Reflections on God and Money: January 2013

Saturday, 26 January 2013

Creating a Budget (2)

King Solomon was king over all Israel, and these were his high officials: Azariah the son of Zadok was the priest; Elihoreph and Ahijah the sons of Shisha were secretaries; Jehoshaphat the son of Ahilud was recorder… Solomon had twelve officers over all Israel, who provided food for the king and his household. Each man had to make provision for one month in the year.

1 Kings 4:1-7

I ought to say, again, just to be clear, that a budget should not dictate your lifestyle but be a means to help you live successfully – especially if you live in a consumer society where almost everything has a price tag. It should be a means of you controlling money, not money controlling you.

This does not mean, of course, that there are not some things that you have any choice but to pay for. You have to pay taxes and often for housing, electricity, food, clothes, transport communication and other ‘survival’ costs. But, even though you cannot avoid these costs, you can often do a lot to minimise them and free up money for other things.

This is the point of a budget: not to ensure that you pay what you must only but that you can maximise your ability to live the way you want and do the things you want. You may wish to live selfishly, you may wish to be generous; you may wish to gratify your desires, you may wish to live for the glory of God. A budget will help.

The first thing to decide is what time period your budget should cover: a week, month or longer? This will almost certainly depend on the frequency of your main income. If you are paid weekly, budget for each week; if monthly, for each month. If you receive State benefits that are paid once a fortnight, then budget for these two-week periods; if you are a college or university student who receives part of your student loan or bursary at the start of each Term, then budget for each entire Term and also for each vacation in between. If you receive an irregular income, budget for single weeks. If you are planning a long trip, like a ‘gap year’, do your best to plan for the entire period, so that you can be confident of having enough money to last and to get home safely at the end of it.

Prepare a table with three columns: the left hand column is to describe your income and spending (such as ‘salary’, ‘rent’, ‘food’, ‘birthday presents’, ‘nights out’ and ‘giving’); the middle column is for the amounts of income and spending; the right hand column is for totals. The table can be drawn on a sheet of paper, or be a computer spreadsheet, but the principle is the same.

Why do you need to take such a detailed approach? For the same reasons that King Solomon appointed officials to oversee his affairs. He did not take it for granted that, because he was so very rich, that the provisions he needed would always be there. He wanted to be a good steward of all the resources that God gave him and to meet his obligations to his people in a structured way.

I will resume this series next weekend and consider how to prioritise items in your budget.

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Handling money and dealing with debt can be complicated and neither the author nor anyone else involved in the production of these Reflections is responsible for any action you take, or fail to take, based on what is written here. You are invited to put a link on your website to these Reflections. You are welcome to copy these Reflections for personal study or for circulation to family and friends on a non-profit basis. For any other purpose, whether or not for profit, you will require written permission in advance from the author before copying, reproducing or transmitting extracts in any form or by any means, electronic or mechanical, including photocopying, recording or using any information storage and retrieval system.

Friday, 25 January 2013

Creating a Budget (1)

At Gibeon the LORD appeared to Solomon in a dream by night, and God said, ‘Ask what I shall give you’. And Solomon said… ‘Give your servant therefore an understanding mind to govern your people, that I may discern between good and evil, for who is able to govern this your great people?’

It pleased the Lord that Solomon had asked this. And God said to him, ‘Because you have asked this, and have not asked for yourself long life or riches or the life of your enemies, but have asked for yourself understanding to discern what is right, behold, I now do according to your word. Behold, I give you a wise and discerning mind, so that none like you has been before you and none like you shall arise after you. I give you also what you have not asked, both riches and honour, so that no other king shall compare with you, all your days…"

1 Kings 3:5-14

There is only one way to budget, whether you are as rich as King Solomon or a homeless person who can fit all your valuables into your pocket: list all your income, list all your spending (necessary and desirable) and ensure the latter come out less than the former.

