Personal finance books are hot sellers. Bestsellers include such well-known titles as Robert T. Kiyosaki’s “Rich Dad, Poor Dad,” Dave Ramsey’s “The Total Money Makeover,” and Stephen R. Covey’s “The 7 Habits of Highly Effective People.” However, there’s one book that’s more popular than any of these and offers plenty of sound advice about money: the Bible.
Of course, most people don’t think of the Good Book as a personal finance guide. To some, it’s the literal Word of God; to others, it’s a beautiful work of literature; still others view it as a historical text that’s had a profound influence on our society.
Whatever else the Bible is, it’s also an incredibly useful source of guidance on money matters. Numerous stories and sayings from the Bible, written thousands of years ago, illustrate basic financial concepts that are as relevant as ever in the modern world.
Money Tips From the Bible
1. Set Priorities
Proverbs 24:27 – Put your outdoor work in order and get your fields ready; after that, build your house.
This piece of advice from Proverbs seems a little surprising at first. To a modern reader, it’s not clear why planting the field should be a higher priority than building the house, since both appear to be necessities of life rather than luxuries.
However, if you think about it, the answer to the question becomes obvious: Your “field” isn’t just something you need for survival – it’s actually a means of survival. If you’re a farmer, your crops are your source of livelihood. If your field isn’t properly planted and prepared, you won’t have the money you need to build a house or provide for any of your other needs.
Today, few people rely on actual fields for their income. However, we all have certain basic needs that we have to meet in order to survive. And to meet those needs, most of us need some form of gainful employment. What good is a house if you don’t have the means to put food on the table, or pay the rent or mortgage?
So in modern terms, this proverb means that you need to set priorities with your money. Make sure you save enough to cover the essentials – what you need to keep yourself alive and able to work – before spending money on creature comforts. In other words, set aside money to pay all the bills before you spend any on new clothes.
2. Make a Budget
Luke 14:28-30 – Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, “This person began to build and wasn’t able to finish.”
This Biblical saying is about budgeting. You know you need to cover the cost of necessities first – but those costs don’t always come up right away, so you need to plan for them or make a budget. Some major expenses, such as rent payments, only come due once per month. Others, like home insurance premiums, only come due once annually. Planning ahead and saving for those intermittent (but known) expenses is a key component of budgeting.
For example, suppose you earn $600 weekly. Out of that, you spend $50 on groceries, $10 on gas for your car, and $40 to pay the monthly electric bill, which happens to be due this week. At this point, you might think you’ve covered all your essential expenses, and the remaining $500 is free to spend as you like. However, if you just blow through that “extra” $500 every week, you’ll be in for a rude awakening when your $700 rent is due at the end of the month.
By sitting down with a pen and paper – or a computer and budgeting software, such as Mint – you can figure out exactly which expenses you have to cover – not just in the immediate future, but over the long term. Then you can determine how much money you need to set aside to cover all your financial needs, from paying your weekly grocery bill, to financing your retirement years down the line. That way, you can make sure your “tower” – your personal finances – can be completed, from bottom to top.
3. Build an Emergency Fund
Genesis 41:34-36 – Let Pharaoh appoint commissioners over the land to take a fifth of the harvest of Egypt during the seven years of abundance. They should collect all the food of these good years that are coming and store up the grain under the authority of Pharaoh, to be kept in the cities for food. This food should be held in reserve for the country, to be used during the seven years of famine that will come upon Egypt, so that the country may not be ruined by the famine.
In this passage from Genesis, Joseph interprets a dream the Pharaoh has had about seven fat cows grazing by a river that get swallowed up by seven skinny cows. Joseph concludes that the seven fat cows in the dream represent seven years of prosperity for Egypt, which will be followed by seven years of famine. To plan ahead for this disaster, Joseph advises the Pharaoh to store up grain during the seven good years and use that stored grain to get the country through the seven hard years to follow.
