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Having talked about the right attitude and mindset towards financial management, it seems fitting now to say a few things on the practical level about what we can do towards better financial health — especially now that we are entering a brand new year!
In this article I plan to talk about two things: tithing, and then three basic principles of money management. Then in the next article, I will dive a bit deeper into how to build your portfolio.
Tithing
Let me begin by stressing that one should tithe before doing anything with his or her wealth.
He or she may think: “Oh, I do not have much now so let me write a rain check — I will give more when I earn more. “ It is not the right mindset. It is not that God needs our money, but that we need to give. There are two reasons for that.
First, through giving out our time or money, God our Provider wants to train us in our faith, especially when we are not sure where that time or money will come from. Secondly, God is about loving and giving. Christians have been changing the world for the better by loving and giving.
We need to have the right attitude when giving — “Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion, for God loves a cheerful giver. And God is able to bless you abundantly, so that in all things at all times, having all that you need, you will abound in every good work.” (2 Corinthians 9:7-8).
Through this journey of giving, you will grow stronger in your faith and you will find money is not your master. Interestingly, the only time God says “test me” in the Bible is on tithing — ‘“Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the Lord Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it.’ (Malachi 3:10) This is so true. His blessing may not necessarily come in monetary form, but I have never met someone who is generous in their wealth and is not blessed.
Three Basic Principles of Managing Money
1. Live below your income. This is the “golden rule of finance.” If your total expenditure is more than your income, you will need to borrow and incur debt. With debt you lose lots of flexibility. While the Bible does not prohibit borrowing, every reference to it is negative from the perspective of the borrower. More on this below.
2. If you follow #1 above, then you will have some surplus. There are four basic areas for those surplus:
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Paying taxes and debts
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Basic Giving
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Basic family needs (food, housing, education, medical)
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Basic savings (a good rule of thumb is 10% of your income)
After those essentials are covered, you can then choose between increased giving and other things (secondary family needs, saving for capital, amenities, etc..).
3. Aspire to be debt free. Here in the US it is all too easy to borrow. Avoid it if possible. Among all types of debts, credit card debt is probably the worst with double-digit interest rate. So if you have credit card debt, cut it down and eventually eliminate it by spending less.
In the next installment, we will talk about the nitty-gritty of managing money, starting with strategic asset allocation.