Wednesday, October 23, 2013

Save All You Can

Here is my sermon from Sunday:

We continue today in our sermon series entitled Faith, Hope and Money, which is roughly based on a series created by Dave Ramsey, and for those who are ready for me to be done talking about money, you’re in luck because we’re almost through.  But we ignore money in the church, and in our own personal lives, at our own peril. Rev. Jim Wallace, who is one of the co-founders of the sojourners movement, who are commonly referred to as Red Letter Christians, said that he once took a bible and cut out all of the passages that dealt with money, wealth, or possessions, and there wasn’t a lot left to it.  It was pretty holy, and not in the sense we normally think of the scriptures being holy. And sometimes our checking accounts can feel just as holy.

Now I know that most of us feel like this (dropping money straight through piggy bank) that our money comes in and goes right back out, and we hope that somehow, somewhere, that something will get caught, but normally it doesn’t.  John Wesley, the founder of Methodism had a lot to say about money and possessions.  But perhaps his most famous statement begins by telling us to make all we can. While we can look in the Bible and see that money can be a problem, it is not a sin.  Remember that the passage from 1 Timothy does not say, as is commonly attributed, that money is the root of all evil, instead it says that the love of money is the root of all evil.  Nowhere in scripture are we told that people who make a lot of money are bad, and those who only make a little money are good.  We might believe that, but it’s not scriptural, because it’s all in how we approach our money.

You can be generous and loving with a million dollars just as easily as with $1, and you can be greedy and stingy and a hoarder with a million dollars, just as easily as with $1.  It’s all in the attitude we have towards money and what we do with it.  So first we are to make all we can.  Second, Wesley says we are to save all we can, which is what we will be talking about today, and third we are to give all we can, which is where we conclude next week.  Now it’s pretty rare to encounter someone who says, “saving is a bad thing, don’t do it.”  There are lots of debates about how much we should be saving, and where we should put those savings, but very few people say that saving, in and of itself is bad, evil or unnecessary, and yet we don’t save.

According to the Federal Reserve, up through as late as the mid-80s, the savings rate in the US was consistently around 10%, year in and year out. That is people were saving 10% of their disposable income.  That number has continued to drop each year, hitting a low of 2% in 2007, just before everything went to hell in a hand basket.  After the crash it started going up again, slightly, but has begun decreasing every year again, with a savings rate at the end of August of this year of 4.6%.  That of course is the average.

There are lots of people who save a lot, and lots who save nothing.  1/3 of Americans have less than $1000 in savings, and even with the savings rate being at 4% that does not mean that we are not still spending more money than we make, because you can be using a credit card, or other debt instrument, and be saving.  But the number one key to being financially healthy is to be spending less than you make every month and every year.  In Proverbs we are told “Precious treasure remains in the house of the wise, but the fool devours it.”  If everything is just passing through then we are just devouring all we receive, we are the fool.  I’m not saying it, scripture is saying it.

We can’t just have wishful thinking about how we are going to save, we can’t have something where we say “a miracle happens here.”  We have to be deliberate and intentional about our saving and our spending.  We have to say where our money is going, and where it is not going, because when we say that then we control our money, it does not control us.  As Jesus said, and you are going to hear this from me a lot, you cannot serve both God and money, for you will love the one and hate the other.  So we have to make our money serve us so that we can ultimately serve God.

There are three reasons to save.  One is for emergencies.  What did our grandma always tell us? Save for a… rainy day.  This is not about hording, this is about protection.  It’s going to rain.  That is what Joseph does in Egypt.  He warns the Pharaoh that there is going to be a famine and so they begin storing grain to protect themselves for seven years.  They save for a rainy day, and it is what we should do as well.  Dave Ramsey says that the way to start this is to create an emergency fund as quickly as you can of $1000, but that is just a start, and remember this is not the I need a pizza or a new DVD player fund.  This is for emergencies only.  But the $1000 is just a start, most financial planners will tell you that you need to have anywhere between 3 to 9 months of expenses also, but that will take you a little longer to build up.  This money will protect you in case you lose your job or something else happens that you are no longer in bringing in money.  But it can also serve you in other ways, let’s say your car breaks down and you don’t have money saved up for repairs, then it also protects you against that.  When you have an emergency fund then you no longer will have major financial crisis.  Dave Ramsey jokes that when you are broke, when you don’t have an emergency fund, then your life will resemble a country song.  He also says that when you have an emergency fund that you stop having emergencies.  I disagree with him on that, it’s not that you stop having emergencies, it’s just that you are now prepared for them.

