Parable of the Talents
The parable of the talents, as told in the Bible, (Matthew 25:14-30), offers several practical pieces of advice for managing financial resources.
Be prepared: The master in the parable was leaving on a journey, and he entrusted his money to his servants before he left. In a similar way, it is important for us to be prepared for the future and to plan for unexpected events or changes in our circumstances. This might include setting aside money for emergencies, investing for the long term, or having a financial plan in place.
Use your resources wisely: The servants in the parable were given different amounts of money based on their abilities, and they were expected to use their resources wisely. This teaches us that it is important to be mindful of how we use our financial resources and to make the most of what we have been given. This might include being frugal in our spending, looking for opportunities to invest or grow our resources, and avoiding wasteful or unnecessary expenses.
Take risks: The servant who received five talents was praised by the master for using his resources to take risks and earn a profit. While it is important to be careful with our money, taking calculated risks can be a way to grow our resources and increase our wealth. This might include investing in stocks or other financial instruments, starting a business, or pursuing opportunities for education or career advancement.
Be accountable: The servants in the parable were expected to give an account of how they had used the money entrusted to them. This teaches us the importance of being accountable for our financial decisions and being transparent about how we are using our resources. This might include keeping accurate records, being open to feedback or advice from others, and seeking out opportunities to learn and improve our financial skills.
Serve others: The servant who received one talent was punished by the master for burying his talent and not using it to serve others or earn a profit. This teaches us the importance of using our resources to serve others and make a positive impact in the world.
Other good financial lessons in the BibleProverbs 22:7 says, "The rich rule over the poor, and the borrower is slave to the lender." This verse teaches us that it is important to be careful with debt and avoid becoming beholden to others.
Proverbs 13:11 says, "Wealth gained hastily will dwindle, but whoever gathers little by little will increase it." This verse encourages us to be patient and disciplined in our financial planning, rather than seeking quick fixes or shortcuts.
Matthew 6:24 says, "No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money." This verse reminds us that our priorities should be centered on God, rather than on material possessions or wealth.
1 Timothy 6:10 says, "For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs." This verse warns us against the dangers of letting our love of money consume us and distract us from our faith.
Luke 16:10-12 says, "One who is faithful in a very little is also faithful in much, and one who is dishonest in a very little is also dishonest in much. If then you have not been faithful in the unrighteous wealth, who will entrust to you the true riches? And if you have not been faithful in that which is another's, who will give you that which is your own?" This passage teaches us the importance of being trustworthy and responsible with the resources that we have been given, whether they are small or large.
Financial Lessons from my Life:
Be frugal and save: The first step to financial freedom is spending wisely and well within your means. This means as you begin your journey you need to be spending about 20-30% less than you are making. This includes housing costs, food costs, and what I call “fun money” which would be eating out, buying clothes, streaming subscriptions, and anything else that isn’t strictly necessary. Your goal is to build up 3-6 months of expenses into a savings account that you do not touch unless there is an emergency. This is your emergency fund. Note: This step comes before paying off debt.
Debt Snowballing: Paying off debts is key, there are a few different methods but the most effective one I have found is paying off small debts first. This means you make your minimum payment on all debts you have except for your smallest debt. Put any extra money in your budget that isn’t allocated towards needs or building an emergency fund to the smallest debt you have. Once this debt is paid off add what you would have been paying to the smallest debt to your new smallest debt.
Example: Your credit card debt is $100, your car debt is $3000, and your student loan debt is $10,000. Your minimum payment on each is $20, $100, and $300 respectively and you have an extra $20 dollars in your monthly budget. First you will add that extra $20 to your credit card payment, making your monthly payment $40 this will rapidly work on removing the principal balance from your credit card debt. Once this is paid off take that $40 that you would have been spending on paying your credit card bill and add it to your car payment. This makes the payment for your car go from $100 to $140. This will help pay off the car quicker. Continue this until all your debts are paid off (note don’t do this to a mortgage just for smaller debts). Once you have eliminated all your debts not only will you be free from the chains of interest but you will also have built up a sizeable addition (by eliminating payments and snowballing) to your monthly budget. In the example above you will have freed up $440 monthly once all debts are paid off. Use this found money to build your savings, invest in a retirement account, upgrade your quality of life, or to save up for a large purchase like a house.Home purchase: Many young people today (I am 28 by the way) believe it is impossible or impractical to buy a home. I am telling you that it isn’t and not only will it be the greatest financial decision you have ever made but it will build your self-esteem, teach you valuable lessons about ownership, and give you a place you can call your own but it will free you from the man aka the landlord. Here is what you need to do to buy a home.
