7 Principles of Personal Finance

Happy New Year everyone! It’s been a little while since I’ve posted, but I wanted to jump into the fray with some of the things I’ve been learning about as I’ve been preparing my messages these last couple weeks on the topic of personal finance. I hope these are helpful to you.

Disclaimer: The Bible has a lot to say about finances, almost more than on any other topic. However, out of that large body of literature, only a very small percentage of it pertains to personal finances. The vast majority of God’s Word speaks about how businesses and governments should use money, not individuals. So, while I am presenting these Principles as solid recommendations from the Word, please understand that much of how you handle your money needs to be worked out in your relationship with God.

Principle One: Actions over Outcome

I believe this principle is both the most important and most liberating, so I wanted to start with it first. The principle of Actions over Outcomes means that it is our job to do certain things with the money given to us and that it is God’s job to make sure it is enough to meet (and even exceed) our needs. The focus is on faithfulness, not net worth.

For the sake of those reading this who have not heard these last two Sunday’s messages, money is not evil. It is a tool that can be used for evil, and it has certain seductive properties on the human heart, but wisdom and obedience to God’s Word allow us to avoid the pitfalls of having money and use it to do good in the world. Being rich does not mean someone is evil and being poor does not mean someone is holy.

This Principle allows us to rest in God’s faithfulness. We know that whatever comes our way, feast or famine, we can be content and know that God will be sure to feed, clothe and shelter us just as he does the birds of the air and the flowers of the field (see Matthew 6).

It isn’t always the case, but the general rule is that, if we abide by the following six Principles, we will flourish — and greater wealth is but the smallest portion of that.

Principle Two: One Tenth goes back to God

Also know as the tithe, this principle is older than the Law of Moses. In fact, this Principle predates that Law by several hundred years. The tithe was first introduced when Abraham encountered Melchizedek, the Priest of God Most High in Genesis 14. He gave his tenth after Melchizedek brought out bread and wine and reaffirmed the covenant YHWH had established with him. The context isn’t extremely helpful, but it seems that Abraham gave this as a form of worship and thankfulness. In any case, tithing is not part of the Old Covenant done away with at the Cross, tithing is part of the Law of Faith and, as spiritual descendants of Abraham, it only makes sense to follow his spiritual practices as well.

Tithing, again, offering one tenth of your income to God, has tangible benefits. Spiritually speaking, tithing is a reminder that everything we have comes to us from a Good, Gracious and Generous God. Tithing reminds us that, not only are our finances God’s, but we are ourselves. Everything we are belongs to him, we were bought with a price — the blood of his son Jesus. And just as we live in response to that Love and offer ourselves to God’s service, we offer our finances to the work of his Kingdom as well. Tithing also offers us the spiritual benefit of God’s protection and provision in our lives. I don’t mean to say that God abandons you or doesn’t bless you if you don’t tithe — that isn’t true — I simply mean to say that the Bible, especially the book of Malachi, seems to imply that supernatural favor rests on those who practice tithing.

The tithe in the Law of Moses had three distinct purposes: to care for the priests and Levites, to care for the poor and to be used in celebrating the Lord. The New Testament doesn’t spell out specific uses for the tithe, but there is still the expectation that the corporate Church will care for those whose work is preaching and teaching, care for the poor and those in need in the Church community, and celebrate the Lord’s Supper.

Last point on this subject — you will have far greater purchasing power with 90% of your money blessed by God than if you kept all of it for yourself.

Principle Three: Pay your Taxes

It seems silly to say this, but pay what you rightfully owe, not only to the government, but to everyone. Though our citizenship is in heaven, we still live on the earth and are, therefore, subject to the laws of the land in which we live. We are not exempt. While our government does do things I don’t approve of as a Christian, it does many good things too. But even if it didn’t, it is still required of me. Don’t pay more than what you owe, but don’t pay less either.

Principle Four: Save/Invest

It is wise to save at least 10% of your income each month and 15% is better. We never know what is coming down the chute and it is better to be prepared. Remember, what happens to one person can happen to anyone. In this life we aren’t guaranteed a steady job, perfect health or freedom from disaster. So be prepared. Have proper insurance as well as 3-6 months of expenses (not income) in an emergency fund.

