A couple of years ago, I read the book Your Money Counts by Howard Dayton with my small group. Howard was the cofounder of Crown Financial Ministries. This is a mix of what I’ve learned from the book, along with some of my own thoughts. I hope these tips help as you start your saving and investing! According to one source, the average person is three weeks away from bankruptcy. This person may have little money saved, piles of credit card debt, and total dependence on next week’s paycheck That’s heartbreaking to hear! But the Bible says it’s wise to save. Why? Because saving makes provision for tomorrow, but debt presumes upon tomorrow. The wise man saves for the future, but the foolish man spends whatever he gets. – Proverbs 21:20 LB So how do we do this? How to Save When you receive income, the first check you write should be to the Lord. It all belongs to Him, and this is part of how we show it. The second check should be written to yourself. Experts recommend that you save at least 10 percent of your income. I know that for many, this may be hard to do at first. But it’s important to begin developing the habit. Here’s a simple idea to help you build up to 10 percent slowly. Start by saving just one percent of your income now, for one month. That shouldn’t be too difficult for most of us. Then the next month, kick it up a tiny notch and save two percent. The third month, save three percent. Continue this habit until you’ve saved of 10 percent of your income in the tenth month. Congratulations! Now you’ve reached your goal! Types of Savings There are two types of savings you should prepare for: long-term and short-term. Long-term savings are needed to provide for things such as your retirement, or an inheritance for your loved ones. A good man leaves an inheritance for his children’s children. – Proverbs 13:22 NIV Short-term savings are needed for spending in the near future. This includes purchases such as cars and home repairs. You should also set aside money for potential emergencies, such as a temporary job loss or family illness. Framework for Investing Many people also put some of their savings in investments to receive income and growth in value. Before doing this, keep these points in mind. Be a Steady Plodder Steady plodding brings prosperity; hasty speculation brings poverty. – Proverbs 21:5 LB Successful investing boils down to spending less than you earn, and investing the difference over a long time. Understand Compound Interest It’s said that compound interest is the eighth wonder of the world. But why’s it so important? Let’s look at the three variables of compounding. Amount The amount you save depends on your income, cost of living, amount of debt you have, and ability to budget . Finding ways to increase the amount you save will allow the power of compounding to work harder for you. Rate of Return If you invested $1,000 a year for 30 years – at 6 percent interest – you’d end up with over $83,000. Yet suppose you were able to invest the same amount, for the same length of time – but earn an 8 percent return instead. Guess what? You’d end up with over $122,000 dollars. Of course, it’s important to note that higher returns usually come with higher risk. Time The main thing to realize with regards to time is that the earlier you start, the better you’ll end up. Let’s compare two people. Disciplined Dan starts investing early, saving $1,000 a year from age 25 to 35. Slower Suzie begins investing later in life, saving $1,000 from age 35 to 55. Guess who’ll have more money at age 60? Disciplined Dan. Even though he saved for 10 less years than Slower Suzie, his investments will be worth more when they reach age 60. Suzie will have over $53,500, which is nice. But Dan will have over $64,200! That shows the power of starting early. Avoid Risky Investments People have lost money investing in speculative and fraudulent investments. To keep yourself safe, here are three warning signs that an investment may be risky. A large profit is practically guaranteed. The decision to invest must be made quickly. There’s no time to do your homework. Little is said about the risks of losing money, and the investment will require little or no work on your part. If any of these apply to an investment you’re looking into, proceed with extra caution. Investing Goals We should have three goals for investing: Providing for Our Families If anyone does not provide for his relatives, and especially for his immediate family, he has denied the faith and is worse than an unbeliever. – 1 Timothy 5:8 This applies to caring for your family in old age, and leaving an inheritance to your children. Freeing Yourself to Serve the Lord Wise investing can reduce our dependence on a salary to meet our needs. The more your investments produce, the less you’ll be dependent on income from work. Some have saved enough to be free one day a week. Others are in a position to be full-time volunteers without the need of a salary. Wouldn’t it be great if we had more time to serve in the ministries we have a heart for? Establishing a Maximum Amount When a marathon runner crosses the finish line, he stops running. But in regards to saving, some keep accumulating more and more, even though they’ve achieved acceptable savings goals. To combat this, establish a maximum amount that you’re going to save that will meet your financial needs. Once you’ve finished this race, consider giving away the portion of income you were saving. This will protect you against the dangers of hoarding. How are you saving and investing today? This guest post is part of the CPF Writer Auditions . Darren loves to help people learn business skills that they can apply to better their lives. Check out his blog at Gain Business Skills and get free updates via his RSS feed . Related Articles: How to save money for retirement How Much Should I Save For Retirement? Do I need an Emergency Fund? How To Set Strong Long Term Financial Goals Your Income Tax Refund: How to Manage it Wisely 5 money saving ideas to help you save How much do Americans save? This article was written by a Guest Author. If you would like to write a guest post for our personal finance blog , you can find out how here . The articles on this site are for entertainment purposes and should not be taken as financial advice. Please contact a financial professional for specific advice regarding your situation. Also, many of the CPF articles help us pay the bills by using affiliate relationships with Amazon, Google, eBay and others. Find out more here .
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Biblical Tips on How to Save and Invest