Dishonest money dwindles away, but whoever gathers money little by little makes it grow. – Proverbs 13:11 NIV
In Matthew chapter 25, Jesus tells a parable of a man going on a journey who entrusts his wealth to his servants. He gave to each servant according to his ability. The servant who had received the most went at once and put his money to work and was able to double what had been originally given to him. The second servant did the same thing, but the third servant dug a hole in the ground and hid his master’s money.
When the master returned, he told the first two servants, “Well done, good and faithful servant! You have been faithful with a few things, I will put you in charge of many things. Come and share your master’s happiness!”
But to the servant who hid his master’s money, he called him wicked and lazy.
While I think Jesus means for this lesson to apply to our entire lives – to every gift and blessing He gives us, I think it is also a call for us to put to good use the financial resources he has provided. A key to good financial stewardship is saving.
The key to saving is spending less than you bring home. Sounds simple enough. But it gets complicated because, through credit, we can easily spend more than we make and not even realize it until we are in bondage to debt. In order to save, you have to be deliberate. Set up a separate savings account and have money deposited directly into it. Out of sight, out of mind is key to being able to save consistently. Set a goal to save a certain percentage of your pay each paycheck. 10% is a great goal but it might not be realistic at first. Set a realistic goal – one you can achieve and increase it when you can. When you get a raise or promotion, raise the percentage. Treat this separate savings account as off limits! It is not to be used for anything other than it’s intended use. What is its intended use?
Save for Emergencies – (The Sleep Well At Night Fund)
One of the best sleep aids I know of is a fully funded emergency fund. Set a goal to save up about 6 months of living expenses in your savings account. This money is to be used for things such as the furnace going out or the car breaking down. (A weekend trip to the mountains does not qualify as an emergency.) If you get laid off from work, this fund can help you get by until you land the next job. Once you have fully funded your emergency fund, start saving for major purchases.
Save for Major Purchases
Interest! It can be deadly to your savings efforts or it can help you reach them faster. When you buy that big screen TV with a credit card or take out a loan for that new car, interest is your enemy. It makes the items you purchase far more expensive than the price you agreed to pay. Avoid paying interest by saving up for the item and paying cash.
While you are saving for a purchase, interest is your friend. Interest adds to your savings and even grows upon itself. If you are saying to yourself, “there is no way I could save enough to buy a new car with cash”, you are probably right. Buy used. Buy whatever rundown jalopy you can afford to buy with cash. Drive it til the wheels fall off while you save for the next one. When you are ready to buy again, trade in the jalopy and use the cash you’ve saved. This one will be a little nicer than the last one. Now start saving for the next one. You will find that you are saving a fortune in interest over time. You will also find yourself keeping your cars a lot longer than you did when you had a loan.
When my wife and I bought our first car with cash, we were able to get a used sedan, a few years old with 30,000+ miles on it. After saving up for the next one, we were able to get a 4×4 SUV, also used, with less than 20,000 miles. At this point, if we wanted to, we could get a brand new SUV. But we will likely go used again because we save so much letting someone else deal with the depreciation.
I knew a co-worker, a fellow Christian, who believed in this concept so much, that he actually saved up and paid cash for his house! He has been completely out of debt for close to 15 years and pays cash for everything. Imagine the money you could save if you didn’t have a car payment or a mortgage payment!
Save for Retirement
If your company offers a 401K with an employer match, you should absolutely be taking advantage of this plan. Many employers will match employee contributions up to 4%-6%. Make sure you contribute to get the full company match. It’s free money!
If your company does not offer a match or a 401K at all, you should consider an Individual Retirement Account (IRA). A traditional IRA allows you to potentially take a tax deduction at the time you invest. You are taxed when making distributions upon retirement. A Roth IRA does not provide a tax benefit when the money is invested but distributions are generally tax free at retirement.
Save for College
States offer a college savings vehicle called a 529 plan. A 529 plan allows savings for college to grow tax deferred and most states provide a tax deduction on contributions. These funds are somewhat limited as to the investment options. They also require that the funds be spent on qualified college expenses or the funds will be subject to steep penalties.
When you are young, time is on your side. Take full advantage of the benefits of compounding interest by saving as early as possible. If you save only $2,000 per year from age 25 to age 35, at 10% annual interest you will save close to $700,000 by age 65! $20,000 of savings becomes almost $700,000! However, if you wait to start saving until age 35, you would have to save about $3,400 per year for the next 30+ years, or a total of over $100,000 to have the same $700,000 at age 65.
While saving early is clearly better, starting at any age can really add up. Don’t wait, start now.
Have a question or comment? Can I pray for you? Contact me. Thanks for reading. God bless you!
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