Managing Money God’s Way

Often the hardest part of doing something is just getting started.  For example, millions of Americans smoke and most people know that smoking will cause long-term health issues, yet they don’t quit.  Why?  The majority of people know that McDonalds is not only fast, but it can also be bad for you (and can be expensive).  Yet, thousands of households feast nightly at the altar of the dollar menu.  Why?  I think the answer to both of these questions is because it is easier to keep doing what you are doing than to change your lifestyle.

Pay Me Now, Pay Me Later

Fram, the maker of automobile oil and air filters has a very effective commercial that says, unless you take care of your car problems today, no matter how small they appear, you will have to pay someone a lot more money to fix the big problems later caused by years of neglect.  The same idea applies to our personal finance situation.  If we refuse to make the necessary life changes now to address our current problems, the problems in years to come will be a lot bigger.

Have you thought about how you are going to pay for your kids college? What about your own retirement?

Just Do It!

In 1988, Nike introduced a new slogan – Just Do It!  I am pretty sure that almost everyone has at one time or another heard or read those words.  Most likely, especially if you are a parent, you have used those words.  But too often, we ignore the meaning behind the phrase and become content with ‘not doing it’.

The thing we are not doing is obviously the one thing in our life that is preventing us from being successful.  The weird thing is that the one thing that is holding you back, probably isn’t that big of a deal.  As a matter of fact, for most people, 30-minutes a week, could change their financial life forever. What am I talking about?

Success Begins with a Budget

You guessed it a budget.  What else would I be talking about on a Personal Finance blog.  Maybe you have a budget, but you aren’t living on it.  Maybe you and your spouse just can’t agree on how to spend your money.  Whatever the reason you are not living on a budget, it is time to treat the problem and let go of the excuses.

Before my wife and I began living on a budget, we often found ourselves not able to afford certain things.  We were constantly telling each other, “We can’t afford that”.  It usually wasn’t anything overly extravagant, just normal items that today we can buy anytime we like.

By managing our resources we have found that we no longer have to say, “we can’t afford that”.  However, what we have found is that quite often we don’t want to buy a lot of those items anymore.  There are still times when we find things that don’t fit into our budget, but instead of saying “we can’t afford that”, we now say, “we have decided to spend our money on more important things”.

By putting the focus on what we have decided to do (instead of what we can’t do), we keep a positive attitude with regard to our finances.  If there is something that we really want, we simply decide on how much we need to save to make it happen.

A positive attitude is extremely important when things begin to slow down or the light at the end of the tunnel seems to be getting dimmer.  Anyone that tells you living financially free is easy hasn’t ever had to struggle to make ends meet.  The ideas we talk about on this site are simple, but implementation of those ideas is anything but easy.  The next time you find yourself wondering if it is worth it, just remind yourself that you have decided to be in control of your future.  Remind yourself that you have decided to no longer make poor decisions based on emotion.  Remind yourself that just because it doesn’t fit into today’s budget, doesn’t mean you can’t afford it.  It simply means that you have decided to spend your money on more important things.

I have been having a discussion with my wife lately that centered around the topic are we ‘living within our means’ or ‘living below our means’.  I think they are two phrases that are completely different and here are my ‘definitions’ of them.

Living Within Your Means

To me, this phrase is too positive.  Living within your means sounds like you are spending everything that you earn. That sounds more like living paycheck to paycheck.  Which one sounds more positive to you? If I told someone I was living within my means, they would think that I am getting by just fine.  However, since I am spending everything that I earn in order to pay the bills, mortgage, debt, etc., I am in no way saving any money.  They wouldn’t think to ask if I am saving money because the phrase kind of implies that I am saving when I am not.  However, living within your means also implies that you are taking on no additional debt.  Since I am only buying things that I can afford based on my income, I would not be buying things that I cannot pay with cash.

If I told you that I am living paycheck to paycheck, you would probably feel bad for me.  Living paycheck to paycheck is more negative and it definitely applies that I am saving no money.  I am here to tell you that these phrases are the same thing and there is no difference.