Linda and I used to begin every conversation we had about money by saying do you want to fight now or do you want to fight later, that is to put off the conversation.  But when we created an emergency fund and started budgeting and tracking our money that largely stopped, and I can remember the moment when it did.  We had to replace all four tires on the car Linda drove.  We didn’t have the money saved up to replace them, after all who knew that the tires on the car would have to be replaced?  But instead of having to stress about how we were going to pay for it, and instead of using our credit card, we pulled the money out of our emergency fund, bought new tires and then set-up to refill our emergency fund.  So we save for emergencies, or rainy days.  As I said a few weeks ago, according to Money Magazine in any given ten year period 78% of us will have a negative financial occurrence which will cost us more than $10,000.  If you are alive, there will be emergencies.  God does not promise that it won’t rain.

The second reason we save is in order to purchase things, you know like your grandma also told you to.  When we save to pay for things it does several things.  It stops us from large impulse buys, and the average family of 4 spends $9,000 a year on impulse items.  Impulse buys blow out our finances, often driving up our debt, and are a sign of lack of discipline.  In Hebrews we are told “Now, discipline always seems painful rather than pleasant at the time, but later it yields the peaceful fruit of righteousness to those who have been trained by it.”  So stopping our impulse buys keeps us from going into more debt, it keeps us on track and in alignment with our financial goals.  And saving for purchases involves more than just paying for a new sofa.  It also includes other things that are more regular like tires for the car, auto insurance, which we might pay only once or twice a year.

Instead of being hit with the cost all in one month, we instead divide the cost by 12 months and save that amount each month.  So if our monthly premium is $400, we save $33 each month so that when the bill comes due, we don’t have to stress about how we are going to pay the bill because we already have the money already in hand.  It’s a novel idea.  But it’s these charges that often blow out of budgets.  Most financial planners say that the average household will underestimate their monthly spending anywhere between $1000 and $1500 dollars, because we don’t include gifts, and auto and life insurance, vacations, and the other things that do not occur every month but for which we still need to account for and save up for.

The term often applied to this is called a sinking fund.  The term was originally a way that the English helped pay off their national debt, but in modern usage a sinking fund is used by companies to help pay off debt, buy back stocks or bonds, and also for saving for major expenditures that they know they will incur as part of their operation, such as replacing machinery or the roof of a building.  So create a sinking fund, although you can call it something else, in order to save money for expenses that don’t occur every month but that you know will come up, again such as insurance, or car repairs, vacations, Christmas, which I should tell you will occur on December 25th this year, I know we sometimes get surprised by this, or other presents.  You know you will have these expenses so save for them so they don’t blow out your budget in one month or worse cause you to have to go into debt.

The final reason we save is to build wealth, and this is primarily for retirement, and this is done over time and with diligence.  Proverbs says that he who hastens to be rich will not go unpunished.  There are no get rich quick schemes. The only person who gets rich with get rich quick schemes is the person selling them.  If being rich were easy, everyone would be rich.  It is hard.  It takes time.  Building wealth is a marathon, not a sprint, and so it involves putting money away and letting the power of compound interest do the trick and you need to start doing it as soon as possible.  Let me give you just a couple of illustrations.

If I had started investing $2000 a year, or $166 a month, starting at age 35 and did so until the age of 65, at age 65, I would have invested $60,000.  Assuming I got 10% return (9.8% over the last 40 years for S&P 500), which is easier for calculations, it would be worth $378,534.  If I had started at age 25, and invested $2000 for 40 years for a total of $80,000 my total would be $1,058,711.52, and I beat my 35 year old self by more than $680,000, by starting just ten years earlier.  But here’s what’s worse, and what I wish I had known when I was 18.  If I had started at age 18 and put away $2000 a year until I was 25, and then never put in another dime, my investment of just $16,000 would be worth $1,096,088.53.  The 18 year old investor who only invested $16,000 beat the 25 year old investor who put out $80,000 by almost $40k and beat the 35 year old, who invested $60,000 by more than $700,000.   And if I kept putting in $166 a month from age 18 until 65, never a dime more or less, my investment would be $2,145,885.97.

