The Bible's Suggestion for How to Become Wealthy

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

A reader mentioned one of my favorite Bible verses a few Sundays ago. It's from Proverbs 13:11 -- and here it is in the NIV:

Dishonest money dwindles away, but he who gathers money little by little makes it grow.

I also like the NLT translation, which goes like this:

Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time.

This verse really summarizes the Bible's viewpoint that wealth can be had over time, but if you try to get rich quick, you're destined to failure. I couldn't agree more.

As we've discussed previously, using time is one of the most powerful ways to grow your wealth. Simply spend less than you earn, saving the difference, and invest it year after year after year. From there, you simply need to let the power of compounding do its work. Over a few decades, you'll end up with quite a nice nest egg.

I know, it's not a creative, sexy, fun way to become wealthy, but it's as close to a "sure thing" when it comes to wealth as any other method out there. And it's done well by me. ;-)

Comments

[Everyday Tips]

I also think it is a great method because it can actually be done. If someone is told they need to put away huge sums of money, it may never happen. But if you start young and put away at least a small amount each month, it will add up in no time. My regret is that I was not more diversified with my investments over the early years as my stocks took a beating on and off.

[Mary Kate]

A great passage. I think many of your readers have found this to be true. It has worked for us. I see otherwise intelligent peope ignore this advice, it's not exciting, sexy, etc. I hope that as a parent this lesson is truly absorbed by the next generation.

[Old Limey]

Getting rich slowly has worked well for me for the last 54 years and it is still working.
It is all about "Compounding".
If I make 5% on my investments this year, it also amounts to 5% on the sum total of all the gains and all the savings that I made in every single one of those 54 years. That's "Compounding"!

This is why it is extremely important to never allow yourself to have a losing year.
If I had lost money during my very first year of saving which was 1956 it isn't catastrophic, it just sets you back one whole year. However if, like most people, I had suffered a large loss in 2008, that's a whole different story. Let's say that I had lost 30% in 2008 then I would have lost 30% of all of my savings and all of my gains for all of the 52 years prior to 2008.

Hence my investment motto is: "Understand the Power of Compounding and Don't Lose Money"
Results for 2008 were:
Old Limey .................... +2.6%
Nasdaq ...................... -40.4%
Total Stock Market.... -38.6%
S&P 500 .................... -38.4%

The diificult task facing investors is: How do you avoid a losing year?
The only way I know is to follow my investments closely, read all I can about the market and the economy and develop a technique for lowering my exposure to losses during bad times. It's not easy and it takes work but I have personally totally avoided ever having a losing year and have capitilized on great years. What you absolutely cannot do is to use a "Buy & Hold" approach or bury your head in the sand and not face reality when times are awful.
The good thing about this is that as you get older you can become more and more conservative until finally at some point in your life you can be 100% in fixed income investments and leave the stockmarket to the younger generation. For 2009 I made +4.45% and for 2010 I will finish at about +4.60% and 4.6% of everthing I have saved and made over 54 years is a lot of money, especially when the bulk of it is tax deferred or tax exempt.

[amo-mensah meshach]

well done. the youth of today should know that money is acquired daily and not in a day. the most powerful principle is the power of compound interest