Yitro and understanding financial commandments - opinion

“I have wondered at times what the Ten Commandments would have looked like if Moses had run them through the US Congress.” – Ronald Reagan

This week we have the privilege of reading the 10 Commandments. At the beginning of the Torah portion we read about Yitro, the father-in-law of Moses.

The first verse says, “And priest of Midian, father-in-law of Moshe, heard all that Elo-kim did for Moshe and for Israel His nation, for Hashem took Israel out of Egypt.” The famous commentator Rashi asks what was it the Yitro heard? He cites the Talmud and says he heard about the splitting of the sea and the war with Amalek. 

The question that begs to be asked is why only Yitro decided to come and visit the Israelites, as we have no record of anyone else coming. Surely they also heard the great miracles that had just happened. 

I think the difference is that Yitro “heard” about the great miracles. To really hear something is to understand what you hear. It’s not going in one ear and out the other. He was able to understand that something “big” was happening. These were not just isolated events, rather, they were part of a process and some big plan was in the works and he wanted to see it for himself.

When it comes to building wealth, too often we forget the process. We don’t realize that it’s a continuous process, not just some one-off, one-time event that secures your financial future. If you can’t see that each step leads into the next and into the one after that, then you are not understanding what financial independence means. In honor of this week’s Torah portion, here are eight commandments of wealth building. Feel free to add two of your own to get up to the required 10.

1. Budget – Take control over your spending. Track income and expenses and then you can start a realistic savings plan and start building wealth.
2. Get out of debt – Credit card debt or overdraft is the number one obstacle to making it financially. It’s a lot better to take those interest payments and plow it into savings than to keep paying the credit card company.
3. Emergency Fund – You might be fired or your food processor might die. By creating an emergency fund, you will be able to handle surprise expenses. Keep three to four months’ of income in a short-term deposit or something similar in order to have it liquid and available at a moment’s notice in case you need to draw upon it.
4. Save – there is no shortcut to building wealth. You need to start investing. With discipline, the wonders of compound interest and the growth of the stock and/or real estate market, over time you will create a comfortable nest egg.
5. Know your limitations – It’s well known that Warren Buffett often tells investors that the best advice he can give them is to know their limitations. He means that investors should be aware that their chances of performing better than the major averages are statistically small if they pick individual stocks. As such, most investors should stick to index and exchange traded funds (ETFs).
6. Tax-loss harvesting – A portfolio that is tax efficient can literally save you thousands of dollars a year. Multiply that by 20-30 years of investing, and you can keep tens if not hundreds of thousands of dollars in your account, instead of giving it to the government. You want to offset capital gains with losses. Speak with your accountant before moving ahead with the selling so that you understand all the rules and restrictions that apply to tax loss sales.
7. Maximize your retirement account contributions – There is no better investment than a tax deferred investment. If living in Israel, make sure you are maximizing contributions to your Keren Hishtalmut and Kupot Gemmel. Keep the money invested and you will be surprised at the long-term growth of those accounts.
8. Target date – As a guide for how much money you will need in the future, I like to tell clients that they need about 20 years’ worth of this year’s expense to make it. For example, if you spend $30,000 a year, you will need $600,000. Now keep in mind that any pension, bituach leumi, or social security income that you will receive will lower the overall amount that you need. For example, if you receive $20,000 a year in retirement income, then you will need another $10,000 as supplemental income.

For 99.9% of the population, there are no shortcuts to building wealth. Yes, I am aware of the fact that there is an NIS 80-million jackpot in the lottery this week, but if that’s your plan for financial success, good luck. For everyone else, follow the process, it works.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates. The writer is author of Retirement GPS: How to Navigate Your Way to a Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional in the US and Israel. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995, visitaaronkatsman.com or email aaron@lighthousecapital.co.il.