- Sacrifice: You will need to sacrifice for a while to buy a home, this could mean getting more roommates to reduce your monthly rent payment, moving to a cheaper place to live, living with your parents, going out less if you are able to not spend money or never if you have trouble not spending money. The goal here is to increase your monthly income by spending less or making more so that you can begin saving for a down payment. For your first home, you will need to put 3.5% of the total home cost down, you will also need a work history of 2 years, a good credit score, and a good debt-to-income ratio. Remember this is a long-term goal that is meant to be an investment in your future. Treat your future self as if it is a real person that you love. Real estate always has an upward trajectory in price appreciation over the long term. This means that once you own it in, the long term, it will make you money. Builders are unable to keep up with the demand, this means that prices go up because demand is high and supply is low. My first home gained a value of ~$1000 per week that I lived in it and after 2 years I sold it for $200,000 more than I bought it for. If you can find a better ROI than that, especially when you don’t have to do anything, let me know.
- Your real estate team is key to finding and buying a home. Make sure you find a realtor with a high closing rate, mortgage broker with a quick and available team, and that both have good reputations. My real estate agent and broker helped me beat out higher offers from other people when I bought my first home. The selling agent told their clients that my team could and would close the deal in the shortest time frame. This information edged me above offers that were $10,000-$20,000 higher than mine because the sellers needed to sell quickly and efficiently.
- If you can save some extra money that doesn't need to be put into your down payment, your lender will like to see this in your account and it will help you with any small repairs, furniture, or other goods/services you may need when you first move into a house.Find Successful Friends: I have built a network of people around me whom I trust to get advice from, even if that advice is hard. I am able to go to them when I am presented with an opportunity and ask for their advice. My boss at the time showed me how I could buy a home by saving while I lived with my parents, one of my best friends is a great sounding board for investing in the stock market as he has years of professional experience in it, my mortgage broker and real estate agent keep me up to date on the local market so that I can make the most of my investment in my home. Having people who are more well off than you is a great way to learn and follow their strategies to improve your own financial freedom. These people will bring you up to their level because they want to see you succeed. Be willing to help them when they ask, a selfless favor always returns in kind.
Set goals: Goals are key to accomplishment and success. Once you have built a safety net, freed yourself from debt, and built a network of trusted friends, you must create goals. Goals can be big like “I want to be financially free and able to unrestrained to a 9-5 job” or they can be small “I want to buy a new couch so that I am comfortable when watching movies with the family.” These goals give you direction with your money, they remind you not to spend frivolously, give you a savings target that you will know when you reach, and motivate you to continue to be financially sound. My first financial goal was to buy a home, once I accomplished that my goal was to upgrade my home to something I could build a family in, now that that is done my goal is to buy a truck, pay off my student loans, and become more mobile in my work. These goals check my bad habit of wanting to buy a coffee from Starbucks or a sandwich from chic-fil-a. They stop me from buying video games and they are so rewarding to accomplish. At the present moment, I will have my student loans paid off by the end of 2023. That is the last debt I have outside of my house, one I thought would take way longer than expected. I am so close and it will add $300 to my monthly budget which will allow me to save up for a new Truck. Small but diligent steps, living within my means, saving, removing debt, building a network, and setting goals have in six years taken me from a broke college graduate to a 2-time homeowner, who owns his own business and has 6-9 months of savings ready for any emergency that comes my way. I am also about to pay off my student loans, down from owing $40,000 to only owing about $10,000. I haven’t ever had a huge salary I have only ever earned somewhere between $20,000 to $50,000 a year but because I was willing to sacrifice for a while I am now way ahead of even high-salary earners from my graduating class.
I hope this is encouraging to you, you can attain financial freedom. Use the tips and wisdom and advice above and share anything that you have felt useful in the comments below. I would love to hear your success stories!