Let's Talk Money, Part 2
Blog -> Bible
In our last blog, we started the big topic of money. So far we covered the first important aspect, which is giving. Now we cover the second important aspect of finances: Savings.
The Bible consistently tells us how important saving actually is. For example:
Proverbs 6:6-11 Go to the ant, you sluggard; consider her ways, and be wise: Who having no guide, overseer, or ruler, Provides her food in the summer, and gathers her food in the harvest. How long will you sleep, O sluggard? when will you arise out of your sleep? Yet a little sleep, a little slumber, a little folding of the hands to sleep: So shall your poverty come upon you like a vagabond, and your want like an armed man.
Two important principles we can learn from this verse:
- Always save some of your income. Whenever you get paid, whenever you get a gift, whenever you receive any kind of income, the basic principle is: Save some of it for later.
- Never be lazy, make work a priority. Now that doesn’t necessarily mean that we all have to work for income all the time. For example, your work for a season can be to do well in your studies. Or your work could be to be a fulltime caregiver at home. So the Bible doesn’t say that we all should always work for money. But the principle is: Work! Don’t be lazy. Do something meaningful with your life. Of course, nothing wrong with taking breaks, going on holidays, etc. But there’s a difference between “taking a break from work” and “being lazy”. And if we start being lazy, it’s only a matter of time until disaster comes.
Now there are other verses that confirm this same principle:
Proverbs 21:20 There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spends it up.
This verse speaks of the flipside of saving: Spending it all (aka: Not saving) is foolishness.
Proverbs 27:12 A prudent man foresees the evil, and hides himself; but the simple pass on, and are punished.
This verse doesn’t specifically talk about money, but the principle applies to money as well. Foresee danger! You might lose your job. You might have unexpected costs coming up (e.g. a hospital bill). It doesn’t have to be danger: Maybe a wonderful opportunity for an investment shows up, but it does require a certain amount of money. A wise person prepares for that and has a certain financial flexibility. This can only be achieved one way: Saving!
How do we save?
Ecclesiastes 11:2 Give a portion to seven, and also to eight; for you know not what evil shall be upon the earth.
Ecclesiastes 11:6 In the morning sow your seed, and in the evening withhold not your hand: for you know not which shall prosper, either this or that, or whether they both alike shall be good.
Put your savings in different places. If you put it all in one investment (e.g. a house) it is possible that “something could happen” (e.g. the real estate market crashes). And so from one day to another, all our savings might be gone (or at least take a huge hit). That’s why the Bible tells us to put our savings in different places. Practically speaking, it’s good to put some of it in “emergency cash” accounts. Places where we could get quick access to the money, in case we suddenly and unexpectedly need cash. Then we should put money in more long term investments (e.g. planning for retirement, putting money in an account that we cannot withdraw from for several years, but it gives a high interest rate, etc). If we are parents, we should also set aside money early for our children’s university time (It’s difficult to come up with the money in a year, once they decided to study. On the other hand, it’s much easier to come up with the money if we simply set aside small amounts for this purpose on a regular bases from their birth). Then we should put some money in investments for the future (e.g. buying an apartment). That’s why the Bible tells us to put our savings in many different places.
Now different from tithing, the Bible doesn’t give us a percentage for savings. Tithing is easy: At least 10% to our local church, and being generous beyond those 10%. For savings, we don’t find such a number in the Bible. I think this is because we go through different seasons in live. In some seasons, during times of blessedness, God might ask us to save a lot (20%, 40% or even more). In other times, things might be extremely tight, and we might not be able to save a lot. We personally think that aiming towards ~10% is a good number. But depending on the season of life we’re in, this number can be a bit higher or lower.
The key principle however is this: We save first, and live of the rest. We don’t live first, and save the rest.
What do I mean by that? Well, for most people, they start with their lifestyle. “I want to have this kind of apartment, I want to have this kind of car, I want to spend this much on leisure,…” And then at the end of the month, they save whatever is left (which is usually nothing or very, very little). The Bible tells us to do the opposite: After tithing, the next thing we need to do is save. Set aside a certain amount of money (either a fixed amount or a percentage) on a monthly basis. And then we live of the rest, and we set our lifestyle accordingly.
Then what about debt? Is it OK to go into debt?
Proverbs 22:7 The rich rules over the poor, and the borrower is servant to the lender.
The general principle is “no”. Debt brings us into slavery. And I certainly do not agree to go into debt in order to live on a higher lifestyle. “I can’t afford this car right now, but I’ll just go into debt, so I can have it”. That’s definitely not Biblical.
Now there might be some special occasions in which debt might be OK. But I think we have to be very, very careful about them.
1) First of all, long term it has to make financial sense for us. For example, if I’m thinking of buying a house, then it might make sense to say: “I’ll go into debt, but once I own my own place, I don’t have to pay rent any longer. The money I’m saving for not paying rent is actually more than the interest I’m paying for my loan.” So there has to be a financial benefit for going into debt. The reason cannot simply be “wanting something that I cannot afford otherwise”.
2) Our financial assets always need to be much greater than our loan. Going back to the house example, I would not recommend to buy a house by taking a loan with 100% of the house’s value. Let’s say 2 things happen (which happen all the time): We lose our job and the real estate market goes down. If these two things happen, we suddenly have an ever increasing debt (due to interest), and no way to get out of it. That’s why we should always make sure that our assets are always worth much more than our debt. Most banks (at least in Germany) don’t give you a loan for a house unless you can pay at least 40% of the total value upfront. They want to make sure that if you can’t pay, they can take the house back from you without losing their money. But I think we should follow this same principle: If we take a loan, we need to make sure that if “something goes wrong during the time of repaying”, we can simply sell our assets and this way repay our debts. If we don’t have those assets, going into debt is simply too risky.
So if these two conditions are met, a loan might make sense. But we have to be very careful and need God’s personal guidance on whether we should really take this loan.
3) Plan well and stick to the plan, make repaying your debt a high priority
If we really go into debt, then we need to have a plan on when/how to repay it. Define the monthly amount you want to repay, and make sure you have that money. Calculate how many years it’ll take you to repay. If you have extra money, use it to repay your debt more quickly, rather than “investing in something else”. And do whatever you can to not extend the time of your debt.
We think that sometimes it is OK to make an investment by going into debt if we follow these principles. But we have to be very, very careful about them and certainly need to get God’s confirmation first, before simply going ahead with such an investment.
So these are some principles that we can read about in the Bible on Savings (and related to this: Debt). So of our income, we first give (at least 10%). Then we save (For simplicity’s sake let’s just say another 10%, though this number is not fixed). So that leaves us with ~80% of our income to live on. What should we do (and not do) with these 80%? Are we free to do whatever we want with those? What does the Bible say about “how to spend money in our daily living”?
We’ll cover such questions in our next blog. For today we simply want to end with this conclusion:
You and I need to plan ahead for our future. Yes, God provides for all our needs. But we have to cooperate. If not, we will pay the price for our naïve attitude one day in the future. Let’s start saving today. And enjoy the fruit of our wisdom in the future.
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