Discover the single most important personal finance principle. Perhaps you think it might be to live below your means. Although that is certainly important to a healthy personal financial life, it's not the most important. It's not to get out of debt either. In fact, I have trainings on why debt can be good! It's also not to pay yourself first or even to own your own business, although those two are both quite important too. Nor is it to invest in real estate even though you may have thought that I would said that. No, the most important personal finance principle is...
What Do You Think is the Most Important Personal Finance Principle?
- Is it live below your means? That’s great advice and simple, a lot of people don't follow it. In fact, I have a video called Personal Finance Wisdom You'll Hear Nowhere Else. In it I talk about the power of being frugal when it comes to personal expenses and post-tax expenses, then being very aggressive when it comes to pre-tax or business expenses. I'm a huge fan of living below your means, but that's not the most important principle.
- Perhaps it is to get out of debt? The G-O-O-D, the good principle? It's not that either. In fact, I think you need to be careful when it comes to paying off debt. I have a video which proves why you shouldn't pay off student loans early. I'm also a proponent of never owning investment rental real estate free and clear, but instead always have long term fixed rate, low interest debt against that real estate. I have a video on that as well because it makes such a big impact on cash on cash returns.
- Maybe it’s to pay yourself first. It's a timeless principle, the idea that before you start spending the money that you earn, you set some aside for savings. This is also a great principle, but it's not the most important.
- Is it to own your own business? Obviously when you own your own business, you're in control of your time, and you can be in control of how much money you earn. I put together a video directed toward graduates on how they can become wealthy more efficiently than through the traditional means of getting a job, saving a little bit of money on the side, and then slowly building up. I've talked about how powerful it is to own your own business and to run that successfully, and then take those profits and invest them. Is this the most important principle? It's an important one, but not the most important one.
- How about to invest in real estate? You're thinking, "That’s what you've been driving at Phil, because you're a real estate investing guru, you want everybody to invest in real estate." Well, interestingly, this is also not the most important personal finance principle. You know me, I wrote the book on how to be a real estate investor, and I do think that real estate is the ideal investment. You get the income from it if you own it long term and you can get depreciation, so that makes that income more tax advantage. If you buy it correctly, you get instant equity. You also get the potential for appreciation, and you can use leverage to acquire it. I think it's the ideal investment, but it's still not the most important principle. What is the most important finance principle?
Giving is the Most Important Finance Principle
Giving is Returning
When I was back in my homeless days I was attending a church. One day when I went, and the message was about tithing, which I knew nothing about. I had been to church as a kid, and I saw the plate go across the aisle, but I didn't really know what it was all about. The pastor was describing how in Malakai the Lord was telling the Israelites that they had robbed him in tithes and offerings.
The scripture says, "Test me in this and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it. I will prevent pests from devouring your crops, and the vines in your fields will not drop their fruit before it is ripe".
Tithes and Offerings
What the pastor was preaching was that we should test the Lord in this idea of tithes and offerings. This is the only place in the Bible where the Lord says to test it. Challenging us he said, "Give it a test." I had about $200 in my pocket because I had refereed pee-wee football the day before. That was all my money for the week, so I gave $20, which is 10% of what I had (biblical tithing is to give a 10th).
You may be thinking that you don’t have 10% to give. I know, I didn't have 10% then either. In fact, that was the difference between me eating beans or being able to go to Subway one day that week. That said, what did I have to lose? I was already broke, looking for ideas and willing to test some things. I gave it a shot and here's what happened.
Test the Lord
A few days later I was going to check my mail at a PO box. I received this envelope and opening it up I discover a cheque for $200. To my surprise the return address was of a property that I had rented along with three other college buddies about a year prior. The money was my deposit being returned to me when I rented that place. Now I must tell you, this was back in my party and heathen days and we left that place a wreck. I was the last one to leave, and I remember walking out seeing the mattresses and the torn carpet thinking, "Oh my gosh, we're not getting our deposit back. We might get a big fat bill instead."
Seeing my deposit returned, especially since it was a year later, was a complete miracle. Later I learned what had happened. The property belonged to Vanderbilt University and they demoed it after we moved out to build a new building. I guess by law they had to give us our deposit back because of the demoing. I don't know why the accounting took so long. Then I tried to figure out how they found me, because I had a PO box, and it turns out that it was through mail forwarding. The timing was miraculous, but there were some logical explanations. The point is, I put $20 into the offering plate when the pastor told the entire congregation to test him, and a couple of days later and I had $200. I was sold.
Giving Impacts Everything You Do
This is not a cosmic vending machine and there's a lot I could cover on this topic. However, I want you to look at giving as the single most important principle in personal finance because it impacts everything you'll ever do. It's the wind at your back. It is the thing that ultimately overcomes those circumstances that are truly outside of your control. Some of you know what I'm talking about. You're doing all these things, but there are circumstances in your life that you have no control over that have pushed you back down.
For about the last eight years I have been giving the offering message at my church periodically, giving me pretty good handle on this subject at this point. I've talked to thousands of people, both who have participated in giving consistently and those who haven't, and the bottom line is this. It's the most important principle.
Giving is Stewardship
I refer to giving as returning because it's all the Creator's, everything. Any power you've been given, has been given to you by the Creator. The power to get wealth and the power to do anything. It is the Creator that owns everything, and we are stewards of it. When you have that perspective, it really shapes the way you look at giving. I'm not giving what is mine, I'm returning what is His.
