life, and eat, and live forever”– 23 therefore the LORD God sent him out from the garden of Eden, to cultivate the ground from which he was taken. NASB
2 Cor 12:14 Here for this third time I am ready to come to you, and I will not be a burden to you; for I do not seek what is yours, but you; for children are not responsible to save up for their parents, but parents for their children. NASB
Matt 25:14-30 “For it is just like a man about to go on a journey, who called his own slaves, and entrusted his possessions to them. 15 “And to one he gave five talents, to another, two, and to another, one, each according to his own ability; and he went on his journey. 16 “Immediately the one who had received the five talents went and traded with them, and gained five more talents. 17 “In the same manner the one who had received the two talents gained two more. 18 “But he who received the one talent went away and dug in the ground, and hid his master’s money. 19 “Now after a long time the master of those slaves came and settled accounts with them. 20 “And the one who had received the five talents came up and brought five more talents, saying, ‘Master, you entrusted five talents to me; see, I have gained five more talents.’ 21 “His master said to him, ‘Well done, good and faithful slave; you were faithful with a few things, I will put you in charge of many things, enter into the joy of your master.’ 22 “The one also who had received the two talents came up and said, ‘Master, you entrusted to me two talents; see, I have gained two more talents.’ 23 “His master said to him, ‘Well done, good and faithful slave; you were faithful with a few things, I will put you in charge of many things; enter into the joy of your master.’ 24 “And the one also who had received the one talent came up and said, ‘Master, I knew you to be a hard man, reaping where you did not sow, and gathering where you scattered no seed. 25’And I was afraid, and went away and hid your talent in the ground; see, you have what is yours.’ 26 “But his master answered and said to him, ‘You wicked, lazy slave, you knew that I reap where I did not sow, and gather where I scattered no seed. 27’Then you ought to have put my money in the bank, and on my arrival I would have received my money back with interest. 28’Therefore take away the talent from him, and give it to the one who has the ten talents.’ 29 “For to everyone who has shall more be given, and he shall have an abundance; but from the one who does not have, even what he does have shall be taken away. 30 “And cast out the worthless slave into the outer darkness; in that place there shall be weeping and gnashing of teeth. NASB
Prov 21:20 There is precious treasure and oil in the dwelling of the wise, But a foolish man swallows it up. NASB
1 Tim 5:8 But if anyone does not provide for his own, and especially for those of his household, he has denied the faith, and is worse than an unbeliever. NASB