Mission minded money is about keeping your money on the playing field. But as much as I write about risk and generosity there is still a reality of having to feed your face, pay your bills and eventually retire. But how do you know when you’ve saved enough?
I recently read “God and Money: How We Discovered True Riches at Harvard Business School” and while the authors take 256 pages to say what could be said in 150. I had a key takeaway that helped frame the answer to this question. If you’d like to skip the book you can get the gist of it by listening to this podcast from the Bible Project.
The author’s main point is to flip the script on the giving question. Instead of asking “How much should I give?”, they want you to ask “How much should I keep?”
This framework fits well within the mission minded money principles. Factoring in needs for sustenance, commitments towards your mission and God ordained life-style choices, what do we think God gave us the rest for?
We are blessed to bless, not to hoard.
When to Stop Saving
The authors use the concept of what they call ‘finish lines’ to help you gauge when you can stop saving. While their personal finish lines are laughably far from sacrificial, they are at least drawing some lines in the sand for when enough is enough.
Here’s two different ways you can think about finish lines.
The Present Value Finish Line
No matter what the goal, retirement savings, kid’s college or something else, there’s a point where the amount in an investment account or asset will likely grow to the necessary future amount. Adding more isn’t on mission, it’s just…more.
You can calculate this present value using a little FInance 101.
Say, you’re considering how much you should keep for retirement savings. Look at your mission minded money worksheet and consider the ‘daily bread’ portion. Will your needs still be approximately the same at retirement? Slightly higher? Lower? Think in today’s dollars.
Once you’ve decided on your annual need for sustenance subtract any known income sources in retirement. This could be rental income, a pension or social security. Divide the final number by 4%.
Annual Daily Bread Income Need in Retirement / .04
The 4% rule is a rule of thumb to determine what your net worth should be in order to generate sufficient income for the life of your retirement.
Once your net worth is equal to that number there is no need to save additionally for retirement.
We’re not quite done yet because we hope your net worth grows over time. You can run a time value of money calculator to determine if your current net worth would be projected to grow to your finish line upon retirement.
I like to think in today’s dollars, therefore, I use a conservative estimate of 5-7% (depending on the makeup of the net worth). The S&P 500 Index has averaged approximately 10% growth per year. Subtract 3% out for inflation and you are in the 7% range.
If your net worth is made up primarily of real estate or conservative positions you might use a rate more like 5% or even lower.
For instance, say you determine that you’ll need approximately $3,000 monthly for living expenses but can reasonably expect $2,000 in social security. You’ll need another $1,000/month for sustenance in retirement.
Take $12,000 (your annual additional income need) and divide by 4%= $300,00. That’s $300,00 in today’s dollars you’ll need to take care of your necessities in retirement.
If you are going to retire in 20 years, a net worth of $110,000 or more will grow to $300,000 at a 5% rate by that time (remember we’re adjusting for inflation).
Again, there are a lot of factors here, and it is highly dependent on the makeup of your net worth, but this is how you do the math. You should seek the advice of a financial advisor for your specific situation. Keep in mind they normally talk in future dollars so their figures will be higher.
You can use this process for any savings goal. Once you’ve saved enough. Stop.
The Budget Finish Line
Once you reach a point where you are dedicating sufficient cash flow to your savings goal, you’ve reached your budget finish line. Again a time value of money calculator is helpful here.
For instance, if I need $40,000 to pay for my children’s education in 12 years, there is no reason to save more than $203 per month assuming an inflation adjusted 5% return on my account. Perhaps we back that rate up or down, but the math stays the same.
Dedicating more of your monthly income to that goal takes money off the mission. Trying to get to that number faster robs ministries of your donations or makes you unable to consider a job change with an income decrease, all for a pile of money you didn’t need in the first place.
Budget finish lines allow you to dedicate a portion of your income towards real life needs, without going overboard. These budget items go in your ‘mission money’ category because being able to feed yourself beyond your working years and providing for your family into the future is part of your life’s mission.
Once you’ve reached these finish lines, however, additional allocation isn’t about responsibility, it’s about greed. It’s about your comfort or preference, not the mission. Of course, if things pan out better than expected, that’s great! But “more” is not the call.
As Christians, we need to learn to prioritize the good works God prepared in advance for us, over our comfort.
How Much Do You REALLY Need to Keep?
Where I take exception to “God and Money” is their finish lines are not sacrificial in the least. Their attitudes seem to be: “All I need is enough to make me comfortable.”
I do think God gave us money for sustenance and not just sustenance today but sustenance for our eventual work stoppage, but I don’t see creature comforts being championed in the words of Jesus.
Furthermore, while I like the idea of finish lines, I think the idea that I should start being sacrificial after I have my retirement and kid’s education on lock is dead wrong.
We need to prioritize our giving before we even tackle some of the standard saving goals.
We need to give when it hurts, or we’ll never give when it doesn’t.
Although they didn’t go as far as I’d like them to, at least someone is trying to bring some balance to the millionaire obsessed money education being championed in churches today (I’m looking at you Dave Ramsey).
The saddest financial outcome I can imagine is someone dying a millionaire while missing their calling, yet that seems to be what the church refers to as stewardship.
That needs to change.
Finish lines give us a way to know when we need to stop saving and get on mission.
Thanks to reader Brad P. for inspiration for this post.
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