by Derek Sisterhen on March 11, 2010
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.
“A faithful man will be richly blessed, but one eager to get rich will not go unpunished,” is written in Proverbs 28:20.
I’d like to tell you about an exciting opportunity a lot of people like you are talking about…
Ugh! I can’t stand the pitches – whether from people who corner me in a hardware store or from goofy infomercials with horrible actors – for a product, service, or “opportunity” that promises to deliver untold amounts of money with little or no effort.
Give me a break.
You don’t have to look far into the various layers of our economy to find people who’ve been burned by trying to get rich quickly. What I admire in this proverb, is the word “faithful.” When you commit yourself to a discipline of saving money over a long period of time, you are acting in patience and faithfulness.
A brief review of the performance of the stock market shows that those who invest regularly with a long-term time horizon (meaning they don’t jump in and out at the latest fad investment), tend to earn an average return around 11% annually. One recent study showed that the typical day trader – eager to get rich – will average around 7%.
Losing out on 4% might not seem like punishment.
If you invest $200 a month for 40 years at 11%, you end up with $1.7 million; if you invest $200 a month for 40 years at 7%, you end up with $525,000.
Losing out on $1.2 million is punishment to me.
Staying faithful to a disciplined, balanced investing strategy is part of being a good steward, and will surely help you avoid a million-dollar slap on the wrist.
by Derek Sisterhen on March 4, 2010
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.
“The rich rule over the poor and the borrower is slave to the lender,” is written in Proverbs 22:7.
The first significant decision I made when I graduated from college was to borrow nearly $20,000 to buy a new car. Did I mention that I had a degree in finance?
I drove that car with a who-cares-you-always-have-payments attitude for one year. Then I had a light bulb moment: I was paying over $400 each month on the loan and losing over $400 a month in depreciation.
That’s a monthly loss of over $800 in value.
The relationship between a borrower and lender is typically very cordial – as long as every payment is made on time (if not, the master cracks his whip). But could there be some other implication in this verse from Proverbs?
What if you took that $400 monthly car payment (or credit card, student loan, personal loan, signature loan, home equity line, home equity loan, timeshare loan, or medical bill payment), and invested it for 25 years? You’d wind up with over $530,000.
And that’s exactly what the lender gets. With the interest lenders make on loans, you’re essentially investing your money to build their wealth.
A slave works for a master without any ownership of or rights to what he produces. Transferring your wealth building power – your income – to a lender will keep you in bondage. Instead, invest your income’s power in the liberation effort! Use every last cent to break the chains of financial slavery for good.
You can be the master.
by Derek Sisterhen on February 19, 2010
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.
“Know the state of your flocks, and put your heart into caring for your herds,” is written in Proverbs 27:23.
Back when Solomon was writing Proverbs, flocks and herds were currency (which often makes me wonder how they made change for a sheep, but that’s beside the point).
There are two words in this verse that leapt off the page the first time I read them: know and care.
Know. You have to know what’s going on with your money. How you behave will reveal a lot about what you know of your personal finances. Do you regularly balance your checkbook? Are you creating a monthly plan for every dollar you earn and tracking where it goes?
John Maxwell said, “A budget is telling your money where to go rather than wondering where it went.” When you know the state of your personal finances, you don’t have to wonder where your money got off to.
Care. When you care about your financial situation, you honor and respect your most powerful wealth building tool – your income. Stewards are those who manage the resources of someone else to the very best of their ability, even though they have no ownership rights. Understand that you don’t own anything, but everything – from income to assets – is a blessing.
Caring requires attention and intention. There must be a greater purpose for these resources, some larger goal to accomplish – whether retirement savings or giving to those in need.
Knowing demands your mind; caring demands your heart.
by Derek Sisterhen on February 12, 2010
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.
