Chapter Three – THE IMPORTANCE OF MONEY MANAGEMENT
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Whether you are a newly married couple, have a family, are in debt or paying a house payment, we are living in economically tumultuous times. Following the September 11th attack, the job market experienced a shake-up. Many lost jobs—1.7 million Americans had been unemployed for more than 27 weeks by January 2003, up from 1.2 million a year earlier.
The number of people not even looking for work, due to discouragement, increased 37% in just one year, to 449,000. For those still employed, fears of recession, corporate downsizing and loss of business to foreign production often consume their thoughts. Perhaps several people have recently been “let go” from your place of employment and you fear for your job. You may already be looking for a new job.
Although many are facing the fearful reality of losing their job, most have forgotten the importance not only of proper money management, but of the need to budget and save. As spending and standards of living rise, families’ savings are dropping—drastically. As a result, many families are on the brink of financial disaster, living one or two paychecks from the streets.
This need not be!
If you are currently unemployed, take control of your circumstances. The stability of your family and spouse depends on it. Be a motivated job hunter. Do not waste time dwelling on your troubles. Take an active approach to your search. In fact, instead of staying in the house worrying, try spending all eight or nine hours that you would have spent at work looking for a job. By sitting idle, waiting for employment to be handed to you, you will soon find yourself sinking in a quicksand of slothfulness, inactivity and laziness, leading to financial insecurity. Also, by remaining inactive, the prospect of gaining a new job looms larger, seemingly becoming unattainable. Laziness always increases fear.
Budgeting—A Forgotten Tool
By establishing a budget and following it carefully, individuals and families can set patterns for efficient spending and saving, and avoid periods of financial stress. Tithing also helps develop this diligent practice, allowing one to see how much further the remaining 90% of his income goes. Keep in mind that, just because you start tithing, God will not shower money on you. But He will bless you. God expects you to follow His tithing law, in addition to practicing faithful stewardship. In doing so, you will begin seeing Him bless you in ways you have never seen before.
Helpful Points
The following are helpful tips to ending credit card bills, and taking charge of one’s finances:
• Do not ignore monthly balances on credit card statements. Gather all your monthly bills and tally the balances. This figure will almost definitely be more than you expect—or hope.
• Do not carry multiple credit cards. If you have had problems with overspending, it will take some time to develop self-control. In the meantime, do not allow yourself the temptation to have many credit cards in your purse or wallet—thus allowing yourself some “cushion” to spend what you do not have! Carry one credit card for emergency purposes only.
• Pay at least $15-20 more than your minimum monthly payment. Most often, the minimum payment only affects the monthly interest, and does not include much, if any, principal.
• Before making a large purchase, think about it for a number of days. You may even want to schedule a savings plan, which will allow you to save portions of the purchase price over a period of time. This would then allow additional time to think about it, helping ensure that you are making a wise purchase. Remember, it is always better to “sleep on” a decision than to jump in impulsively and later regret your action.
• Consolidate multiple credit card bills onto one credit card with a low interest rate. Pay off bills with higher interest rates first.
• If your interest payments are higher than you can pay, try renegotiating your interest rate with your creditors.
• If you do not have the money to buy something—do not buy it!
• Teach your children to budget and save money. If properly instilled now, these principles will stick with them throughout adulthood. Imagine the benefits of learning, at a young age, rules and laws that have been proven to work!
• Lower your standard of living, and avoid unnecessary spending. If you ask three men, one making $25,000, one making $50,000 and another making $100,000, about the status of their financial situation, all three will likely answer that they are barely making enough to “get by.” This attitude is prevalent—most are never satisfied with what they have.
• Stop the cycle of borrowing to pay for expenses.
• If you are not able to pay your bills, you may need a part-time job in order to do so.
• Remember, a wise family should learn to live with credit—never by credit!
God’s laws are faithful—they are sure—and they WORK!
As the book of Ecclesiastes explains, “Cast your bread upon the waters: For you shall find it after many days” (Ecclesiastes 11:1). While man takes indiscriminately, God tells us how much He wants back and, after seeing our actions of faith, He blesses us many times over. God has even instituted another tithe, which the tithepayer saves, as a guaranteed “vacation tithe”—to be spent at God’s commanded annual festivals.
A budget helps one plan, specifying how a family’s or individual’s income should be spent over a designated period. When creating a budget, all income must be calculated, followed by expenditures.
