Financial stewardship is an important issue for Christians. Christians, in general, are criticized by those in the world because it assumed, sometimes rightly, but often wrongly, that ministers are just out to get our money and the money from little old ladies who live on their meager social security checks. In spite of this denigrating caricature, most little old ladies I know are more financially savvy than the bloggers making these claims from their parents’ basement.
How we handle our money should be important to us, because it is important to God. In the gospel of Luke, Jesus asks the question, “Therefore if you have not been faithful in the unrighteous mammon, who will commit to your trust the true riches?” – Luke 16:11 NKJV. Perhaps, God is watching how you handle the money he has provided to determine if you are ready for greater responsibility.
To get a handle on your finances and manage them well, you must take the first step of making a budget.
Follow this process to set up your first budget:
1. Determine Your Monthly Income. The first thing you must do to establish your budget is to figure out how much money you will have in income each month. Consider all your income sources. This will be your paycheck, other family members’ paychecks, alimony, child support, money from government programs, (such as tax refunds, welfare, unemployment assistance, government retirement programs, and social security), money earned from selling items, business income, investment income, etc.
Jesus said, “For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it– lest, after he has laid the foundation, and is not able to finish, all who see it begin to mock him, saying, ‘This man began to build and was not able to finish,’” (Luke 14:28-30 NKJV). When you begin, you want to make sure you have enough to get through the month without credit or spending your savings. This is the starting amount you will allocate for the various categories in your budget.
2. Put Everything You Spend into a Category. Make a list of categories for everything you spend money on in a typical month. If you don’t spend cash, but use credit and debit cards, you can simply look at your statements from the previous month. Each month is different, but this will give you a rough idea of where the money goes.
3. Compute a Percentage of Your Income for Each Category. Allocate a percentage of your total income to each category you set for your budget. It doesn’t matter what percentage you allocate to each category, but you have to follow these two important rules.
* The percentage you use for each category must assign enough money in your budget to cover the expenses in that category for the whole month.
* When you add the percentages of all the categories together, they must equal 100%.
While it doesn’t matter to me what percentages you allocate to each category, it might matter a whole lot to you. Since you must have enough money for each individual category and the percentages must add up to 100%, you have to allocate these percentages very carefully.
For example, if you allocate 60% of your income for housing, you are going to be in trouble. That leaves only 40% of your income for the other categories. That’s probably not going to work well. Even if you can make it work somehow, it is not a healthy budget. You have more house than you should for your income.
For those of you that have trouble with math, you may need help to understand how to allocate the categories correctly. The chart below can get you started.
You can use these percentages as starting numbers. Plug them into your budget and see how it works. Adjust as necessary, but ensure your percentages, when totaled, equal 100%.
- Track your spending. This can be done in a variety of ways. Some people advocate taking the amounts for items like food or entertainment out in cash. You spend the cash and when its gone, that’s it for the month. Others will keep an old-fashioned account ledger book to record each day’s expenses. Others suggest using a spreadsheet to keep track of expenses on your computer or a budgeting app on your smartphone.
One of best tools for tracking your expenses is the free online app from Dave Ramsey call Every Dollar. (You can access it at https://www.everydollar.com.) Although the basic app is free, you can sign up for a paid version. ($99.00/year) The subscription has additional features like the ability to sync your online bank account to the app and tech support via phone.
Other possibilities are http://mint.com (from the same people that make the popular QuickBooks accounting software) and You Need a Budget (http://ynab.com). Some banks and credit unions also provide free tools on their online banking websites to track spending.
Congratulations! If you’ve followed these steps, you should have created a reasonable budget. It may not seem to work at first, but if you stick with it for two or three months, it should help understand where you may be overspending and get those areas under control.
Before the beginning of each month, you should create a new budget. If this month’s budget worked well for you, you can reuse the same numbers. If the numbers were difficult to live within, adjust the percentages so it is more realistic. You know your budget is working when the amounts you choose take discipline to maintain, but are not overly stressful.
As you make your budget each month, look for ways you can reduce your spending in each specific category. Perhaps you could bike to work and save on your fuel bill. Buy less convenience foods and eat more fresh vegetables to cut back on groceries, and perhaps your waistline. Drop your cable TV and get a Netflix account instead to stream your favorite shows. If you work at it, you will find all sorts of creative ways to spend less.
Managing your money well will help you honor God, grow your wealth, and give generously to the causes that you wish to support.
For a more robust treatment of this topic and other issues with money management, see my e-book:
Available at Amazon.com.