Developing a Financial Plan

Developing a financial plan might seem very carnal and unspiritual. Some of us might even react to it because there are many people who are not Christians that are making financial plans. However, we must realize that there are times that the Lord asks us to do things that look a lot like how the rest of the world is doing. A case in point is the Old Testament sacrifices that were required of the children of Israel. Though they were unique in some ways and done in the name of Jehovah, the truth is that to the objective observer they were a bloody mess that looked a lot like many of the pagan rituals practiced in that day.

We must be secure enough to do what the Lord is asking us to do. It could be radically different—like spitting in someone’s eye to the heal them. Or, it could look just like what everyone else is doing—Jesus getting baptized in the Jordan with many others.

A closer examination of the scriptures shows us that many in the Bible had a financial plan. Joseph had a plan. Jacob had a plan. Poverty minded people have a difficult time setting goals or verbalizing their plans for the future. Can we move in the opposite spirit of this? Yes, we should live like the Lord Jesus might return tomorrow, but we should plan like he won’t return for 40 years.

When we write a financial plan, it forces us into the discipline of thinking long term instead of short term. Planning can be one of our greatest skills. Many Christians think that planning is contrary to God’s nature; however nothing could be further from the truth. In Isaiah, we find the Lord talking about his plan.

…what I have said, that will I bring about; what I have planned, that will I do 

(Isaiah 46: 11) 

So God has a plan and we are not supposed to…I don’t think so. Is God’s plan completely scripted and unchangeable? No. I believe his plan has some variables built into it. It has to because he is working with us. But it is still a plan. Hey…this works for me. The scriptures state that the plans of the diligent lead to prosperity:

The plans of the diligent lead to profit as surely as haste leads to poverty 

(Proverbs 21:5)

Bring it on!

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Thinking Long Term Changed How I Buy Tires

My tutoring by the Holy Spirit in the area of thinking long term became very practical for me. I was having a conversation with a gentleman I met, and we started to talk about cars. He commented about a certain vehicle that he had owned and what a good truck it was. He said he had bought it new and owned it until it had 120,000 miles driven on it. This was a new concept to me since I had never purchased a new car, but his next comment really got my attention. He said he had gone through two sets of tires in the life of the vehicle. I thought he was joking. “What do you mean two sets of tires?” I asked. He replied it had a good set of tires when he bought it from new that lasted for 60,000 miles and then he bought an expensive set of tires that lasted for the second 60,000 miles.

I was amazed. I started to think about what happened when I went to buy tires. I would walk into the tire store and scan the racks of tires until I found the least expensive ones, purchase them and leave thinking about what a bother it was to spend money and time buying tires. Unfortunately the reality was that the cheap tires would soon wear out and before I knew it, I was back in the tire store scanning the racks for the cheapest tires once again. I didn’t realize it at the time, but the spirit of poverty was affecting the way I bought tires. I was just thinking about saving a few dollars in the short term and not thinking about the long-term effect. We owned two vehicles, and between the two of them, I was spending a lot of time and energy at the tire store.

I contrasted my experience with this man’s experience. Somehow, what he was describing seemed like a better path to take. It seemed like a more prosperous path. I changed my method of tire purchasing and started to buy better tires that lasted longer. I spent a lot less of my time and energy shopping for tires and had more of both for important things…like my family.  The more expensive tires gave my cars a smoother ride and my family felt safer in bad weather. My new tire-buying strategies gave me a better quality of life. I found a better way, a more prosperous way to live.

There might be times when it is appropriate to buy inexpensive tires for a vehicle; however, in my personal life, this was one area where the Lord was specifically working to uproot a spirit of poverty in my life.

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Some Practical Examples of “Thinking Long Term”

Thinking long term causes us to step back and take more of an overview of our lives, careers and families. For example a church leader might want the church to grow and be a blessing to the people who get involved. This is a good and godly thing to desire. However the church leader should not think in terms of trying to invite one new person to the church. He should be thinking bigger toward creating a spiritually enriching environment that will draw many new people to the church.

Think for example of the advertisements for soft drinks. They never come out and say, “Go to the store and buy a coke.” No, they portray all the fun things of life and portray the soft drink as a part of that. The key is they do not want you to buy one soft drink, they want you to buy their soft drink for a lifetime. This is thinking long term in their marketing.

Great restaurants don’t sell individual meals, they create an atmosphere. An effective insurance salesman doesn’t look to sell you a single insurance policy, but wants to develop a relationship with you because he wants your business for a lifetime. One way of thinking long term we will discuss in upcoming posts is developing a financial plan. However…I want to give some more practical examples first. Learn next week how “thinking long term” changed the way I buy tires for my car. Maybe you can imagine where I am going with this.

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Thinking Long Term Changes the Way We Approach Life

When we start to think long range it changes the way we approach life. It changes the things we buy. When my wife and I saw this principle we stopped buying a bunch of cheap, plastic toys for our kids and started to buy better quality toys that our kids could use and that could last for our grandkids to use.

A business person is often thinking 5-10 years down the road. I spoke with one individual in the USA who had built a significant number of chicken houses on a farm. He and his partners will be using the proceeds to pay off their capital investment in the construction for the first 9-10 years of operation. After ten years however, the construction cost will be paid and it will turn into a highly profitable and lucrative investment. But you have to be able to see ten years down the road to get there.

In conversation with another business man who had started multiple businesses, I learned another application of thinking long term. He stated that when he was first starting a business he never kept track of the amount of hours he put in because it wouldn’t make sense to put that many hours into a business with the minimal initial return. The return came in the years after as the business got off the ground and started to generate returns on a larger scale. This insight helped me when we started the property rental business and there was a lot of initial start-up work required in the first few years. I was OK putting the extra work in to get it off the ground so that it could yield rewards for many years.

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Poverty Thinking Focuses Only on Today’s Need

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 billsThe 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.

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Think and Act With Long Range Goals in Mind

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.

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Thinking Long Term is Prosperous Thinking

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.

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How Do I Increase My Net Worth ?

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.

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So What Should My Net Worth Be ?

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. 

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Be Like an Olive Tree

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.

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