Monday, January 17, 2011

5 Ways To Find Investing Money

"Cast your bread upon the waters, for after many days you will find it again."
– Ecclesiastes 11:1

Saving is good, but I've heard it said that saving money makes losers of us all. How you ask? Because saving money usually ends up in you losing money, just not as fast as spending it. Let’s say you are making 2% a year in a savings account. If you realize that you will be taxed a significant percentage of that and that inflation will increase faster then your interest rate you’ll see that you are actually making minus percentage points. Yikes. One alternative to this slow bleeding of resources is invest and make your money grow. But how do you get the money to start investing with? Here are a few ideas:

1. Pay Yourself First. Almost everyone could put 5 to 10% of their income aside (first) every month and then invest it. This is by far the easiest and most productive way to raise money for investing. It is a great habit to get into. If you are on a salary, you could start with a small amount and have it automatically taken off your cheque and put it into an account until you have enough to purchase an investment or asset that will make you money.

2. Windfalls. Most people over their lifetime will receive a windfall, an unexpected blessing of money. Maybe it will be a lottery, a contest, an unexpected tax refund, an inheritance, etc. Instead of blowing it all on something that will depreciate quickly (like a car), why not put the lion’s share into an account for investing? That way when opportunity knocks you’ll be ready.

3. Sell something (or somethings). Most people have between $500 and $1500 of things around their house that they could sell. Or if you have a $20,000 vehicle, you could sell it and buy one for $10,000 leaving you with $10,000 to invest. Your $20,000 vehicle will only depreciate anyway, why not use some of it’s value to make yourself some money?

4. Use the equity in your home. Many people look forward to the day they pay off their house, but in the meantime that equity (the difference between what you owe and what your home is worth) is doing nothing. Why not unlock some of it and use it? We did this to purchase our first rental property – we didn’t even have to take any money out, we just used it as collateral. Another great way to use your home’s equity is to get a line of credit. The interest on a l.o.c. is often extremely reasonable. Just be careful that you invest in something relatively safe when using borrowed money.

5. Work a bit more. Doing a little work on the side (consulting, babysitting, etc) or even working overtime is a great way to make some extra money to invest. Even $100 extra a month is $1200 a year.


Marc said...

I'm reluctant to post because I'm going to start sounding like a cantankerous busybody pretty soon. :) But, I carry on...

I see someone else has already commented on giving to God first in a previous post, so I won't mention that. But I wonder if there are are other implications for this whole venture?

I'm not opposed to saving for needs and emergencies, but to what end are we investing? How important is it for a person to invest money that they should re-mortgage their house, or get another loan, or sell their stuff, or, possibly more concerning, work more?

I guess I see this potentially getting people into greater financial trouble (moving backwards financially now in order to gain for some distant future). More significantly, this could well be a very big step towards turning the purpose of life into earning more money (which is what it already is for a lot of people: earning more money in order to buy more stuff). How does that view of life correspond to the Christian worldview? (Don't get me wrong: I'm not saying investing isn't Christian. But I do think it's an important question to ask.)

I'm not expressing my thoughts very well. I'll have to think about it some more. But I'll leave those thoughts for now.

Mark said...

Hey Marc! No worries, you aren't sounding like a cantankerous busybody at all. I like your thoughts and your questions and I wish we could talk about them in person! Alas, since that won't happen for awhile. . .

I really don't want to "should" on anyone. I don't think you "should invest," or that it is crucial to someone's financial plan although I do think it very wise, but that is only according to my limited understanding. And certainly (as I have posted before) giving is a much higher priority then giving. The term "pay yourself first" as I have explained before doesn't mean paying yourself first before you give, it means paying yourself first before you pay your other life expenses. It is a method to circumvent our natural proclivity to spend all we have without saving enough for future needs. The term is well known in personal finance circles. Maybe I'll just have to change it to "pay yourself second" as Joel suggested.

You asked the question - to what end are you investing? I think that is an excellent but personal question that everyone has to answer (and is terribly difficult to answer for someone else). Some people's motives are very good and others are perhaps suspect. I believe we need to be extremely careful about trying to judge other people's motives on any subject without hearing from them directly and by judging them by their fruit. When I write about investing I'm assuming that people will have good motives as I hope that I do. This is no different then if I'm writing about ministry, relationships, etc; all which can be engaged in with good or poor motives. Some good motives for investing would include; the ability to give generously, to use one's gifts to God's glory, to provide financial protection, to bless others, to provide for one's family, and to provide for oneself (and spouse) after you retire.

Is it possible to have both good and poor motives when investing? Absolutely. Investing in of itself is not right or wrong, it is simply a thing that can be used for God, for oneself, or both. I like to think of John Wesley's famous words "Make all you can, Save all you can, Give all you can." For many their views of money wouldn't let them embrace such a worldview and that's OK. It works for me.

You asked how important it is to someone that they would be willing to do some things (even risky things). I guess I believe that risk is quite personal and definitely in the eye of the beholder. There is risk in investing and risk in not investing! What might be too risky for one person (even unwise) might be fine (even wise) for another. We all have different risk tolerances. Mine is probably a little higher then the average persons. I know many good Christians for whom it is much higher.

Marc, I hear your concern about the risks of moving backwards instead of forwards and it's ramifications. To me it is kind of a "what if?" question that is difficult to answer or defend. You wonder if it might lead a person to making money their goal, I could say it might lead them to greater fruits of generosity and sharing! Either of us could find many proof cases of both results. I agree that there is a danger as one makes money, but we are reminded in Scripture that is the love of money (not money itself) that is bad.

This is a great topic and I would like to discuss it more. I'm not sure if this medium is the best (maybe in person?) as I have probably misinterpreted some of what you said (and if I did I apologize) and misstated what I meant to say. Your thoughts help me test and clarify my own worldview which I highly appreciate!

Stacey said...

Marc said a lot of what I was thinking with your previous post about money.

It may be just me, but it does seem like a lot of your focus on this blog is money, which is probably where my concern comes from. It starts to "sound" like the love of money, even though I know that is not your intention.

In the blog world, we only see just a glimpse of the whole person, making it hard to know the motives and intent of each post made. I just think that someone who stumbles across your blog, who doesn't know you personally, may take what you say in the wrong light.

Terry L said...

Well I like your posts, Mark. I find you have a pretty good balance of different topics. And I find your take on finances refreshing. If more people would focus on finding ways to make what God has given them work for them instead of squandering them or using them in non-sustaining ways, many fewer people would have to worry about money.