A Biblical Primer on Wealth (Part 3)

A BIBLICAL PRIMER ON WEALTH I. How you handle your wealth reveals a lot about your character. LUK 16:10-11. A. Do not set your heart on wealth, nor trust in uncertain riches. PSA 62:10; 1TI 6:5-10, 17. B. MAT 6:19-21. What one values most is where his heart will be. Examine yourself in the light of the following passages: 1. PSA 4:6-7. What brings you the greatest joy? 2. PSA 84:10; 137:6. How highly do you value God's house? 3. PSA 119:72. Do you esteem God's law above your wealth? 4. PRO 18:10-11. What is your defence? 5. HEB 10:34. How do you react to the spoiling of your goods? 6. PHIL 4:11-12. Can you be content without wealth? C. Be knowledgable of your financial circumstances. Know your assets and liabilities. PRO 24:3-4; 27:23-27; LUK 14:28-29. 1. Keep a regular account of income and expenditures. 2. At least for a month or two, itemize EVERY expenditure. You will likely be surprised as to where the money has been going. II. Giving of your wealth is an investment that the Lord recompenses. ACT 20:35; LUK 6:38. A. The Lord is to be remembered with the FIRSTfruits. PRO 3:9-10. B. Poverty is not necessarily an excuse for not giving. LUK 21:1-4; 2CO 8:1-4. C. Give generously and cheerfully. 2CO 8:12; 9:6-7. D. Obligatory giving would involve support of: 1. the ministry. GAL 6:6; 1TI 5:17-18. 2. the poor. PRO 28:27; LUK12:33; GAL 2:10. E. Liberality to the poor is to be regulated according to NEED, not desire. DEU 15:7-8; 1JO 3:17. 1. Giving to the poor is according to "...whensoever ye will..." (MAR 14:7); it is a matter of personal discretion. 2. There are times when giving to the poor is not in their best interest. It may only empower their self-destructive behavior. 3. Those who refuse to support themselves should not be supported by others. 2TH 3:10. F. Any charitable giving beyond the necessary support of the ministry and relief of the poor is optional. Be wary of "causes" and false responsibility. G. 1CO 16:1-2 is the pattern for giving. Each should lay by himself in store so as to have the means on hand when the need arises. 1. This argues against turning all of one's charitable giving over to a church to be doled out at the discretion of others. 2. This also argues against the forcible extraction of wealth by taxation for the support of perceived "needy" causes. H. It is immoral to support the church to the neglect of needy family members. MAT 15:3-6; 1TI 5:8. I. It is immoral to support other causes to the neglect of honorable duty towards family. PRO 13:22; 2CO 12:14. J. Giving should not be self-promoting. 1. Do not give for show. MAT 6:1-4 ct/w ACT 4:34-37. 2. The benefit of a tax-deduction should not determine willingness to give to godly causes. K. Giving should be from out of what one has. LUK 11:41; 2CO 8:11. 1. This argues against borrowing for the support of charitable causes. 2. God burdens us according only to what we have. 2CO 8:12 c/w MAR 14:8. III. Saving is a vital part of successfully managing wealth. PRO 21:20; 6:6-8. A. Understand that we live in a failing world. We can expect calamities. It is wise to make provision for this. PRO 22:3. B. To not do so is to tempt God. MAT 4:7. C. Invest wealth so as to earn additional income (LUK 19:23), or to provide useful commodity (PRO 27:23-27). There are times when the commodity may be more useful than the currency. 2KI 6:25. D. MAT 25:14-30. The parable of the talents provides some sound investment principles: 1. The man diversified his investment. He did not put all his eggs in one basket. vs.14-15. 2. He was not looking for a quick return; a get-rich quick scheme. His objective was long-term. v.19 c/w PRO 20:21; 28:20. 3. He did not discount the merits of a minimal return by simply putting it in a bank, but preferred the higher return generally found in trading. vs.26-27 c/w LUK 19:23. 4. He made an accounting of his different investment vehicles. vs.19-27. 5. Having determined that one investment wasn't panning out, he transferred that account to a proven performer. v.28. E. PRO 24:27. One should not invest until he has the means for such investment. 