Steven R. Covey taught that we should focus on living a principle centered life. As we align our actions and purpose with correct principles, we set a firm foundation for success and happiness.
So what principles will help guide you through the financial jungle that affects our daily lives? Although the optimal number of principles that will best help you may vary, you should at least include two longstanding tenets of both religion and law.
The first principle is Stewardship. Whether through good fortune or the sweat of your own brow, you have a certain amount of financial assets. Your assets may include automobiles, money in the bank, investment accounts, real estate, or insurance policies, to name a few. No matter the amount of financial assets or the source (assuming legal means of course), you have the obligation to oversee your assets with responsibility. Considering your assets as the opportunity to act responsibly is acting as a good steward. The use of stewards is millennia old. Kings would place a steward over sections of their land and the corresponding subjects. Each steward held the responsibility to wisely use the resources over which he presided.
In today’s world, we are not assigned stewardships via a kingship, but by the very nature of having financial assets. Let me give you several examples.
Let’s say that I make $65,000 each year. At some point, I plan to retire and spend time with my wife vacationing. In order to fund our vacations, I need a certain amount of money to pay our bills and travel expenses. I therefore have the responsibility to save an adequate percentage, let’s say 20%, of my income each year in order to pay for my retirement. This may seem like good financial planning but it is also acting as a good steward. We must see ourselves as being responsible for preparing for future events and not needing to rely on someone else for support due to our poor decisions.
Now, let’s take this scenario a step further. My wife and I decide to have two children. As we raise our children, it will be tempting at many times to either indulge ourselves or indulge our children with material goods. If I am still making $65,000, then I have a finite amount of resources available for our indulgences. Using a credit card or loans to buy now that which I hope to pay for later is acting as a poor steward. If I cannot make my financial obligations, then I lack self-discipline – an important attribute of a good steward. This is not to imply that we can’t own goods. We simply have the responsibility to financially plan for purchases and not place a financial burden on ourselves or anyone else.
One last example. Throughout my family’s life, we notice that many people throughout the world are less fortunate than us. My seemingly average $65,000 suddenly doesn’t seem so average. In fact, it is within my power to sacrifice part of my lifestyle in order to increase the standard of living for another person. Therefore, we decide to allocate 10% of all our gross earnings to donate to charity or other praiseworthy endeavors. To use my assets to elevate others is to be a good steward.
In order to make this important paradigm shift, I have to fundamentally believe that the assets I have are not mine, but rather, have been loaned to me for a time and I have to use them wisely. This is why I always tell my wife, “I’m glad I don’t have billions of dollars. I don’t want to have to be responsible for appropriately handling all that money.” Most would probably disagree with me.
The second fundamental principle in building a secure financial house is Accountability. Under the premise that I am a steward over assets that I have been allowed to use for a time, I must answer to someone at some future moment. If you are a God fearing individual, then you may believe that all things are created by God and are therefore His. You will then have to answer before Him for how you handled the assets He loaned you during life. If you are not a God fearing individual, then you are a temporary being on this earth and share in the obligation to responsibly use its resources. Therefore, you will have to answer to society and your fellowman for how you handled the assets afforded you during your life. Did you prepare adequately for future financial events? Did you overextend yourself and require outside assistance? Were you generous with others and give back on a regular basis? How you answer those questions might give you some insight into what type of steward you are and how you would be judged today if held accountable for your decisions.
As I stated at the beginning, there are many principles that if practiced consistently will lead you to financial success. Among your governing principles should be the understanding that you are Steward over loaned goods and you will one day be held Accountable for the decisions that you make. Once you start making decisions around those two principles, you will find yourself seeing money as a privileged tool that enables success and freedom instead of a right that can be squandered.