If you are like me, you’ve probably had enough of all the media news surrounding the downgrade of U.S. credit by Standard and Poor’s credit rating agency. Yet there’s no denying that these are tumultuous times. The day after the DOW dipped over 600 points, I had to remind myself that the money in my retirement plan really isn’t my money in the first place and God is still in control.
While it is critical that I maintain this perspective, it doesn’t mean that I should keep my head in the sand and not take responsible actions. For those of us managing ministries, we are stewards of the ministry and money he has entrusted to us. So, what appropriate actions should we take as we manage our funds and investments?
Preservation of Principal. Even in a changing economy, the fundamentals of managing our funds are still the same. We all know the tradeoff between risk and reward. The more reward we seek, the greater risk we take. For short-term ministry funds, including all our operating reserves, our primary goal and responsibility is the preservation of principal. This means that we don’t take undue risk with these funds. So, while S&P may have downgraded U.S. credit, it still represents the safest investment we can make. Deposits at federally insured credit unions and banks, as well as investments backed by U.S. Treasuries, are still appropriate places for these funds.
Adequate Liquidity. After preservation of principal, the next most important fundamental is maintaining adequate liquidity: Make sure you can access your funds when you need them. This doesn’t mean you have to keep all your funds in a checking account, but it does suggest that you evaluate when you might need your funds and keep the appropriate amount liquid for immediate access. An account such as a money market should give you this flexibility. Some financial institutions, like ECCU, even offer certificate accounts, which allow partial withdrawals without penalty during the certificate term.
Return on Investment. Evaluating the potential return on your investment should only happen after you have first ensured the preservation of principal and adequate liquidity. When you have comparable investment opportunities which satisfy the first two—and most important—fundamentals, then you can use return as a part of your consideration.
A word of caution: I know it is tempting to invest short-term operating reserves in stocks, commodities, or even precious metals. But I can tell you numerous stories of ministries that lost thousands, even hundreds of thousands, of donors’ gifts this way. It is appropriate for long-term investments to include such investments, but not your operating reserves.
So even while the markets fluctuate and negative news leaves us concerned, sticking to these fundamentals can allow us to stay focused on the ministry God has called us to accomplish.