If you’ve been reading the news lately, you’ll have probably seen “the R Word” raised at least once. Our government is reluctant to mention the possibility of recession, because of the fear it inspires. But how should we, as Christians, see the prospect of economic downturn?
Alex Cook is the founder and head coach of Wealth with Purpose, an organisation helping Christians find a Biblical approach to finances. During his recent guest appearance on Vision Christian Radio’s 20Twenty program, Neil Johnson asked him about how we should see hard times from a faithful perspective.
Listen to the full interview:
Alex says the most important thing for us to remember is that everything we have comes from God, or as Psalm 24 puts it, “the Earth is the Lord’s, in all its fullness”. That means our job is to steward those resources, and use them for His glory.
He also points out that God wants our finances to be healthy, so we’re not worrying about them all the time. “If we manage money God’s way, money shouldn’t be a source of distress in our life.”
Recessions, Alex explained, happen when economies experience two or more quarters in a row of negative growth. “I think that governments have painted them as sort of an evil that needs to be stopped at all costs,” he said. But Alex sees them as normal and necessary.
He says we should imagine the economic cycle as a clock. “Sometimes it’s in that growth, booming phase, then it gets to a point where excesses build up, and then you go into a downturn, and things slow down, and then typically governments come in and spend a bit of money to prop it up, or lower interest rates.”
So are we heading toward recession time now? “Australia hasn’t had a recession for 28 years. So in one sense, I guess there’s a certain inevitability about it. I think the million dollar question is really more when, and of course what do we do in order to steward finances as well through that.”
So what can we do to be prepared?
Alex believes there are a few key steps we need to take to ensure our financial security, and they’re the same for a household, a business or even a government. The first one, he says, is to make sure your cash flow is under control. “So how much money comes into our house vs. how much goes out, and ideally, we’re in surplus.”
Save Up For a Rainy Day
“This is what any financial planner will tell you, secular or Christian. And that is the idea that you have a cash reserve designed so that if you, unfortunately, lost your job, or if your income slumped, you still have plenty of money there to ride out that tough period while you’re seeking further employment.”
Another advantage of having some spare cash on hand is that downturns provide great investment opportunities. “Stock markets do crash now and then. That’s not an unusual thing, where they fall more than 20 per cent. And so to me, all that is is a fantastic opportunity to buy things at a much lower level than what they are today.”
When thinking about investments though, it’s important to consider how much risk you’re willing to take. During the Global Financial Crisis, the Australian Stock Market fell by 55 per cent, making a $100 thousand portfolio worth just $45 thousand. Alex calls this the “sleep-at-night test”. “How will you feel, knowing where your money is invested? Will you sleep well, and are you comfortable with the level of volatility?”
Some of the clearest Biblical advice on investing comes from Ecclesiastes 11:2. “Invest in seven ventures, yes, in eight; you do not know what disaster will come upon the land”. Alex believes diversification is essential for financial security. “You shouldn’t have all your eggs in one basket, because when recessions come, some things go broke, some companies go under.”
In the Parable of the Talents, the servant who fearfully buried his gold ended up with nothing. But the two servants who doubled their money were rewarded, partly because they were eager to please their master. Alex says God clearly wants us to be using what we have, but we should always be thinking, first in foremost, about what Kingdom return our investments will bring.
Ultimately, Alex says we should all see recession as an opportunity. We should be thinking about how we can take advantage of it to sow into God’s work. As Deuteronomy 8:18 reminds us, it’s God who gave us the ability to produce wealth. “And for some of us that’s a little, for some of us that’s a lot. We have to use those resources wisely to extend His Kingdom.”
About Alex Cook
Alex Cook has advised individuals and businesses on how to manage their finances for over 19 years. He recently sold his successful financial planning business to pursue his passion of helping people like you to take control of their finances and future.
Visit Alex Cook’s website wealthwithpurpose.com for more information.
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