Tuesday, June 5, 2012

Spiritual Economics

There are two obvious and one hidden dimension of the financial equation. Income and expenses are the obvious ones, so what is the hidden one?  As long as we spend less than we earn we will build savings.  The emphasis on limiting expenses makes sense because when we want to change the situation it is easier to stop spending than it is to bring in more money.  Income can be raised through increasing your education. 
 Photo by Petr Kratochvil

It is possible to make more money but the options tend to take a lot of time.  It is appropriate to work on these long term fixes, but it is best to reign in your spending now.  So what are some ideas to make more?  Some jobs automatically pay more if you have furthered your education.  You can switch careers, but this may take going back to school.  A switch does cause most people to experience a short term drop in income because you move to a lower tier on the pay scale.  As a teacher my pay is entirely a function of time in service and education level.  

If a car mechanic making $52,000 a year goes back to college, finishes a bachelors degree and gets a teachers credential it will take roughly 7 years at my district to get back to the point of where they were.  Remember, that in those 7 years the auto mechanic would probably be receiving pay raises.  This doesn’t mean the auto mechanic should give up on the dream of teaching, it just means that switching careers can be time consuming and expensive.  If that same auto mechanic were receiving no medical or retirement benefits, switching careers would make sense in order to get these benefits.  This pay drop keeps many people from going after something they want. 

 Long term thinking always trumps short term thinking, but is generally more painful in the short term.  You can generate more cash by working overtime, taking a second job, starting a sideline business, but these options eat into your time.  Sometimes it is best to make do with what you have then to chase after more money.  This chase for money can erode other areas of your life, especially you relationships with God and the people you love (Mark 8:36).  It is not wrong to be rich, but the thirst (or lust) for riches, is a foolish pursuit (Luke 12:13-21).

By lowering expenses you will generate savings, allowing you to invest and build wealth.  The goal of wealth, is to allow you to be independent and not dependent on others (1 Thess. 4:11-12) while able to help others (Eph 4:28).  Most people when they take a good hard look at their spending can identify areas where they can cut.  The truth of spending cuts as a way to economic freedom out of debt takes us to the third dimension of finances.  There is a spiritual dimension to your finances and it must be taken into account (Luke 12:34). 

The above verse talks about the correlation of spending to thinking.  We think about the things that involve our money.  If our money is going to bills and ever increasing late fees we will only think about that.  This is the mental trap of debt.  The hard reality is that you do not control any of the important variables of life (Matthew 6:25-34).  You could lose your job because the company you work for goes out of business, gets taken over, or moves to a new location.  Companies know that increasing productivity allows them to produce the same or more products with less human labor.  

According to Steven Bragg in his book The New CFO Financial Leadership Manual human labor represents the single largest expense for most companies; therefore, companies are always searching desperately for ways to limit costs.  Lower costs equals greater profits for companies, so you just need to be aware that there is no loyalty within the context of the free market system, and you can essentially be let go for any number of reasons.  Even government agencies are working to limit labor costs. You will need to view everything as temporary and be ready to adapt or adjust if you see change coming.