Having enough money doesn’t have to be puzzling
By Kregg R. Hood
When I attended high school, my dad planted a tiny pecan tree in our backyard. The tree stood only 2 feet high and I remember wondering if it would live, let alone produce pecans.
Recently, I returned to my parents’ home in Texas, walked out of the garage and noticed all the broken pecans and sticks on the driveway. Now, 30 years after the planting of that sapling, it has grown into a mighty tree loaded with pecans and shading much of the backyard and driveway.
Like the humble beginnings of that pecan tree that grew strong in maturity, most people want to see their finances grow proportionally over time. A few nurturing steps in the beginning can lead you into the essence of practical, biblical stewardship. Stewardship involves managing and developing our time, treasure and talents. God wants these resources to increase, both in order to bless us and to build His kingdom.
Step 1: Spend less than you make
To realize an increase in finances, your expenses must be less than your income. The fact that income moves you up and expenses bring you down is the “financial law of gravity.” You cannot add to your worth without having money left at the end of each month, quarter and year.
You can increase your income through a variety of methods, including receiving a raise, finding a better-paying job or gaining a second income. You also can reduce your expenses — by spending less or spending less frequently. Because adding to income is more difficult in the short term, you should eliminate any unwise spending habits immediately. You will find a number of helpful ideas in this article.
After cutting nonessential spending, start tracking your monthly spending efforts. For example, you might pick every second Saturday afternoon to total the money that came into your checkbook (from your job, gifts, rebates, refunds and the like). Next, subtract every dollar you spent. Note the positive (or negative) difference. If your total is positive, congratulate yourself and keep up the good work.
If your total is negative, you are in trouble. My hunch is you are using credit cards too often. Credit card debt destroys financial growth. Do not despair, but do not ignore this red alert. Put your credit cards away without delay, spend only the cash you set aside and force yourself to say no to all unnecessary spending. Later, when your monthly financial total is positive, you might relax a few spending restrictions. The dollars will add up faster than you think.
Step 2: Grow what you have
Financial growth is fueled by series of small, wise, consistent actions. Yet, many Americans (Christians included) complain about not having enough money. While money can certainly be tight, research and practical experience tell us small, daily expenses add up and cause overspending. Trips to an automated teller machine to withdraw cash to have on hand, or drinking a daily Dr Pepper gnaw at your ability to invest and produce income.
Imagine what would happen if you trimmed your excessive expenses and put this money to work in your future by increasing investment. As Solomon put it, “He who gathers money little by little makes it grow” (Proverbs 13:11, NIV). Sure, it will take time, but if you develop a regular habit and enjoy adding to the amount you can put away each month, amazing results are possible.
Some time ago I watched an instructional video on money management for young adults. The speaker described what would happen if someone at age 18 began investing $50 each month. He then showed an investment graph that assumed a 10 percent average yearly growth rate. Then he showed what would happen if the person invested for 20 years (stopping any new investments at age 38), yet left the money in the account to keep growing.
By using time and the effects of compound interest, more than $440,000 would be saved by age 65! This hypothetical but realistic scenario indicates that it is possible to invest only $50 a month, or $600 per year, for 20 years and have that $12,000 outlay pay off in a big way.
In the same video, the speaker also showed what would happen if someone waited until 45 to begin saving and investing at this same rate. At 65 the total would be only about $40,000, a difference of $400,000!
This scenario is well within the reach of most Americans who discover the mathematical and financial effects of time and compound interest. These powerful forces either help you or hurt you. They provide a fantastic incentive to give up double-lattes, invest the money saved and build your finances. Start as quickly as you can.
Step 3: Increase your giving
Because God has all the wisdom in the universe, it makes sense to trust His judgment about finances. God owns everything (Psalm 50:12), can create anything (Genesis 1:1) and needs nothing (Acts 7:49). Giving is not designed to benefit us, but to build God’s kingdom. Consider these passages:
• “ ‘Bring the whole tithe [10 percent] into the storehouse, that there may be food in my house. Test me in this,’ says the Lord Almighty, ‘and see if I will not throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it’ ” (Malachi 3:10).
• “Give, and it will be given to you. … For with the measure you use, it will be measured to you” (Luke 6:38).
• “You will be made rich in every way so that you can be generous on every occasion, and through us your generosity will result in thanksgiving to God” (2 Corinthians 9:11).
Get the point? One of your smartest financial growth decisions is to make giving to the Lord a top priority. Would you rather have 90 percent plus God’s blessing or keep 100 percent and be on your own? The choice is yours.
Step 4: Live by a spending plan
What would you do if you hired a homebuilder who did not draw up and work from a blueprint? You would not pay him a cent! Anything important requires a plan, and your spending is no exception. A spending plan, often called a “budget,” is simply a “to-do list” for what, how much and when you will spend money. Your spending plan is your friend, not your enemy. It will bring you:
• Clarity to describe exactly how you will spend your money.
• Priorities so that spending for essential expenses comes first, important expenses come next and fun stuff comes last, based on what is left.
• Conviction to keep you on track when temptation knocks.
Set aside time and develop your plan carefully. Start by listing all your required expenses, then your important expenses and finally your discretionary expenses. Next, examine each expenditure and decide which ones can be reduced or eliminated. Be objective.
Some items, such as your tithe check, retirement contribution and savings may need to increase. Do not forget to plan for car maintenance and insurance. Ask the Lord for direction and seek the counsel of a wise Christian friend.
Then take the list and develop a written plan for when and how much you will spend each month. When unexpected spending opportunities arise, simply check your plan. If the expense fits the plan, you are free to make the purchase. If not, wait until the following month or two. You will be surprised at how often waiting cures a spending urge.
A good spending plan, just like a blueprint, helps you expand your finances, especially over time. The lack of a plan virtually guarantees failure. Remember, God wants you to succeed. Keep Lamentations 3:40 in mind: “Let us examine our ways and test them, and let us return to the Lord.”
Step 5: Review your progress and adjust for more growth
Remember the pecan tree? Dad did not simply stick the twig in the ground and leave it alone. He watered, pruned and shaped its growth.
Our finances work the same way. Watering means regularly adding more funds to your accounts. Pruning is akin to making changes that will lead to the greatest returns, without bringing on unwise risk. Shaping involves holding to an investment strategy that will help you reach your financial goals, regardless of your age or life situation.
While this article does not address the details of these three financial actions, they are extremely important. You would be wise to find a competent, professional adviser to help you discover your options and make decisions that are in your best interests, not theirs. Evaluate and adjust every year.
Above all, learn the secret of contentment. When you are content with what you have, you please God. Thank Him for what you have rather than fretting about what you think you lack. Carefully manage every dollar. Enjoy an affordable level of spending. Look for new blessings every day. These steps honor the Lord, build your finances and prepare you to manage more in the future.
Dr. Kregg R. Hood is senior vice president of AG Financial in Springfield, Mo. He is the author of Escape the Debt Trap: Let the Lord Lead You Out and From Debt to Life: 10 Proven Steps to Beat Credit Crisis & Build Financial Freedom.
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