Session 2 Personal Budgeting
Most people don’t plan to fail, but they do fail to plan.We all want to get somewhere in life but without a plan we seldom get there.
- What is a budget?
Planning the distribution of your finance.
God requires that we be diligent and disciplined in firstly attaining our finance (working), then in distributing our finance (spending / saving).
Consider the ant in Prov 6 v 6-8
- How should we spend our salary?
The old rule says live on 1/3; spend a 1/3; save a 1/3
Live: Accommodation, rent / bond and rates / services.
Spend: Tithe, groceries, living expenses, cars.
Save: Insurances (life & retirement) and saving.
Times have changed and this is not always possible, although attainable.
Let’s take a look at our budget layout.
We start with our total combined income
Then we deduct our tithe (note this is not an expense).
Biblically that is 10% of your gross income
“……..Then Abraham gave Him a ______of _______ (Gen 14 v 20)
“Be sure to set aside a ____of all that your fields produce each year (Deuteronomy 14 v 22)
“Bring the whole _______into the ______that there may be food in my house (Malachi 3 v 10).
Then we have 3 types of expenses in basic order of importance:
1) Fixed expenses: These are things that are set usually on debit order and / or should not vary from month to month.
2.) Variable expenses: The day-to-day living cost. Here we must separate the wants from the needs; the battle can be won or lost here.
3) Planned cost: These things don’t occur every month, but are costly when they happen so funds need to be available.
The aim is to always have some money left over in the surplus column for a rainy day. God wants us to be wise stewards (Prov 21 v 20), so that we may enjoy life, free from financial short fall.
Important – Your salary is not meant to settle last month’s debt. Debt is bad, a silent killer. We need to settle our debts fast. This battle is won or lost in the variable expense section. The budget is the plan we put into action.
2 Implementing a the plan
Know what you want to achieve. Think about it, pray about it. Set long term and short term financial goals.
Cut up all cards, credit cards and clothing / retail accounts cards. This will be one of your biggest victories on the road to financial freedom.
Set the budget (column 1). The money going out always has to be less than the money coming in. After tithing, we allocate our fixed expenses in general order of importance (note the cell phone is in there, this spending must be capped).
In the variable expenses section we must set the budget realistically according to our income. Bearing in mind that after our planned expenses we want about 10% of our income left in our surplus column. Next we allocate our planned expenses according to our circumstances. We end with that surplus amount.
Structure a plan to settle the outstanding accounts.
Take all the money from clothing, entertainment, holiday and home maintenance and pump it into account repayments until they are all paid off. At this point the best card to have is a debit card so that there can be no more spending of money you don’t have.
During the time of settling the outstanding account the surplus is not used to pay off the debt but acts as a safety net to see you through any unforeseen dilemmas.
Now that your budget is set and you have a plan to pay off you debt, you need to stick to the plan. Each month you must fill what you actually spent and where, vs what the budget says.