Establish and Live by a Budget
If you don't take control of your money it will take control of you and your life. Money is a great servant but is a cruel taskmaster. A budget is the most important and effective tool for getting your finances under control. A budget is simply a plan for earning and spending money. It provides limits and boundaries, which give security. There are many Scriptures on planning (Proverbs 15:22; 20:18; 21:5; 27:23-24. Jerermiah 29:11. Luke 14:28-30).
INCOME - How to Acquire Money
Human labour is the means by which we earn money. It is the key to the earning side of the financial equation. God is a worker. He worked for six days (on His creation project), then rested from his work on the seventh day (Genesis 2:2-3). We were created to work (Genesis 2:5, 15). The primary means of acquiring income is through work. Work was not a result of sin. It is part of God’s plan for our lives. He works and he wants us to work too. We are created to make a contribution and to add value to the world. In return we receive finances for our efforts.
A Plan for Financial Freedom
Most people will earn millions of dollars in their working lifetime. However, what we do with that money is what is most critical. That brings us to the second part of our budget which is our expenses. We need a plan for doing three things with our money - Spending, Saving and Giving. Most people only do one thing with their money - spend it. In fact, a lot of people spend more than their income and as a result they’re drowning in an ever-enlarging pool of debt. Consider starting with something like the 10-10-80 plan.
1. GIVE - first, give at least 10% to God. God gives us our very breath and the power to acquire wealth (Deuteronomy 8:18) All that we have comes from him and therefore belongs to him (1 Chronicles 29:14-16). Giving God the first part of our income is a regular reminder to us of this reality. In doing so, we honour him as our Lord and as the source and owner of all of our resources. In Old Testament times, ‘tithing’ (giving 10%) was a law for all Israelites. In the New Testament, the emphasis moves toward generous giving. Followers of Christ are instructed to give to God’s work - proportionately, generously, sacrificially, willingly, regularly, cheerfully, and wisely, excelling in the art of giving (see Matthew 6:1-4, 19-24. Mark 12:41-44. Luke 19:8. Acts 2:41-47; 4:36-37; 11:27-30; 20:35. Romans 15:25-27. 1 Corinthians 9:11-12; 16:1-4. 2 Corinthians 8-9. Philippians 4:18. 1 Timothy 5:17-18. 2 John 5-8). Giving 10% (‘tithing’) of our income to the work of God is an excellent principle of good financial management (not a law).
Abraham tithed 430 years before the law and Jesus affirmed the principle of tithing (Matthew 23:23. Luke 11:42). The new covenant of grace brings us to a higher law - a place where we give not because we have to but because we want to.
The subject of giving can be approached from two different perspectives - human wisdom or the wisdom of God. The natural mind says, “Giving means I make a loss.” The truth is when you give or invest in the God’s work it is not a loss but it is actually a deposit in your heavenly account. God records it and there will be return for you (Matthew 6:19-21. Luke 6:38. Philippians 4:10-19). God can make your 90% go further than you can make your 100% go without his help and blessing. Secondly, the natural mind easily says, “I can’t afford to give” or “I’ll give when I’ve got some surplus.” However, God challenges us that when we give in faith even when we are in a time of need, his miraculous provision begins to come our way. He only asks us to give of what we already have, not what we don’t have, and as we go first, in faith and obedience, we release his blessing into our life (see 1 Kings 17 and Mark 12:41-44).
2. SAVE - secondly, take at least another 10% and pay yourself by putting this in a savings or investment account. Prepare for the future by adopting a savings and investment plan (Proverbs 21:20). Savings creates freedom, reduces pressure, enhances joy, is a powerful witness and enables you to give. Make a decision to become a saver and get a plan to make it a reality (Proverbs 13:11; 21:5). Spend less than you earn, then save and invest the difference over a long period of time. Ants have small bodies and small brains but they are very smart (Proverbs 6:6-11)! They store up (save) for the winter months. We humans have bigger bodies and bigger brains but sometimes we’re pretty foolish. We have nothing saved up for the future. Growth financially takes time and continued effort. If we are faithful with what we have, God will give us more (Matthew 25:21).
Investing is about getting your hard-earned money to work for you. There are a lot of ‘shonky’ investment schemes out there that promise you a fast track to wealth (Eccesiastes 5:13-14). If it sounds too good to be true, it probably is. However, there are many investments that can yield good returns. Do your research, obtain good advice and learn about different investment types - both their potential returns and risks.
3. SPEND - use the remaining 80% or less to pay everyone and everything else. This is for the rest of your normal living expenses – food, clothing, housing, transportation, debt reduction, entertainment, holiday, extra giving, etc. You’ve already honoured God and paid yourself. You can now enjoy life a little because you’re on plan. You’re living wisely.
Beware of the major “budget busters”, especially “impulse buying”, which refers to unplanned expenditures based on emotion. Just because you can afford it doesn’t mean you should buy it. If you buy something on sale, you are not saving, you are spending. Advertising motivates us to buy things we often don’t need and seeks to make us dissatisfied with what we have now. Material things always oversell themselves and rarely deliver on their promises over the long term. Avoid situations that encourage you to spend. Be satisfied with what you have. Focus on what you have not on what you don’t have.
Use debt strategically (to increase assets) not destructively because debt puts you in bondage (Proverbs 22:7), it puts you under pressure (Proverbs 23:4), it can sabotage your peace and joy (Ecclesiastes 4:6), it can damage your Christian witness and it hinders you from being able to give (Luke 10:25-37). If you are in debt, make a decision to get out of debt, get a plan, get some help and don’t give up (Proverbs 3:27-28. Romans 13:6-8).
If you can’t live on 80% of your income you have to make some changes: Either earn some more income – find a higher paying job (upgrade your skills, if necessary, to make yourself more qualified), work extra hours or start an extra job (possibly part time). These are all possible options but consider the ramifications of each choice. The other option is to reduce your expenses, which may require you to ‘down-size’ your living standards (see Eccesiastes 4:6). If your standard of living is creating great pressure and stress in your life and relationships, why not lower it. Right-size your living expenses to match your income.
Most people think that the solution to their financial problems is to earn more. However, it’s not what you earn that matters - it’s how much you spend. If you consistently spend less than you earn, and save or invest the rest, you will gain financial freedom. It has nothing to do with how much you earn. Overspend just a few dollars a day and you can be thousands of dollars in debt in a number of years. On the other hand, put aside a few dollars a day into savings and you’ll save thousands of dollars in a number of years.