Now that we have obtained a blank Spending Plan worksheet and identified our spending categories, it is time to start filling it out. Today, we are going to start with income. As previously mentioned and as will be the case as we fill out our Spending Plan worksheet, the guidance to do so comes from the resources of the Good $ense financial ministry.
The first area of our financial lives is - earning. The Pull of the Culture tells us that our self-worth is primarily determined by our position in our professional life and how much we make. This drives us to make more money and deceives us with the lie, "A little more money will solve all our problems."
But God does not value us by our position or how much money we make. None of that matters to Him. The Mind and Heart of God (which is where we want to be with all our financial decisions) counters these cultural myths with the message that our value is measured by who we are -- beloved sons and daughters of God.
Do you think that work is a blessing? Some of you may be quick to respond with an emphatic, "NO!" However, Genesis 1 states that, after creating man and woman in his own image, God blessed them and called them to join him in the ongoing management of His creation. By that act, God established that work is a blessing, not a curse, and that all work has dignity.
We should be "diligent earners" working with commitment, purpose and a grateful attitude. This is hard for some of us because we allow the situations we are in dictate our attitude in a negative way. Colossians 3:23 actually commands us to be diligent: "Work hard and cheerfully at whatever you do." This same verse also calls us to be purposeful. We are to work "as though you were working for the Lord rather than people." Have you ever thought about that? Have you ever considered going into work and telling yourself, "I'm not here to work for my boss, but rather, my Lord and Savior Jesus Christ"? How would that impact your performance? How would that impact your decision making?
We should also be grateful for the job we have. Again, how many of us are truly grateful for our job? Deuteronomy 8:17-18 reminds us that even our ability to earn is a gift from God: "You may say to yourself, 'My power and the strength of my hands have produced this wealth for me.' Remember the Lord your God, for it is he who gives you the ability to produce wealth."
Step 2: Filling out Earning/Income Section on your Spending Plan
Under Salary #1 and Salary #2, you are asked to put down your net take home pay. This is the amount you bring home every week, every two weeks or every month after taxes, insurance and all other deductions have been made. If your paycheck is always the same, that is an easy figure to write down.
However, if you make commissions or your income varies from week to week or month to month, you need to make a conservative estimate of your take home pay during the past year. For example, a $30,000 estimate of after-tax annual income divided by twelve months results in an estimated average monthly income of $2,500. In months when income exceeds $2,500, the excess goes into short term savings to be drawn on in months when income is less than $2,500. Then, at the end of the year, if you happened to have made more than $30,000, you use the excess to help accomplish one of your financial goals that you established at the beginning of the year, such as, paying down any existing debt you may have.
You will note that there is room on the Spending Plan to account for more than one income. This will apply if you have a spouse who is also working. If you are able, the idea is to live off only one income. In other words, the primary income goes to pay for ongoing necessary expenses such as:
1. Giving
2. Savings
3. Housing
4. Food
5. Clothing
6. Transportation
7. Basic household
8. Basic entertainment
The second income should be used for:
1. Additional giving
2. Additional saving
3. Accelerated debt repayment
4. Additional travel and entertainment
5. Other non-essentials
Therefore, if the second income stops for any reason, your basic needs can still be met.
Consider this: What happens to your raises?
All of us have been in the position where we have been blessed with a raise that increases our income. At first, we are so excited to have that extra money. However, after a couple of months, we wonder where it went as our spending now dictates that the raise hasn't provided us with any cushion but rather, it is needed to pay for our everyday expenses. We wonder how we could have made it before the raise!
Make sure you decide AHEAD OF TIME what you are going to do with your raises. Either intentionally apply that to one of your goals or put it in a savings account so it isn't touched. If you are ever going to start making head way on changing your financial situation and accomplish your goals, you have to spend LESS than what you make.
Congratulations! You have completed the first section of your Spending Plan worksheet.
Next time, we will complete the Giving section; which by the way, is the most important of them all!
Tuesday, January 15, 2008
Sunday, January 13, 2008
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.
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.
Sunday, December 30, 2007
Budget Benefits: A Great Start to the New Year
For most people, when they think of budgets they immediately cringe. They think: "The fun times are over. I'll never be able to spend any money." That cannot be further from the truth.
