A Dollar In, A Dollar Out
Jim Rhone, a well-known motivational speaker, noted, “The poor spend their money and invest what is left. The rich invest their money and live on what is left.” Which will you do?
When we receive money, as a gift or from income, we want to be able to spend it all. However, I would rather you not follow the habit of the poor. I want you to establish a better mindset for money.
A dollar may be just a dollar, until you spend it all. Then, it cannot work for you. Your ability to give to good causes and establish a fund for the future has passed.
To Give or Not to Give
Have you ever been helped in a difficult time in your life. I have. It was through my church. Some institutions have an accumulation of resources to help. There is a long list of good causes and the groups who support those needs who need contributions to be effective.
Yes, do some verifying on their authenticity. Unfortunately, there are those who take advantage of those willing to give.
According to Scripture, in a seeming contradiction, we must give to receive:
In Proverbs 19:17 – Whoever is generous to the poor lends to the Lord, and he will repay him for his deed.
In Luke 6:38 – Give, and it will be given to you. Good measure, pressed down, shaken together, running over, will be put into your lap. For with the measure you use it will measured back to you.
Giving helps others recover from hard times. And, giving will become a blessing to your future.
Larry Burkett, in Your Finances in Changing Times, notes that there are many quotes of wisdom related to our stewardship, financial responsibilities. “God is not obligated to grant wishes…Exercise the Spiritual give of giving…The main reason that God supplies a surplus of wealth to a Christian is so that he will have enough to share for the needs of others.”
So, how do I achieve that “surplus of wealth” that will enable me to give generously?
Invest in Yourself
This is another reason for not spending all that you receive. You need to save to be able to invest in your future earning potential.
It is important that you work on gaining skills that can help you increase your abilities. The job market values skills and working knowledge.
That is why formal education and self-education are an investment in yourself and your future earning capacity.
There may be a course that will help you build necessary skills. Without savings, how will you afford it?
Emergencies Hurt
You have some control over how long an emergency will hurt your financial position. Having set some back in savings will help to cushion the temporary blow to living expenses. Dave Ramsey says to start with at least $1,000 in savings to cover most of what we face as emergencies. However, he also says, “Save for emergencies, then, hide it…Christmas is NOT an emergency!” Be careful how you define an emergency.
Establish the habit of saving at least ten percent of your take home pay and you can build a viable savings account over a fairly short period of time. With that habit, you will be able to replace any emergency reduction in your savings account.
Please avoid using credit cards to cover emergency expenses which will not only add to your monthly expenses, and you will pay more with interest and potential late fees for not paying on time. Until they are paid off, the credit cards become the emergency!
This, I think, is the most important reason to save. And do NOT be impressed with a large amount of savings. If you lose your job and it takes a while to replace it, you will be VERY glad you saved three to six months of living expenses!
A Big Number to Retire
What is your life expectancy? The answer will vary a lot with a wide variety of people. My father died of a heart attack at the age of 58. My mom died of cancer at the age of 88.
I do not know when my time will be up. Few of us do. Therefore, I keep hoping for another twenty years!
I retired at age 69. As Dave Ramsey likes to say, I was busy “paying stupid tax” on my financial life decisions. So, it took working three years while drawing social security to save enough money to retire with some comfort. However, I needed three times that figure to be able to draw enough money to live like I was before I retired.
Will you be able to afford to live well for thirty years past your retirement age?
When I say big numbers, I mean BIG numbers for retirement. Social Security may or may not be available to you when you retire. Can you save enough money to support yourself for an extra thirty years?
As scary as those sound, there is hope.
Many Single Steps in a Long Walk
You need to be honest with yourself and what habits you need to change. As Suze Orman notes in her book, The Laws of Money and The Lessons of Life, “When lies are woven into the fabric of your financial life, that fabric will inevitably fray.”
Step back. I mean think for a moment. A BIG pile of rocks can be moved one stone at a time. It just takes longer than using a shovel and a wheelbarrow!
If you start early, there is the beauty of compounding. It can become your wheelbarrow for moving more money into your future! The sooner you start saving, the sooner compounding can work for you. Your money can earn money. Then, those earnings will grow from interest and investing. Growth will happen as you sacrifice to make contributions to your retirement account, with good advisors.
Share the Advice
As you realize the effect of these positive habit changes, you have the obligation to share this wisdom with your children.
When your children are tempted to spend all their birthday money, remind them, as Jim Rhone shared in his talks to young audiences, “Don’t spend the whole dollar! If they ask why, then, take them to the poor side of town and ask them if they want to live like these people live, unless you already live there, then just show them around!”
Mr. Rhone would note that we should all learn to live on just seventy percent of our take-home pay. We should set aside ten percent for emergencies, ten percent for our future opportunities, and ten percent for financial growth and retirement. The future opportunities portion relates to our dreams and other passive income potential.
So, set some goals. Make some plans. Take care of your needs and provide for your future and the future of those around you. Do NOT spend it all!