Money and Wealth (Part 10) - Greed, Investing (Part A) - The Power of Compound Interest

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Money and Wealth (Part 10) - Greed, Investing (Part A) - The Power of Compound Interest 1. Taking an account of your wealth A. We should periodically take an account of our wealth (Pro 27:23-24). B. It is a good idea to have a spreadsheet which contains all of your bank account balances, investments, assets, cash, etc. which you update at least once or twice per year. 2. Financial freedom A. If you have money saved, you are not tied down to a particular job or location. B. If need be, you can quit your job and find a less stressful one. C. If something happens to your church, you will have the financial wherewithal to move to be a resident member of another one. 3. Financial security A. Money is a defense (Ecc 7:12). B. Poor people are vulnerable to harm from any one of a thousand troubles they may face. C. “I never been in no situation where havin’ money made it any worse.” (Clinton Jones) D. While money is a defense, we must never trust in it (1Ti 6:17; Pro 18:11). 4. Financial peace A. “I don’t like money actually, but it quiets my nerves.” (Joe Louis) B. “Financially independent people are happier than those in their same income/age cohort who are not financially secure.” (Thomas J. Stanley, The Millionaire Next Door, p. 46) C. “Too many high-income/low-net worth types live from paycheck to paycheck, fearing a sudden downturn in our economy.” (Ibid, p. 49) D. If you have money saved, you don’t have to worry if the roof needs replaced, the foundation starts leaking, the HVAC system goes out, the car engine blows up, or you have an expensive medical need. 5. Saving money over a lifetime pays off. A. If you manage your money foolishly and save little, at the end of your life when you look at your bank account and consider the amount of money you earned over your lifetime ($1-2+ million), you will ask yourself in bewilderment, “Where did it all go?” B. If you manage your money wisely and fugally, at the end of your life (or much sooner) when you look at your bank account, regardless of how much money you earned over your lifetime, you will ask yourself in bewilderment, “Where did it all come from?” 6. A warning against greed A. Greed n. – Inordinate or insatiate longing, esp. for wealth; avaricious or covetous desire. B. Saving is good, but being greedy and miserly is not.  C. They that will be rich fall into a snare (1Ti 6:9). i. The love of money is the root of all evil (1Ti 6:10). ii. Greed will make a man do terrible things (Pro 1:10-19; Eze 22:12). iii. You can’t serve God and money (Mat 6:24). iv. Greedy men are sometimes drawn into the ministry (Isa 56:11; Jud 1:4, 11), and therefore a pastor must make sure that a man is not such before ordaining him (1Ti 3:3). D. Those that haste to be rich shall not be innocent and have an evil eye (Pro 28:20, 22). E. We should not work for the sole purpose of becoming rich (Pro 23:4). F. Those that hide their eyes from the poor are cursed (Pro 28:27; Pro 29:7). G. Those that will oppress and defraud the poor to increase riches will be brought to poverty (Pro 22:16). H. Those that are greedy of gain trouble their own house (Pro 15:27). I. It’s not only the rich who can be greedy; poor, lazy people can be too (Pro 21:25- 26). J. “Antoine Rivaroli said, ‘There are men who gain from their wealth only the fear of losing it.’” (Dave Ramsey, The Total Money Makeover, p. 220) K. “People that have lots have nothing because they forget about Jesus and want more.” (Myra Gagné) II. Investing 1. Investing is often called trading. A. Invest v. – II. 9. a. To employ (money) in the purchase of anything from which interest or profit is expected; now, esp. in the purchase of property, stocks, shares, etc., in order to hold these for the sake of the interest, dividends, or profits accruing from them. B. Trading vbl. n. – a. The action of the verb TRADE in various senses; esp. the carrying on of trade; buying and selling; commerce, trade, traffic. C. Trade n. – II. 7. a. lit. Passage to and fro; coming and going; resort. 8. a. Passage or resort for the purpose of commerce; hence, the buying and selling or exchange of commodities for profit; commerce, traffic, trading. D. Trading and investing are permitted (Gen 34:10) and even encouraged in the Bible (see verses below). E. Trading is condemned only when it is practiced by proud, wicked people in an ungodly manner (Eze 27:2-3, 12-14, 17; Jam 4:13-16). 