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BIBLE-BASED FINANCIAL GUIDANCE, Part 10

by Jerry Dewey

            Part 1     Part 2     Part 3     Part 4     Part 5     Part 6     Part 7     Part 8     Part 9     Part 11

          In Part 2, the statement was made that “your” money has a divine purpose (Truth Number Two).  In 2 Corinthians 9, it talks about bread money and seed money; your bread money is for taking care of your needs and living expenses, while your seed money is the catalyst for a future harvest.  God’s plan is that you have enough money to take care of your needs, both present and future, and have plenty left over to fund the works of the kingdom and help others.  By now, you should realize that God is your source; it’s from Him you received the talents and abilities you have to do what you do that brings in the financial resources you need to fulfill that divine purpose.  The question becomes, “how do I get there, fulfilling both halves of the divine purpose for my financial resources, from here?”

If you were to travel to an unknown location or destination, would you go without a map or plan?  Probably not, otherwise, how would you know how to get there and how would you know you were there when you arrived?  The same goes for your finances, you need a plan that will show you how to properly manage and handle the financial resources God places in your hand so you will know if you are headed towards fulfilling the divine purpose for “your” money.  In Luke 14:28-30 (Amplified) it says, “For which of you, wishing to build a farm building, does not first sit down and calculate the cost [to see] whether he has sufficient means to finish it?  Otherwise, when he has laid the foundation and is unable to complete [the building], all who see it will begin to mock and jeer at him, Saying, This man began to build and was not able (worth enough) to finish (the NIV says, “estimate the cost to see if he has enough money to complete it” while the NLT says, “calculating the cost to see if there is enough money to finish it”).”  The man had a vision, but before embarking on the actual construction, he developed a set of blueprints; the blueprints would help him figure out what and the quantity of materials he was going to need, so he would know how much money he was going to need to make his vision become a reality.

          The plan that will show you how to properly manage and handle “your” financial resources is called a budget.  The purpose of a budget is to show you where you are at, to show you where you are going, to show you how to get there, and to show you when you get there.  It is not, as some people think, designed to make sure you spend every dollar you earn but to make sure you are spending every dollar correctly, in the major areas you identified in your daily diary, so you don’t spend over a dollar for every dollar you earn.  Managing your budget on a regular basis makes your money flow smoothly.

          There are hundreds, maybe thousands, of explanations on how to create a budget; some are very detailed, which tends to make the process very complicated, leading to confusion and frustration.  Here is a very simplistic approach that should make this a very useful management tool:

                    Think of your plan as a circle (you can make it as big or small as you want because it doesn’t really matter, a circle is a circle) or a pie.  Since the beginning and ending point around the outside of the circle is the same, your circle equals 100 percent.

                    The circle represents your gross income; it could be your gross income for a month or a year, but since most of your bills are paid on a monthly basis, you may find it easier thinking in terms of a month.

                    Each of the major areas you created for your daily diary represents a slice of the pie (other than your income because that’s what the circle represents); how big each slice is determined by how much money you need each month to take care of all the sub-areas that make up each major area.  The sum total of all the slices (for the major areas) should equal 100 percent (or equal less than 100), but it can not exceed 100 percent.

          You do not need to worry about cutting your pie into slices until after you have monitored your spending for a minimum of a year – once you have collected and calculated the data, the results will tell you how big each slice should be; hopefully, since you have been tweaking your spending so your monthly expenditures do not exceed your monthly gross income, the results will put you close enough to the magic number so only some minor tweaks are needed.

          To illustrate what your budget would look like, let’s say you decided on using the following as your major areas: tithes, payroll taxes, housing costs, personal expenses, medical costs, food costs, transportation costs, clothing costs, savings, and debt payments.  NOTE: to make this explanation as simple as possible, all the percentages were made whole numbers and made to add up to exactly 100 percent without any tweaking.  In reality, you should carry out the calculation of these percentages to at least three-four decimal points and you will probably have to tweak some of your numbers to get them all to add up to exactly 100 percent.

                    First, you need to set the first 10 percent of your gross income for your tithes.

                    Next, since your payroll taxes are automatically deducted from your paycheck, you need to set the percentage for these which includes your federal income tax, social security tax, Medicare tax, and state income tax (also include any city or local tax if they are deducted from your paycheck); from your calculations, you determined that these account for 15 percent of your gross pay.

                    Next, you need to set the percentage for your housing costs; from your calculations, you determined that these accounted for 35 percent of your gross pay.  Typically, the greatest percentage of people’s gross income goes towards housing costs.  Financial experts will tell you most people’s housing costs are around 35 percent of their gross income.  They will also tell you that you should never spend more that 38 percent of your gross income on housing – this could lead to serious financial problems down the road.  If you are spending 40 percent or more, financial disaster is pending.

