Forum Summary: 10 Practical Financial Principles
Author: Ryan Price | Student, Living Education – Charlotte, 2021-22
Estimated Reading Time: 4 min.
Mr. Josh Lyons, a minister in LCG and former Living University student, brought to the Living Education students’ attention that the Bible has many verses related to finance and wealth, and that it gives us foundational financial principles of being balanced, being generous, and tithing.
But he wanted to focus on some other practical tips for this week’s forum, so he provided the students with ten financial principles he hoped would help them in life. He began by splitting these principles into three broad categories.
Small, Practical Tips
Principle 1: Have at least $1,000 in your emergency fund.
In life, there will come days when you have no choice but to spend $500 or $1,000—your car could break down, you could sustain an injury, your house could need repair, etc. It’s best to always be prepared for these situations with at least $1,000 in reserve.
Principle 2: Intentionally build and maintain a good credit score.
The FICO credit score ranges from 350 to 850. The closer your score is to 850, the better your credit is. When you have good credit, you can get better loans more easily, with better terms and better credit cards.
The five main aspects to your credit score are paying your bills on time, how much debt you are in, the length of your credit history, the type of debt you accrue, and recent inquiries into your credit. A good practice for young people is to get a credit card and spend just a little with it, paying it off at the end of each month to start building your credit score early.
Principle 3: Buy things used
A brand-new car will decrease in value as soon as you drive it out of the dealership. For many, buying used cars is a better option. This applies to furniture and appliances, too.
Principle 4: Keep a personal balance sheet
A balance sheet is a snapshot of everything you own and everything you owe, your assets and liabilities. This is a useful tool in figuring out your financial status, both in the present and in the future.
Avoiding Financial Traps
Principle 5: Avoid credit-card debt
Two big reasons that it is very important to pay off your credit card at the end of each month are that credit cards can make us feel like we have money that we really don’t have, and that the interest for late payments can be as high as twenty percent. If you don’t pay your credit card balance on time, you’ll likely end up paying way more in interest than the original purchase was worth.
Principle 6: Avoid investing in something you don’t understand
This is a simple principle: You need to be sure to do your research on something before you invest. Don’t buy into the hype. Practicing discernment and acquiring knowledge is essential to successful investing.
Principle 7: Never gamble
This is common sense, but some do fall into this trap. Gambling on sports, as Mr. Lyons has noticed, seems to be on the rise. It’s very easy to do, but we must be careful to avoid it, as it can be very addictive.
The Big Principles
Principle 8: Make sure your biggest financial decisions are good ones
One of these big decisions can be buying a car—you need to do your research to make sure your car won’t have problems down the road. A good car can last for years. This principle especially applies to buying a house, which could be the biggest financial decision of your life.
Principle 9: Choose a good career
Choosing a career path, depending upon the career, can cost you a lot of time and money. So, make sure that the career you choose will pay you back. It’s wise to pick an industry that has a demand for workers and to consider how well your degree, trade, or certificate will financially benefit you. Choosing a career can be one of the biggest decisions you’ll make and will have a significant financial impact on your life—so, be sure you know what you’re getting into.
Principle 10: Always spend less than you make
This is another very simple principle, but, as with many things, it is easier said than done. However, if you live within your means, you will accumulate wealth over time that can be used as a tool to provide for and protect your family, and to help others in times of need.
Mr. Lyons hoped the Living Education students found his message helpful and reminded them that living by these principles will lead to prosperous financial stability in their lives.