1. Leveraged investing (investing on credit) is very risky and should generally be avoided. 2. It is wise to invest in one's business or career before investing in a house. A home may be considered as a form of investment, but many factors influence its storehouse of value. F. Consider the wisdom of two investment objectives: 1. A short-term investment of relative security and liquidity ("rainy day fund") which could be used for present emergencies when regular income stops or is stressed due to things like: a. sickness or injury. b. a depressed business cycle, lay-off or loss of job. c. home or vehicle "surprises." 2. A long-term investment to provide for the "golden years" and an estate to pass on to the next generation. PRO 13:22; 2CO 12:14. a. Such an investment may assume greater risk for greater returns, since the time-value of money works for you. (1) Mind the Risk / Reward Relationship. (2) Generally, the greater the potential reward is of a given investment, the greater is the risk of loss. (3) Generally, security = lower return; risk = higher return. (4) Young, single or wealthier investors can more reasonably accept higher risk investments. (5) Retirees or fixed-income investors more reasonably would choose lower return, secure investments. (6) If you could not reasonably survive in the event of loss of invested dollars, avoid unsecured / high-risk investments. b. Consider establishing an immediate estate with cheap life insurance, which is really death insurance. (1) If you have outstanding debts that you would not want to leave to your survivors or heirs if you died, consider life insurance sufficient to clear off the debts (a lender may require you to carry life insurance). (2) If you were to die, leaving dependent survivors, life insurance sufficient to replace your income or at least provide for the dependents' needs could be considered. (3) Be wary of purchasing life insurance "bundled" with an investment (usually a pricey package). You are virtually always better off to buy low-cost term life insurance for an immediate estate in the event of untimely death, and place your long-term investment in a separate vehicle. G. Do not let the seeming impossibility or futility of your task deter you. Faith teaches us to do right even when we don't see any sense in it. 2KI 5:10-14; LUK 5:4-6; JOH 6:5-13. H. Do not let the size of your investment goal overwhelm you. Some keys to successful long-term investing are: 1. small, regular investment amounts. 2. good rate of return. 3. time. The sooner you start, the better. 4. tax-deductibility of invested principle. 5. tax-deferred growth. I. Consider the following examples (no adjustment for taxes): ONE-TIME INVESTMENT OF $1000.00 (Interest computed annually) Yrs: 20 25 30 35 40 A.P.R. 4% 2191 2665 3243 3946 4801 6% 3207 4292 5743 7686 10,286 8% 4661 6848 10,063 14,785 21,725 12% 9646 17,000 29,960 52,800 93,051 14% 13,743 26,462 50,950 98,100 188,884 ONE-TIME INVESTMENT OF $1000.00 (Interest computed monthly) Yrs: 20 25 30 35 40 A.P.R. 4% 2223 2714 3314 4046 4940 6% 3310 4465 6023 8124 10,957 8% 4927 7340 10,934 16,293 24,273 12% 10,893 19,788 35,950 65,310 118,648 14% 16,180 32,451 65,085 130,534 261,801 REGULAR MONTHLY INVESTMENT OF $100.00 (Interest computed monthly) Yrs: 20 25 30 35 40 A.P.R. 4% 36,800 51,584 69,636 91,678 118,590 6% 46,435 69,646 100,954 143,183 200,145 8% 59,295 95,737 150,030 230,917 351,428 12% 99,915 189,764 352,991 649,527 1,188,242 14% 131,635 272,728 555,706 1,123,249 2,261,518 J. Low-risk, low potential return investments would include vehicles such as cash-value whole-life insurance, bank savings accounts, money-market accounts, CD's (certificates of deposit), and scaling upward through bonds and Treasury notes, etc. 1. Remember, the time-value of money also works for the people with whom you place your funds for investment. 