Arrows in my Financial Quiver

Last month I read a couple of books that I will shortly review, but here is a quick overview of a couple of financial principles I took away. One of these has dominated my thinking about finances since learning of it, mainly because I had assumed I had discovered all the building blocks of finances at this point. Turns out I was missing one and not thinking clearly about another. Maybe one day my quiver will be full of these principles.

Most of my financial acumen revolves around 2 important principles which remain unchanged: Give to God first and get out of debt. I still believe that these are foundational principles and I credit any progress I have made towards financial “success” to God’s grace in compensating for a lot of foolish financial choices that I have made. My favorite writer to read when it comes to finances is Randy Alcorn, and his little booklet “The Treasure Principle” is a great place to start.

But these new principles are really good. The first one is the principle of productive property, which is defined as something that you own that makes you money. This is different than an asset, which is something you own that has financial value. Most people think of their house as an asset, but if you owe money on it it is your bank’s asset. Your house counts as personal property, unless you rent it out. Unfortunately, most people can’t live in their house and rent it out at the same time, which means that if you lose your job you may need to sell your house.

What caught me off guard about this principle is how little productive property I have! So my mower, which is devaluing quickly, is something I own to maintain someone else’s asset (my house, until it is paid off). In the modern world simply owning nice stuff is an end in itself, while in a previous age you owned stuff because you used it to support your family. Think “family farm”. Over the last few months we have seen the incredible rise in unemployment and the need for the government (ie, the taxes collected from everyone) to support these people. That’s because they were dependent on someone else for their livelihood and probably own no productive property to fall back on.

This principle is helping me evaluate my purchases more clearly. Even if I can afford something, am I investing in anything that can be classified as productive property? Obvious things would be real estate, equipment for producing or manufacturing something to sell, a business interest, etc…

Speaking of evaluating my purchases more clearly, the second principle is thrift. I have been aware of this one for a long time as I have been financially strapped for a lot of my life and I’m blessed to live with a thrifty wife. But I’ve always seen thrift as a necessity instead of a virtue. I’m a huge fan of getting a good deal on something, which is how I’ve often been able to have things and do things that are beyond my income bracket. That’s not a bad thing.

But thrift isn’t just something you need when you’re broke to make it to the next paycheck. Thrift is how you keep the money you have earned! No matter how much your income increases you can always find a way to spend all of it. In fact, another important financial principle is that you always spend all of your money.

So thrift (which is different than miserliness) understands that should you run around as if you are spending Brewster’s millions (which you don’t really have) then all of that money you have accumulated will be accumulated by someone else. Not everyone is thrifty in the same way, but everyone should find a way to be thrifty. My wife is thrifty with clothes both for herself and for our kids. We could spend a small fortune on textiles if we bought everything new or everything at the mall. But she is thrifty.

So there you have it. Do you own any productive property, and are you thrifty?

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