What is your number?
Being good stewards does not happen without focus and planning. God wants us to generate a return on the resources He has given us. The most powerful financial resource God has given us is our income, and in almost all cases He expects us to spend less than we make so we can use the difference to build our financial net worth and plan for the future goals He has given us.
So what is your number? How much are you planning to save from your income this year? Saving will not happen unless we plan it and are diligent each pay period to make it happen.
I recommend you setup your budget to save a minimum of 10% from your gross income, and work over time to increase your savings rate to be more than 15%. This is long term savings, and is separate from what you budget for car replacement, vacations, and other more short term saving needs.
Your 10-15% long term savings from your income should be used as follows in order of priority:
Pay off all Consumer Debt
There is no better investment than paying off our debt, since debt interest is paid from our after tax income. For example, paying off a loan with an interest rate of 8% is equivalent to generating a guaranteed pre-tax return of 12% for most people (assumes a 33% tax rate). Finding investments that return 12% guaranteed is not easy, so pay off your debt before you invest!
2. Pay off your Mortgage early
One of my favourite investing approaches is to take 50% of your monthly long term savings and use it to pay off your mortgage early, and take the other 50% and use it for Retirement savings.
3. Invest
Invest to achieve long term goals that fit your life and calling, such as RRSP’s, RESP’s, Stocks, and Real Estate. Unless you are an expert, use an advisor and only invest in areas’s you can understand.
Everything we own belongs to God, and we have the privilege of being His stewards and managers. Let’s start the year by assessing where we are at and setting realistic goals to multiply what God has trusted us with.
Proverbs 21:5 - Brilliant ideas pay off and bring you prosperity, but making hasty, impatient decisions will only lead to financial loss. TPT
Todd Payne, CPA, CMA, The Path Forward, Jan 2023