Garwood Presbyterian Church

341 Spruce Avenue, Garwood, New Jersey 07027

Phone: 908-789-0360

Planning For Your Future Financial Success

Proverbs 6:6-8, Proverbs 21:5, 20, Ecclesiastes 11:2
# 5 In "God's Guidelines For Financial Success"

Introduction In this series we have learned that the key to financial success is to live below our income. Last Sunday we learned that this is so that we will have some money left over to give to God to especially help others who have much less than we do. Today we will see that we need to live below our income so that we also have some money for our future financial success by putting it into savings and investments.

  1. Savings
    1. Savings are for emergencies and large purchases, should be easily accessible, and be a very safe investment.
    2. Proverbs 6:6-8
      1. The Joseph principle.
    3. A money market account is very good for savings.
  2. Investments
    1. Investments are made for our long range future financial success, like for retirement.
    2. Proverbs 21:20
    3. The best investment you can make if you are in debt is to pay off your debt.
      1. It is difficult to make 15-20% a year in investments. But if you are paying that in interest on your debt, but pay it off, then you are giving yourself a 15-20% return.
      2. The average American is about $10,000 in debt on their credit cards. If you are paying 20% interest on it and pay the credit card company $2,000 a year for the interest and also pay for your current purchases, but not for any of the $10,000, then after 40 years you have paid $80,000 and got nothing for it, and are still $10,000 in debt.
      3. On the other hand, if you pay off your $10,000 of credit card debt and instead put the $2,000 each year into a Roth IRA, see the example below of how you end up financially.
    4. One of the very best investments you can make is to put your money into a Roth IRA.
      1. If you put $2,000 a year, or $38.46 a week, into a Roth IRA and earn a10% return on it, then after 40 years you will have $1,062,797!!!
      2. Also, because it is a Roth IRA, all of the money is yours! With other investment instruments, you have to pay a 28% capital gains tax on your profit, which would cause you to lose $275,183 of your $1,062,797. Instead, because it is a Roth IRA, you make an additional 28% by being able to keep all of your $1,062,797!
    5. How should you invest your money in your Roth IRA? What are the basic principles of investing?
      1. Invest steadily over a long period of time.
        1. Proverbs 21:5
      2. Invest monthly, preferably automatically out of your paycheck.
        1. Another way to invest steadily over a long period of time, is by working for a company that gives you a pension. Because having a pension is really another form of investing steadily over a long period of time. It's just that our company is doing the investing, instead of us.
      3. Start at a young age. If you retire at 65 and put $2,000 a year into a Roth IRA that earns 10% and start doing this at 45, then at 65 you will have $127,616. But if you start at 35, you will have $379,888. And if you start at 25, you will have $1,062,797.
      4. Keep in mind the rule of risk versus return: the higher the return, the more risk you usually have to take. The more time you have to invest, the more risk you can take, and the greater return you will earn. But if you have a short time to invest, you should take less risk, even though you will earn a smaller return.
      5. Diversify for safety.
        1. Ecclesiastes 11:2
    6. Another excellent investment we can make is to buy a house using a 15 year mortgage.
      1. First, buy a little less expensive house. For example, a $260,000 house instead of a $300,000 house.
      2. Then take a 15 year fixed mortgage instead of a 30 year fixed mortgage.
        1. Your monthly payments will be higher, but you will save a lot of money in the long run.
        2. For example, currently, a $300,000 home with 20% down and a $240,000 mortgage at 4.875% interest for 30 years will cost you $1,588 per month. Your total payments come to $571,680 and you paid $331,680 in interest.
        3. On the other hand, currently a $260,000 home with 20% down and a $208,000 mortgage at 4.375% interest for 15 years will cost you $1,972 per month. Your total payments come to $354,960 and you paid $146,960 in interest, for a savings of $216,720!
      3. Next, after your 15 year mortgage is paid off, continue to make your $1,972 payments, but now put it into your own investment account. After 15 years, if you earn 8% on your in-vestment, you will have a total of $682,387.
      4. Now let's see how much we have made over the last 30 years by using this method.
        1. We now own a home that originally was worth $260,000.
        2. However, in 30 years homes will usually appreciate at least triple in value. This means our home has likely increased in value by at least $520,000.
        3. Also, all of the interest of $146,960 we paid on our mortgage is deductible off of our taxes. If we are in the 25% tax bracket, then we saved an additional $36,740.
        4. Finally, by investing $1,972 a month for 15 years we earned an additional $682,387.
        5. By following this method, we received a quadruple return on our investment, and if we add it all up, our total worth after 30 years is $1,499,127!
  3. Wise Investing Will Give Us Future Financial Success, and Also an Inheritance For Our Family
    1. The Bible says it is good to leave an inheritance for our family.
      1. Proverbs 13:22
    2. It is also wonderful to leave something for our church family, besides our personal family.
      1. And it would be greatly appreciated here at our church.

Conclusion: Today you have learned the best investments you can make in order to have financial success in your future. However, there is an even better investment you can make because it yields an eternal return for you. The money you give to the poor, because of the love of God, and in Jesus' name, to give Him the praise and glory, gains for you an eternal reward that God Himself will give to you. Now that's the very best investment that a person can make!

I will be a wise investor, following God's principles. _____I will do my own thing. _____

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