Managing Money God’s Way

The first six principles we have discussed have focused on changing the way you think about your money and building a plan that will help you begin living within your means so you can get out of debt and begin saving money.  The final block in building a strong Biblically based financial plan is by design the most rewarding.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

We all know someone that at sometime in their life has needed financial help.  Maybe it was your elderly next door neighbor, or the single mom you pass in the grocery store, or maybe you yourself have been that person.  There is nothing wrong with needing help, but have you ever been in the position to be the person that helps?

Why Should I Help?

Some feel that helping others will only encourage the bad behavior that got them into the current situation.  While that may be true, they still need some help.  I feel that we should be discerning in our giving.  The first principle we talked about reminded us that everything we have belongs to God.  Would you be OK with someone frivolously giving away your money?  In the same way, we should not frivolously give away God’s money.  We should try to determine why the person needs help.  If it is because of bad behavior, the best help you could give them would be to teach them some good behavior.  Help comes in various forms – teaching a man to fish is always better than simply giving them a fish.

The Strong Should Help The Weak

If you determine that financial help is warranted you must look at your own situation.  Can you afford to help financially?  If you find yourself in a position that you have extra money to help others, then you are in a position of strength.  The strong can help the weak, but if you are also in the middle of a financial crisis don’t make it worse by giving money you don’t have.

Get Ready For The Change

“So let each one give as he purposes in his heart, not grudgingly or of necessity; for God loves a cheerful giver.” II Corinthians 9:7

One part of your budget should be designed specifically for giving.  As Christians, we should desire to align our character with the character of God.  God was a giver and as we systematically begin the process of cleaning up our financial life and start giving,  some wonderful things begin happening in our life.

• We become less selfish.
• We become content with less stuff.
• We see opportunities within others

All of these changes will not only make us a better person, but if we teach our children sound financial principles, we are building a legacy that will continue for generations.

Deciding to get your financial house in order is a great first step, but for most people actually getting a budget that works is a little more of a challenge.  The sixth Biblical Financial principle will help you decide what is important when creating your “on-purpose” spending plan.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

One of the biggest deterrents when it comes to creating that first budget is a fear of the unknown.  Let’s face it, for the most part, our schools aren’t teaching good sound financial principles.  When the average student graduates from high school they know very little about budgeting and even less about saving.  Then they head to college with a new sense of freedom and it is easy to understand why so many college students graduate with a mountain of debt and no real plan to effectively get rid of the debt.

Commit your activities to the LORD and your plans will be achieved. (Proverbs 16:3)

You wouldn’t begin to build a house without a good plan, and the same should be true in building your financial future.  You must have a plan that is prioritized around the things that are important.  For Christians and non-Christians alike the most important things in your plan should center around taking care of your family.

But if anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever. (I Timothy 5:8)

Dave Ramsey defines the four walls as food, shelter, transportation and basic clothing.  If you are taking care of these things each month then you can get up and start the day knowing that you are taking care of your family.  When you begin your budget these items need to be near the top of your list of priorities.

When you write your budget the first time, it is going to seem very cumbersome and unrealistic.  That is to be expected, after all, did you ride your bike the first time you climbed on the seat.  Probably not.  It will take some time to get used to having control of your finances, instead of your finances having control of you.  Don’t be afraid to look to others for help.  Just be careful not to take advice from anyone that you wouldn’t want to change places with.  In other words, if you seek advice, look for someone who is already where you want to be.  Those are the people that you should imitate, not the guy that is just as broke as you.

Do you know that feeling you get when you put your hands in the pocket of your favorite pair of jeans and you find money?  That is awesome isn’t?  The crucial part of this new find is deciding what to do with it.  Some would go and spend it on a cup of coffee.  Maybe it was a 20-dollar bill and it will help offset another pizza night this month…or you could save it or use it to help pay off debt.

If you could find extra money each month, what would you do with it?  Deciding to ‘Establish a Cash Flow Plan with purpose is the fifth Biblical Financial Principle in our series.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

Finding extra money is something that is almost guaranteed when you start working and living on a budget.  How is that possible?  When you decide ‘on-purpose’ where your money is going, you gain control of how your money is spent.  You won’t be wondering where that money in the jeans came from, because you are now going to be the boss of your money, instead of the other way around.

(Luke 14:28-30)
“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 – 29 lest, after he has laid the foundation, and is not able to finish, all who see it begin to mock him, 30 saying, ‘This man began to build and was not able to finish.’ ”

From the scripture passage above, you can see that a successful financial plan, really has two parts.  The first, sitting down and actually putting the plan together.  The second, implementing the plan.  If you have never put a successful budget together, there are many different ideas about what you need to do.  Whether you use a software package, a spreadsheet, or paper and pencil, the process is basically the same.  Take your income and allocate it (or spend it) until it is gone.  The goal is to have all your necessities covered first and then if there is anything left over, start applying it to other areas of your life.  The two most important areas would be savings and debt.

