The Bible supports our efforts to provide for ourselves and our families through planning, saving, and investing the treasures that God has entrusted to us. The principles that are employed in investing: planning, saving, selecting investment tools, and sharing the profits with others are highlighted through multiple passages throughout the Bible.
Planning
Proverbs 13:16 – “The shrewd always act prudently but the foolish parade folly.”
Luke 14: 28 – “Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion?
Luke 14: 31 – “Or what king marching into battle would not first sit down and decide whether, with ten thousand troops, he can successfully oppose another king advancing upon with him twenty thousand troops?”
Planning is the key to the success of any plan – personal growth, business success, and wealth building. It is essential to understand the objective of our financial plan to select the investment instruments needed to accomplish goals effectively. The financial instruments selected will correlate with the risk tolerance levels and timeframes of the individual investor. Studies have shown that individuals who have a low tolerance to risk-taking are less likely to invest and that tolerance level is a significant determinant of whether the person will possess investments in the assets to meet their objectives (Moray et al., 2019).
Luke 14:28 and Luke 14:31 both highlight the importance that planning plays in the success of the endeavor (Nabre – New American Bible Revised Edition Paperback, 2010, Luke 14: 28-31). While individual investors are not building a tower or preparing to go to war, we need to understand what we want to accomplish. These accomplishments could include funding a home purchase, paying college tuition costs or planning for a comfortable retirement. The planning process helps investors to make intelligent decisions and to not act in haste. The individual can shift consumption to a later date as funds are needed to accomplish objectives. Wealth is stored in financial assets such as stocks and bonds for use later (Bodie et al., 2019).
Saving – Investing
Proverbs 21:5 – “The plans of the diligent end in profit, but those of the hasty end in loss.”
Proverbs 21:20 – “Precious treasure and oil are in the house of the wise, but the fool consumes them.”
Ecclesiastes 11:2 –“Make seven, or eight portions: for you know not what misfortune may come upon the earth.”
These three passages from Proverbs and Ecclesiastes emphasize the successful execution of the savings and investment plan, which leads to profits. This principle is relevant for both individuals and businesses. Understanding one’s goals and planning to achieve them builds the foundation for success. Proverbs 21:20 talks about the treasures that are held by individuals and the importance of holding on to them (Nabre – New American Bible Revised Edition Paperback, 2010). Specifically, the passage talks about how it is foolish to consume (or spend) everything we have. Ecclesiastes 11:2 relates to diversification and the importance of spreading one’s investments out among different investment alternatives (Nabre – New American Bible Revised Edition Paperback, 2010). This diversification protects against the possibility of a downturn in the economy or an event affecting the entire investment.
Taxes – Common good.
Genesis 41: 34-36 – “Let Pharaoh act and appoint overseers for the land to organize it during the seven years of abundance. They should collect all the food of these coming good years. Gathering the grain under Pharaoh’s authority, for food in the cities and they should guard it. The food should serve as a reserve for the country against the seven years of famine that will occur in the land of Egypt, so the land may not perish in the famine.”
1Corinthians 14:2 – “On the first day of each week, each of you should set aside and save whatever he can afford so that no collections will be going on when I come.”
The United States tax code is designed to encourage individuals to save for the future to be able to provide for themselves and their families in retirement or in the event of economic uncertainty. Similar tax incentives are implemented to encourage investment by businesses to increase economic activity. However, this is not always possible and does not always achieve the desired results (DeBacker et al., 2019). The typical cyclical nature of the economy demonstrates the need for both individuals, corporations, and governments to have reserves.
The tax code is designed to raise revenue based on the building of wealth by individuals to facilitate the building of reserves by the government. While the rate of taxes on investments is often less than that of income, investors are still required to turn over some of the profits to the government to help build the reserve necessary to support those who were unable or unwilling to build their reserves. These passages provide support for paying taxes on investment earnings with the idea that taxes act as a reserve for the country. These reserves are stored until they are needed to provide for the needs of all citizens. This concept supports the principles emphasized in the book of Genesis that God created us in His image and provided the resources to be cultivated not for the benefit of one individual but for the common good of entire communities (Nabre – New American Bible Revised Edition Paperback, 2010).
In addition to the normal growth and contraction cycles, some events are unexpected and have significant impacts. The terror attacks of 9-11 and the current pandemic are two examples. The first required significant expenditures to ensure the country and its citizens were safe from further attacks. At the same time, the latter has resulted in widespread unemployment, with millions of business closures predicted to occur in the coming months. By following the principles laid out in these scripture passages, the nation will be on solid footing and in a position to assist as it is needed.
Granted, what we often see in practice is making the expenditures by taking on additional debt. Debt is usually required by not having sufficient reserves in place. The importance of having a reserve is a lesson to be learned by our government, but it is also vital for each of us to build into our investment planning.
References
Bodie, Z., Kane, A., & Marcus, A. J. (2019). Essentials of investments (11th ed.). Mcgraw-hill Education,.
DeBacker, J., Heim, B. T., Ramnath, S. P., & Ross, J. M. (2019). The impact of state taxes on pass-through businesses: Evidence from the 2012 Kansas income tax reform. Journal of Public Economics, 174, 53–75.
Moray, R., Pabalkar, V., & Buch, N. (2019). Asian Journal of Empirical Research, 9(8), 188–201.
Nabre – new American bible revised edition paperback. (2010). American Bible Society.