A budget can do 3 primary things:
1. Provide a roadmap for your income so you tell your money where it goes rather than it telling you.
2. Help you achieve your financial goals.
3. Create financial freedom.
A budget provides a roadmap for your income. It tells you exactly where your money should be going. That way, you know exactly how much you can spend when you go to the department store or to a restaurant, rather than worrying later if you have enough money in the account to pay your car note, or gas, or the groceries.
The best analogy I've come across for explaining the benefits of a budget comes from the Good $ense (www.goodsenseministry.com) financial ministry materials. Suppose you were at the beach and you wanted to get into the water but you knew there was a dangerous rip current that would quickly take you under water. You would be very hesitant about getting into the water, and may not do it at all. Now suppose the lifeguards put a boundary around the area where it was safe to swim. You now know with certainty that as long as you swim within the confines of that boundary, you will not be pulled under by the rip current. Thus you can swim with the peace of mind that all is safe.
A budget serves the same purpose. It creates a safe boundary for you to use your money. Go outside that boundary and you are at serious risk of being taken under by the rip current, or worse yet, by your creditors!
A budget also helps you achieve your financial plans. It happens all too often that we know in our mind what we want to achieve financially. However, we fail to write those goals down. We then lose track of our spending and wonder why we have no extra money left at the end of the month. We, therefore, never have the money to reach our financial goals. How frustrating!
Creating a written plan of exactly where your money is supposed to go each time you receive your paycheck, helps ensure you don't consistently overspend on those items that might get you in trouble each month (for me and my family - eating out!). It also creates peace of mind that you know exactly where every dollar is going so there is no guessing on which bills to pay with which paycheck. You will then have the money necessary to start reaching those goals.
I tell people that the start of the new year is the perfect time to review your finances and develop your plan for the upcoming year. Just as people resolve to eat better, excercise more and read more at the start of each year, so too should they be establishing a written plan for their finances.
That is the goal for January: to create a budget for the New Year. I will help you do that on this blog.
Remember, budgets are not restrictive. They are actually the key to living financially free. When you have control over your money to tell it where it is going every month, it no longer controls you. Until you realize that, you really won't have any fun.
A budget can do 3 primary things:
1. Provide a roadmap for your income so you tell your money where it goes rather than it telling you.
2. Help you achieve your financial goals.
3. Create financial freedom.
A budget provides a roadmap for your income. It tells you exactly where your money should be going. That way, you know exactly how much you can spend when you go to the department store or to a restaurant, rather than worrying later if you have enough money in the account to pay your car note, or gas, or the groceries.
The best analogy I've come across for explaining the benefits of a budget comes from the Good $ense (www.goodsenseministry.com) financial ministry materials. Suppose you were at the beach and you wanted to get into the water but you knew there was a dangerous rip current that would quickly take you under water. You would be very hesitant about getting into the water, and may not do it at all. Now suppose the lifeguards put a boundary around the area where it was safe to swim. You now know with certainty that as long as you swim within the confines of that boundary, you will not be pulled under by the rip current. Thus you can swim with the peace of mind that all is safe.
A budget serves the same purpose. It creates a safe boundary for you to use your money. Go outside that boundary and you are at serious risk of being taken under by the rip current, or worse yet, by your creditors!
A budget also helps you achieve your financial plans. It happens all too often that we know in our mind what we want to achieve financially. However, we fail to write those goals down. We then lose track of our spending and wonder why we have no extra money left at the end of the month. We, therefore, never have the money to reach our financial goals. How frustrating!
Creating a written plan of exactly where your money is supposed to go each time you receive your paycheck, helps ensure you don't consistently overspend on those items that might get you in trouble each month (for me and my family - eating out!). It also creates peace of mind that you know exactly where every dollar is going so there is no guessing on which bills to pay with which paycheck. You will then have the money necessary to start reaching those goals.
I tell people that the start of the new year is the perfect time to review your finances and develop your plan for the upcoming year. Just as people resolve to eat better, excercise more and read more at the start of each year, so too should they be establishing a written plan for their finances.
