These four rules work no matter where the economy is heading, what the stock market is doing and where interest rates stand. Time-tested, biblical principles work regardless of worldly circumstances. You can get your finances under control and live your ideal life if you diligently follow these rules.
Rule #1: Spend less than you make
Whether you make $30,000 or $300,000, make it a habit to spend less than you make. It is easy to reduce expenses if you analyze your spending habits and keep a log for 90 days or more. The trends may surprise you. You may see some areas where spending is excessive and you can reduce. It’s estimated that the average person has at least 15 to 20 percent wiggle room – meaning they could cut back 15 to 20 percent of what they’re spending and see few negatives change in their life. A little can go a long way. The key here is to live within your means. I know our government gives us a bad example, but you can’t keep spending money you don’t have hoping someday you’ll be able to repay.
I have seen people making less than $30,000 a year become millionaires and those making $300,000 or more a year end up bankrupt. It all comes down to discipline. Will you create a spending plan that operates within your means or will you keep spending above and beyond what you make? Too many lottery winners, athletes, musicians, and other celebrities make short-term financial decisions based on expected income rather than using conservative figures. Presuming upon your future earning ability leads to trouble the second your cash flow fails to live up to your expectations. Instead, learning to live on 60% or less of your income allows for more generous giving, saving, and simplifying your life.
Rule #2: Develop a savings strategy
Earl Wilson once said, “Money in the bank is like toothpaste in the tube – easy to take out, hard to put back.” Many of today’s financial problems are related to a lack of savings. Emergencies come too often and most are ill-prepared. Most people need at least 3 to 6 months of expenses set aside for emergencies (illness, job loss, major repairs, etc) and many may need a year or more of expenses saved depending on their life situation. Do you have a savings strategy?
Having a savings account doesn’t show a lack of faith but rather a good use of common sense. God says we will have many times of feast and many times of famine. Planning ahead allows us to have resources in time of our greatest needs. Instead of waiting for someone to bail you out, have a plan in place. This provides independence and for others’ resources to be used to help those less fortunate.
Rule #3: Have an investment plan
Many confuse saving with hoarding (excessive saving to try to eliminate all problems). God used the Parable of the Talents to show that hoarding was unwise, but investing for the future was not only acceptable but encouraged: ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!” Shouldn’t we all want to maximize blessings God provides?
Investing involves many financial skills such as selecting good investment opportunities, managing risk, minimizing taxation, diversifying holdings, and asset allocation to name a few. Too many people make huge mistakes in the area of investing. They pay too much in fees, too much in taxes, and suffer significant losses due to a failure to truly understand and know what they own.
I have seen thousands of people blindly had over their life savings and put trust in a mutual fund, a money manger, or a financial advisor without truly understanding where they were investing. With investing comes a great moral responsibility to not only attempt to maximize the return but to do so ion a way that is consistent with your values, beliefs, and faith. How can you expect to be blessed by God investing in companies or investments that are immoral and if you do profit in such a way, how does that resonate with you?
Rule #4: Simplify your life
Jesus warned us all about placing too much importance on the things of this life. Money and possessions do not transcend your time on earth. He told us not lay up treasures for ourselves on earth. In other words, do not be materialistic (store money) or selfish (spend all on yourself) or spiritually short-sighted (focus too much on your time on earth). In Luke 12:14, we see ‘Watch out! Be on your guard against all kinds of greed; a man’s life does not consist in the abundance of his possessions.’ How do we balance our spending, saving, and investing habits to reflect biblical principles? How will we live a life of abundance yet glorify God?
Those who have wealth have greater responsibilities. There is much good that comes from wealth when used for noble and godly purposes. It takes a Christ-centered attitude and commitment to live simpler lives to defeat the temptations of greed and lust. It is when we focus on kingdom purposes and doing His will that we ultimately claim victory in this lifetime. What if we were all focused on living simpler lives so we could help more of God’s people, how different would the world look?