As with most financial topics, there are biblical principles that should guide our investing, but many of the specifics are left to us to figure out, hopefully motivated by a heart to consider how a good steward would invest. Last week, we looked at some reasons to invest. This week, we’ll start to build a more detailed framework.
To figure out what a biblical approach to investing might look like, think about a spectrum of ways to invest. At one end are people who don’t invest. They’re confused by the terminology. “Exchange-traded funds.” “Asset allocation.” What does it all mean? Or maybe they’re scared to invest. Just look at what happened between the end of 2007 and early 2009. The market lost half its value. Half!
On the other end are people who are excited by headlines about people making a fortune investing in Bitcoin, Tesla, or whatever else is the hot investment of the day. Investing looks like an easy path to quick riches.
I think you’d agree that neither approach is healthy. In both cases, there are spiritual issues at work, and there are practical issues.
Take it slow
For those who are scared or confused, it may help to read, reflect on, and memorize what God’s Word has to say about His provision (Matthew 6:25-34) and protection (Isaiah 41:10), and about seeking His wisdom (James 1:5). And there may be practical issues at work, such as a need to understand that putting money in a bank savings account is unlikely to beat inflation, to learn about the power of compounding, and to review some market history, seeing that while the market moves through cycles of growth and decline, times of growth have tended to last longer than times of decline and they’ve added more value than times of decline have taken away.
Those eager to make a fast fortune in the market would also benefit from time in the Word, seeing that while wealth is not described as inherently evil, we are cautioned against being eager to gain it (Proverbs 28:20).
Here’s a foundational investment-related verse to memorize:
“Steady plodding brings prosperity; hasty speculation brings poverty.” – Proverbs 21:5 (TLB)
That’s a great starting point for developing a biblically-informed approach to investing.
Plan to succeed
With that slow and steady mindset in place, a good next step would be to create a plan. Planning is encouraged in the same proverb we just read, only in a different translation of the Bible:
“The plans of the diligent lead to profit as surely as haste leads to poverty.” – Proverbs 21:5 (NIV)
Do you have an investment plan? That would include specific investment goals you’re trying to achieve — perhaps an amount of money you’re trying to have in an investment portfolio by a certain age for retirement, or a specific sum in a 529 plan account by the time each of your kids turns 18.
If not, run some numbers using this Fidelity calculator for retirement (Premium members of Sound Mind Investing have access to an even more powerful calculator) and this SavingForCollege.com calculator for college.
With the retirement calculator, after answering just six questions, you’ll get some feedback as to whether you’re on track. If not, you can make some adjustments to some of the variables.
I recommend being somewhat conservative with your assumptions. For example, it’ll list your “planning age.” That’s the polite way of saying, “anticipated age of death.” I’d encourage using age 95. I’d rather that you plan for a long life and have some money left over rather than not having enough to live on.
The calculator will also ask for your “retirement age.” If you plan to work past the traditional retirement age — say to age 70 — I’d encourage you to plan more conservatively by using a retirement age a year or two younger. More people than ever are saying they plan to retire later than age 65. However, most people still retire around that age or earlier, often because of health issues or the need to care for a loved one.
With the college savings calculator, if you have more than one college-bound child, use the calculator one child at a time.
Taking these two steps — adopting a slow and steady mindset for investing and starting to put a plan together by running some numbers will be a great start toward putting into practice a biblically-informed approach to investing.
Next week, we’ll take all of this a bit further.
Take it to heart: “If any of you lacks wisdom, you should ask God, who gives generously to all without finding fault, and it will be given to you.” – James 1:5
Take action: Use the calculators mentioned above to figure out how much you need to invest each month in order to meet your goals. Very few people have taken this step, and yet those who have tend to set aside more money for investing each month than those who haven’t. Knowing how much you should be investing each month can be a motivator to act.
Read more: Four Steps to Conquer Your Fear of Investing