Saving is generally considered money put away in vehicles that preserve the principle amount. Usually, the money earns a lower percentage of interest on a regular periodic basis. Also, it can be accessed quickly when needed. Usually, it focuses on seen and unforeseen expenses that might occur in the short-term (a period less than five years) for things like roof repairs, furnace repairs, hospital emergencies, etc.
Investing is often thought of for the long-term horizon (five years or more). It would normally be used for things like building retirement savings, funding a business or ministry dream that will take years to finally engage, saving for a child’s college tuition, etc.
The person who invests should understand that he will not earn periodic interest and that the value of the investment at any given time (whether increased or decreased from the time he bought it) is subject to supply and demand for that investment. Also, he may lose principle and should be willing to take that risk hoping that he will instead experience greater growth in value during the time he holds the investment.
Investing should usually be done after you have been disciplined to use good money management practices like consistently earning an income, adhering to a budget that keeps your monthly expenses below 70% of your take home pay, consistently giving money for ministry that leads people to Jesus Christ, saving at least six months worth of take home pay as an emergency reserve account, eliminating all debts, and committing to never co-signing for anyone else’s loans/debts.
Because most of us are not market experts and stock picking gurus, we should utilize a process called dollar cost averaging whereby we automatically buy on a periodic basis (weekly or monthly) a certain dollar amount of diversified investments with solid historical track records from a brokerage house like Vanguard or through our employer’s deferred compensation plan (401k, 457, 403b, etc.). This helps us exercise the buy low, sell high principle that leads to investment success and wealth building. Those who do otherwise are trying to time the market and are usually doing so without proper investment education. The vast majority suffer extreme losses over time and never wind up building the wealth they envisioned and hastily went after.
No matter the style, with investments past results are no guarantee of future returns. However, you should have greater comfort being invested after your financial stewardship is in order. Down the road (after 5 or more years of holding good investments), they will put you in a much better financial position and help you overcome inflationary pressures that might otherwise diminish the purchasing power of money in savings accounts.
Here are a few helpful guidelines you can use when the time comes for you to add investing to your good stewardship repertoire:
1. Review the prospectus for each investment to see what its one-year, five-year, and ten-year investment returns. Make sure they meet or exceed benchmark returns for that type of investment.
2. Identify its expense ratio. Stay away from any investment where it is not well under one percent of the assets under management.
3. Make sure no more than 10% of your investment dollars are put into any one investment. Proper diversification and asset allocation are generally best for everyone.
4. Start with no-load mutual funds until you are very knowledgeable about and skilled in capturing growth in the value of other types of investments (individual stocks, real estate, futures, oil & gas leases, etc.).
Many of the mutual funds you choose to purchase will have an electronic funds transfer provision that will allow you to immediately start investing in them by giving the brokerage house authorization to electronically transfer as little as $50 per month out of your savings or checking account that it will use to purchase shares of the mutual fund(s) you want.
The electronic funds transfer option allows you to avoid the minimum start-up investment (normally $1,000 or more) that many funds require for people who send checks to the investment firm. If you can't or don't wish to use an electronic funds transfer option, then it's worth your while to save the amount of money needed to meet the required minimum investment for the investment vehicle you want to invest in.
Investing is a great wealth building tool that can enhance your life and ministry. It also helps you better capture increased monetary value that can be used to abundantly give in the future in a way that enhances the lives of many others.
Please pray for this ministry and email any questions. May God bless you richly as you follow His plan!!!
Proverbs 6:6-11, Ecclesiastes 11:1-6, Matthew 25:14-30, Luke 19:12-27, 1Timothy 6:17-19
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