I joke often that, in spite of my degree in finance and career in the banking world, had I just read the Book of Proverbs I would have gotten a much better – and much cheaper – financial education. In this series I’ll highlight a few key principles from Proverbs that you can apply to your finances today.
“In the house of the wise are stores of choice food and oil, but a foolish man devours all he has,” is written in Proverbs 21:20.
I draw two different principles from this one proverb. First, wise people have savings. Second, foolish people live beyond their means.
There are three reasons we must save money: for emergencies, for large purchases, and for wealth building. If Money magazine were providing a commentary on Proverbs, they’d reference this verse for the study that revealed eight out of ten Americans will have a major negative financial event in any given ten-year period.
In turn, it’s usually the lack of savings that throws us into deals like “90 days same as cash,” “no interest, no payments for 36 months,” and “0% balance transfers.” And then we wonder why we’re still making payments on a refrigerator when the ice maker stops working. Wise managers of resources put a portion of what they make into savings to cover life’s unexpected events along with the needs they’ll have when they retire.
Webster’s defines a fool as one “lacking in judgment or prudence.” The truth of this proverb is that we are imprudent, or irresponsible, when we spend all we make. We also know that we reap what we sow. For some of us, we reap stress, pressure, and discontentment. Others reap mounting debt to maintain a lifestyle beyond their means – they’ve devoured everything and then some.
To be successful, you must save. To save, you must live within your means.
