Essential Steps in Responsible Money Management

Finances are a major problem in almost every family. Many live constantly on the brink of financial disaster, barely making it from paycheck to paycheck. Even the most conscientious grapple with the challenge of having an adequate income and deciding how to spend what they do have. A Gallup poll of Christian families shows that 40 percent admit to overspending each month. Of couples who are divorced or contemplating divorce, 90 percent cite finances as the major problem.

Part of the problem is our American tendency to define wealth in terms of material possessions. Our culture is centered not on attitudes of contentment or gratitude, but on a mindset of spending and acquiring. Thrift and prudence are considered out-modeled virtues. The economy is dependent on consumerism, materialism, and planned obsolescence.

Yet it is readily apparent that being overextended in debt is harmful to your own peace of mind, to your relationships with others, and to spiritual stability. Financial freedom is not a condition of being debt-free or having X number of dollars in the bank, but rather learning to manage your money responsibly, honestly, and wisely, as a steward of God's blessings to you.

DETERMINE YOUR GOALS.

• The first step in money management is not listing your bills, but listing your wants. When you know what you really want to do with your money, you can then begin to set priorities which will help you reach those goals.
• Set three kinds of goals: long-range goals, goals for the next five years, and goals for the next twelve months. Be flexible, knowing that goals will change as circumstances change. Be realistic; don't frustrate yourself with unattainable expectations. But don't limit the range of possibilities that may be open to you.

ESTIMATE YOUR INCOME.

• List every source of income you have or can reasonably expect.
• If you have no source of income, or if you are underemployed, think about options which would increase your employment possibilities--job training, more education, a change of vocation. If your goals require a certain salary range, then think in terms of employment which offers that kind of wage.

ESTIMATE YOUR EXPENSES.

• Use check stubs, receipts, or whatever records you have to determine how you actually are spending your money at the present time.
• List two categories: (1) Fixed expenses: those over which you have little or no control--housing, car payment, insurance, etc. (2) Flexible expenses: items which vary from month to month, over which you can exercise more control: food, clothing, etc.

PLAN YOUR SPENDING.

• Make your plan flexible. Allow for the unexpected. If you project expenses on the basis of a certain spending pattern and then have an unexpected expense--illness, car repair, or whatever--your budget will be blown, and the frustration will make it more difficult to get back to a responsible and realistic plan.
• Make it fit your own situation. Your own responsibilities, needs, and goals should determine your schedule of spending, not what some other person or family might do.
• Put it on paper. Have a clear written chart of the financial course which you have chosen for yourself. Keeping tabs on your expenditures and comparing them with what you have allotted for those items helps you avoid overspending. Some families use a system of envelopes, labeling each with the amount allotted for that item, and putting that much cash in the envelope. When the money is gone, no more is spent in that category until the next month.
• Provide for unpaid bills. If financial difficulties have put you in debt, apportion a certain percentage of your income toward repaying those debts. Contact your creditors, explain your circumstances, and outline the approach you want to take to paying off the debt. Most companies will be cooperative if they know you are sincerely trying to act responsibly.
• Plan to save. This should be viewed as a fixed expense. A part of all you earn is yours to keep. Select a percentage of your income--whatever you realistically can allot, and stick to it regularly. This gives a nest egg to provide for emergencies and special expenditures.
• Plan to give. A portion of all you earn belongs to God. The biblical standard is a tenth to be shared through your local church. Additional gifts to special causes will help you and your family grow in maturity and enrich your lives through compassion for the needs of others.

SOME IMPORTANT CONSIDERATIONS

1. For a family, money management must be an exercise in togetherness. Mutual goals, communication, and cooperation are essential. A family must be able to talk together objectively and lovingly about financial decisions and decide together what is important.

2. Shop to beat inflation:

(a) Watch for genuine sales and specials; not everything that's advertised is really a bargain.

(b) Shop around.

(c) Compare both price and quality-a higher priced item may long outlast the cheaper variety

(d) Avoid impulse buying; plan your expenditures.

(e) Buy what's right for you, not according to fads or what others are buying.

(f) Buy in quantity, but only if you really can use up the items.

(g) Read the label.

(h) Consider service and maintenance.

3. Keep a tight control on borrowing--which includes credit-card purchases.

Do NOT borrow if:

(a) You don't have a reasonable prospect of paying for the item, but are stubbornly going ahead anyway simply because you want it.

(b) You are borrowing to the hilt of your capacity to repay. A sudden emergency or even a minor miscalculation could force you to default.

(c) You are buying on impulse.

(d) You are considering the purchase, not because of quality or price, but because the payment terms are easy.

(e) You are buying to boost your morale.

(f) You are using credit to increase your status.

(g) You are failing to maintain an adequate cash reserve and overextending yourself.

(h) You are borrowing on the expectation of future salary increases or windfall cash, such as tax refunds.

(i) You are borrowing to meet current bills. Piling up debts to manage day-to-day living is a ticket to financial disaster.

(j) You are borrowing to buy something that will be used up or worn out before you've made the final payment on it. There are a few exceptions to this, such as vacations, but such loans should be approached with great care.

4. If you are getting into serious difficulty, cut up all but one of your credit cards, and use it only for stated purposes or real emergencies.

CONFIRM YOUR VALUES

Most important of all, consider God's plan for your life and your home (Matthew. 6:31-33). The Bible talks often about money, because it recognizes that how we spend our money is a true test of our values and our loyalties (Matthew. 6:19-21, II Corinthians 9:6-8). Following Christ's example of honesty, compassion, and faithfulness will help us gain peace of mind, contentment and harmony within ourselves and with others.