Giving Creates a Healthy Relationship with Money
Or as R.G Letourneau, one of my favorite Christian entrepreneurs says, "It's not how much of my money I give to God, it's how much of God's money I keep for myself." If we look at it in terms of returning, that also sets the context for a healthy relationship with money. It eliminates greed because we're not looking at it in terms of what’s mine, but rather with the mindset of being productive with the time and talents the Lord has given us. We can also ask ourselves, “What can I do to impact society?"
Giving Impacts the World
When you are returning to the Creator effectively, what you're also doing is impacting lives. I often hear people wanting to know what their purpose in life is. I can assure you of this, your purpose in life is not completely selfish. Part of your purpose in life is to impact and help the greater good. It really is.
Giving Provides Purpose
When you're searching and praying for your purpose, remember that it's probably more likely that your purpose is going to impact others versus just impacting you. If you're returning, it's also making a huge impact on the world. It also means that you don't look at the idea of personal finance from the perspective of reaching some level, such as early retirement and then stopping. Instead you look at it from the perspective of, "The more productive I am, the more I can help others." You don't get caught in the trap of early retirement.
The More Productive I Am, the More I Can Impact Others
A lot of you wonder why I still work. I don't need to, and I haven't needed to in a very long time. However, one of the reasons I continue is because I'm a part of this returning program. Not at the 10% level, a lot higher than that. If you've ever watched the movie Office Space; I don't wear the minimum amount of flair, I try to go to the max.
The more productive I continue to be, the more I can impact other people's lives. I have no interest in retirement. You will not see me talking about retirement on my videos. Instead I'll tell you about being more productive. This also helps create a healthy relationship with money.
Giving Leads to Blessing
Earlier I was mentioning this idea of a cosmic vending machine. That’s not how returning to the Creator works. The Lord loves a cheerful giver. This is about you bringing back to Him what is rightfully His and then receiving His blessing, but it doesn't always mean money. I’m not talking about prosperity gospel here. There's a lot of other ways to be blessed besides money. Here’s the thing, He has it all. You see, God has a bigger bucket, so the more you shovel at him, the more he's going to shovel back at you. There's no way you can catch up.
I think it's so important that you recognize this is not about putting something in and expecting something back. You're putting this in because you are already more than blessed. Chances are you are in the top echelon of anybody in the world. You're already crazy blessed, right? This is about returning to the Creator and that gives Him the opportunity to bless you even more in every aspect of your life.
Where Should I Give?
I love that question. In fact, it was John D. Rockefeller, one of the wealthiest people in history, whose biggest challenge was where to give the money. He could earn it more efficiently than he could find the right organizations to plug those resources into. These days, we have a lot of great organizations. I believe money is like manure. If you let it pile up, it'll stink, but if you spread it around, it will fertilize. When it comes to the subject of returning, I recommend you don't return all to one place. If you are a Christian and part of a church, you are called to tithe 10% to your local church. That is a standard, and then everything above that is where you can get flexible.
Give Locally and Globally
One of my favorite organizations is Compassion International for sponsoring a child. I sponsor a lot of children across the world. It's a remarkable organization. Third party, independent studies have proven their effectiveness, so I’m a big fan of Compassion. I also support Samaritan's Purse, which is Franklin Graham's organization. They are typically first responders to disasters providing aid, they are a remarkable organization. I do quite a bit in contributing to missionary work worldwide, as well as give to my local community's missionary work. I was one of the founders of Orlando Serve Foundation, which is a homeless organization that does extraordinary things for the homeless community in the central Florida area.
Orlando Serve Foundation
Orlando Serve Foundation hosts events in local community centers helping the homeless get their driver's license back so they can get a job. We help them overcome certain legal matters and things that just get them stuck, and there are no other organizations doing that. At these events we bring in judges and technology so they can literally hold court. By doing this we solve some of the problems that the homeless have that are holding them down,, for decades in some cases. Recently I heard this story:
There was this one gentleman. He was formally a successful business owner, but some legal problem had literally wrecked his business and his life. His wife and two children were living in a motel. The week of the event he had become so angry that he was at the point where he was going to kill the people that had caused him all those legal problems. He wasn't going to kill what he called innocent people, he was going to kill the people that ruined his life.
This man went to the He Got Up event with Orlando Serve Foundation, and got plugged in. After two years of him not being able to do it himself, he got some of his legal matters headed on the right track. He gave his heart to Jesus Christ, and his entire world changed that day. It wasn't just his world that changed that day, but also the people that he planned on killing that he didn't. The point is, when it comes to this concept of returning, it's about impacting other people's lives and spreading the blessing around.
You Are Called to Give
The great news is there's an enormous amount of amazing organizations that need more financial resources. In some respects, that’s what you've been called to do. You've been called to produce great economic results, so you then can spread them around wisely and fertilize those amazing organizations that are impacting thousands, if not millions of lives.
I also see this as an amazing opportunity for our country, which is so divided politically right now. If everyone was willing to be a part of this returning program, think of the amount of money that could go into these private organizations that could then help. That way we aren't always asking the government to do this or do that. We have private organizations to do it. I don't want to get too political, but I see a greater dream here.
I hope this helps you better understand the passion I have for this. Some of you might find this controversial, but I'm telling you, you will not find someone who's been on this program for any length of time to say, "Boy, my life's miserable." You won't find it. Test the Lord in this, he tells you to do it. Test him in this and see what happens. You'll see, it is remarkable the way he can bless your life.