2. Make your money work for you. A. You can do three things with your savings: spend it, do nothing with it, or invest it. i. Spending it all is what fools do (Pro 21:20). ii. Doing nothing with it is what slothful, unambitious, and fearful people do (Mat 25:18, 24-30; Luk 19:20-26). iii. Investing it is what diligent and prudent people do (Mat 25:14-17, 20-23, 28-29).  iv. All our money is God’s money (Mat 25:20, 27; Luk 19:16, 18, 20, 23), and God blesses those who are good stewards of what He has given them. B. Investing wisely enables a man to use his money to gain more money (Luk 19:15- 19). C. Gain v. – 1. a. trans. To obtain or secure (something which is desired or advantageous). 2. a. To obtain (a sum of money) as the profits of trade or speculation; to be benefited to the extent of (so much) by any transaction or event; to obtain, earn, ‘make’ (a livelihood). 3. a. absol. or intr. To make a gain or profit; to be benefited or advantaged, whether pecuniarily or otherwise. D. Wealthy people possess income-producing assets (2Sa 12:2), rather than wasting most of their money on consumer goods. 3. Wealth building takes time―it is a marathon, not a sprint. A. Those who try to get rich quickly will end up in poverty (Pro 28:22). B. Slow and steady wins the race. i. “Small amounts invested periodically also become large investments over time.” (Thomas J. Stanley, The Millionaire Next Door, p. 54) ii. “Diligently investing your money, little by little over time is where real, lasting wealth comes from. Simply put, the best way to get rich quick is to get rich slow.” (Dave Ramsey, Baby Steps Millionaires, p. 67) iii. “Beverly Sills, a famous opera singer, reminds us, ‘There is no shortcut to any place worth going.’ Our data from The National Study of Millionaires indicates that almost no millionaires get there quick and easy with one big hit. Only 3% received an inheritance of $1 million or more. And only 2% of millionaires surveyed said they came from an upper-income family. Not only that, but three out of four millionaires (75%) said that regular, consistent investing over a long period of time is the reason for their success. In other words, they became wealthy slow and steady, not quick and flashy.” (Ibid) iv. “Remember, it takes the average Baby Stepper two and a half to three years to knock out Baby Steps 1-3. Then it takes the average Baby Stepper about seventeen years or less to do Baby Steps 4-7 and reach a million.” (Ibid) v. “A dollar invested in your twenties has the ability to multiply itself over and over. The key is time in the market, not timing the market.” (Dave Ramsey (quoting a man named Rafael), Baby Steps Millionaires, p. 108) C. Investing money over long periods of time will yield huge profits, depending on the average rate of return (and the Lord’s blessing – Pro 10:22). Here are some examples, which you can verify at: https://www.ramseysolutions.com/retirement/investment-calculator i. If an 18-year-old kid invested $583.33/month ($7,000/year, which is the current limit on a Roth IRA), at a 10% average rate of return, he would have $1,067,841 by age 46. (i) If the same man kept investing the same amount until he was 65, he would have $7,477,826. (ii) If he would have started when he was 25, would have $1,067,841 by age 53.  ii. If a 22-year-old man just out of college making $40,000/year invested 15% of his gross income ($500/month) at a 10% average rate of return, he would have $1,017,423 by age 51. (i) If he kept investing that same amount, he would have $2.1 million at age 58. (ii) He would have $4.2 million at age 65. (iii)He would have $7 million at age 70. (iv) That is assuming that he never got a raise! iii. If a 43-year-old man who got off to a late start begins investing $1,000/month (15% of his $80k salary) into his 401(k), at a 10% average rate of return, he would have $1,065,548 by age 66, and $1.6 million by age 70. iv. It’s Biblical and commended by God to invest and multiply your money by many fold, even by 10x or more (Luk 19:16-17). D. The law of 72 i. To calculate how long it will take your money to double, divide 72 by the interest rate. ii. Here are some examples: (i) Money invested at 12% interest will double in six years (72/12=6). (ii) Money invested at 10% interest will double in 7.2 years (72/10=7.2). (iii)Money invested at 7.2% interest will double in 10 years (72/7.2=10). (iv) Money invested at 6% interest will double in 12 years (72/6=12). (v) Money invested at 4% interest will double in 18 years (72/4=18). iii. Compound interest is powerful. E. Do you see how investing is critical when it comes to building wealth?