A pastor once said, “Living right financially isn’t complicated; it may be difficult, but it isn’t complicated.” It’s difficult because living right financially is more than simply learning financial strategy and management techniques; living right financially has spiritual components as well. It’s important to have a godly view of money and to use it in the correct way.
The Bible verse “The love of money is a root of all kinds of evil” 1 has often been misconstrued to imply that money is the root of all evil. But it is the love of money that is the root of all evil, and that is certainly true. There is genuine danger if undue importance or a sense of security is attributed to money. As many people have discovered through personal experience, financial security can be fleeting; lasting security is only found in God.
Nonetheless, we need money to live, to care for our loved ones and communities, and to bless others; thus, the topic of finances is relevant to each of our daily lives.
Most experts in this field agree on a handful of points that are key to good money management. If you’re looking for a formula to help you wisely manage your finances, I recommend these five points as a starting place.
When the subject of money comes up, or you hear terms like “financial stability” or “savings,” you might groan, especially if you feel overwhelmed by the prospect of improving your financial situation. Perhaps you’re struggling financially right now. Perhaps you’re in debt. Perhaps you don’t see how you’re ever going to be able to save, or at the rate you want to, due to your current circumstances. Before going further, I want to encourage you with two empowering thoughts.
The first is: With God’s help, nothing is impossible.
The second is: Any God-ordained goal can be reached … one small step at a time.
So if you have a long way to go to reach your financial goals, if you’re struggling with debt, or if you feel discouraged or even in despair when it comes to personal money matters, remember this: God’s power can make your “impossible” possible, finances included.
Through that lens, let’s look at these five practical cornerstone points to financial responsibility.
Number 1. Have a budget and stick to it.
A must-do when it comes to managing your money is having a budget and sticking to it. That last part is the tough part, but it’s also key to financial balance and progress.
Your budget represents the plan for how you will spend your money. As Dave Ramsey says, “A budget is people telling their money where to go instead of wondering where it went.” You want to avoid looking back over a month and wondering, Where did that money go?
1 Corinthians 4:2 says, “It is required that those who have been given a trust must prove faithful.” 2 As stewards of the money that God has entrusted to us, whether it’s a little or a lot, we need to have a plan in place for our financial spending and saving. That’s where a budget comes in.
Life is full of expenses, but most of those are regular expenses that we know are coming, whether weekly, monthly, quarterly, or yearly. Every regular or semi-regular expense should be accounted for in your budget. Of course, bona fide emergencies sometimes come up that cause you to spend beyond your budget. We’ll talk about that more in point four.
When creating a budget, here are a few tips:
* Identify your true income and budget all of it. Work with the income you can consistently count on. Don’t include windfalls or year-end bonuses as part of your regular income. Budget beginning with your basic living expenses, other vital payments, then allot any remaining funds to pay off debt and save for emergencies and other long-term needs.
* Be realistic in calculating expenses. It doesn’t help to try to minimize genuine expenses that cannot actually be trimmed down. If you underbudget for food or gas, for example, because you’re hoping to save or would liketo spend less in those categories, but your figures aren’t realistic, you’ll end up spending more than is noted on your budget anyway. That will bring stress, and it works against the purpose of a budget.
* Adjust as needed. Go over your budget monthly to keep it current and to assess what changes or adjustments need to be made.
* Keep records in a way that works for you. The best record-keeping system for you is whatever works for you, whether that’s a spreadsheet program, various envelopes, or a handy notebook.
Number 2. Live below your means.
The way to avoid debt and save money is fairly straightforward: don’t spend more than you make. This has been termed “the fundamental rule of finance,” and it’s the only way that you’ll have sufficient finances to cover your expenses and be able to save.
There are many things that can trip people up when it comes to living within their means. Some points to bear in mind are:
* Live frugally. Being willing to sacrifice today can result in benefits tomorrow.
* Know the difference between luxuries and necessities. Needs and wants are two different things, and most successful savers limit purchases that fall into the “want” category. They choose to save and build toward long-term financial stability over having temporal wants, nice-to-haves, and luxuries.
* Consider your habits and routines. Many people have one or more costly habits. It might be a daily latte, a fondness for new shoes, or meals out. Analyze all of your habits and routines to see where you can cut back in order to stay within your means or free up money toward savings.