For the younger members here, do you understand what I just showed you?  If you follow this simple advice I have just made you millionaires by the time you retire, and all it cost was $166 a month for 8 years.  Now some of you are saying, “that’s great John, but I’m not 18, I’m not even 35,” and I know, and we’ll get to that in a moment, but don’t you have something you would like to say to those who are much younger than 25 who are with us today? (Do it now) Grandparents are you paying attention.  Tell this to your children and your grandchildren and you can change their lives.  Proverbs says “the good leave an inheritance to their children’s children.”  I think this about more than money.  By educating your children and your grandchildren, and great-grandchildren about how to work with their money and how to make their money work for them, you can also leave an inheritance.  PT Barnum said “Money is a terrible master, but an excellent servant.”

Now if you are older than 25, or 35 or 45, or even 65, is it too late to start?  Absolutely not, as I already said, if you are still breathing you can be working this.  Author David Chilton said, “The best time to plant an oak tree was twenty years ago, the next best time is now.”  Don’t wait.
Now for those who still say they can’t afford to do this, that your budget is already too tight, as I already said, the simple truth is you can’t afford not to do this, (not a true $1 to $1 deduction, about .70, and if your company matches then it’s even better, many will match 50%, so you’re getting $1.50 of investment for 70 cents, it’s a great deal,) the easiest way is to pay yourself first.  Why does the IRS take your money before you ever get your check?  Because they don’t trust you to save the money in order to pay your taxes at the end of the year, and so they have you pay them first.  The government is very smart in this, follow the lead of the government.  I know you never thought you would ever hear anyone say that the government is smart when it comes to their finances, but they are smart about this.  Pay yourself first, take the money right off the top.  You cannot spend money that you never receive.  You should also be doing this with money you give to charities, but we’ll save that for later.  Don’t wait until the end of the month in order to see if you have anything left in order to save it, because if you wait I can guarantee you that it won’t be there.

Now I’m sure that some of you are still saying, “That’s great John, but I still have more month left than I have money and if I do this I’ll have even less money and more month.  I just can’t do it.”  And I’m here to tell you that you can and you must, and by paying yourself first will help you because you can’t spend what you don’t have.  We cannot begin to control our spending or increase our saving until we understand our spending, where every penny we make is going and what is happening to it.  In Proverbs we are told “Know well the condition of your flocks, and give attention to your herds.”  Most of us not only don’t know the condition of our flocks, we don’t even know where a lot of our flocks are or what they are doing.  Only 40% of American’s track their expenditures, and that does not mean they are budgeting, or having a financial spending plan, just that they are tracking their funds.  Jesus says “For which of you, intending to build a tower, does not first sit down and estimate the cost, to see whether he has enough to complete it?  Otherwise, when he has laid a foundation and is not able to finish, all who see it will begin to ridicule him.” We don’t know what our building is, because we have not set financial goals, let alone know the cost of building it.

The median household income in the US is $52,096, but for simplicity sake let’s round it off to an even $50,000.  Over ten years then how much does the median household make? (1/2 million) And over 20 years $1 million.  Now if you owned a business that saw more than a million dollars in income, and the person running it could not tell you where the money went or what was spent on what, would you fire that person?  So why don’t we apply that same level of diligence to our financial lives?  Proverbs says “the plans of the diligent lead surely to abundance, but everyone who is hasty comes only to want.”

The biggest piece of personal finance is the personal part.  Every one of us will think differently and want to do different things with our money, but all of us can learn from the lessons the Bible tells us, like the fact that the borrower is the slave to the lender, that we are to know the condition of our flocks and how much the building will cost before we begin to build, we know that we are to save for rainy days, or in Joseph’s case days without rain, and that the plans of the diligent lead to abundance, and that a fool uses up all they have, and John Wesley told us to Make all we can, save all we can and give all we can.  I pray that you are taking these messages to heart and that together we are beginning to take the first steps to financial diligence, and remember that only 20% of personal finance is knowledge, the other 80% is actions.  Nothing will work if we don’t actually work on implementing it in our lives.  Dave Ramsey always concludes his radio program by saying “There is ultimately only one way to financial peace, and that is to walk daily with the Price of Peace, Christ Jesus.”  May it be so.  Amen.

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