In my next post, we will look more closely at the nuts and bolts of developing a working, successful budget

One of the greatest myth’s people have bought into is the benefit of bankruptcy.  This idea brings us to the fourth Biblical Financial principle, which is the understanding that there is Life after Debt.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

It is unfortunate, but a lot people feel that they can simply use bankruptcy as a way to walk away from the debt they have accumulated.  As Christians, the Bible is very clear that we are responsible for the repayment of our debt.  Even for non-Christians, the idea of following through on your promise is something that everyone should understand is a good thing.

Personal Control? Lost or Given Away?

When you sign your name on a contract, a loan agreement or even on a credit card receipt, you are promising to pay back the money that is being extended to you.

Proverbs 22:7
“The rich rules over the poor, And the borrower is servant to the lender.”

When you borrow money, the lender gains a level of personal control over you.  When you have borrowed yourself up to your financial limit, you have lost almost all control of what you can do with your finances.  You have sacrificed your financial freedom.  When we think of the sacrifice that Jesus paid on the cross to free us from the bondage of sin, we get a small picture into what God thinks of His children being in bondage, and yet for the thrill of the moment we are willing go out and tie ourselves to stuff.  We need to understand that debt cannot be a long-tern way of life, however, no matter how deeply in debt we are, there is a way out.  It is not going to be easy, but there is life after debt.

Sick and Tired of Being Stuck

Before you can get out of debt you have to get sick and tired of living the way you are.  Maybe you are tired of seeing all of your money go out with no real enjoyment from all the ’stuff’.  Maybe there are bigger things you want to be doing, but because of the debt you can’t move toward your dreams.  Whatever the reason, deciding to get out of debt is the first step.

When you look at the new bankruptcy laws, things are a lot tougher now than they used to be.  Each state is a little different, but the one thing that is common, is that it will cost you to file and declare bankruptcy.  In addition to the big black mark on your credit, most states will force you to liquidate things to help pay off the debt.  You can no longer just walk away from the problem.  If it is going to hurt to go through bankruptcy, you might as well go through some pain and get out of debt the old fashion way; pay it back.

Getting out of Debt

There are a lot of differing opinions on how a person should start paying off debt.  Some think you should always payoff the debt with the highest interest rate first.  Others thinks you should start with the smallest balance and pay them off smallest to largest.  This is the method Dave Ramsey suggests and I think it works very well.  It isn’t the most efficient mathematically, but it will give you positive satisfaction and will provide the results that will keep you motivated.

There is still one problem.  Where are you going to find the money to start paying off your debt?  That is a great question, and if you missed it, I answered that question in the third Biblical Financial principle.  Make sure you check it out.  In the next principle we will look at establishing a budget that will help you live on less than you make.

The second Biblical Financial principle was to start saving money.  Today we introduce the third principle which is the key to saving money.  This principle is very simple, but not always easy.  In order to start saving money you have to stop spending everything you make.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

This is the single most important rule of money management.  You only have a finite amount of money, and when that is gone, you can’t keep spending by using credit.  The new definition of being able to afford something needs to become, “I have the money to purchase it”.  If you can’t pay for it, you can’t afford it.

Unfortunately, society has a different definition of what it means to afford something.  If you go to the loan officer, he or she will tell you that you can afford anything if the terms are right.  That is why so many people got wiped out in the sub-prime mortgage mess.  Someone convinced them they really could afford that great big house, they just had to get a loan with a Variable Rate mortgage.  Now that the rate has changed they can’t afford the payment, which means they couldn’t afford the house.

“For we brought nothing into this world, and it is certain we can carry nothing out. 8 And having food and clothing, with these we shall be content.”    I Timothy 6:7-8

The one thing that causes people to buy more stuff is a lack of contentment.  We just aren’t content with what we have. There is always something else that we ‘need’.  We keeping ‘needing’ things until we can’t pay our bills.  We aren’t the government so we eventually have to pay our bills.  The best way to make sure we can pay our bills is to spend less than we make and save the rest.

Unfortunately, what we see is that 61% of the families that use credit cards carry a balance from month to month, and the average balance is almost $10,000.  The amount of interest that these families are paying on the balance on credit cards is ridiculous.  These rates can go as high as 30%.  If the average family carrying $10,000 in credit card debt has to pay 30% interest, and they are making only minimum payments, it will take decades, not years, to pay of the debt.

Paul tells us in the book of Philippians that he had to learn to be content.  It doesn’t happen overnight, but just like trying to teach your puppy to sit or stay, we learn better with a treat.  Try living on less than you make for a single month.  I know that if you start saving and only buying things you can afford, you will learn to be content with what you have, and if you start spending cash instead of swiping a piece of plastic, I know you will make some changes. Trust me.  If you start laying down cold hard cash you will think twice about whether or not you really need that ‘thing’.

