Financial Freedom Series: The 10-20-70 Principle (Part 5)

Welcome back to our Financial Freedom Series, where we’re looking into God’s Blueprint for Building Wealth and Managing Your Money Well!

We dive into biblical principles and cutting-edge money management wisdom to help you…

• Honor God with your money
• Build wealth
• Shrink your debt
• And build toward financial freedom

“But remember the LORD your God, for it is he who gives you the ability to produce  wealth.” (Deuteronomy 8:18) 

“Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.” (Proverbs 21:5) 

“I will guide you along the best pathway for your life. I will advise you and watch over you.” (Psalm 32:8) 

“The wise man saves for the future, but the foolish man spends whatever he gets.”  (Proverbs 21:20) 

“The rich rules over the poor, and the borrower is the slave of the lender.” (Proverbs  22:7) 

“But blessed are those who trust in the Lord and have made the Lord their hope and confidence. They are like trees planted along a riverbank, with roots that reach deep into the water. Such trees are not bothered by the heat or worried by long months of drought. Their leaves stay green, and they never stop producing fruit.” (Jeremiah 17:7-8) 

“Hope deferred makes the heart sick, but a dream fulfilled is a tree of life.” (Proverbs 13:12) 

It is your time to dare to dream. 
It is time to reset your goals. 
It is time to rekindle your passion. 
It is time to aim high. 
It is time to attempt great things with God. 
It is time to live on purpose. 
It is time to reignite your vision. 
It is time to be fruitful. 
It is time to get positioned for God to 
catapult you into your destiny. 

Your best days are ahead of you.

Today, I want to encourage you to MANAGE YOUR MONEY LIKE A PRO. 

To manage your money like a pro, you need to…

• Wipe out your debt
• Dare to dream and have goals and a vision for the future
• Get your priorities in order
• Create a financial plan that you can stick to in order to build toward financial freedom

If you want to manage your money well, you need to know where your hard-earned money is going. A good starting point is to create a budget.

“Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.” (Proverbs 21:5)

The 10:20:70 Principle in a Nutshell…

Managing your money like a PRO consists of three simple steps…

We have encouraged you to put God first and give him your first 10%.

We have also encouraged you to save and invest 20% of your income to build a cash reserve and a wealth portfolio.

We have also suggested that you diversify your portfolio to reduce risk. 

We have encouraged you to get advice on how best to construct your wealth portfolio.

As mentioned over the past couple of weeks, it is vital to build up your short-term savings to ensure that you have funds available for when the storms of life hit.

Make sure you set funds aside in easy-to-access cash investments for emergencies and potential opportunities. (I suggest you build up at least three months of backup income to fund your contingency needs.)

But it’s also vital to start investing in growth investments that can generate real growth over the longer term. 

Today, I want to focus on your longer-term growth investments and show you how you can stunt your long-term growth if you invest your growth money too conservatively. (Remember that your portfolio needs to match your needs and objectives, so please get advice.)

Look at the difference between investing in the stock market compared to cash over the longer term…

If you invested R100,000 in a cash savings deposit account, you would have grown your money from R100,000 to around R504,419 over the last 20 years.

Over the same period, your R100,000 would have had to grow to R462,483 to keep up with inflation. 

So, we can conclude that a cash investment would have given you a return just ahead of inflation over the last 20 years.

However, if you had invested your R100,000 in the stock market, you would have received an average return of R981,453 over the same period. 

If you had invested at the perfect time, just before the market went up, your R100,000 would have grown to R1,132,030.  

And if you had invested at the worst time, just before a mighty crash, you still would have grown your R100,000 to R836,544.

What is the moral of the story? 

Over the long term, even with its ups and downs, the stock market would have given you a far superior return than leaving your money in cash, even with the volatility.

As a worst-case scenario, your R100,000 over 20 years would have grown to somewhere between R836,544 and R1,132,030, compared to cash at R504,219 or inflation at 462,483.

Now compare a cautious investment to a higher risk equity investment…

The difference in growth over the longer term shows that an investment of R1,000,000 would have grown to R5,400,000 in a cautious portfolio, compared to R11,900,000 in a higher-risk growth portfolio over the longer term.

Let’s look at one more example.

If you had R6,000 in 1980, you could have purchased a brand new Ford Cortina.  

If, instead of buying the Ford Cortina in 1980, you saved R6,000 in a bank deposit account, your money would have grown to around R127,000 by now. (Today, your R127,000 would be enough to buy a second-hand car.) 

However, if you had chosen to invest the R6,000 in a balanced or equity unit trust fund, your money would have grown to around R2,300,000. (This would allow you to buy a middle-class family home.) 

The difference between investing your R6,000 in a bank account and a growth investment is the difference between buying a second-hand Kia Picanto or a middle-class family home in the suburbs.

Building up short-term savings is essential, but building up a wealth portfolio is also vital. 

It is vital to get your financial priorities in the correct order. 

Put God first. Save before you spend and live on the rest.

In the coming weeks, we will examine various investment strategies and principles aligned with the Word of God that you can apply to help you grow your money using God’s wisdom. 

By sticking to a 10-20-70 PRINCIPLE…

• You will be honoring God
• You will build up a cash reserve
• Over time, you will build a Wealth Portfolio to help you attain financial freedom

I encourage you to MANAGE YOUR MONEY LIKE A PRO.