Once you have a fully funded emergency fund, start investing. The Bible has very little to say about investing, but it is a necessity in this day and age. The US Government has decided that things need to get 3-4% more expensive each year (called “inflation”) to keep our economy buzzing along. So, unless you are getting a 5%+ raise each year, you are actually getting poorer (i.e. losing purchasing power) by keeping your money in a bank account that gives you tenths of a percent in interest each year. Investing is necessary to beat inflation.

I am not a finance expert and I will not pretend to be one on the Internet. Instead, I recommend you check out The Bogleheads Guide to Investing  for more. Or you could start your own business. Historically (also Biblically) owning a business was the greatest investment and the most secure route to financial prosperity and security.

Principle Five: Give to Charity

We are called to help the poor and needy, be they orphans, single moms or folks on the side of the road. Jesus expects that of us (see Matthew 6:2 “When you give to the needy…”). Unlike tithing, there is no set percentage or amount we are supposed to give. Instead, we have the (rather vague) words of the Apostle Paul, “On the first day of every week [Sunday], each of you is to put something aside and store it up, as he may prosper [ or “in keeping with his income”], so that there will be no collecting when I come.” The collection Paul mentions is what he was going to bring to Jerusalem to care for the Church there which was going through a famine.

We are to give to the poor “in keeping with our income.” That seems like the rich are supposed to give more (both percentage based as well as the objective amount) and the poor are to give less, but they are still supposed to give. For the sake of simplicity, I will recommend that everyone give  at least 1% of their income and those who have greater amounts of disposable income can give more.

Principle Six: Give to Missions

We are called to go to the ends of the earth in order to make disciples of all nations. Clearly, not all of us are going, but some of us are. For those called by God to preach and teach and take the Gospel to unreached group of people, that in itself is a full time job. We benefit the cause of Christ in the world if those of us who have regular jobs will give a portion of our income to those called to evangelize the lost.

The Apostle Paul chose to go against this paradigm in his own life, but he defended it for others whenever he was asked about it. Paul was looking for a special reward for himself, but he taught that it was only right that the Church should support those whose full time occupation was preaching, teaching and modeling the Gospel for unbelievers. I believe this is in addition to the money we give to the local church, but you can ask God about that. I think 5% given to missions is money well invested.

Principle Seven: Avoid Debt

“Let no debt remain outstanding, except the continuing debt to love one another,” writes Paul in his letter to the Romans. Paying off debt can and does eat up a huge portion of the average American’s paycheck. Kicking the debt habit frees up a staggering amount of income that can be used to invest in the Principles above and still have some leftover for personal use.

Pay cash whenever possible. Pay off credit card bills in full at the end of each month. Doing simple things like this make a huge difference in your financial health. Avoiding debt also gives you a large amount of freedom to follow the call of God in your life. It is hard to go overseas for a 3 month tour if you are up to your eyeballs in bills. It is much easier if you have no debt, low expenses and 6 months of savings in cash. Don’t underestimate the power that comes from not being enslaved to debt.

What does this look like in real life?

All this is well and good in theory, but does it actually work? What does this look like in real life? Here is a hypothetical scenario of a single income family of 3 that make $50,000 a year:

  • Income: $50,000
  • Tithe: $5,000
  • Taxes: $6,500 (15% tax rate, this would actually be much, MUCH lower in real life)
  • Save/Invest: $5,000
  • Charity: $500
  • Missions: $2,500
  • Debt: $0
  • Leftover for Living Expenses: $30,500 or ~$2,541 per month
  • Breakdown of the $2,541
    • Mortgage: $800
    • Utilities: $250
    • Groceries: $600
    • Gas: $250
    • Healthcare: $100
    • Car Insurance: $30
    • Cell Phone: $100
    • Miscellaneous: $411 (for spending, chiropractor visits, gym membership, sink fund for car repair/replacement, whatever)

Clearly this family isn’t rolling in the dough, but they are meeting their needs, having fun, and doing a lot of good in the world. Perhaps on some really lean months they end up dipping into their savings, but they are usually able to pay it back with the various windfalls they get throughout the year – Christmas or birthday money, random surprises from generous friends and family. All in all, they are making it work and can feel really excellent about their contribution to the world.

I hope you enjoyed this article. Thanks for reading friends!

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2 thoughts on “7 Principles of Personal Finance”

  1. We would all be much happier if we followed these principles. You did a great job explaining why they’re so important.

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