Hi Friends,
Once we have taken care of our present by getting out of debt and fully funding that Emergency Fund, we can then look to our future and start really investing our income for what lies ahead. Here is another wise verse:
“Dishonest money dwindles away, but whoever gathers money little by little makes it grow.” Pr 13:11 NIV
God invests and so should we. Just like with time, there are three things we can do with our money. We can waste it, spend it or invest it. Since we work really hard for our wages, the wisest thing we can do is follow the advice from the verse above and gather our money and make it grow, little by little, for our benefit, right? We should never be greedy and try to put our money in “get rich quick” schemes. That never works well for anyone except the crooks who run those scams. So investing wisely and consistently, every month, is the goal. This is where we want to place the majority of our earnings, in investing, not wasting or even spending. I shouldn’t have to explain wasting money, we’ve all done that, right? Spending money is using it for something that only helps us in the present, but doesn’t give us anything to show for it. An example would be going out to buy that special “cafe latte something” that you really like. This is not horrible, but it might not give you any future rewards either. We invest our funds when we go on vacation and make good memories with our loved ones. We invest our funds when we choose to buy healthy organic foods, so that we can be more physically fit. But we have been talking about other ways to invest our income this whole time too, in case you were not aware. When we get out of debt, we stop paying interest to others, so we have the freedom to put our money where it works best for us. Whether this means investing in our peace by fully funding the Emergency Fund, or being responsible to use the money for truly needed items in our Monthly Budgets, these ARE all ways to invest in our spiritual health, as they can bring us all sorts of peace. Not every investment has to give us more money in return. To be able to have more peace or better health is way more important, please don’t forget that. But we are talking about finances this month or two, so let’s get back to financial investing.
One step at a time. One of the reasons why FPU’s Baby Steps work so well for so many is because it focuses us on smaller goals, instead of scattering us everywhere. When you understand that you should not invest for your future until you have gotten completely out of debt, you are going to be a bit more serious about getting out of debt, aren’t you? I mean your future depends on it, so you will use “Gazelle Intensity” as Mr Ramsey teaches. You are going to run away from debt as quickly as you can, so that you can move forward with your financial peace. We all want to get to the point where we are building wealth and being as generous as God is towards us, right? That should be our goal. After all, Generous is Who God is, and our ultimate goal should be to be like Him. This means we get serious about getting through each Baby Step, as quickly as we can, to move forward, reaching for this mighty target. As with everything in life, this requires a lot of Faith and some risk. Faith because some of these investments are not guaranteed. We all know the Stock Market can be very volatile, with all its up’s and down’s. But we also know that, from its inception until now, it has had an upward trend. If you are going to increase your income by having it work hard for you, then you must understand that there is a risk that stocks will go down. But the truth is, Christians are NEVER to put their trust in money anyway! It is in God, alone, that we trust. So we do our part, by making good decisions of where to invest our earnings, then we trust God to provide for us, whichever way He is going to do that.
Aim for 15%. In this Baby Step number 4, Mr Ramsey suggests that we invest as much as we can according to our budgets, with the goal being at least 15% of our gross yearly income. We want to exhaust all the “free money” we can first, then move on to other types of investments. For instance, if your company matches, let’s say 4% of your pay to your 401k, then that is where you want to invest your first 4% of this 15%. This is like an instant 4% return on your money since your job will match, dollar for dollar, what you put into that account. Then, you would go to a Roth IRA, were you can invest after tax money, but it is all tax free whenever you take it out at retirement, for now anyway. So just as an example, let’s say that you are able to put in 7% of your income into that account before reaching any limits. If you are able to put in your budget the whole 15% to invest, then that still leaves you with the last 4%, right? Because 4+7=11 and 11-15=4%. So if you have not reached any limits on your 401k, you can put the rest of that into this pre-tax account. But just to give a fuller example, let’s say you can only invest another 3% into your 401k before you max out. Then you still have 1% that you can invest elsewhere. The point is you want to use non-tax (like Roth IRA’s) and pre-tax accounts (like 401k, 403b plans) first, so that your money can really work harder for you. So to use this example, 15% investment would look like this:
1- 4% company match 401k
2- 7% Roth IRA
3- 3% finish 401k limit
4- 1% other mutual funds
15%
Please get advice about the limits for each investment account as they change yearly. Below are general limits on several different plans for the year 2021, taken from the following website: https://www.thestreet.com/retirement-daily/saving-investing-for-retirement/what-are-the-2021-contribution-limits-for-iras-401-k-s-and-hsas
Diversify. Does anyone remember The Aesop Fables? I used to love them as a child and one that always caught my attention was this: it is never a good idea to put all your eggs in the same basket, because if the basket falls? Well, you get the idea, no eggs for you! It is the same idea here. We want to put our funds in different markets so that, even if one goes down, the others should compensate. Mr Ramsey recommends we split 25% into each of these markets: Growth and Income Funds, Growth Funds, International Funds, Aggressive Growth Funds. Once again I will mention that any investments in the Stock Markets, are risky endeavors. We just might lose it all, although the odds are we won’t. Remember the trend has been upward in the long run, even when the short term might be really nuts. I say this so you can assess your own personal risk level. If you tend to be really fearful about taking risks, then you might want to split your investments differently. As with everything, pray about God’s Will for your money. And if you think God doesn’t care about it, let me point you to one of the parables of Jesus: Matthew 25:14-30. We are responsible to DO something with ALL the gifts God has given us, and this includes our income. I will repeat one of my favorite sayings of Mr Ramsey, “Broke people can’t feed hungry children.” You want to use your time, talents AND treasures to be a blessing? Then investing it responsibly is the wise thing to do.
Get help. Mr Ramsey has so many articles on his website about this topic, so I am going to refer you there. But please know your are not alone. There are many experts available that can help navigate you through these sometimes dangerous waters. As I said last week, our income might be our third greatest asset, behind time and health. So paying for their experience and knowledge, as well as their time, is also an investment worth making if you really have no idea what to do with this really big asset. Once you get out of debt and have made sure you are prepared for any emergency, make sure you mark this “extra” income for your future. We all want to reach our golden years and be able to live with dignity, so investing these funds for tomorrow, instead of wasting or spending them all here today, is not only smart, it is godly….and godly living always leads us to more of the Abundant Life. I know I want that. How about you? Then won’t you join me?
Until we meet again, keep lifting your eyes to God, He’s closer than you think.
<>< Peace, Diane
