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The Richter scale measures the intensity of an earthquake on a logarithmic scale, where each whole number increase represents a tenfold increase in measured amplitude and roughly 31.6 times more energy release. For example, a 5.0 earthquake is significantly more powerful than a 4.0, and the damage caused escalates exponentially.

Relating the Richter Scale to Money:

When we think about money in a similar way, we can draw some parallels:

  1. Magnitude and Impact: Like a high-magnitude earthquake causes greater damage, increased wealth or lack of using it wisely can have a much larger impact.
  2. There are other arenas that we could look at, but our goal in this episode is to look at some and common financial mistakes that people make and give them our assessment of where they would land on the Richter scale…so you would know by the end of listening today what the potential outcome would be if you are living with one or more of these financial mistakes.

1 = A “penny mistake”

9 = Devastatingly bad.

 

Stop Making These Financial Mistakes

  • Keeping unneeded subscriptions – 2-4 (depending on how many and what the total cost is)
    • If you are paying monthly for subscriptions you don’t use, you are literally just wasting money. Gym memberships, Netflix, cable subscriptions, app subscriptions are you using these things? Do a subscription audit and cut what’s not needed!
    • Proverbs 27:23 (NIV84) – Be sure you know the condition of your flocks, give careful attention to your herds;

 

  • Failing to have an emergency fund – 5
    • This is a bad choice!  Why?  Most likely it will result in debt. But it’s a debt that you can dig yourself out of ONLY if it’s a rare occurrence.  (and you know your rainy day savings gets depleted every other Tuesday!) You should build an emergency fund – minimum of 1K, and upward to 3 months of necessary income. 
    • The results of not having an emergency fund are almost always higher stress and no way to handle unexpected bills other than debt, which could move you from a low of a “4” all the way to a high of a “7” …or even higher on the financial mistake Richter scale. 
    • Proverbs 22:3 (NIV84) – A prudent man sees danger and takes refuge, but the simple keep going and suffer for it.

 

  • Not budgeting your income – 3-9
    • Severity depends on how closely you are living paycheck to paycheck. How close your income is to your expenses…”margin.” If you have no margin, living without a budget is extremely dangerous. If you have more margin, there are still dangers, but the effects are less severe.
    • A budget is a roadmap to get you where you want to go financially! If we go through life never thinking about where we want to end up financially, then we’re never going to make progress. A budget frees us to pursue what is most important to us. 
    • The plans of the diligent lead to profit as surely as haste leads to poverty.— Proverbs 21:5

 

  • Impulse spending – 1-6
    • The risk factor, again, depends on margin! What is the extent of this impulse spending? Are you going into debt for your impulse spending? Does it prevent you from paying down debt? Does it prevent you from making your current money last the entire month? Does it prevent you from reaching your saving and investing goals? 
    • This on the Richter scale could be minor, but for many, it could become a MAJOR impact on daily living!  
    • Proverbs 13:11 (NIV84) – Dishonest money dwindles away, but he who gathers money little by little makes it grow.

 

  • Overextending on major purchases – 1-6
    • Overextending on a purchase is spending more than you can afford to spend without compromising other financial priorities. This is really tied to impulse spending.  Usually, less impulsive, but there’s still a social drive and impulse to make the bigger purchase.  This could be minor, like overextending to buy the bigger steak at the restaurant. But, it could also be a major mistake if you buy a house that’s bigger and more expensive than you actually need. 
    • Proverbs 21:20 (NIV84) In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.

 

  • Living Beyond their means – 7
    • The effects are not felt all at once, but if you continue to live beyond your means year after year, the compounding effects of growing debt loads will devastate your family and eventually lead to bankruptcy. 
    • For many today, both Christian and non-Christian, living this way could be marriage-ending if it’s not handled properly. The effects on their children and their perspective on wealth and possessions could be radical
    • Galatians 6:7 (NIV84) – Do not be deceived: God cannot be mocked. A man reaps what he sows.

