Prosperous people think and act with long range goals in mind. Today’s labor may not pay off for years. Job was a man who learned to look at the long term picture. He lived 140 years in God’s blessing after the devastation he experienced. We will be more prosperous today by thinking about paying next year’s bills. The mind set on the long term produces patience today. Poverty thinking focuses on today’s need.
In our rental property business we learned it was to our benefit to think long term. When we first started we did not take adequate time to screen the renters to make sure they had a history of paying their bills and had a desire and the resources to stay in the apartment for a long time. Instead we quickly tried to fill the vacancies so we did not miss one month’s rent. We learned the hard way that quickly filling the vacancies caused a lot of turnover and each time there was a change it cost us extra money in advertising, maintenance and sometimes legal fees. We learned that it was fiscally better for us to take a long term approach to renting the apartments.
A prosperous man buys good tools and takes care of them, because he wants to use them all his life and pass them on to his sons. A prosperous mindset will cause you to be a good steward of the things the Lord has given to you. You will want to take care of them so that they last a long time. Many times in poverty stricken countries you can see vehicles overloaded way beyond their capacity to earn a few extra cents by taking extra people to a destination. There is no thought of taking care of the vehicles so they last and produce income for a long time. The overloaded vehicles are quickly destroyed and broken down.
Prosperous people think and act with long range goals in mind. Today’s labor may not pay off for years. I will use my African friend William Manyanya as an example again.
William built a new house on a property in the Kitale region of Kenya. He demonstrated long term thinking for his neighbors by preparing to get electricity to his house. The house was built in a rural area with no access to electricity. In rural Africa, electricity is not available along every road but only comes where people pay for it to come. They knew when they built the house that the closest electricity was located miles away, and they didn’t have the money to pay for it to get there.
William’s plan was to research what kind of tree the electric company uses for electric poles, and then he planted a stand of this kind of trees on his property. These tall slender trees grow fairly rapidly, however it will still take 7-8 years for them to be large enough for him to trade or sell to the electric company for electrical service. It will take time but he will get electricity to his home for his family.
Start thinking now about how you can incorporate more long range thinking and planing in your life. I have many great examples in upcoming blogs.
William Munyanya is in an African entrepreneur who lives in the Kitale region of Kenya. He told me the story of trying to teach some of his neighbors to think more prosperously by thinking long term instead of short term. Kitale is a rich agricultural area of Kenya and their biggest cash crop is corn which they call maize. The problem with selling the maize they harvest is that it is all harvested at the same time, and this creates a glut on the local market and drives the price of the corn down.
William explained to his neighbors that they could put their maize in storage for six months and then get twice the price for it. Of course it would cost them some money for storage, but they would still make significantly more than if they sell it at harvest time. William was ready to hire the storage space so they could all share that cost together. As he finished his proposal, his neighbors’ response was to laugh at him. In their minds they had never heard of such a stupid thing. They didn’t believe him because they were so used to getting all the cash right away at harvest. It didn’t matter to them that if they waited they would actually get more cash, almost twice as much. They couldn’t see it. There focus was only on today’s need. William ended up doing it himself to prove it to them. He did.
William wanted to demonstrate for them that long term thinking is more prosperous way of thinking.
In the book The Millionaire Next Door1, the authors state that most millionaires have not inherited a large amount of money, but are wealthy as a result of having a good offense and a good defense. The information given there is that most millionaires are still making somewhere in the range of 100K, but are able to save/invest 20K per year to develop their net worth.
The four commonly agreed upon factors that help increase net worth are increasing income, increasing savings, decreasing expenditures (via budgeting) and reducing your debts. To be wealthy you really don’t need a bigger house, you need a bigger net worth, although sometimes the two are related. Because wealthy people think in terms of net worth, they balance their spending on enjoyment with investing for freedom tomorrow.