That is the goal for January: to create a budget for the New Year. I will help you do that on this blog.
Remember, budgets are not restrictive. They are actually the key to living financially free. When you have control over your money to tell it where it is going every month, it no longer controls you. Until you realize that, you really won't have any fun.
Monday, October 29, 2007
Does God Care How We Use Our Money?
Absolutely! People who don't believe in God or don't have a close personal relationship with Him, think He is irrelevant or dosen't care about how we use our finances. They also tend to think that the Bible is not a practical resource for 21st century issues. That could not be farther from the truth. Money is the second most discussed topic in the Bible (the first is love). Two-thirds of Jesus' parables discuss the handling of financial resources. God knew that left to our own devices, money would become the chief rival god in our lives. God wants a close personal relationship with each of us. When we spend the majority of our time thinking about how to get more money or worrying about not having enough of it, we don't focus on God and what He wants us to accomplish in our lives.
Unfortunately, we live in a society where advertising's main purpose is to make us dis-satisfied with what we already have or make us feel we can't live with things we don't have. This is the pull of the culture telling us it's ok to put that sweater on credit, or pay for the new leather couch over 12 months because it's just as if you were paying cash. Or telling us that we can afford that bigger, nicer house with an interest only loan or initial low interest rate (that always skyrockets at the worst possible moment). Or telling us that we deserve that expensive car because after all, your neighbors have it and if they can afford it, so should you. These are pitfalls that can get us into huge financial trouble.
Money is not evil. The love of money is. It is not a sin to buy nice things. However, how we prioritize our finances is extremely important to God. God wants nothing but the best for us and He knows what is best for us. As it states in Matthew 6:24 (NLT): "No one can serve two masters. For you will hate one and love the other, or be devoted to one and despise the other. You cannot serve both God and money."
I am the chairperson of the Good $ense financial ministry at my local Church. Good $ense is a program initially implemented by Willow Creek Church in Barrington, IL http://www.goodsenseministry.com. Our main focus is to instruct individuals on how to use their finances based on biblical principles, while at the same time, strengthen the individual's personal relationship with Christ. In addition to my own experiences and research, some of my comments are dervied from the instructional materials we use from the Good $ense ministry. One of the areas that we instruct on is the cultural order vs. the God-honoring order of prioritzing our finances:
The culture tells us that we should use our finances in this order:
1. Our lifestyle
2. Our debt
3. Our savings
4. Our giving (if anything is left over)
The God-honoring order is completely opposite:
1. Giving
2. Saving
3. Debt (hopefully none)
4. Lifestyle
The key to the God-honoring order is that we give from the very top. That means from our gross (not net or take home) pay. Giving comes from the heart. The Bible directs us to at least give 10% of our gross (also called the tithe), but it certainly doesn't stop there. If you are at a point that you cannot give at least 10% to the work of God (usually through a Church or local christian charity), then give something. Then establish a goal of reaching 10% or more as quickly as possible as you begin to pay down your debts. Putting God first in our finances shows that we trust in Him to provide for us. When we don't, God labels that as stealing from Him (Malachi 3:8-9; NIV). Have you ever thought that you may be stealing from God?
This is not designed to make you feel guilty about using your money. Rather, it is designed to enlighten you on God's perspective of our financial resources. Being the loving God that He is, God goes on in Malachi 3:10 and tells us to TEST Him with our tithe and that He will "throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it" (NIV). This is the only time in the Bible that God tells us to test Him. But be careful! "We should not give to God with the expectation or for the purpose of getting something back. God is saying that if we choose to be generous, he will keep giving to us so that we can continue our lifestyle of giving" (2 Corithians 9:8-11, as summarized in the side notes of the NIV Quest Study Bible, Revised by The Zondervan Corporation).