No matter whether you believe Joseph had a divine gift for interpreting dreams, there’s no denying that the advice he gives the Pharaoh is fundamentally sound. It always makes sense to save resources in good times so you have them to help you get through lean times. In modern-day America, “lean” years are less likely to be a literal famine than some sort of financial crisis, such as a job loss or a health problem that saddles you with hefty medical bills. Regardless, Joseph’s basic strategy – setting aside money for future emergencies – still holds true.
Of course, present-day financial experts tend to modify Joseph’s advice a little bit. Instead of storing up cash for seven years, they say you should set aside roughly six months’ worth of living expenses in an emergency fund (more if you’re self-employed or have a fluctuating income). And since you can’t predict exactly when a financial crisis will hit the way Joseph could, this money should be kept in cash or safe investments that should hold their value, so your money is there to draw on whenever you happen to need it.
4. Avoid Debt
Proverbs 22:7 – The rich rule over the poor, and the borrower is slave to the lender.
This proverb takes no skill to interpret. It describes debt as a kind of slavery – and modern Americans appear to agree. A survey by the Pew Charitable Trusts found that for many Americans, debt is a condition that lasts a lifetime and is impossible to escape.
The survey found that 80% of all Americans are in debt, and a majority of the oldest Americans are still carrying some form of debt in retirement. And 70% of those surveyed said debt was a necessity in their lives – something they didn’t want, but still couldn’t imagine living without.
All that debt takes a toll on those who carry it, both mentally and physically. A 2014 article in Health reports that high levels of debt are associated with anxiety, depression, and relationship problems. Debt can also be linked to high blood pressure, lowered immunity, and a host of physical symptoms, including headaches, back pain, and ulcers.
However, the Pew survey also found some signs that Americans’ attitudes toward debt are changing. Younger Americans – those in the Millennial generation – are more likely to take a negative view of debt, saying it has burdened them rather than expanded their opportunities. They’re also more inclined to say the way Americans use debt is irresponsible. And in their own lives, they’re less likely to take on new debt, such as credit card debt or mortgages.
These young Americans, it appears, have taken the Bible’s advice about debt to heart. They view debt as a type of enslavement, and they want to avoid new debt and pay off the debts they already owe.
5. Diversify Your Investments
Ecclesiastes 11:2 – Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.
This line from Ecclesiastes is a short, clear explanation of why it makes sense to diversify your investments. Nearly any type of investment can fall victim to “evil” of some sort, whether it’s a plague of locusts that wipes out a grain crop, or a market crash that reduces the value of stocks or real estate. So it makes sense to put money into many different types of investments so that a single disaster can’t cost you everything you have.
For instance, if you were a merchant in Biblical times, hoping to make money by trading cloth or spices with neighboring countries, it wouldn’t make sense to load all your cargo onto a single ship. If that one ship sank, you’d lose everything you had in one blow. However, if you divided up your cargo among seven or eight ships, all headed along different routes, the chances that all of them would sink would be very low. So even if you lost one or two ships, you could still hope to earn enough from the others to make a profit.
It’s a basic principle of investing that the more you diversify, the more you reduce your risk. Investing in 100 different stocks – for instance, by buying shares in an index fund – is far safer than investing in just a single stock.
Admittedly, there are some who argue that diversification is a myth. Their claim is that you can earn a much better return by putting all your eggs in one basket – as long as it’s the right basket. However, it takes a true genius to figure out which basket is the right one, and investors who try it are far more likely to end up losing their shirts than becoming millionaires overnight. For the ordinary investor, diversifying to reduce risk is a much safer and sounder plan.
6. Reduce Risk as You Age
Ecclesiastes 5:13-14 – I have seen a grievous evil under the sun: wealth hoarded to the harm of its owners, or wealth lost through some misfortune, so that when they have children there is nothing left for them to inherit.
In this story from Ecclesiastes, a father loses everything on a bad investment and has nothing to leave to his son. This is unfortunate for the son, but in the modern world, it could be a disaster for the father as well. That’s because his bad business venture wouldn’t just wipe out his son’s inheritance – it could wipe out his own retirement savings as well.