2. This means that the more immediate access to your funds you want (as opposed to salting them away for a long time without touching them), the less will be the return that the investment vehicle is willing to pay you. K. Higher-risk, higher potential return investments would include things like venture-capital investments (where you invest in a new business or idea), or direct purchase of publicly-traded company stock, or in a mutual fund that has professionals investing in public companies on behalf of multitudes of other investors like yourself. 1. Stock market investing is likely to require more day-to-day monitoring and "hands on" maintenance for the average person. 2. A stock-oriented mutual fund is often a better choice for the average long-term investor. L. Real-estate can be a good investment and is a definite material asset, particularly if you are looking for something to hold on to for yourself. 1. Buying real-estate as an investment to re-sell on an "up" market can be very profitable but can also be very risky. 2. Real-estate is also subject to property tax yearly, and then possibly to capital-gain tax if sold at profit. M. The funds for investing may come from simply cutting unnecessary expense. 1. Suppose a "pack-a-day" smoker gives up his cigarettes and invests those saved dollars in his tax-deductible, tax-deferred Individual Retirement Account in a stock fund that has a historical long-term return of 12% / yr. $4.00 per day would potentially be worth (after 40 years) $1,254,348. Bonus: he is more likely to still be alive to enjoy it. 2. Suppose a 15-year old abandoned his "one McDonalds meal per day" habit and put those $4.00 in a similar investment as above. At age 60, that would potentially be worth $2,220,978. N. "A penny saved is a penny earned." One of the best ways to build wealth is to avoid paying interest or reducing it. 1. You are investing wisely in the way of the Lord when you retire debt. a. Consider the attached comparisons between identical home purchases: one on a 30 year mortgage with a lower monthly payment; the other on a 15 year mortgage with a modestly higher monthly payment. b. Carefully weigh the supposed tax advantages of mortgage interest. The tax-savings are often offset by the lost dollars paid in mortgage interest. c. The sooner a mortgage is paid off, the sooner you can devote real dollars to investing, and the easier you can breathe. O. Live within your means. Consider the merits of bulk food, thrift stores, less restaurants, affordable transportation, limited vacationing, less trips to Wal-mart or Target, etc., etc., etc. 1. Perhaps a more accurate motto is, "Live below your means." If you make 30k/year, act like you only make 25k/year and use the 5k difference to invest, pay down debts, etc. 2. Think twice about purchasing a brand new car. Vehicle depreciation in the first year of ownership is highest. A one-year old car that still has much of its warranty intact may be a better deal than a new car. 3. How much do you really need all those "extra" services on your phone? 4. "Brown-bag" it for lunch on the job instead of eating at a restaurant. 5. Forget about "keeping up with the Jones'," which is tantamount to covetousness and envy. It is unwise to measure oneself by others. 2CO 10:12. a. The Jones' probably are head over heels in debt anyway. b. Walk wisely and you can buy the Jones' stuff later for pennies on the dollar at a sheriff's seizure sale. 6. Stressed out by all the bills? Need a break from it all? Don't borrow $15,000.00 to take the family to Disneyworld (an actual example that I know of). Instead, take a vacation from the mall. Go to a free public park for a family picnic. Puree a few credit cards in your blender. IV. The wise saint thinks twice about gambling; fools think they can gamble with impunity. A. Gambling is extremely high-risk and addictive and is not seen in favorable light in Scripture. JOEL 3:3; JOH 19:24.. B. Wisdom teaches us to avoid "get rich quick" schemes. PRO 13:11; 20:21; 21:5; 28:20, 22. C. Believers ought to minimize risk and walk circumspectly. PRO 10:9; 28:26; COL 4:5. 1. Circumspection: "The scanning of surrounding objects or circumstances, careful or wary looking about one; the faculty of doing this. Circumspect action or conduct; attention to circumstances that may affect an action or decision; caution, care, heedfulness, circumspectness." 