The Book of Proverbs has many great financial principles.  The second financial principle we want to look at in our series is ‘learning to save money’.  A lack of savings is the number one reason people go into debt.  They see something they want, they don’t have the money to pay for it, so they buy it on credit.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

How much are we saving?

In 2005, according to the Bureau of Economic Analysis the personal savings rate in the U.S was -0.5%.  That means that as Americans we spent more than we made.  There is good news however, according to government calculations, the savings rate for the last quarter of 2008 was 2.9%, which was up from 1.3% from the previous quarter.

“There is desirable treasure, And oil in the dwelling of the wise, But a foolish man squanders it.”    Proverbs 21:20

Are you wise or foolish?

If we use this verse from the book of Proverbs and apply it to the typical family we could come to no other conclusion than we are foolish.  The other negative impact on families that don’t save is the lessons that our children learn.  Unless we as parents are teaching our children how to save and manage money, we are setting them up to continue in the debt trap as they step out on their own.  Right now if you were to ask the freshman class at any college in the U.S. how they are paying for their degree, the overwhelming majority would say they will graduate with guaranteed student loans, but no guarantee of a job.  I can’t see anything desirable about that.

How do we teach people to save? Most people would like to save, but they just don’t seem to have any money left at the end of the month.  What can they do? Tomorrow we will look at the key to saving.

Today I will be starting a series dedicated to the seven Biblical principles of personal finance.  As a reminder I will list the principles and links back to the post for each principle as we tackle them.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

The first principle reminds us that everything we have belongs to God.

“The earth is the Lord’s, and all its fullness, The world and those who dwell therein.”   Psalm 24:1

If you have ever read the Bible, you were reminded from Genesis to Revelation that God is the creator of everything. However, we sometimes forget that everything includes our money and the things we buy with our money.

Most families in the U.S. have bought into the idea that “we deserve” stuff.  After all, we work hard for the money we get, so we should have all the nice things that we want.  To a degree that is true, and I believe the Bible teaches us that God wants us to prosper, however, the Bible also teaches us that we are merely stewards of God’s resources.

As a steward we are not owners, but instead we are managers.  Because we often put ourselves in the place of the owner we take something that doesn’t belong to us, spend it in a way that is not pleasing to the rightful owner and then wonder why our lives are in a mess.  I believe that if we truly want to prosper the way the owner intends for us to prosper, we have to begin by being a better manager of His resources.

When I borrow something that belongs to a neighbor or a friend, I can’t treat it as if it were my own.  I shouldn’t toss it out, just because I no longer have a use for it.  I shouldn’t lend it out to someone else just because they need it.  When I am trusted to manage that which does not belong to me, I need to make sure each and everything I do with that item would be approved by the rightful owner.  In the area of personal finance that means we should be spending, saving and giving our money in a way the rightful owner would approve.  Over the next few days we will be looking at principles from the Bible that will help you better understand what the owner would have you do with His money.

What if you don’t believe in God? Well, this post is not a sermon on eternity, but I think the remainder of the posts in this series will still apply to you.  It is kind of like the Ten Commandments.  Even if you don’t believe in God, the Ten Commandments are still good things to live by.

What the Bible says about Personal Finance

In the New Testament, Jesus spoke more about money, possessions and stewardship than any other topic.  It isn’t because money is the most important thing in our lives, He spoke so much about it, because He wanted us to understand that if we could learn how to handle the pressure that money brings to the family, and channel that pressure into helping others we could be successful.

Jesus understood the dangers of materialism.  Today we are bombarded on a daily basis to get more stuff.  Even during this roller coaster economy, we are tempted to spend more than we make.  This ‘I want it now’ lifestyle was exactly what Jesus was trying to teach us to stay away from.

Biblical Financial Principles

I am going to start a series on seven Biblical Principles that will change the way you think about money. If you take time to read these posts I know they will help you better understand who God is and how He wants you to live your financial life.

1. Understand God’s Ownership (Psalms 24:1)“The earth is the Lord’s, and all its fullness, The world and those who dwell therein.”
2. Learn to Save Money (Proverbs 21:20) “There is desirable treasure, And oil in the dwelling of the wise, But a foolish man squanders it.”
3. You Must Live on Less Than You Make (I Timothy 6:7-8) “For we brought nothing into this world, and it is certain we can carry nothing out. 8 And having food and clothing,  with these we shall be content.”
4. There is Life After Debt (Proverbs 22:7) “The rich rules over the poor, And the borrower is servant to the lender.”
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30) “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 – 29 lest, after he has laid the foundation, and is not able to finish, all who see it begin to mock him, 30 saying, ‘This man began to build and was not able to finish.’ ”
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8) “But if anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever.”
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7) “So let each one give as he purposes in his heart, not grudgingly or of necessity; for God loves a cheerful giver.”

In the upcoming days and week ahead, I will be talking about each item in an individual post.  Thanks to all of you who continue to read and support this blog.