7.09.2009

Foolish Man Built His House Upon the Sand

This morning I was doing my morning scripture study and read a passage of scripture that I was very familiar with, but never thought of it in the domain of finance before.

In the New Testament, Matthew chapter 7 versus 24-27, it reads:

Therefore whosoever heareth these sayings of mine, and doeth them, I will liken him unto a wise man, which built his house upon a rock:
And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell not: for it was founded upon a rock.
And every one that heareth these sayings of mine, and doeth them not, shall be likened unto a foolish man, which built his house upon the sand:
And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell: and great was the fall of it.

This is such a simple analogy, yet is packed with so much wisdom. As I look back at my financial path it is very obvious to see how fast the house falls when built upon a sandy foundation.

The current financial storm that we are in the middle of has made apparent the fact that it is not IF the storm will come, it is WHEN the storm will come.

Here is the rock of a foundation described above that is surely to withstand the financial storms of life:

1. Pay yourself the first 10% of all you earn
2. Build a 3-6 month emergency reserve
3. Pay off all debt tied to depreciating assets - this includes cars, credit cards, etc. The two acceptable forms of debt are real estate & businesses.
4. Write a will
5. Invest your surplus in wise investments with those wise and experienced in their handling
6. Allow time and the miracle of compounding interest to be aid you

Tomorrow I will explain the process of moving from the sand to the rock. There is a formula that if followed will guarantee a smooth transition.

As the great Warren Buffett said, "You never know who is swimming naked until the tied goes out."