Living Below Your Means

When someone says that they are living below their means, I automatically think of clipping coupons and driving an old beat up car.  I don’t know why, but that is just what I picture.  However, I feel that living below your means simply means that you are able to sustain your standard of living by spending less than you earn.  You may be completely comfortable with the way you live your life financially.  You just do not spend all of your income meaning you can save.  You can save up for retirement, a car, a house, etc.

What are your definitions of these phrases? Are they radically different than mine? Which category do you feel you fit in?

Most people think that the solution to their financial problems is more money.  If they could just get a few more dollars each month, they would be able to make ends meet.  Larry Burkett used to tell a story of three couples, each with different incomes and expenses, yet they all three said the same thing.  The cause of their financial problems was too little income.

Although I understand the logic behind the statement, the logic really is flawed.  The answer to the problem isn’t always more income, sometimes it is less expenses.  That’s right.  If you had less money going out, you wouldn’t need more money coming in.  Instead of buying coffee that costs $5.00 a cup, you could make coffee at home for $0.50 a cup.  Instead of paying for the extra fast internet you could cut back and go with the pretty fast internet.  Instead of paying $6.00 a day to eat out for lunch you could bring lunch from home.

What does all of this do for your “I don’t have enough money” problem? If you are not spending as much, you don’t need as much.  When you decide (and it is a choice) to cut your expenses, it is the same as getting a raise, and you didn’t have to ask your boss to get this raise.  Actually, cutting your expenses is better than a raise for two reasons. First, because you have learned to live on what you are currently bringing home, you aren’t paying more taxes. Second, when you really do get a raise you will be able to use the raise for the important parts of your financial plan, like debt reduction and retirement.

What have you done recently to lower your monthly outflow? Leave a comment and share your ideas with others.

I write this article today, as I am going through the process of determining if I am spending money that I really don’t need to.  This is something I think we should all go through periodically.  It helps us to see if things have crept into our spending that we could get rid of.  It is like when you are looking for something and it is right under your nose, but you cannot see it.

The same thing is usually true with our money. Unless you are living on a budget it is very likely that you are spending money each month and you don’t even realize how much it is costing you. A while back I read an article at SmartMoney.com that lists 7 Things You’re Wasting Money On.

1. Bottled Water
2. Extended Warranties
3. Gym Memberships
4. Overdraft Fees
5. Organic Produce
6. Auto Insurance
7. Music Downloads

At some time or another each of us has spent money on most if not all of these items.  Some may seem like they are necessities, but with a little bit of work, you can still enjoy the benefits without wasting the money.  For example, bottled water.  You can try using a filtered pitcher such as Brita.  Auto Insurance can often be found cheaper from another company, or maybe your current company will offer a discount.  What about that gym membership? Do you really need to go to the gym to use their treadmill? Try a nice walk around the block.

The one that seems to be the most detrimental to your long-term financial plan is the overdraft fees.  If you can convince yourself to start living on a budget, then you can eliminate overdraft fees from your life very easily.  The solution is very simple; first, keep your checkbook balanced or monitor your account online at least once a week. Second, stop using your credit and and finally, don’t use your debit card on anything other than what you have budgeted.

It isn’t difficult but it does take some discipline.

I have often recommended that people give up their cable TV in an effort to decrease their monthly expenses and help pay down their debt.  The usual response is “No way!”.  I can completely understand why they feel this way.  Watching television has almost replaced baseball and the national pastime.  Now with HD television, large screen plasma panel and more channels than anyone can possibly watch in a lifetime, it is very easy to understand why so many people feel like they couldn’t live without it.

What about you? Ready to give up cable TV for the benefit of your kids and your wallet? If not, why not? Leave a comment and let us know how much you are spending each month on cable TV and all of the extras that go with it.

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

I can speak from experience that when we complete our budget before the month begins, my wife and I both feel so much more confident that we are going to be successful that month. When we don’t get the budget done before the month begins there is always a little bit of fear that we are going to make a mistake. Fortunately, we are at the point where small mistakes aren’t going to impact us too much, but the extra stress is there just the same.

