Letting the Past Change the Future
Written by Brandon Allen
Executive Director | Fortify Foundation
The year is 1980. A point in time that some will remember well, others not as much, and for the rest of us, we might not have even been a thought to anyone but our omniscient God. Why do I bring this year up? Well, for the sake of this article, it is to bring a clearer understanding as to how our money is either working for us or against us.
Let’s say you had a wonderful grandmother who was kind enough to leave you in her will and had divided up her assets to where $10,000 would be gifted to each of her grandchildren. (Wow! Thank you so much, grandma!) What do you think you would have done with it? To continue our example, let’s assume you were the super frugal type and wanted to hold on to that money for a potentially rainy day when it might come in handy. Well, the good news is that to this day you still haven’t had to use it! Now for the bad news… Are you ready? Unfortunately, since 1980, between inflation and the decrease in the value of the dollar, that $10,000 is only worth roughly $3,000 in today’s money. While I’m sure all of us would still appreciate the $10,000 regardless, the sad reality is it will still only buy us roughly a third of what it would have back in 1980! Now that’s a hard pill to swallow when we put it in those terms.
And then there’s your goody-two-shoes sibling… They decided to take a different route with their inheritance back when it was received. Just like you, they didn’t have an immediate need to spend the money so they chose to invest that same money and haven’t even checked their investment account until recently. What a surprise it was to find out that they had now accrued a balance of approximately $115,000! Not only were they able to offset inflation and the devaluation of the dollar, but they also made a decent amount of equity off of the same money!
Now let me ask you something, which grandchild do you think grandma would have been more proud of? (It’s ok to admit it, she’s not around to tell anyway!)
Why do I bring this illustration up? To change the way we think about our money and to help us evaluate what God has entrusted us with now to greater impact on the future! I’m sure if we all had grasped that concept back then, we might have taken a different approach with that inheritance. As this might be an example of what could happen, life doesn’t always make it feasible. No doubt at some point in that window of time we all would have had to use a portion of that money for something, especially in a school setting!
The reality is if we aren’t spending something now we may not be making the forward day to day, year over year progress that we should. Whether that’s paying down debt, keeping the lights on, or making enhancements to our campus. All worthwhile and necessary requirements for our future. So how can we talk about spending money and investing money?
Truth be told we need both. We need a perfect blend of both money now and money later. Let’s take the example of debt. I’m sure most of us have been there at some point in time. We have borrowed money that is costing us to use for however long it takes us to pay it off. We all have the burden to make that happen as soon as possible! However, let’s give some further consideration of our money working for us. What if that note has a 3% interest rate? Over time that 3% can really add up! We really cringe when we notice how much interest we are paying on the front end of that loan. Does it make sense to pay as much as we can now to get rid of that note as soon as possible? What if some was used for future returns and you were able to create 10% on that same money? Instead of saving a potential 3%, you’ve now generated 7% on that same money!
Again we need both sides of the equation. But until we start to work on both sides it will never work for us the way that it could. It’s really a process of digging ourselves out of a hole (debt) and in the meantime creating a mound for us above ground (returns) to help provide the right balance.
What if we never change the way we are currently using our money? What if it’s always being spent or always being held with no opportunity for returns? Where does that leave us in the future? Perhaps it’s fighting the same financial battles we did 10 years ago, 10 years from now. This is why our Foundation was created. To ensure the future of Christian education is Fortified!
* I’d encourage you to use this investment/inflation calculator for your own point of reference! https://www.nerdwallet.com/article/investing/inflation-calculator