There are always a lot of uncertainties in the world. Some may be global political conflict or wars or terrorism. Others may include domestic conflict between political parties with very different views. The world is still recovering from a recession with a lot of interference from central banks keeping interest rates lower than they should remain.
How do you handle your finances in a situation like this? Are you digging a hole, gambling, or investing with your finances?
Digging a hole refers to constantly spending more money than you earn. Even if you are not accumulating debt, if you are not saving money for future emergencies or future planned expenses (e.g. car, house, retirement, etc.) you are actually digging a hole for yourself that gets harder and harder to climb out of as you get older. This principle applies whether world events are volatile or calm.
Gambling reflects those who, often driven by greed, make disproportionately large investments, or bets, on things like oil or a particular stock that they think will make them “rich” if it moves in a particular direction. This approach may be acceptable as a speculative diversification in part of an investment portfolio but the typical investor should never assume any particular investment is “fool proof” and go “all in” on it. Sometimes it will work out, but it may also result in disaster.
A wise investor instead diversifies across multiple investments. He or she is prepared for unexpected moves in value of the investments in short term and long term. The wise investor does not always make the highest return on any one investment, but instead makes a steady and predictable return on investment regardless of circumstances.
So each of us should periodically reflect… “Am I digging a hole? gambling? or investing?”
Remember that all you have belongs to God. Manage your money God’s way. Visit GrowGodsMoney.org .