Solomon’s Leading Indicators

The radio station that wakes me up in the morning has business and finance news at 55 minutes after the hour. Sometimes, the announcer describes activity at a local corporation or an occurrence that has global ramifications. Other times, the news may be about the latest economic indicators.

A leading economic indicator is one that predicts where the economy is headed. Construction of new houses, for example, provides an early indication of an economic up-tick. A lagging indicator is one that confirms where the economy has been. For example, employment figures tend to move up months after the economy has improved. Someone somewhere crunches numbers and interprets data to create these economic indicators.

Some people who follow economic trends scrutinize curious things. Alan Greenspan, former chair of the Federal Reserve, reportedly watches the sales of men’s underwear as an economic indicator. Sales of briefs and boxers tend to remain steady until recession crimps discretionary spending and sales figures drop. Who knew that Fruit of the Loom could tell us so much about economic trends?

Laxative sales increase during tough economic times. So do sales of lipstick, mascara, and eyeliner as women look for relatively inexpensive ways to do something fresh. Sales of romance novels increase during a downturn. Songs which reach the top of the charts in gloomy economic times tend to be longer and slower than in a booming economy when most popular songs are likely to be faster and more upbeat. If the stock market tanks one day, activity at online dating sites sets record highs the next. Also, restaurant staff can tell when things are moving up, because diners begin ordering dessert again.

People trying to make sense of economic trends pay attention to a myriad of other items, as well. The dry cleaning industry reports that the length of time it takes a client to pick up a garment increases during a recession. Also, the number of people who start home gardens to raise their own vegetables, berries, herbs, and fruit goes up as people try to stretch food dollars. The use of coupons at the grocery store increases, too. When sales of cardboard boxes increase, economists see the sun rising, since most require cardboard in the shipping process. Isn’t it interesting that the plain cardboard box is a leading indicator in the sophisticated art of predicting an economic trajectory.

Indicators from Proverbs

Let me suggest three leading indicators for personal finance. These don’t have the curiosity factor of some, but they do have important implications for a person’s fiscal health. You won’t find their source in modern statistical methods, but in the ancient wisdom tradition. These were provided by King Solomon in the book of Proverbs.

1. Starting to save for retirement early – even if it’s only a little bit each month, is a leading indicator a person will have adequate resources in retirement (Prov. 13:11). Suppose Monte put away $100 per month. With an annual return of six percent, the investment would be worth $100,451 in 30 years. In 40 years, however, it would be worth $199,149—an increase of 98 percent for starting just ten years earlier. Monte discovered that even a modest investment over time pays off.

2. Paying the credit card bill in full each month –is a leading indicator of financial freedom and flexibility (Prov. 22:7). Sara looked at her credit card statement and realized it would take more than 20 years to zero out the balance by making minimum payments. By doubling the minimum payment and staying at that dollar amount, she achieved her goal in less than three years and saved thousands of dollars in interest. A short time later, when the starter went out on her car, she didn’t groan at the thought of an unexpected bill to pay as she would have before. She liked the good feeling her financial margin gave her.

3. Dealing generously with the poor – is a leading indicator of personal re-invigoration and joy (Prov. 11:25; 22:9). As Kimberly came to a stop at the traffic light, she rolled down the window and handed the homeless man a one-gallon Ziploc bag. In it were a water bottle, granola bar, peanut butter crackers, fruit snacks, and gum. She watched the man check out the goody bag. He looked up and waved as she drove off. Kimberly’s smile stayed with her the rest of the drive home.

Originally published by Pensions & Benefits USA.