My suggestion is to be consistent each month and complete your budget before the month begins. Remember the budget should be “on-purpose and on paper”. This is the first step in winning in the area of personal finance.

I must admit, I used to struggle with budgeting.  I mean it was always a pain to figure out what categories to use in a budget, how much to budget for each category, and manage to the budget.

What I tried at first was Microsoft Money and their built in budget tool.  I did not care for it, as it was difficult to use, difficult to manage, and it never seemed to work for us.  We were never able to stay within budget.  Then I tried a basic Excel spreadsheet.  This was easier to use, but still I could never manage to our budget and we always struggled.

Budget Failures

The reason we always failed at creating and managing a budget I think were two fold.

1. I really hate to budget.  Makes me feel like I am limiting myself with my money.  I like to now call what I do a spending plan.  My wife and I give every dollar we make a job.
2. Managing to a budget was difficult because even though we budgeted a certain amount for instance eating out, we never knew how much we had left to spend.

Spending Plan Success

What we have switched to that works for us is a spending plan.  For the plan we use a great spreadsheet that you can find over at It’s Your Money.  It is an envelope spreadsheet.  Why it is perfect for us is you are able to allocate funds into a virtual envelope and as you spend money in that category it reduces the envelope by that amount so you always know how much you have left to spend.  If you overspend, you must borrow funds from another envelope to make up the negative.  That way, you can never spend more than you have (as long as you stay on top of managing the envelope system).

So if you are looking for a better way to budget, give this a try!

I am writing today to start what will probably be a 3 part series on budgeting.  I was inspired to write this series by one of the comments I received the other day from JoAnn.  She writes “Can you teach an old dog new tricks? I am retiring soon – will be 65 in a few months – have never in my life done a budget. I’m not sure I even know how.  I will be living on 30% less income. I would like to see on this page, how to make a budget.”  So today I start out with what I am calling “First Steps”.

Finances are one of the most difficult challenges that many of us face during our lives.  It is no surprise (or maybe I should say it SHOULDN’T be a surprise) that the challenges double when we get married.  There is no one way to create a budget and there is no definite key to financial success.  The best thing that we can do is be good stewards over what we have – what ever that means for each of us.

1. Keep up with what you are spending.  It doesn’t matter how much money you have you need a record of what you are spending.  Write down every thing that you spend each month and then look at ways you can improve on that spending or make cuts.
2. Pray over your finances.  This is not about asking for more but about asking for guidance over each penny that you spend. Talking to God about how you are utilizing your talents (money) will help you stay focused on doing the best with what you have.
3. Give freely.  It really is true that you can’t out give God.  When you talk to Him about your finances see what He leads you to give to others.  I’ve given away ear rings, dishes, food, time, and plants.  Tithing is important, but giving freely and joyfully of all that we are stewards over is just as important.

Getting your finances in order does not happen over night.  You have to be willing to change, mold and tweak your spending and income so that you can the financial challenges that are facing your life.

Not everyone makes a salary.  Many people live paycheck to paycheck and week to week.  It can be difficult trying to set up a budget when the money is coming in by the week and going out by the month.  Here are a few tips.

• Write down a list of all the payments that you make and the date that each payment is due.

• Put the payments together in equal (or close to it) amounts.

1. Car payment ($450), credit card ($75) and water bill ($75)
2. Mortgage ($650)
3. Electric ($250), Cable ($100), Phones ($200)

• Be sure that each group is scheduled before the due date of the bills. It is okay if the payments go out before the due date but NEVER pay late.

• Make the payments as soon as you get the paycheck, before anything else comes out. One of the reason people struggle to make monthly payments on weekly paychecks is that it is hard to set aside the money to make those payments. This skips that step.

• Save at least a portion of any amount that is left over.

Creating a budget for a weekly paycheck can be painless if you schedule out your payments in equal allotments so that the money can go where it is needed before it manages to go somewhere else.

Let’s all pitch in and help JoAnn.  What tips do you have for creating a budget?  What have you found that works best?  What spreadsheet or software do you use to help with your budget?