2. Considering the addictive nature of gambling, its known wake of financial and emotional ruin, its "pro-house" odds and the worldly environment in which it is usually conducted, the circumspect saint does well to be extremely wary of the allure of gambling's potential windfalls. D. One is lacking judgment if he stakes his fortune where the overwhelming odds are against him. PRO 13:23 c/w PRO 28:19. E. PRO 14:8. A prudent man seeks to understand his way. He doesn't take wild leaps in the dark against the odds as a gambler does. V. Avoid debt when you can (ROM 13:8), particularly "non-wealth-building debt" which does nothing to increase your net worth and for which you do not have the current assets to pay it off if you had to. Interest only benefits you when you are earning it, not paying it out. A. "The modern American is a person who drives a bank-financed car over a bond-financed highway on credit-card gas to open a charge account at a department store so he can fill his mortgaged home with installment- purchased furniture." B. The blessing of God in Israel meant a debt-free economy. DEU 15:5-6 c/w DEU 28:43-44. C. Borrowing in Israel meant tragedy. LEV 25:35-37. D. Lending is an act of mercy. PSA 37:26. E. Debt is slavery. PRO 22:7. F. Sin is a debt. MAT 6:12; LUK 7:40-47. G. Covetousness is at the root of much of modern debt. People desire what they do not have the means to own. HEB 13:5; LUK 12:15; EXO 20:17; COL 3:5. H. Debtors today have power and prestige ascribed to them. PSA 10:3. I. The Christian is to seek freedom, not slavery (1CO 7:21). There are some instances where borrowing cannot be avoided but "If thou mayest be free, use it rather." J. Do not become surety for the debts of others. PRO 22:26-27; 11:15. 1. The case of the Good Samaritan is exceptional. LUK 10:35. 2. Christ became a surety. HEB 7:22. 3. Do not become a surety for anyone's debt unless you are able and willing to absorb the loss of the entire amount guaranteed. 4. Becoming a surety for someone's debt empowers him to be a borrower. Consider why you would empower another man's slavery (PRO 22:7). K. "Neither a borrower nor a lender be: For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry." (Shakespeare, Hamlet, I, 3) L. Debts are to be paid. PSA 37:21; PRO 3:27-28. 1. If you have unwisely racked up debts, accept the consequences of your actions and proceed to correct them. LEV 26:40-42. 2. Do not fret against God because you were foolish. PRO 19:3. 3. Do not fret against your creditors with whom you dealt voluntarily. 4. Be cooperative and humble with your creditors. Work out a payment plan with them. MAT 18:23-27; 5:25-26. 5. Be willing to sell possessions to pay off a debt. 2KI 4:1-7. 6. If you are smarting for your financial folly, admit to it. Denial is not a river in Egypt. Swallow your pride, confess your error and your need to a merciful God and LEARN from your experience. VI. Seek counsel for your financial problems or goals (PRO 15:22). Consider your pastor, a godly financial planner, Dave Ramsey, etc. VII. Learn contentment. A. Be content with food and raiment (1TI 6:6-10). It is better to be godly and pay your debts even though you have to content yourself with basics, than to be ungodly and not pay your debts. B. Contentment can be learned in affluence or poverty. PHIL 4:11-12. C. Trust God to supply your needs. MAT 6:25-34; PHIL 4:19. 1. If a dying Savior could supply for His mother's needs (JOH 19:26-27), how much can a risen Savior in glory provide for yours? 2. Do not be consumed with work as this shows a lack of trust and warped priorities. PSA 127:2; LUK 10:38-42 c/w PHIL 4:6-7. D. Beware of covetousness. LUK 12:13-21; 1TI 6:10. 1. Covetousness is the antithesis of contentment. HEB 13:5. 2. Be rich in good works. 1TI 6:17-19. E. "Money will buy: A bed but not sleep; books but not brains; food but not an appetite; a house but not a home; medicine but not health; luxuries but not culture; amusement but not happiness; a crucifix but not a Savior." F. Enjoy your wealth (1TI 6:17; ECC 5:8-9) but not at the expense of honoring God and meeting commitments.