Principle #10: The More You Give, The More You Get
Some people hold on to their money too hard that they eventually lose it. It's like clutching sand in your hands. Others freely give and they never seem to run out of money.
My sister-in-law has a generous heart and she's blessed financially. Give a little and get back a hundredfold. Many people attest to the power of giving.
To me, there are three things we can all put into practise to make this principle work in our lives.
Stewardship
If you come to think about it, we're really just stewards of whatever we have. Of course, we think we own what we have because we worked to get them. But even our abilities are God-given.
If we put that into perspective, we become better stewards of money. To be sure, that's easier said than done.
But if we do think of ourselves as stewards, part of being good stewardship is growing our money and sharing it.
TIthing
Part of being stewards is tithing, which is giving ten percent of our income to the church.
Tithing is an acknowledgment that everything belongs to God. It's also an act of faith, because it's hard to give ten percent when we can hardly pay the bills.
But many people who diligently practise tithing testify that the promise of tithing is real.
Charity
Of course, the concepts of stewardship and tithing are Biblical concepts that you may not ascribe to.
Whether or not you share these beliefs, there's a third way of applying this principle: charity.
A lot of rich people like Bill Gates and Oprah Winfrey give back a lot to society. But you don't have to be rich. You don't even have to give cash. You can give your time and effort, which also have financial value, if you think about it.
Principle #9: Make a Life, Not Just a Living
Money is not the root of all evil. What the Bible says is "the love of money is the root of all evil." It's one thing to keep in mind when we deal with the subject of money.
Money is a tool, a means to an end. If it becomes the end in itself, then we should ask ourselves about what really matters.
Unfortunately, for some people, rich or poor (yes, even the poor), the pursuit of wealth for its sake has become their philosophy and lifestyle.
And for many people, including you and me, making money has often stood in the way of enjoying our lives. It's quite ironic: we work hard to make money to pay for things that make us and our family happy. But we end up neglecting the important things in life, like quality time with our loved ones or simply enjoying the little things.
Surely, many good things in life are free. And we should invest our time and effort in them. But there are also some good things in life that we spend for, and ought to invest in. Let's not just spend for material things that we accumulate or for necessary living expenses. Let's also spend for things that help us enjoy life more. There are three I recommend.
Recreation
Part of enjoying life is recreation. Is recreation part of our lifestyle? Or is the one-week holiday abroad too much to handle when we're always worrying about the work we left back home?
It's good to work to pay for a house, groceries, travel, cars, tuition, gadgets, clothes, and all those mundane things. But you should include recreation in the things you spend for. That includes sports and hobbies that you enjoy and enrich your life.
Education
Education is also part of enriching your life. That means continuing education classes, seminars, workshops, books, magazines, and traveling. Do you invest in your education? Learning continuously is a great way to live our lives.
Avocation
And then there's our avocation. Is there something you like to do off hours? There are things that we spend time, effort, and even money on, even if don't get anything concrete in return, just a sense of fulfilment.
For me, Money Minute and promoting financial literacy is my avocation. I enjoy writing and teaching and learning. That's a reward in itself. There are also other things I want to pursue in the future. What's yours?
Whatever it is, it's okay to spend for things that give you satisfaction. And the point is, it doesn't have to be (and should be) just material things. Recreation, education, and avocation that enrich your life are often more long term or more deeply satisfying.
Principle #8: Match the Right Instrument With the Right Requirement
Okay, this principle doesn't sound so catchy. For sure, the familiar warning "If it's too good to be true, it probably is." plays better on the ear.
But it doesn't quite capture what's most important when it comes to investments. When it comes to investing your money, the key principle to remember is "matching". This should guide you when making investment decisions.
If you don't match your investments with your requirements, you'll end up making poor choices. When I started investing, all I knew was that stocks was the way to go. So I invested in stocks with no particular objective except to save and invest "for the future".
But I should have taken into account my immediate needs, like wedding expenses and a mortgage. That way, I should have invested in bonds, government securities, and other fixed income instruments.
Matching investments with specific needs helps you determine how much you should expect and can take (risk and return), how much to invest (asset allocation), how long to be invested (time period), and what to avoid (speculation and scams).
Risk and return
Everyone has a different appetite for risk. Some are conservative investors who only keep their money in safe instruments like bank deposits and government securities. Others are risk takers, putting money into speculative stocks and even get-rich-quick schemes. Most of us are in between.
But our risk attitude as investors and our expectations for returns should really take into account our goals. Example, if you were planning for retirement, then investing in equities, which has a higher risk, is an appropriate decision. Putting money in bank deposits is not a good idea because inflation will eat up your measly returns. There's no way you'll accumulate enough wealth for retirement purposes if you're too risk averse.
In the same way, if you're saving for a downpayment for a car loan by next year, you shouldn't be investing in stocks. Don't expect double-digit returns in a short period of time if your goal is short term. Even if you have a high appetite for risk, you should be guided by your specific need.
Asset allocation
How much of your money should you put into stocks, bonds, real estate, money market accounts, government securities, and cash?
It all depends on your goals. If your goal is something immediate and you don't want to risk losing your principal, then allocate money into short term and relative safe instruments. If it's long term, then allocate more into equities.
Time period
Now, how long should you keep your investments? Again, if you have no particular objective for your investments, and you're invested in stocks, you may be easily tempted to pull out when the market goes down. But if those investments are for the long term, then you can ride the ups and downs of the stock market.
If you have short term needs but you invest in long term instruments, you may end up losing money if you're forced to sell your investments.
If you have long term requirements but you just invest in short term instruments, you may risk not earning enough on the smaller returns.
Speculation and scams
Lastly, this principle should guide you in avoiding get-rich-quick schemes and investment scams. If your need is to protect your income, then you certainly shouldn't play with speculative investments, and worse, potential scams.
If you have play money you don't care to lose (lucky you), then putting it in high risk investments is a gamble, as long as you know what you're getting into. Still, I don't encourage it. Wasting money, even play money, is still a waste.
So, if you have money to invest, go back to the financial goals you set (remember the exercise we did before?). What is it you want to achieve first? When you determine your need, you can now make the right choice on what type of investment can best meet that need.
