Creating a Budget: Step 1

First, relax. It is really not that difficult. And as we previously discussed, it will actually provide you with financial freedom!

If you are ever going to get your finances in order and achieve your financial goals, you must first determine what you are doing with your money. A budget, or spending plan as we like to refer to it, provides the road map for where your money goes each time you receive a paycheck. In other words, how you spend your money when you receive it, is dictated by what is on the spending plan.

Pursuant to the Good $ense budget course materials, the benefits of a Spending Plan are:

First, it gives us the facts about how we're doing. It removes the guesswork and the anxiety we feel when we don't really know what the true situation is. A Spending Plan allows us discuss our finances and make decisions based on fact rather than emotion.

Secondly, it avoids waste. Without a Spending Plan we will spend more money. We all want to be good stewards and not waste God's resources.

Thirdly, it keeps our values and priorities in check. A Spending Plan reflects what is really important to us. Without it, we can easily fall into spending patterns that conflict with our financial goals or are not God honoring.

After we earn our money, the following is generally how we should prioritize what we do with it:
1. Give
2. Save
3. Pay down debt as quickly as possible
4. Spend

When we choose to be faithful in these financial areas, the Bible indicates that we become a: (1) diligent earner, (2) generous giver, (3) wise saver, (4) cautious debtor, and (5) prudent consumer.

Step 1: Create categories for what you will be spending your income on.

So how are you going to spend the money you earn? Right now, it might be whatever most urgently requires your attention. A bill, the rent or mortgage, the car note, the utilities. That is a tough way to get through until the next paycheck. The main reason is because you have no real certainty where your money is going and whether or not you will have enough to pay for everything you need, like food, gas, etc.

We have provided for your use a blank Spending Plan worksheet that will help you get started. This Spending Plan worksheet identifies the categories that most people spend their income on. The percentages in the parentheses indicate our recommended percent of your income that should be allocated for that category.

This Spending Plan worksheet should be inclusive of all possible categories, however, if there is something missing, add to it. Review the Spending Plan worksheet and begin thinking of which categories apply to your current spending. The next step will be to start filling it out which we will cover next time.