* Avoid impulse buying. When a potential unplanned purchase comes up, wait a few days to think about whether you really need the item or not. A good friend of mine has what he calls the “three-day rule.” For any major purchases, he waits three days before making his decision. That gives time to let his emotions subside and reason to come into play so he can be sure the purchase is the best option.
* Derive your joy and contentment from God and relationships, not from things. It’s human nature to want the latest and greatest new things, but as the Beatles sang, “Money can’t buy me love.” Nor can money buy health, peace, friendship, or contentment.
* Pay with cash or debit. Research has shown that it’s easier for people to spend when making purchases on credit. People think twice when they’re handing over actual cash, so if you’re trying to tighten up financially, consider using cash.
* Visualize reaching your goals. If you’re working toward building an emergency fund, saving for a specific need, or even saving toward something special, each time you’re faced with a possible purchase or financial decision, keep your financial goal in mind. If your purchase isn’t going to help you to reach your goal, ask yourself if you can do without the purchase.
* Enjoy the simple, free things in life. There are so many things to enjoy that don’t cost money. Explore and enjoy the simple things, and see how meaningful and enriching some of these “priceless” activities or shared moments can be.
Number 3. Avoid (or pay off) debt.
The best debt prevention is to live within your means, but if you currently have debt, don’t despair. No matter how daunting the current situation is or how long it takes, God is able to help you get out of debt.
Paying off debts, whether small or large, requires a plan, commitment, and sacrifice. And depending on the amount of debt, you may need to get fairly aggressive with your approach. If your goal is to save money toward your future, becoming debt-free becomes of paramount importance, as many types of debt come with high interest rates. It will be very difficult, if not impossible, for you to strengthen your financial position and put money into savings if you have outstanding debts to pay off. Not to mention the sense of relief and freedom you will have when you are debt-free.
Number 4. Save. Build an emergency fund.
Proverbs 13:11 states: “Whoever gathers money little by little makes it grow.” 2
Saving is important. Even if you have a well-crafted budget and are living within your means, there are important reasons to save. You probably noticed those encouraging words in the verse from Proverbs about saving—“little by little.” Any amount you can save is worthwhile, and it’s worthwhile to start saving at the earliest opportunity.
A notable point on the topic of saving is creating an emergency fund. Emergencies happen to everyone, and there’s no way to know when they’re going to hit.
Experts recommend having an emergency fund that would cover three to six months of your basic living expenses. This wouldn’t necessarily cover three to six months of your full budget, but rather the minimum that you can get by on without going into debt.
Start by adding an “emergency fund” entry to your monthly budget. Even if you can only put a small amount aside each month, it will gradually grow. Remember the “little by little” approach spoken of in Proverbs.
An emergency fund is not to be used for anything that is not a true emergency. The key words are “unexpected” and “unavoidable.” You want this rainy-day fund to be there when it actually does rain hard, when you really do need it. That’s the value of the emergency fund.
Number 5. Give to God and others.
Giving to God and others is part of living a healthy and blessed financial life. If you’re struggling financially right now or trying to save to buy a car or a house, build a retirement fund, or anything else, it might seem counterintuitive to give part of your income to God’s work or to those in need. It’s natural to think, I need that money! I can’t possibly afford to give any up.
Here are a few passages of Scripture that highlight the value of giving to God and others:
Sometimes you can become rich by being generous or poor by being greedy.—Proverbs 11:24 CEV
Whoever sows sparingly will also reap sparingly, and whoever sows generously will also reap generously.—2 Corinthians 9:6 NIV
Give, and it will be given to you. … For with the same measure that you use, it will be measured back to you.—Luke 6:38
As Christians, we are responsible to use our finances in ways that glorify God. Giving to God and others isn’t a get-rich-quick scheme. It’s a personal commitment between you and God that invites His blessing into your life, blessings which often come gradually yet undeniably.
Most all of us have faced or will face times when we are in financial need. As Christians, we are blessed to be able to bring our needs, worries, and concerns to our heavenly Father. He wants us to rely on Him in every area of our lives, including for our financial needs. But we have to do our part, by being wise and careful stewards of our finances and by bringing our needs to Him in prayer. As His children, we know that He loves us, cares for us, and has promised to provide for us. “Seek the Kingdom of Godabove all else, and live righteously, and he will give you everything you need.” 3