In Case of Emergency

America used to be a nation of savers. I have been in the financial advisory business for over 13 years. Other advisors will verify what I am saying. There is a huge disparity in the savings habits of older- over 70 years old- and younger clients. Many of my older clients live in houses that are modest and have large amounts of cash reserves- over $100,000.

Younger clients tend to place little value in cash reserves and invest large amounts of resources in homes. I am not sharing anything revolutionary here. But I believe it is important to continually stress the importance of having a healthy emergency fund. Asset prices have risen dramatically in the last thirty years if you have been an owner of stocks, real estate and lately commodities. Having money saved for a rainy day has seemed like a stupid financial decision in light of these advances. But let us heed Proverbs 21:20, "A foolish man devours all that he has."

I have four reasons why it is important for you to build up your cash reserves.

1. Adversity will come. Whether it is a medical problem, an unexpected downturn in business, a family situation or some type of disaster, you will experience adversity. Job 5:7, "Man is born to trouble as surely as sparks fly upward."

2. Adversity creates opportunity as an investor. Successful investing often comes down to having cash reserves at times of maximum pessimism. Harvey Firestone for example built a fortune in large part because he was able to buy up real estate during the Great Depression.

3. Adversity creates opportunity as a giver. Since most people do not prepare for the future, you will be in a position to show the love of God to them in a tangible way. I am not encouraging supporting financial irresponsibilty. But many who are faithful to God experience unexpected loss- health issues, job losses, divorce. Katrina, 911 and the Tsunami remind us all that disaster can strike a moment's notice.

4. Healthy cash reserves affords peace of mind to allow your longer-term investment and giving plans to work. From an investment standpoint, most people fail because they panic. They sell at times of pessimism and overinvest in times of optimism. A Dalbar study recently confirmed this fact. From 1984- 2002, the average equity investor earned 2.57% per year on their money while the S&P 500 index earned 12.22% per year. From a giving standpoint, I agree with Dave Ramsey in that the reason people don't give is that they are overspent. They have no savings and too much debt, therefore giving among Christians is less than 3% of net income annually.

In saying all of this, I don't want to advocate ever putting your trust in cash. There is only One who is worthy of your trust- a God who saves us out of the trials and adversities we are sure to face. Acts 14:22, "We must go through many hardships to enter the kingdom of God." But cash is a good thing- it allows the faithful steward to maximize resources in times of need and opportunity.

Are you building up your short-term cash reserves on a monthly basis? Are you living below your income level? If your outflow exceeds your income, then your upkeep becomes your downfall. Are you aggressively working to retire debt? Are you working towards a simpler life free from the entanglements that distract us so that you can be more available to God's calling?

For His Glory,

Ashley Hodge