There are two types of expenses: Fixed expenses—payments that need to be made on a regular basis, and are usually the same amount. (These include such items as car and school loans, rent or mortgage, etc.)Variable expenses—payments differing in amounts and frequency. (These include credit card bills, clothing purchases, down payment for insurance, etc.)
Before making a purchase, you must ask: (1) Is this something that I want? (2) Is this something that I need? (3) Can I do without it? (4) Does the budget allow for this purchase?
This enables you to examine whether your spending is the product of impulsive desires, or whether the purchase is justifiable—essential. American scholar and former Secretary of State, Henry Kissinger once said, “Many people have had to learn in their private lives, and nations have had to learn in their historical experience, that perhaps the worst form of tragedy is wanting something badly, getting it, and finding it empty.”
Wastefulness is another, often invisible, fast and easy way to burn money. Impulsive, wasteful spending is the product of a generation lacking in strength and character, and is driving up the mountain of debt now burying so many! Notice that God places wastefulness in the same category as slothfulness: “He also that is slothful in his work is brother to him that is a great waster” (Prov. 18:9). John 6:12 records Christ’s detail-oriented thinking in making sure that leftover food was not wasted: “When they were filled, He said unto His disciples, Gather up the fragments that remain, that nothing be lost.”
Just as every successful business runs on a budget, so does every successful household! The benefits of maintaining a budget are invaluable.
Unfortunately, most people do not implement this vital tool, and do not realize they are spending unwisely. Week after week, they spend and waste, not really knowing where their money went—or what purpose was served.
But merely knowing where the money went is not enough.
How to Balance Your Budget
In a marriage, both husband and wife should go over the household’s finances. Although the husband has been ordained to have final control over the household (Eph. 5:23), this does not mean that the wife cannot have a helpful and active role in financial matters. In fact, by openly sharing her ideas and thoughts with her husband, a prudent wife (Prov. 31) will strengthen and fortify the family budget.
After tallying the total household income, you are ready to begin budgeting, allotting your income for specific purposes. One of these should be savings. It is vital to have a family savings fund, aside from savings for emergency purposes. (In 1950, 12% of the average household’s income went for savings. Today, people no longer appreciate the value of saving. In fact, they are spending more than they actually make!)
The following is a sample budget guideline. You will need to adjust certain percentages based on your specific situation:
• Tithe and Offering—over 10%
• Housing (including utilities)—20-25%
• Food—20-30%
• Clothing—10-15%
• Savings—5-10%
• Reserve Savings (emergency)—5%
• Insurance—2-5%
• Pocket Money—2-5%
• Recreation—2-5%
• Educational material, books, magazines, etc.—2-3%
• Transportation—3-15%
Remember that emergencies regularly occur, and extra flex in spending may be required. Having an emergency savings will be vital. With this in mind, the percentage assigned for transportation costs should include space for any possible preventive maintenance and repair work.
Examine all of your monthly and yearly bills, and divide the portions of payments according to how often you receive income, remembering to divide yearly payments according to installments. (For example, if paid bi-weekly, divide yearly bills into 26 installments.)
After completing this, compare to the guideline and begin budgeting for your expenses. After you have designated your tally, make sure that your expenditures are less than your income. If not, you will have to recalculate your budget. If you find that you are spending more than you make, you are heading toward disaster. You have only two choices: Lower your expenditures or increase your income. And, unless you get a raise or an additional job, your only remaining choice is to lower spending!
Remember to budget on a regular basis. At the beginning, this may seem difficult and time-consuming. However, diligently apply what you have learned. The benefits from budgeting directly relate to the amount of effort you put into it.
After regularly disciplining yourself to hold to your budget, you will be amazed at how much money you were spending in ways you did not even realize. By the end of the first month, you will have an overall idea of where you are spending your money. The second month will allow you to make slight changes and adjustments. By the third month, you will have an overall idea of your permanent budget model.
At times, you may be tempted to stray from your designated budget. But take the following example as a precaution: If your food budget was set at $70 a week, and you begin eating out, eventually spending $100 a week, the effects will pile up. After one month, you will be $120 over budget. After one year, you will be $1,440 over budget! While occasional overspending may seem minimal, it will accumulate.
With this budget model and with God as your business partner, you can slowly begin to take control of your personal finances. By learning to properly plan for your financial future, you can begin to reach a level of stability and security as never before!
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