1) Understand your money world-view
Our relationship to money is very complex – in most cases we have grown up with a certain understanding, either as a result of our parents’ model or as a reaction against their principles. We define ourselves as “spenders” or “savers” and, in both instances, are quick to fall into the trap of following the world’s view that our money is our own. It’s little wonder; when we are bombarded by advertisers telling us that this is the case, and that true satisfaction is possible through consumption (or wise investment). We are happy to give a percentage of our income for ministry purposes, but all too often simply add a Christian gloss to a view of money that looks no different from that of our unsaved friends and family. Getting to grips with a godly view of money starts with reflecting deeply on whether we really believe that God owns everything, that He provides for all our needs and that we are living for the new creation, where we’ll leave behind all the possessions we stashed up on earth.
2) Test your spending habits and what they reveal
We may believe the biblical view in theory, but in practice it may look a little different. In The Treasure Principle Randy Alcorn says Jesus put such an emphasis on money and possessions (15% of everything Christ said relates to this topic) because there’s a fundamental connection between our spiritual lives and how we think about and handle money. Is your heart deceiving you? Ash Carter (author of The Money Mentor) points out that the only reason advertising works is because we are sinful – “at every point in history, human beings have looked to their harvests, their families, their trinkets and their toys to fill the deep longing in their hearts that can only be filled by a relationship with God”. Diagnose where your heart really lies by asking these kinds of questions: How would I feel about losing X (your job, for example)? If I had to choose between X and Y, which would I give up? How do I actually spend 168 hours a week? Where does the money from my salary really go? (Recording these details over a two-month period may reveal a surprising reality). And ultimately, ‘In 100 million years, will it matter that I…?’
3) Know God’s priorities for your money
Fortunately, the bible is not quiet about how we should order our priorities in order to reflect God’s concerns and be responsible stewards of the limited financial resources He provides us with. Carter defines our responsibilities as starting with providing for our own needs (so that we are not a burden to others), then for those of our family (this includes our parents, whether they are believers or not) and then the local church followed by the global church. Remember that all important differentiation between needs and wants when it comes to looking after ourselves and our families! Ultimately, the more we appreciate the ongoing generosity of God to us, the more willing we will be to give freely from all that we already have (2 Corinthians 9).
4) Get out of debt
This is when it starts to get practical. Most developed countries are struggling with massive national and personal debts. Living on credit, through unsecured loans (where you have not pledged an asset of equal value) may be “manageable” if you can maintain the monthly payments, but it reveals the underlying problem of living beyond one’s means and the strong possibility of an attitude towards money that is not honouring to God. If you find yourself in this situation, the starting point is to make a list of what your debts are, what they cost you over a year, and whether you have any items that you can sell in order to reduce these loans. Develop a strategy to pay off the most expensive debts first – it may require a change in lifestyle to free up more money to get out of debt quicker. The advice of a professional can be invaluable here.
5) Break down your expenditure
The Money Mentor divides spending up into five headings: fixed necessary expenditure (essential basic, unavoidable costs – rent, electricity, water etc), flexible necessary expenditure (these costs can change from month to month, for example groceries, depending on our consumption habits), long-term financial planning (we need to make provision for our retirement), giving (Randy Alcorn recommends thinking of tithing as training wheels to get you going: “Start at 10% of income, and then ramp up your giving from there, removing the stabilisers”) and variable discretionary expenditure (the category that covers everything not listed above; and also the easiest to overspend in!). Information is power, so once you are clear on the above (in practice, not just on paper) you can start planning to re-order the things in your financial matters that you are not happy with.
6) Make a plan
This is where the word budget comes in! To design an annual budget, set up a spreadsheet with the next twelve months across the top and your categories down the left-hand side. Put the income at the top, and expenses underneath, and using your records, estimate what you will spend in the year to come. Remember that plans change, so be prepared to be flexible. Also build in contingencies – there are always surprise expenses!
Try to think through one-off items that will occur, for example, a holiday, as well as events like Christmas and birthdays that will predictably break the regular pattern.
7) Think through future investments carefully
Bear in mind that all investments need to deliver returns. This is the case even when it comes to things like education, where we can be tempted to put sound financial practices to one side for the sake of emotional or other reasons. While there are many non-financial reasons to invest in your children’s tertiary education, at the end of the day their subsequent career needs to yield an appropriate return.
8) Remember cash is key
Any businessman knows that running out of cash spells disaster – and it’s the same when it comes to personal budgeting. Be sure to understand how your cash flows so that there is no point in the month when your expenses are more than the amount in your bank account, despite the theoretical availability of the money at a later point in the month.
9) Increase giving at every opportunity
Remember that our goal is to serve Jesus with our whole lives, so as soon as you receive an increase in income, or an unexpected bonus, consider how it can be used generously. Budgets are useful but at the end of the day they are simply tools to help free up more money for giving.
10) Keep records
Making real progress and change in the area of personal finance requires a long time – so commit to the long haul and keep going as you started. This means keeping your spreadsheet up to date, even when it seems that watching paint dry would be a more entertaining alternative. Over time, you’ll develop a system that works for you, but don’t expect it to be instinctive. And don’t be too hard on yourself when you don’t it right 100%. Success starts with that initial step – all the best for a disciplined and rewarding financial year ahead!
This article was published in Radiant’s Jan/Feb 2013 issue on page 11. Check out the article for budgeting tips and tricks from pastors’ wives!