Retirement and Building Wealth: The Wealth Snowball Vs. Ocean Tide

For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.

The following is an excerpt from The Bible and 21st Century Finances (a free eBook offered to people who subscribe to Money Help For Christians).

Wealth is much more than a bundle of money. To be truly wealthy is to live in the presence and the blessings of God.

When it comes to retirement planning and saving for retirement, every Christian investor should add a simple word to their vocabulary – enough. The Bible seems to indicate that a Christian who neglects an I-have-enough attitude is considered a hoarder.

On the bottom of every page in the book The Total Money Makeover, Dave Ramsey writes the words, “Live like no one else, so that you can live like no one else.” Unfortunately, Dave Ramsey never completely defines what that means. My understanding of the phrase is something like this – “Don’t buy something now, so that in the future you can buy something better.” This makes me wonder: Do you sacrifice today so you can win more tomorrow? Or do you sacrifice today so you can help someone else win tomorrow? Is the goal of Christian finances just to build wealth for one’s own self?

As Christians, it is essential that we clarify our financial goals. While our spending, earning, and investing might mirror the actions of others, the differentiating factor is our motivation. An important criteria when evaluating good financial goals is the amount your plans involve assisting others.

To simplify things, you can adopt one of the two following retirement saving strategies. The two retirement options are the Wealth Snowball and the Ocean Tide.

Choice #1: The Wealth Snowball

The pattern is obvious. When you get ahead financially, it is easy to stay ahead and get more and more wealth. Perhaps this is why the rich keep getting richer. The problem with an unchecked Wealth Snowball is that your life will be consumed with building bigger and bigger barns to store your wealth.

Choice #2: Ocean Tide

The ocean pattern is painfully predictable. The tides are equalizers. If tides kept coming in indefinitely, there would be issues with flooding. If the tides kept going out forever, there would be issues of water shortage. But high tides and low tides maintain a balance in the sea level.

Applying this illustration to our finances, we should find a fixed level for our retirement savings. This predetermined level becomes our equalizer. When money comes in, there is an opportunity to look around for helpful places to use those funds as a blessing to others.

Notice that those extra funds are not just going to be used to increase your nest egg. Instead, they will flow out into the pockets of worthy churches, organizations, or individuals. When you appear to be falling short (tide goes out), you can once again rebuild your nest egg to your fixed level. This allows you to ensure that you have enough while also avoiding the temptation of hoarding.

When is enough, enough?

Unfortunately, I cannot answer that for you. I have enough difficulty answering that question for myself. It is, however, a worthy issue to discuss with trusted friends and your church staff. Pray over the issue, insightfully read your Bible, and trust that God will make things clear to you.

You might have enough when:

• You have the ability to follow God?s calling without wrestling with the monetary implications.
• You have the ability to provide for your children. Peace can flow out of the realization that your children are well fed and provided for.
• You have the ability to provide for the needs of others. Learn how to increase in the grace of giving.

May the financial advantage you gain as a steward for Christ be used to bless others as much as it blesses your own family.

Comments

[Concojones]

May I suggest a third approach?

The wealth snowball has going for it that it creates the most money. I agree there's the trap of keeping it all for yourself, but you don't have to fall into that trap. You can give most of it away eventually. To keep that motivation fresh, I think some constant small-scale giving is a good idea. So I'm basically advocating the wealth snowball combined with small tides that become floods at some point.

I'd complement the small-scale money giving by giving in other ways that don't cost money. Keeps your generous spirit alive, while you learn how you can make your giving dollars go further.

[Jonathan]

I agree with Concojones - we each have different spiritual gifts, and some people have a way with making money. The more you make, the more you can give. Obviously, your relationship with your money is a big factor in this, but for those who consistently give generously with what they've been entrusted, I think it is sensible to continue to make and give as much as possible (through ethical and conscientious means).

[Old Limey]

Younger people tend to think that they are immortal and that they will always be active, healthy, and able to take care of themselves no matter what.
I am now 76, my wife is 77. When I look back at our life I would say that the absolute peak was when we were in our very early fifties. Neither of us had any health problems then, we were both very happy in our marriage and our work and very energetic, our three children had been raised, had left home, and we had plenty of money and plenty of vacation that enabled us to travel the world. Some of the exotic places that we visited are off limits these days because of political unrest. We have much to be thankful for, the stars were aligned perfectly for both of us. We have been watching an excellent Masterpiece Theater drama recently and one of the themes throughout the main character's life has been, "Life is all about Good Luck and Bad Luck", and I have to agree that it really is, and we have been fortunate that we have had all Good Luck so far.

At our age now, something we both think about, especially after 55 wonderful years of marriage is, "What will life be like for the survivor when the first of us departs this world?"

The problem is that the future is totally unknown. There are so many ways it can play out that it's impossible to predict. Now that people are living longer there are many more people that live to an age when they may develop Alzheimer's, Parkinson's, or one of many other debilitating illnesses. This is why so many assisted living developments have sprung up to cater for retired seniors with various levels of needs. Even without a debilitating illness there could also be the problem of "Loneliness" to deal with after having had a lifelong and loving companion. Assisted living developments are very expensive indeed and the nicest ones, these days, require that you purchase outright a unit that can vary from a small apartment or condo, up to a nice villa with great views. The value of the unit passes back into your estate upon your death but there are very expensive monthly fees to cover everything from nice meals to maid service and utilities, or even different levels of nursing care should they be necessary.

This is why I believe it is premature to start giving your hard earned wealth away while you are still young and active. In our case we have one particular charity that we like very much in addition to bequests to our three children, and grandchildren. We have a large wealth snowball rolling down the mountain and growing larger every year, and it pretty well takes care of itself these days. I certainly don't have to build bigger and bigger barns to store it, and the security of knowing that it will be there for either (or both) of us if needed is a great source of comfort.

[Matt]

Balance is my philosophy.

The Lord will provide but do not hoard what is give to you but don't spend beyond what you are given or give thinking that he will provide endlessly.

All to often it is hard to listen to what God really wants us to do. With all the noise in our lives we need to stop and figure out how to listen to what God really wants us to do.

[BryanW]

In defense of Mr. Ramsey, he advocates tithing throughout the process that he teaches. Additionally, the last of his baby steps is to build wealth and give like never before. As Jonathan noted, the relationship that you have with money is key.

I completely agree that "enough" is an elusive concept. Even the most grounded and simple Westerner would struggle to defend our idea of "enough" to countless people in other parts of the world.

People often claim that they have earned what they have or that they deserve a certain level of comfort based on the hard work they have put in. Of course, that is a ridiculous view while people in developing nations work tirelessly for a lifetime simply to avoid starvation.

All we can do is live in a constant state of gratitude. Nothing we have can be fully attributed to us since every life contains so many variables that could have led us to abject poverty instead of incredible wealth. If we are first grateful (to God above all), our handling of money in the wealth stage falls in line pretty easily.

[First Gen American]

I guess I'm doing much of #1 for much of the reasons Jonathan stated above. My mother is 78 and I'm starting to see her slowing down. She is still very active but it's much harder for her to do simple things. I know that if I'm lucky enough to live that long, I want to make sure I'm not a financial burden on my children. I don't know the magic number for "enough" but for now, I'm trying to make the most of my peak earning years.

[First Gen American]

Oops, I meant Old Limey