7 Christian Financial Planning Principles for Good and Bad Times

The global Covid-19 epidemic has decelerated mighty China’s economic growth. As China is the single biggest contributor to aggregate planetary GDP it isn’t surprising worldwide growth is slowing.

Against this backdrop, Malaysia has its own woes to contend with that stem from decades of substandard government policies that sacrificed the economic future of generations of Malaysians at the altar of communal politics. For example, I consider it a cultural loss of monumental proportions that with the onset of the New Economic Policy (NEP) in the early 1970s, English literature was banished from our classrooms.

Way back in 1981 I was 17 years old when I sat for my SPM (Sijil Pelajaran Malaysia) exams. One of my 10 subjects was English Literature because my late father insisted I take it.

I still remember the look of profound frustration on the face of my headmaster Mr Chan Ying Tat, Malacca High School’s principal. He seemed irritated when I sheepishly handed him a letter typed on the letterhead of my father’s legal practice.

My father was, back then, known as ‘Lawyer Devadason’ throughout Malacca. His politely worded – yet firm – ‘request’ to my HM worked.

However, I had to study the subject on my own. There was no teacher I could turn to as this abandoned subject had not been taught in my school in seven years!

Nonetheless, I found my lonely journey through the works of William Shakespeare, Harper Lee and several Irish poets whose names I no longer remember, enriching. The A1 grade I secured was icing on the cake.

Even today I am shamelessly pleased and proud of my results in an examination I took more than 38 years ago. No one else remembers that minor accomplishment, but it has stayed with me all this time.

Today, long decades after English literature was consigned to the rubbish heap of Malaysian scholastic history through the short-sighted, asinine, ultimately racist policies of low calibre politicians who dumbed down Malaysia’s public education system through decades of mismanagement, few Malaysian adults in their 20s, 30s and 40s will know, for instance, that Charles Dickens’ A Tale of Two Cities begins with these riveting words:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…”

The soaring language Dickens used there still makes me sit up in awe and thank both my departed parents for imbuing me with an abiding passion for reading… in English.

Furthermore, as far as my day-to-day work now as a licensed financial planner in Malaysia goes, there is a remarkable parallel between the era Dickens wrote of – the terrifying, bloody French Revolution of the late 18^th century – and the world we inhabit at the start of the third decade of the 21^st century.

The stirring opening words of England’s greatest novelist are a poignant reminder of how people in different circumstances face opportunities and challenges.

One advantage of surviving strenuous economic times such as we face today is that it helps those with the right attitude grow tougher by addressing weaknesses in our financial armour. The best possible result can be greater resilience in the face of future crises, which will undoubtedly barrel toward us in speedy succession in the decades to come.

Through all of today’s and tomorrow’s challenges, Christians have Jesus’ comforting words to cling to:

 He will always be with us, ‘even unto the uttermost parts of the world’.

Furthermore, biblical counsel also urges us to seek wisdom. So, the purpose of the rest of this column is to leave you with seven principles you can harness over the remainder of your life.

Let me start at the top of God’s hierarchy of financial principles: It is wise for us to honour God by paying our tithes.

If you already tithe, good for you! I therefore urge you to read or reread Malachi chapter 3 in its entirety, and grasp God’s promise to bless you.

But if you don’t tithe, I suggest you read the same portion of Scripture and permit God to guide you.

Principle 1: Pay your tithe.

 Once the first tenth of what we earn is given back to God in obedience, we’re left to our own devices as to what to do with the remaining 90%:

Saving and investing would be intelligent. Paying the appropriate amount in taxes would be honest. Living well below our means would be wise.

Different people in different circumstances read Asian Beacon. Some face financial difficulties, others are wealthy, while most are regular people trying to get by as best we can.

Rich or poor we all will benefit from a spending plan also known as a budget. Those who succeed financially commit to a written budget; those who don’t, well, don’t!

Principle 2: Prepare, tweak and use a written budget.

So, let me assume a typical adult reader has RM100,000 in liquid assets and is wondering what to do with it in light of the current crisis. Even if you have more money or less money at hand, the next five principles will be clear enough to apply to your circumstances.

From a financial planning perspective, it’s imperative to structure your affairs so you spend less than you earn. Doing so generates a cash flow surplus each month, which, big or small, may then be wisely channelled toward personal initiatives such as accelerated debt reduction, emergency buffer fund (EBF) creation and specific short-, medium- and long-term financial goals.

Principle 3: Spend less than you earn.

We’ll name our hypothetical reader Adam. Remember Adam has RM100,000 in cash or near-cash equivalents. Right now, he’s wondering WHAT he should do to structure his finances to deal with the economic slowdown and market volatility our battered world is facing now.

Note: All genuine principles are unchanging. Therefore, they are applicable in bad times and good ones. Sound financial principles remain relevant across a range of economic conditions.  

Varying circumstances include variable interest rates. They have been high in the past and are now very low.

Frankly, one advantage of the current low interest rate environment is our ability to possibly restructure existing loans. This situation should be tactically exploited not as a means for borrowing more money but rather to accelerate the retirement of existing loans. (To access more of my writing on personal debt eradication, visit the archive of my New Sunday Times weekly column at: https://www.nst.com.my/authors/rajen-devadason and read those columns published in the first two months of 2020.)

Principle 4: Get out of debt ASAP.

Simultaneously, a savings cushion should be built up and kept safe in bank savings accounts, fixed deposit accounts and, possibly, money market funds.

In my financial planning and retirement planning workshops I teach all participants who are conventional employees to build an Emergency Buffer Fund (EBF) of between 3 and 6 months’ normal expenses, while those who are self-employed or who own their own businesses should have a buffer of between 6 and 12 months’ expenses.

Principle 5: Get your EBF in place.

If we assume our subject Adam is employed by a stable company, earns RM6,000 a month and spends RM4,000, then perhaps a 4-month buffer equalling RM16,000 would be sufficient. He might set that aside in a few staggered FDs or in a money market unit trust fund. This would leave RM84,000.

Different news reports over the last 11 years suggest between 30% and 47% of Malaysians with credit cards pay their balances off in full each month. The majority who don’t do so end up paying exorbitant interest for the dubious ‘privilege’ of having a credit card. And even though domestic credit card companies have reduced their interest rates in recent years, the percentages charged are still higher than for any other type of loan except, of course, for those from parasitic loan sharks intent on binding the poor or naïve into lifelong servitude!

Principle 6: Pay off your credit card balances in full each month.

Let’s assume Adam is among the majority of Malaysian credit card holders who don’t always pay off their credit card statement balances. If his rollover balance is, say, RM14,000, the wisest thing to do would be to use a portion of the remaining RM84,000 to pay off the burdensome debt, which would leave Adam with RM70,000.

Once done, unnecessary credit card accounts should be terminated. Most people don’t need more than two credit cards, one for business expenses and another for personal ones. Probably even wiser people might opt to just use debit cards, which only allow us to spend what we have and not go into debt again through excessive card swiping activities.  

If there is a short-term goal to take the family on a modest local holiday next year, that amount, say RM5,000, could be funnelled into another dedicated FD account. That leaves Adam with RM65,000, which should be invested for the long-term to meet key life goals such as retirement funding and children’s tertiary education funding.

Principle 7: Allocate available funds and future excess cash flow toward key goals.

I trust these seven guiding principles will help you overcome the shortcomings you see in our political leaders and permit you to take charge of your own future.

Trust God and lean into His promises as you sequentially expand your capacity to deal with financial challenges through the very best of times and the absolute worst of times. Heeding all seven principles will help your family prosper regardless of the magnitude of economic gyrations our world will keep wobbling through until Jesus’ Return.