 

  • Neglecting Retirement savings – 2-10 depending on age
    • Ongoing neglect of saving for retirement is like a dimmer switch in terms of its effect. Early on, it’s a problem. But the longer you delay, the brighter (or bigger) the problem gets and the more thorny the problem is to resolve. It could be anywhere from a 2 all the way up to a 10 depending on age, life circumstances and income. But we want to make clear that there’s a difference between ability and lack of ability to save. For example, if you have been living in a high income and high expense situation, and you’re not saving, you’re at the top of the foolishness scale. However, if you are a single mom who is working multiple jobs to feed and clothe your kids and can’t afford to retire… is it foolishness? No! You have bigger fish to fry. This point is simply complicated depending on your context and reality. In this case, your mistake could actually be saving for retirement when you need to be feeding your kids today. But with all, even a little today, or a lot tomorrow tucked way for the future can make a huge difference in one’s later years…
    • Proverbs 6:6–8 (NIV84) – Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer  and gathers its food at harvest.

 

  • Not investing – 5
    • There are cash people that only hold cash because they don’t know any better. (Risk: Inflation… Losing money safely)
    • There are people that invest all of their income back into their business and have no liquidity. (Risk: Liquidity risk.. You don’t have access to cash).
    • Investing into the broader markets provides liquidity and the potential of keeping pace with inflation, and it provides diversity. (Risk: There’s always risk in every kind of investing. It’s important to understand the risks and expenses before investing). We’re talking to ALL people here, not just a specific demographic or income range.  Wherever you are financially, today’s financial world makes it easy to invest some amount somewhere.  
    • Ecclesiastes 11:2 (NIV84) – Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.

 

  • Thinking debt is normal – 6
    • This is a poverty mindset that doesn’t understand that debt destroys your ability to build and grow wealth. Carrying credit card debt is a dangerous thing because you are living enslaved to the bank. Remember debt today is borrowing tomorrow’s income…which will make living tomorrow much more difficult!
    • Proverbs 22:7 (NIV84) – The rich rule over the poor, and the borrower is servant to the lender.

 

  • Not taking advantage of an employer match for retirement plan – 7
    • Employer match – Many employers will offer a match to your contributions into a retirement plan. This is free money! Imagine going 40 years not taking a match at a company that offered you 4% of your income annually (in free money) to your retirement plan. Over the years, that is big money, and can lead you to have less saved. Consider taking advantage of this blessing if your company offers it! 

 

  • Not having enough life insurance – 8
    • If you’re married, and/or someone is dependent on your income for their livelihood, and you don’t have enough cash or investments to replace the income, you NEED life insurance. The severity could be devastating for your family if you pass away without insurance. Your family could be left destitute. 
    • 1 Timothy 5:8 (NIV84) – If anyone does not provide for his relatives, and especially for his immediate family, he has denied the faith and is worse than an unbeliever.

 

  • Not seeking/taking professional advice – 8
    • You don’t know what you don’t know! Assuming that you know the answer to a particular situation or problem could be financially devastating if there are factors that you just don’t understand. There are people who get advice but choose not to take the advice. Obviously, it’s good to not take bad advice. But some many times we find that people simply don’t like the advice because it’s not what they were wanting to hear. Therefore, they don’t implement the advice and are left to suffer the consequences.
    • Proverbs 11:14 (ESV) – Where there is no guidance, a people falls, but in an abundance of counselors there is safety.
    • Proverbs 15:22 (NIV84) – Plans fail for lack of counsel, but with many advisers they succeed.

 

  • Not having an estate plan – 9+
    • Estate plan – Having Will and Power of Attorney Documents. Potentially a Trust if needed.
    • If you die without an estate plan, there are many questions about what will happen to your finances, family, and more. 
    • Instead of leaving that up to the government to decide, you can make those decisions in an estate plan. If you don’t have a will, your state has a plan for your money.
    • Numbers 36:1-12: Suggests that it’s responsible to ensure assets end up in the right place through a carefully written will.

 

  • Not giving – 10
    • Being stingy and not being generous has eternally significant impacts. We focus on making this short life the best we can make it and forget about the rest of eternity. It would be tragic to live the rest of eternity as a panhandler. 
    • Proverbs 11:24 (NIV84) – One man gives freely, yet gains even more; another withholds unduly, but comes to poverty.
    • Proverbs 28:22 (NIV84) – A stingy man is eager to get rich and is unaware that poverty awaits him.
    • Luke 6:38 (NIV84) – Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.

 

Stewardship Application

Luke 16:10–13 (NIV84)

“Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much. 11 So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? 12 And if you have not been trustworthy with someone else’s property, who will give you property of your own? 

“No servant can serve two masters. 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 both God and Money.”

This is our prayer for you, that you will be faithful with what you have been given you have an even greater impact as the Lord blesses you with an increase of stewardship responsibility.

 

 

Next Steps

 

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The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations.Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

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