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What did Walt Disney, Mark Twain, Ulysses S. Grant, and Abraham Lincoln have in common?  They were all bankrupt or insolvent at some point. Grant was a key figure in the Civil War and served two terms as U.S. President, yet he labored on his memoirs as he was dying to avoid his wife becoming destitute. Millions of people in the U.S. and a good percentage of those who use our site need guidance with personal finance. We can learn a lot from the mistakes and successes of others. This short article gives ideas on thinking about money and offers key suggestions. 

Is Money the Root of All Evil? 

To answer that question, we visited our friends over at GotQuestions.Org, and here is what they wrote: "The misquoted version ("money is the root of all evil" makes money and wealth the source (or root) of all evil in the world. This is clearly false. The Bible makes it quite clear that sin is the root of all evil in the world (Matthew 15:19; Romans 5:12, James 1:15). However, when we reflect upon the correct citation of this verse, we see that it is the love of money, not money itself, that is a source of all different kinds of trouble and evil. Wealth is morally neutral; there is nothing wrong with money, in and of itself, or the possession of money. However, when money begins to control us, that's when trouble starts." 

This One Thing! 

Mark Twain earned enough money to live well for many lifetimes, but through poor judgment in making investments and gross overspending, he was forced to go back to work. (To his credit, he did so to pay off his creditors). Most of us would be miles ahead in personal finance if we did this one thing, spend less than we bring in, then save and invest the difference. A good minimum goal is to save 10% or more of our net earnings. It may take some time to get there because of existing debt; we'll discuss that shortly. 

Small savings don't seem to excite most of us as much as that feeling we get when we buy things, but we've undoubtedly noticed how fleeting those good feelings are. It might help us be more disciplined if we remember that for every $1,000 we save now, it could be worth $10,000 or even more later!

The Price Is Right. Which Door Would You Choose?

Imagine if Drew Carey (or Bob Barker) gave you a choice between two doors, but you were told ahead of time what was behind them. They will give you 15 seconds to decide or lose out altogether, and here are your choices. 

Door #1  $1,000,000 (One Million Dollars) 

Door #2  One penny today that is doubled every day for 31 days (so Day One, 1 cent, Day Two, 2 cents, Day Three, 4 cents, Day Four, 8 cents, etc). 

Perhaps you vaguely remember seeing this before or suspect a trick. But with the clock ticking, you shout, "Door #1. But as you might have guessed by now, Door #2 would have given you far more. The Value of Door #2 is $10,737,417 (to see the math, scroll to the bottom of this post). 

We don't double money daily, but the penny example illustrates the impact of compounding. Over time, money can double several times, and the results become increasingly impressive. Ben Franklin's quote serves us well here, "Money makes money, and the money that money makes, makes money." It's worth reading that a few times to ensure we understand and don't forget. 

I Will Gladly Pay You Tuesday for a Hamburger Today 

That line from Wimpy in Popeye tells us that he could not afford the hamburger, in fact, he was always broke, always borrowing. The Bible doesn't say that we can't borrow, but it warns us of the dangers; "The rich rule over the poor, and the borrower is slave to the lender." (Proverbs 22:7). 

Consumer debt, such as credit cards and auto loans, sabotage our ability to save and invest; they are toxic to our financial health. Even worse, if we find ourselves borrowing to pay for our existing debt, that is a form of compounding (and we can see how explosive it is), but it's in the wrong direction and can be fatal to our finances. 

Just because we can qualify for monthly payments according to a creditor does not mean we can afford it. A good rule of thumb is that if we cannot pay cash for a car or other consumer goods and services, we wait until we can. That goes for vacations, eating out, clothing, cable television, upgrades on cell phones, and many other non-essentials. If this seems painful, consider a survey recently updated by Bankrate that suggested 56% of Americans could not reasonably handle a $1,000 emergency. Only 16% of that group was willing to reduce their expenses to help cover the emergency (with many in the survey planning to borrow more). That pain seems far greater, and for those people, it will likely follow them for decades unless they make serious changes.  

I'm Already In Debt - What Should I Do? 

If we already have car loans and credit card debt that limit our ability to save and invest, we must be laser-focused on paying the debt off! We can do this by not borrowing more, finding more income or limiting expenses, and applying the difference to the debt. Paying off debt first is most often our best short-term investment. An excellent tool to help make paying debt more motivating is called Debt Snowball, and several instructional videos about it can be found on YouTube (we recommend watching at least two or three to get different perspectives). When debt is gone (Oh, happy day!), you will be surprised at how much you have to save and invest. 

In summary, we should put God first, spend less than we make, be laser-focused on eliminating existing consumer debt, and then save and invest at least 10% of our income. 

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The Math Behind the Penny Example (as described in the article above), 1 cent doubled daily for 31 days.