Tips On Saving And Investing

Wealth comes from long-term investing and using a strategy of diversification. Einstein has been reported to have said that “compound interest is the most powerful force in the universe.” We don’t have to earn a lot to necessarily accumulate wealth. The key is to be consistent in saving, wise in any investing, and to trust God to provide what is already ours.

The following are a few Biblical principles that ought to govern our savings and investing:

A faithful man will be richly blessed, but one eager to get rich will not go unpunished (Proverbs 28:20).

Principle: The world says, “Get rich quick”, but the Bible says, “A faithful man will be richly blessed”.

Suppose one of you wants to build a tower. Will he not first sit down and estimate the cost to see if he has enough money to complete it? (Luke 14:28).

Principle: Plan and take a long-term perspective on all investment decisions.

Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth (Ecclesiastes 11:2).

Principle: The Bible speaks of diversify out investments.

Here is a five-step sequence to invest wisely… let’s take a look at each step:

1. Pay Off Consumer Debt- Paying off credit card debt is one of the first priorities in saving and investing. Sometimes big sacrifices need to be made, or even a lifestyle change in order to attack the problem of consumer debt.

2. Set Money Aside For An Emergency Fund- Although this is step 2, it should be done in conjunction with step 1. If setting aside money for an emergency fund is difficult, one can set a goal to save just a few hundred dollars. Even a few hundred dollars can be a comforting buffer when working to get out of debt.

3. Save For Major Purchases- The next step is to set goals and save for major purchases. Whether saving for a down-payment or a house or new car, creating a savings plan can help attain our goals.

4. Diversify Investments To Meet Long-term Needs- This next step is a must-do for both short-term and long-term investments. It is true that we shouldn’t put all of our eggs in one basket.

5. Begin Taking Calculated Financial Risk- This step can be applied any time. As we begin to invest and save for the future, the amount of risk should depend primarily on our time frame of investing. If we have a long time horizon, we can be willing to take more risk. But if our time horizon is short, we don’t have the luxury to risk losing money. Our investment choices should be more conservative with less time in most cases.