In this post you will learn some key Biblical insights to help keep you from getting into financial crisis. Part 1 of this 4-part series covered God’s 5 Simple Practices for Personal Finance. Following those practices will usually keep you from ever getting into crisis but will not prevent it entirely. Therefore to help safeguard you, in Part 2 I posted God’s 4 Key Money Management Principles. Having these right practices and beliefs will safeguard you most of the time from getting into financial difficulty. However, often I hear from people that they still got into trouble. How did that happen? It is my belief that they didn’t practice the following:
1. Get counsel
This seems like the most neglected practice in America today–our failure to ask many wise people advice about our financial decisions and plans. Too often we borrow, buy, invest, and start businesses without seeking the advice of many smart people who know more than we do, and who know us better than we know ourselves. We would be wise to follow these verses before making decisions: The way of a fool seems right to him, but a wise man listens to advice. (Proverbs 12:15) Plans fail for lack of counsel, but with many advisers they succeed. (Proverbs 15:22)
2. Learn financial knowledge
When it comes to everything related to personal finances, most people are just not that well informed. Few people are taught financial concepts and practices by their parents or in a school. You don’t have to become an expert, but investing time taking classes and reading books will pay many dividends in life. There are many good classes that you can take (e.g., at Dave Ramsey’s Financial Peace University) and dozens of great books and blogs to read. Scripture indicates that God values wisdom and knowledge too: By wisdom a house is built, and through understanding it is established; through knowledge its rooms are filled with rare and beautiful treasures. (Proverbs 24:3, 4)
3. Create order – get and stay organized.
Do you know where all of your financial documents are? Everything from insurance policies, 401k data to banking statements? If you don’t have everything in one location, easily obtained, it is hard for you to know where you stand on anything, and to manage your financial household well. It is fairly easy to get organized; buy a couple of large accordion files, label them, and then locate and organize your information: one folder for important documents like wills, deeds and policies, another for banking records, receipts and bills. Again scripture indicates this is a wise habit to have: But let all things be done properly and in an orderly manner. (1 Corinthians 14:40)
4. Follow a budget and track spending
Most people don’t have a plan for their money, so life gradually takes over, sometimes very slowly, and one day you wake up and find out that you are broke and more money is going out each month than you make. If you don’t track spending and have limits for all non-fixed expenses (fixed being things like house payments and utilities), life will happen. Interestingly this Bible verse illustrates this well: Know well the condition of your flocks, and pay attention to your herds; for riches are not forever, nor does a crown endure to all generations. When the grass disappears, the new growth is seen, and the herbs of the mountains are gathered in, the lambs will be for your clothing, and the goats will bring the price of a field, and there will be goats’ milk enough for your food, for the food of your household, and sustenance for your maidens. (Proverbs 27:23-27) For which one of you, when he wants to build a tower, does not first sit down and calculate the cost, to see if he has enough to complete it? Otherwise, when he has laid a foundation, and is not able to finish, all who observe it begin to ridicule him. (Luke 14:28-29)
Doing the things outlined here will help you prevent most financial crises from happening, but of course not all, such as those caused by a long-term job loss or a large under or uninsured health care issue. The last article in this series The 4 rules of recovering from financial crisis, will help you if you get into crisis.