Why History is important? Does it matter what happened previously? Can something thousands of years ago be relevant and useful in today’s world? Does the ideas on finances used thousands of years ago apply in the present time or in the future. Many things have changed over the years; people have went from bartering to using money and now virtual currencies. (Credit cards, debit cards, bitcoins, etc.)
In the past most of the writings are either religious or accounting. These where the things most important to the ancient world. In the information age that we live in today we have a volume of information but, I fear the quality suffers. The information that was preserved in the ancient world was more costly to preserve than it is today. So only information important to the ancient world was preserved.
In the ancient world the religious writings usually had a guidance of how people relate to each other. One way people relate to each other is through finances and the management of wealth. Even if you are a non-religious you can learn finances from the ancient religious writings.
Looking to the past (1,609 years ago), there was Saint John Chrysostom (b. 349 – d. 407) who wrote the following:
“Imagine a carpenter with the crudest of tools. It takes him many days to make a simple table; and its quality is so low that the price he obtains for it is poor. He has a choice: either he can spend all the money he earns on food and drink or he can set some money aside, even if it means going hungry, in order to buy better tools. If he does the latter, then he will soon be making good tables much more quickly, and so his earnings will quickly rise.”
This part of his quote is talking about investing in yourself today to build financial momentum. The long term goal of getting paid more influences the steps the carpenter took today. The carpenter; if he set the money aside and purchases better tools he is saving yesterday’s earnings today to invest in the resources tomorrow. The resource he is saving is time.
The quote continues with Saint John Chrysostom perspective of long term meaning this life and the next:
“This choice is analogous to a spiritual choice that each of us must make. Either we can spend for our own pleasure all the wealth we possess or we can set aside part of our wealth to give to others. If we do the later, then we may sacrifice a few immediate, earthly pleasures; but the joy we earn for ourselves in heaven far, far surpasses the pleasure we have lost on earth. Every act of charity on earth is an investment in heaven.”
My reason for posting the full quote is not to convert anyone to any religion but, to show actions today feed into the long term goals of tomorrow. Of course this writing is written with infinity as the the time frame of the long term goal.
Putting goals in long term time frames helps define the actions you need to take today. Improved finances are built upon momentum. The best way to build momentum is to start small and slowly. As your slow start moves forward the speed towards your goal is increased. This is where having a long term thinking goal is helpful.
The long term thinking Saint John Chrysostom continues for another quote of his that relates to loaning money.
“When a family falls into poverty, it may be compelled to borrow money in order to survive. But if the lender charges interest on the loan, then that family will fall deeper into the pit: not only will they have to repay the loan but also the accumulates on it. The lender may pretend, even to himself, that he is acting kindly; but in fact behind the guise of charity he is acting with extreme malice. He is trading on the calamities of others; he is drawing profit from their distress; he is demanding a material reward for an act of charity, and so turning charity into robbery. He seems to be beckoning the poor family into a safe harbor, but in truth he is taking their ship onto the rocks.”
Again with the perspective of infinity he continues to write:
“The lender may ask: “Why should I lend to others money that is useful to me, and demand no reward for it?” My answer is that you shall receive a reward: in gold you lend on earth, you shall receive gold in heaven at a far greater rate of interest than you could ever imagine.”
This quote has many things useful in today’s world.There is something for both the borrower and the lender in the quote.
The beginning states a family falls into poverty. This means to me there was a misstep of some sort (the cause is undefined; it may be external of self inflicted). The family is then tempted to borrow more money with interest and go further in the pit of negative finances.
The lender may think they are doing the family a service but, they are hurting the family and also themselves. It is obvious the borrowing family is in a more negative position. It is not so obvious how this hurts the lender. A lender is not evil for lending money for interest. Lending money should be reserved for people who are looking to invest the money for gain and can endure the risk. If you are a lender is it good business to loan money to someone with no collateral? A poor family by definition is poor. If they are poor they are a greater risk compared to a middle class family. Lending money for interest is not charity. A better option for the lender would be to assist the poor family with knowledge and counsel of how to work out of the negative financial situation. This would be a real act of charity by helping people help themselves. It is also good business with long term thinking. The lender is then growing future customers.
The thought occurred to me based upon this quote is that loaning money for interest should be reserved for people with the proper amount of collateral. During the recent economic downturn many people lost “their” houses. In reality instead of renting from a landlord who is responsible for the maintenance of the property the people who buy houses with a mortgage are renting their house from the banks and credit unions. (with the additional dis-advantage of maintenance costs) The lender of the mortgage owns the house until the mortgage is paid off. (if you don’t believe that; stop paying the mortgage payment before the final payment and see who owns the house.)
Many families tripped and fell into poverty during this time. Some didn’t put enough money down to have equity in the house they acquired a mortgage for. As a consequence when jobs were lost and then houses were returned to the lender upside down. The borrower was then libel for the difference. If borrowing money with interest in order to survive is digging a financial pit, then why not use long term thinking to avoid digging.
Below are some steps that might have kept a family from falling in bad economic times as described above:
- Buy a house under what you can afford (this enables mortgage payments to be made with a lower income)
- Have enough money for repairs and maintenance after the purchase
- Put at least 20% down on the mortgage acquired; more if possible
- if the house needs to be sold the equity helps prevent being up-side down
- if all goes well you will be closer to paying off the house
- the PMI isn’t needed
- the payments will be smaller
- Don’t buy until ready (fight the temptation to get into 15 or 30 years of renting)
This wisdom from the past can be a tool for the future. It is just up to us from this time to farm the knowledge for our own use. Comment below with your own application of the quotes.
Look for the next set of quotes from our ancient financial guru Saint John Chrysostom in a later post. The quotes were from the book “On Living Simply – The Golden Voice of John Chrysostom” a translation of quotes by Robert Van de Weyer.