Now that you have calculated your net worth, take a moment and let the impact of this thinking settle into your heart. At issue is not what your net worth is, but thinking in terms of net worth and increasing it. You now need to make a plan to increase your net worth. We will talk more about crafting a financial plan in upcoming posts. Saving and investing 5%-10% of your income would be a good place to start in a long-term financial plan. However, the most important part is that you start doing something.
1 Stanley, Thomas J. The Millionaire Next Door. New York: Pocket, 1996.
Here is a project for your week-end. How am I doing? Most of us feel like we are behind the ball with our net worth but in reality for our age we might not be.
In his book, Becoming a Millionaire God’s Way, Dr. C. Thomas Anderson gives the following formula to determine if you are on track with growing your net worth. I found this to be helpful and you might find that you are not even that far off track for your season of life. Remember, don’t expect to get rich quick, this is a life long pursuit, advancement comes to those who diligently apply God’s principles on a consistent, long term basis.
Now determine what your net worth should be at this time of your life. Take your taxable income for the last year and multiply it by your age. (If computing these numbers for a husband and wife together, use either person’s age but you will be better off using the older one). Divide that number by ten and you will have the amount your net worth should be at this point in your life. By subtracting your actual net worth you can see how far off you are.3
Complete this calculation. It really works and gives you a practical place to begin to take steps forward. The important thing is not what your net worth is, but thinking in terms of net worth and increasing it. Now ask the Lord for wisdom and a plant to increase it.
Studies have continually shown that small businesses create more than 70% of the new jobs in America, and most of these are family run businesses(1). The most powerful drive to succeed is family and family is held together by faith. This is the basic infrastructure that has sustained America’s prosperity and growth. If you think about it, most of the largest corporations in the world started out as family owned small businesses. A portion of what you accumulate is meant to be a blessing to your children. When you receive an inheritance from your parents, you are receiving the fruits of their labors. It represents their time, their passions, their labor and wisdom passed on to you.
An olive tree is a picture of a generational blessing passed on to the next generation. The Psalmist said, “I am like an olive tree flourishing in the house of God; I trust in God’s unfailing love forever and ever.” When a Hebrew farmer planted an olive tree, he would be planting it for his children. If we are to flourish like an olive tree, we need to start thinking in a long-term framework. The leaves of an olive tree were considered to signify abundance. Many times an olive tree lived and produced fruit, for 500 years.
Train your children to be givers. Let them see you be generous with others. Teach them God’s economy. This applies to both your spiritual children and your natural children. To train means teaching them the information, demonstrating for them to observe and see, giving them the chance to do it and coaching them afterwards. Most will learn your financial values and be good stewards of what you pass on to them.
1 Data from the Small Business Administration and the Bureau of Labor Statistics show this is true when talking about the new jobs created in the private sector, which provides the majority of the jobs in the U.S.
The truth is as we calculate our net worth, it might even result in a negative number. This is not a cause for alarm. It is reality. It doesn’t matter as long as we see this as a starting point and believe to increase this number. The issue is not how much you own, it is how you think about what you own. You are a manager of what God has given you. Determine your net worth and make a plan to increase it. In discussing net worth, I want to be clear that financial net worth in no way minimizes the fact that we are all of great worth to the Lord Jesus. We are of worth to him because we are created in his image and he loves us. Understanding our financial net worth will help us fulfill our destiny.
This is a simple matter of listing all of your assets and how much they are currently worth after subtracting what you owe on them. Part of the process is to determine how much equity you have in your house if you own one. To do this you determine the fair market value of your house and subtract the amount you owe on it in a mortgage. You do the same for your furniture, your cars, everything you own. You might have some retirement funds. These are added to the asset side of your net worth. If you have debt, like credit cards, this is subtracted on the liability side. When you add all the assets together and subtract all the liabilities this gives you your net worth. It will take time and some research to complete this calculation. It will be worth it.
Remember, if the net worth you determine is small or even negative this is not a problem because you are changing your thinking. When I first started to calculate my net worth I did it every six months. It was amazing to watch it grow little by little. This was really encouraging because in the midst of a busy life of paying bills, kids in sports, birthdays, buying food and clothes, etc., it really didn’t “feel” like we were getting ahead. But then I would calculate my net worth halfway through the year, and sure enough, it was increasing because of some decisions we made at the beginning of the year.