People today live longer than ever before. According to data from the National Institute on Aging, the average life expectancy in many developed countries is more than 80 years, and about 12% of the population is over 85 years of age. This number is expected to grow dramatically over the next few decades.
Because people are living longer, they’re also spending more years in retirement. Today’s 65-year-old retirees could easily need their retirement savings to last them 20 years or even longer. So if you speculate with your income when you’re in your 60s, it’s not just your kids’ inheritance you’re putting at risk – it’s the money you need to live on for the next 10, 20, or even 30 years. If you lose a big chunk of your nest egg, you could end up having to put off your retirement because you don’t have enough savings to support yourself.
If you want to be sure you have enough to retire on – and, ideally, something to leave to your kids when you’re gone – you need to reduce your investment risk as you age. As you approach retirement age, you should gradually move your money out of high-risk investments, such as stocks, and into lower-risk investments like bonds and annuities that can give you a modest, steady income.
You can still leave some of your money in the stock market – in fact, you probably need to in order to earn enough to support yourself through decades of retirement. However, at least a good chunk of your nest egg needs to stay protected from market risk so you always have something to draw on for your income.
7. Make a Financial Plan
Proverbs 21:5 – The plans of the diligent lead to profit as surely as haste leads to poverty.
This final rule from Proverbs more or less sums up all the others. Budgeting, planning for retirement, saving for emergencies – they’re all different ways of being diligent by planning ahead.
Making a financial plan is a three-step process:
- Identify Your Goals. It’s much easier to convince yourself to save and invest when you have a clear sense of what you’re saving for. Depending on where you are in life, your financial goals could include paying off student loans, buying your first home, financing your kids’ college education, or investing for retirement. Write down your personal goals, and go back to them from time to time to see if they’ve changed.
- Evaluate Your Situation. Next, figure out what your current financial situation is. This is a step you can take on your own or with help from an accountant or financial advisor. Determine your current net worth, how much you’re earning, how much you’re spending, and what kind of return you’re currently getting on your investments.
- List Steps to Take. Now that you know both where you are and where you want to go, all you have to do is figure out what steps you need to take to get from point A to point B. For instance, suppose your goal is to buy a house in five years and you think you need $55,000 for a down payment. If you already have $15,000 saved up, then you know you need to save another $40,000 over the next five years – an average of $8,000 per year. If you’re currently saving only $5,000 every year, then you need to either make more money, spend less, or earn more on your investments – or all three – to hit your goal within five years. Alternatively, you could revise your goal, planning to buy a cheaper starter home that requires a smaller down payment of only $40,000 – a goal you can meet without making any changes.
Without a financial plan, it’s easy to drift through life, earning and spending money with no real thought for the future. Writing out a financial plan, and checking it every few months to see whether you’re on track, helps ensure that you know what you want out of life and are on a path to get it.
If you’re a Bible scholar, you’ve surely noticed by now that many Bible verses about money weren’t covered in this list. For instance, it doesn’t include “Do not wear yourself out to get rich; do not trust your own cleverness. Cast but a glance at riches, and they are gone, for they will surely sprout wings and fly off to the sky like an eagle.” (Proverbs 23:4-5) or the single most famous Bible verse relating to money, “For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.” (1 Timothy 6:10).
At first glance, this seems contradictory. Some parts of the Bible are talking about how to take care of your money, while others appear to suggest that it’s a mistake to care about money at all. However, when you look at all these different verses side by side, you begin to get a more balanced picture. The overall message the Bible sends about money isn’t that money itself is bad – it’s just that it isn’t the most important thing in life.
When used wisely – to support yourself, care for your family, and help those in need – money is a useful tool. However, you should control your money – you shouldn’t let it control you. Rather than obsessing about how much money you have and how you can make more, take some time to be grateful for what you already have. That’s a bit of Biblical wisdom that can benefit even the most experienced investor.
Can you think of other Bible verses that teach useful lessons about money?