When I was struggling financially and God put on my heart that in order to get out of my financial nightmare to give 10% back to Him from my gross, my initial reaction was "how in the world am I going to be able to do that?!" I was already not making ends meet, so having less money at first seemed to make no sense. However, I quickly realized that as I started tithing, I was no longer trusting in my own abilities to get me out of the mess I created. God was taking over. It was very scary, but God was so faithful to me. I cannot even begin to attempt to recall everything He did for me during those times, but He always provided in ways that I thought initially were impossible. From that point forward, I never missed any payments to my creditors. My story is not unique. There are literally tens of thousands of people with a similar testimony. However, one thing we share in common is: we took that leap of faith to honor God with our tithe regardless of our financial situation just as he expected. In return, He blessed us, just as He promised.
We will cover Saving, Debt and Lifestyle on future blogs.
Unfortunately, we live in a society where advertising's main purpose is to make us dis-satisfied with what we already have or make us feel we can't live with things we don't have. This is the pull of the culture telling us it's ok to put that sweater on credit, or pay for the new leather couch over 12 months because it's just as if you were paying cash. Or telling us that we can afford that bigger, nicer house with an interest only loan or initial low interest rate (that always skyrockets at the worst possible moment). Or telling us that we deserve that expensive car because after all, your neighbors have it and if they can afford it, so should you. These are pitfalls that can get us into huge financial trouble.
Money is not evil. The love of money is. It is not a sin to buy nice things. However, how we prioritize our finances is extremely important to God. God wants nothing but the best for us and He knows what is best for us. As it states in Matthew 6:24 (NLT): "No one can serve two masters. For you will hate one and love the other, or be devoted to one and despise the other. You cannot serve both God and money."
I am the chairperson of the Good $ense financial ministry at my local Church. Good $ense is a program initially implemented by Willow Creek Church in Barrington, IL http://www.goodsenseministry.com. Our main focus is to instruct individuals on how to use their finances based on biblical principles, while at the same time, strengthen the individual's personal relationship with Christ. In addition to my own experiences and research, some of my comments are dervied from the instructional materials we use from the Good $ense ministry. One of the areas that we instruct on is the cultural order vs. the God-honoring order of prioritzing our finances:
The culture tells us that we should use our finances in this order:
1. Our lifestyle
2. Our debt
3. Our savings
4. Our giving (if anything is left over)
The God-honoring order is completely opposite:
1. Giving
2. Saving
3. Debt (hopefully none)
4. Lifestyle
The key to the God-honoring order is that we give from the very top. That means from our gross (not net or take home) pay. Giving comes from the heart. The Bible directs us to at least give 10% of our gross (also called the tithe), but it certainly doesn't stop there. If you are at a point that you cannot give at least 10% to the work of God (usually through a Church or local christian charity), then give something. Then establish a goal of reaching 10% or more as quickly as possible as you begin to pay down your debts. Putting God first in our finances shows that we trust in Him to provide for us. When we don't, God labels that as stealing from Him (Malachi 3:8-9; NIV). Have you ever thought that you may be stealing from God?
This is not designed to make you feel guilty about using your money. Rather, it is designed to enlighten you on God's perspective of our financial resources. Being the loving God that He is, God goes on in Malachi 3:10 and tells us to TEST Him with our tithe and that He will "throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it" (NIV). This is the only time in the Bible that God tells us to test Him. But be careful! "We should not give to God with the expectation or for the purpose of getting something back. God is saying that if we choose to be generous, he will keep giving to us so that we can continue our lifestyle of giving" (2 Corithians 9:8-11, as summarized in the side notes of the NIV Quest Study Bible, Revised by The Zondervan Corporation).
When I was struggling financially and God put on my heart that in order to get out of my financial nightmare to give 10% back to Him from my gross, my initial reaction was "how in the world am I going to be able to do that?!" I was already not making ends meet, so having less money at first seemed to make no sense. However, I quickly realized that as I started tithing, I was no longer trusting in my own abilities to get me out of the mess I created. God was taking over. It was very scary, but God was so faithful to me. I cannot even begin to attempt to recall everything He did for me during those times, but He always provided in ways that I thought initially were impossible. From that point forward, I never missed any payments to my creditors. My story is not unique. There are literally tens of thousands of people with a similar testimony. However, one thing we share in common is: we took that leap of faith to honor God with our tithe regardless of our financial situation just as he expected. In return, He blessed us, just as He promised.
We will cover Saving, Debt and Lifestyle on future blogs.
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