If you don’t know your net worth be brave and calculate it now. There will be more tips in upcoming posts.
The powerful thing about calculating net worth is that it moves you away from thinking about hourly wages and your next raise and to thinking in terms of assets and liabilities. Do not think in terms of an hourly wage, this is limiting and disappointing. If you are thinking in terms of your next hourly raise, this can only happen at the end of the year or at an annual review. And when it does you will find that generally as wages increase so do your taxes. Hand to mouth living is not God’s will. Think in terms of your net worth. This is essential to prosperity.
We learn from the Bible that a portion of what you accumulate should be a blessing to your children. An inheritance-consciousness helps you think and act prosperously today. It causes you to think of increasing net worth on a long-term basis.
A good man leaves an inheritance for his children’s children, but a sinner’s wealth is stored up for the righteous. Houses and wealth are inherited from parents, but a prudent wife is from the Lord (Proverbs 19:14; 13:22).
…You still the hunger of those you cherish; their sons have plenty, and they store up wealth for their children (Psalm 17:14b).
Do not just live to meet your needs. This is selfish. Why would we live and believe for merely enough to meet our needs, when we have the capacity in God to believe for more, meet the needs of others and pass the balance on to our children?
My friend, a pastor, looked at me with wide eyes as if my skin color was green and I had just walked off a spaceship from Mars. He and I had gone for a brisk morning walk along a beautiful river in rural Canada as we were preparing for a church service. Our conversation had turned to finances and I was sharing with him what I was learning about net worth. He could not understand the concept and had no idea what it meant. I patiently explained to him that calculating net worth is a valuable tool to determine and accumulate wealth.
The first two questions asked of anyone who walks into the bank for any advice or funding are as follows: What do you owe (your liabilities)? How much do you own (your assets)? The bank wants to know your equity, or in simple terms, your net worth. This is a commonly used evaluation tool in the financial world to measure your financial status, however most Christians don’t think in these terms when considering their own financial situation. If this is how bankers and wealthy people measure wealth then maybe we should take a look at it. It states in Proverbs that our house contains great wealth and stores of choice food, so maybe we should learn how to measure it.
The house of the righteous contains great treasure, but the income of the wicked brings them trouble (Proverbs 15:6)
As I dialogued with many Christians I found that very few even understood the concept of net worth. When you hear the term millionaire you are hearing about a person who has a net worth of more than a million dollars. Please understand, I am not saying everyone should be a millionaire, I am only asking you to think like a millionaire. The point here is to change our thinking to a more prosperous manner of thinking. This is why I am challenging you to calculate your net worth. Details to follow…
Hopefully I am convincing you to develop a budget if you do not already have one. The best way to build a budget is to start by writing down everything you spend for a three month period. I mean everything. This will at least give you a window into what categories to set and what a yearly budget could look like. After three months of collecting data, you are ready to take your first stab at setting a budget. Only now instead of just tracking what you are spending, you decide how much you want to spend in a certain area.
Expenses and income must be calculated on a monthly basis. Some bills like your electric bill already come monthly. Others, like maybe your trash collection, might come every three months. Then again your paycheck might come every two weeks. All these transactions are averaged into what they are monthly and this gives you a basis to compare, track past expenses and project how much you want to spend in the future by budgeting. You might be above or below for a certain month; however, your expenses should be evaluated quarterly to see if they are on track.
I will not go into a detailed lesson on budgeting since this will be read in various countries with different currencies and various costs of living. I have included a sample North American budget in A Practical Path to a Prosperous Life in Appendix E. Many financial teachers have done a lot of work in this area and have done a far better job than I do. There are a lot of budget helps available on the internet or by purchasing software that helps you with budgeting. Don’t’ wait…start now. Take dominion over your finances. It will make you more prosperous.