Ben Franklin once said, “An investment in knowledge pays the best interest.” Put another way, “Knowledge helps build wealth.” If knowing things is an important part of managing money wisely, we might ask what do the wealthy know that others might not?
Bank of America did a survey awhile back of 700 people with assets of $3 million or more. They found that these people had grasped five important concepts.
1. Delayed gratification – 80% of these wealthy individuals said that investing in long-term goals is more effective than trying to get rich quick or spending money now on things that give only temporary satisfaction. Proverbs 21:5 teaches, “Steady plodding brings prosperity … hasty speculation brings poverty.”
2. Avoid debt – Proverbs 22:7 says, “The rich rules over the poor, and the borrower is the slave of the lender.” So the wealthy use debt only with a definite purpose: Buying a home, starting a business, paying for education, or buying a car for work. These are things that offer a return on the investment (ROI). As a side note, you might say that using a credit card to get reward points falls into that category, but only if you pay off the entire balance each month. Otherwise, the interest will gobble up any rewards you might get. It’s interesting to note that these wealthy individuals have access to a tremendous amount of credit. They could likely borrow however much they want. But the majority said they use it only when they have a reasonable expectation of a return on their money … that exceeds anything they might borrow.
3. Think “long-term” – 85% of those surveyed said their biggest investment gains came by using a long-term buy and hold strategy in the stock market. And they do that by not watching the market closely. So it’s interesting that these are not the investment “gurus” you see on financial shows … trying to “time” the market. They just invest in solid companies and hold those shares for a very long time … 10, 20, or even 30 years in some cases. No “hasty speculation” on their part.
4. Consider tax consequences – While these affluent folks don’t watch the market closely, they do pay close attention to the tax implications of their investments. Help is available for this. We always recommend you consult with a Certified Kingdom Advisor for that. You can find one by going to MoneyWise.org.
5. Invest in some tangible assets like real estate – Now, you may not be able to buy a whole rental house, but earlier this week we talked about how you can buy shares in REITs (Real Estate Investment Trusts), a way that smaller investors can own a piece of big real estate projects.
While the Bible encourages us to invest, and it is an important element of stewardship, we never want to pursue wealth for its own sake. 1 Timothy 6:10 says, “For the love of money is a root of all sorts of evil, and some by longing for it have wandered away from the faith and pierced themselves with many griefs.”
Note that the Apostle Paul is talking about the love
of money, not money itself. As we’ve said many times, money is just a tool. It can be used for good or for evil. Believers must never forget that God owns everything and we’re only stewards charged with managing His resources in ways that glorify Him, not ourselves.
On this program, Rob also answers listener questions:
I’ve paid on my 30-year mortgage for 15 years. The interest rate is 6.25%. I have a balance of about $60,000. I can get a new mortgage at 3.25%, but is it worth it?
Is there a rule of thumb about how much cash one should have on hand? And should that actually be cash? Or money in the bank?
Should we invest in gold? I’m concerned about the US currency.
I have two nephews for whom I’d like to set aside some money for college. What types of investments do you recommend for that?
I have long-term health insurance and my rates have just gone up and will continue to go up. Is it worth continuing to pay for that?
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