If you are very rich, you may have 'sub-budgets' for specific areas of your life. If you have two or three homes, you may want to have a budget for each one; if you have an expensive hobby, like a yacht or sports cars, you may want to budget separately for it. But the principle remains the same: include everything in one, overall budget and make sure you spend less than you get. Even the biggest global corporations produce a single budget once a year (even if they make a loss and need to make up the difference from their reserves or savings).

If you do not have a regular income, perhaps because you are a travelling evangelist who relies on donations from churches, then you are probably already used to maximising the money you get and not buying what you cannot afford. If you do this in the quiet confidence that God is meeting and will continue to provide for you, you may still need to budget to demonstrate transparency and accountability to the people who support you and to meet your legal obligation to pay taxes. Therefore, each week budget for the coming week based on what you have.

If you are rather undisciplined by nature, you may want to regulate your spending by ring-fencing certain amounts of money in a network of banking accounts, so that you can be confident of paying direct debits on time and can see almost immediately when you spend too much cash. There will be more about this in later Reflections.

If you have a joint bank account and your spouse wants to retain some privacy over what he or she spends, you must at least share information about total spending if you want to budget and avoid debt.

It does not matter how many bank accounts, credit cards or personal loans you have, the principle remains the same: collate all your income and spending into a single budget.

King Solomon knew that wisdom would be of greater use to him than wealth; he wrote, ‘By wisdom a house is built, and by understanding it is established; by knowledge the rooms are filled with all precious and pleasant riches. (Proverbs 24:3-4). There have been many famous people in history who have lost inherited wealth through lack of wisdom.

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Sunday, 20 January 2013

Preparing to Budget (3)

For all that is in the world - the desires of the flesh and the desires of the eyes and pride in possessions - is not from the Father but is from the world. And the world is passing away along with its desires, but whoever does the will of God abides forever.

St John the Apostle

1 John 2:16-17

A record of what you have spent money often may make for unpleasant reading but it is enlightening. Sort all of your spending (every penny of it) into one of these four categories:

Survival costs. These are the things that you cannot avoid paying for: rent or mortgage, water, electricity and gas, food, essential transport, personal hygiene, medication and necessary communication (like telephone). And, of course, the tax that pays for the public services we take for granted.

Lifestyle choices. These are the things that give expression to who you are and that make life more pleasant for you. They include non-essential clothing and accessories, like jewellery and gadgets, leisure activities and entertainment. I am not suggesting that these things are unimportant, only that they are not as important as keeping a roof over your head and staying healthy.

Impulse spending. These are the things that you buy on the spur of the moment but, really, are not important to you. They often include coffees, snack bars, alcohol, magazines and anything else you buy without good reason, except perhaps that you are bored waiting for a bus or train. They also include the things that catch your eye in shops, the ‘must haves’ that, on reflection, are inconsequential.

Giving and saving.

You may not want to share this detailed information with anyone else but the important thing is that you know the truth about yourself. It is the essential first step in creating a budget.

If you are already in debt and need to get control of your finances urgently, this detailed approach is a luxury that you cannot afford and you should quickly collate the information you have (like the cost of rent and electricity) and estimate the rest (such as the cost of food and clothes). But if you are not in debt but wish to improve your lifestyle, fulfil some ambition or live your life more sublimely, this is the place to start the journey.

In weekends to come, we will look at:

Creating a budget.
Extending a budget (that is, using credit).
Defending a budget.
Rescuing a budget (from debt).

Along the way, we will digress to cover specific issues, like work, banking, contentment, saving and generosity. But from the start, think about how you may have made your life unnecessarily expensive or complicated than it need be.

Postscript. It is interesting that I should have planned to write about this subject at the end of the week in which the music store HMV collapsed. The issue that seems to have angered many of its customers is the store not honouring the gift vouchers it sold over Christmas. While I understand the legal position, if it is true that the store stopped selling them as soon as it knew it would have to call in administrators, that would seem to suggest a very narrow use of the word 'know' or that a lot of people there were in denial about its financial situation for a long time. One of the benefits of a budget is that you can see problems coming, even if the truth is difficult to accept.

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