                    Next, you need to set the percentage for your personal expenses; from your calculations, you determined that these accounted for 10 percent of your gross pay.

                    Next, you need to set the percentage for your medical costs; from your calculations, you determined that these accounted for 3 percent of your gross pay.

                    Next, you need to set the percentage for your food costs; from your calculations, you determined that these accounted for 5 percent of your gross pay.

                    Next, you need to set the percentage for your transportation costs; from your calculations, you determined that these accounted for 9 percent of your gross pay.   

                    Next, you need to set the percentage for your clothing costs; from your calculations, you determined that these accounted for 3 percent of your gross pay. 

                    Next, you need to set the percentage for how much you are saving; from your calculations, you determined that this accounted for 1 percent of your gross pay.

                    Finally, you need to set the percentage for your payments to your credit cards; from your calculations, you determined that these accounted for 9 percent of your gross pay.

                    Make sure the size of the slices add up to 100; if they don’t, you will have to change the percentage of one or more areas until they do, which means you will have to tweak your spending as well.  Click here to see what your budget pie will look like.

                    So, if you are making $4,000 a month, this is how much money you can spend in each area: tithes, $400; payroll taxes, $600; housing costs, $1,400; personal expenses, $400; medical costs, $120; food costs, $200; transportation costs, $360; clothing costs, $120; savings, $40; and credit card debt payments, $360. 

          Now that you have the percentages of how much of "your" money can be spent in these major areas, as you keep track of the money you are spending each month, you will be able to see how well your spending stays within the percentage parameters you initially set up for each area.  You will probably discover that you did not allocate enough for some areas and too much for others; this is to be expected.  You can adjust the percentages you initially set up by increasing the percentage allocated to the areas that were initially set too low and make matching decreases in the areas that were initially set too high, if there are any; otherwise, you will have to arbitrarily decrease one or more areas to offset any increases you have made.  Keep in mind, any change you make can not cause your total allocations to exceed 100 percent.  Once you get your budget percentages steadied out, whenever you reach the maximum spending threshold for any area, you must immediately stop spending money in that area.  If, month after month after month, you are consistently reaching the threshold in one or more areas, you have to change your spending habits in those areas, cut spending in other areas, or make more money.

                    For things like insurance, vehicle inspections and registration fees, or other expenses that aren’t due every month, here is a tip to help you remain on budget every month.  Break those non-monthly bills into monthly payments and every month, physically set aside that money.  For example, if your car insurance is 300 dollars and due every six months, simply bill yourself 50 dollars every month.  If you have a checking account, write it in (one-sixth car insurance) and deduct it from your balance (50 dollars).  If you don’t have a checking account, put the money in an envelope, seal it, and set it aside.  Handling non-monthly bills in this fashion will accomplish three things: first, it will eliminate distorted readings in your monthly budget; second, it will eliminate the anxiety caused by having to come up with a large sum of money when the non-monthly bill is due (if you have set aside 50 dollars for the past five months, you are going to be a whole lot calmer having to come up with only 50 dollars versus 300 hundred dollars); and finally, it will help you become a more disciplined steward.  There is an old saying that is very appropriate here: “out of sight, out of mind;” once you have set the money aside, there will be less of a tendency to spend it.

          There is an old saying that says “if you fail to plan, you’re planning to fail.”  Basically, this is the same thing that Proverbs 27:12 (NLT) is saying; “A prudent person foresees danger and takes precautions.  The simpleton goes blindly on and suffers the consequences.”  When you develop a budget and stick to it (that’s the key), you can manage your finances clearly, consciously, and correctly within your means on a consistent basis, no matter what your income is and what your obligations are now and will be in the future.  It also helps you to discipline your spending and helps you counter the attacks by the spirit of money – things like compulsiveness, impulsiveness, and indecisiveness.  As long as you consistently stay within the percentage parameters you have established for each of the major areas, especially in the beginning, the temptation for you to take a detour or wander down some unmarked rabbit trail will become less and less.  There will come a day when you will reach your destination.  When you do, don’t be surprised when you notice that your focus on spending has changed from “the here and now” to “what more can I do for God’s kingdom and for my future.”

NOTE: the Excel spreadsheet I developed to track our spending feeds directly into a budget monitor (it's part of the same spreadsheet); because it is “interactive,” it will automatically tell you if you are overspending in any area or if you are under-spending in any area or if you have got your spending under control in an area.  It also provides the percentages for the next year’s budget, as a result of the inputs into the daily dairy. If you’re interested, I’d be more than willing to work with you to modify it to meet your situation.

            If you would like more information, click on the Contact link and send us an email; someone will contact you shortly thereafter.

            Part 1     Part 2     Part 3     Part 4     Part 5     Part 6     Part 7     Part 8     Part 9     Part 11

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