The Importance of Investing Day 1: Why Saving and Investing Matters
“The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.” (Proverbs 21:5, ESV)
The topic of saving and investing is somewhat different from what I normally write about, but I’m excited about this topic and I pray that you enjoy it and hopefully learn from it. Both saving and investing are directly connected; it’s pretty hard to invest if you haven’t set aside money by saving in the first place. While I believe saving is essential, I won’t argue that investing is fully essential, and it’s not imperative that you immediately go open an investment account. I want to focus on how important it is to be aware of your finances, and to be more intentional about your financial future.
Saving and setting aside money shows that we are good stewards of what we’ve been given from God. We read about the dangers of being “hasty” in Proverbs 12, and how that can ultimately lead to “poverty.” I often think of the parable of the Prodigal Son in Luke 15. His father was quite a wealthy man. The son knew that one day he would receive a large inheritance once his father passed away. He was so hyper-focused on receiving this wealth that he actually asked for it well before the father was going to die. Can you imagine that?
By asking for the inheritance early, he was basically saying he didn’t care about his own father; he just wanted his money and he wanted it now. The father gave him his inheritance and the son went on his way. If you don’t know the rest of the story, do you really think that worked out well for him? We read in Luke 15:13 that “the younger son gathered all he had and took a journey into a far country, and there he squandered his property in reckless living.” He ended up spending all his money, leaving his only options for food to be what the pigs were eating (which sounds absolutely vile). He ended up returning home, and his loving father (a picture of the Lord Jesus) took him in and had mercy on him. It’s a lesson about the grace and mercy of our Father, but also of the dangers of treating money in a reckless manner.
So how can we manage our money in a responsible way? Budgeting is a very practical way if you want to improve your savings rate. You may have the best intentions to save but without a budget you will not be able to get from Point A to Point B. You might say, “I’ll definitely start saving more,” but you’ll rarely see that happen without a concrete plan in place.
Everyone will approach budgeting differently, and there’s really no “correct” way to do it. Some like to use pen and paper and keep physical copies of everything, while others use spreadsheets so they can access their budgets and update them everywhere they go. There are also popular apps you can download on your cellphone, like Mint and others, to keep track of your budget. There are so many resources to help us budget that it’s hard to find a real excuse not to do it.
All our savings rates will be different, and what we are comfortable setting aside for the future will fluctuate throughout our lives. I encourage you to sit down and review your finances. Is there any excess income somewhere, or are there certain things you can cut out and devote to your savings? Maybe the amount you’re spending on eating out is embarrassing (I am totally talking about myself here so don’t take it personally), and you could forego some of those meals and devote that money to your savings instead. There are several useful and convenient tools to help you, such as setting up an automatic draft directing your money either into a savings account or an investment account on a weekly, monthly, or yearly basis. This setup removes the hassle of having to remember every week or month, and in time, you don’t even miss that extra spending money.
If you want to talk more in depth about saving or investing, please feel free to drop a comment and I’d be happy to have a conversation with you. Remember that the purpose in saving and investing is to approach money responsibly, because all that we have has been given to us from above.