Before I start in on the main subject of this week’s blog post, I have a specific shout out to a particular segment of the people who stop by here. If you’re a worship leader (paid or volunteer), or if you participate on a worship team at your church, then I highly recommend reading Worship Matters by Bob Kauflin. It was recommended to me by two worship pastors who both told me it was “a must read.” I’m only about 15 percent through and I’ve already taken about a page of copious notes. It’s encouraging, yet certainly challenging, and it should be on the reading list of anyone who plays an instrument or sings into a mic at her or his local church. Do not pass Go… just do yourself a solid and snag yourself a copy. The people you lead will be grateful. Now, on to the rest of this week’s blog…
This week I’d like to focus on one of the disciplines that I’m not very adept in, but I’m striving to make this year the year that I make huge strides in this area. The discipline is finances. Before I go any further I want to make the HUGE disclaimer that I am NOT an expert in this area. Thankfully, there are all sorts of books and blogs that can help us get a handle on our finances. You may ask, “Dave, if you aren’t an expert in this area then why are you taking the time to blog about this particular subject?” Great question.
Over the past couple of years I largely ignored my finances. When I say ignore, I mean that I had no plan to get out of a hole that came from bad financial decisions, personal struggles, and the housing meltdown that affected thousands of families. Thankfully, the housing market is starting to stabilize. Yet many of us felt the shock in our check books. I should have budgeted more intentionally and saved in the midst of it all. Yet, as often happens in crisis, we go into survival mode instead of being proactive.
If you’re a Christ follower, you may not be surprised to learn that Jesus talked about the Kingdom of God the most in His teachings. However, you may not have guessed that second on the list was money. Jesus knew that our finances are tied directly to heart issues. So wise financial stewardship isn’t just a good idea, it’s God’s idea.
As I’ve been recently assessing several areas in my life, I felt the call of God to place my finances on the list. Then, as I was preparing to blog this week, I thought it may be of some help to someone else to share the fruits of my own mental dedication and research to financial stewardship.
If any of this resonates with you then the next question may be, “Where do I start?” You can take the Google dive and probably come up with a better list than I did. I whittled my starting plan down to these three:
- Honest assessment
- Make a plan
- Work the plan
The first step is to go on-line and take an honest look at your income, savings, and spending habits. Don’t just look at your current bank balance. Go through the last couple of months and read each transaction. If you’re on top of your money you already do this. If you’re in a hole though, and you want to start to dig your way out, then do this first. You may be surprised, perhaps shocked, at where your money is going. This also includes looking at every credit card statement.
The next step is to make a plan. If you’re in a deep financial hole, realize that you probably didn’t get there overnight. There may be medical bills or a sudden tragedy that wrecked you. But we often don’t get into messes instantly. It’s an insidious slow process that eats away at us until we wake up one day and say, “Wow… I never thought I’d be here.” Yet, I believe that God honors taking the time to design a schematic for how to be a better financial stewards of what He has given us. Regardless of how you got to where you are, God is there to walk with you through it all. Rededicating your finances to Him and taking the time to make a plan on how to get out of debt or save for retirement is a worthwhile investment (no pun intended).
Finally, work the plan. For example, this website can help you project when you’ll be debt free from your credit cards. It even allows you to project how much sooner you’ll be out of debt if you pay more each month. Also, if it’s at all possible, never pay just the minimum payment each month on your credit cards. You’ll be in debt far longer than you should be.
I have a friend who committed to look at his finances each Wednesday night. If you haven’t looked at them in the past three weeks, that doesn’t sound like a bad goal. This is all part of working the plan. It’s making the choice to be proactive with your finances. Carving out the time one night a week for assessment is a great place to start if you’ve been lax in this particular area.
I’d like to go back and focus on the second point, making a plan. For those of us that are mathematically challenged this can be a bit intimidating. Making a plan with our finances usually involves some sort of budget. I read an easy definition for a budget for when your recollection of your high school life skills class is fuzzy. A budget is simply a system for tracking your spending and staying within predefined spending limits. Or, in real simple terms, know where you spend every penny.
I have several Mint.com users in my family and they rave about how awesome it is. I may take that leap at some point but I really like the envelope budgeting approach. Mint sort of does this, but not in the strict sense of envelopes. If you’ve never heard of envelope budgeting, here is the basic premise:
Envelope budgeting has been around a long time. It’s likely your grandparents used it. On pay day you would cash your check and place it into envelopes (literal envelopes). The envelopes would be labeled ‘Groceries’, ‘Rent’, ‘Clothes’, etc… Each envelope would also have the amount designated to spend from each of those envelopes for the entire month. Once the envelope for ‘Clothes’ was empty, you guessed it, no more clothing for that month. If an unexpected/un-budgeted clothing need came up, you would have to take it from a different envelope. It’s incredibly effective because you very quickly garner an understanding of where money is being spent. Here is a link to explain envelope budgeting in more detail: http://frugaldad.com/2008/01/31/how-to-implement-an-envelope-budgeting-system/
The problem with envelope budgeting in today’s world is that many of us use debit cards. And, carrying around a bunch of envelopes of cash has its own set of difficulties and worries. Yet, many families still adhere to this tried and true method because it works. I wanted something that would allow me to use this method electronically. I could track my spending in virtual envelopes and still use my debit card at the gas station.
There are three online services that get a lot of press for using this approach. YNAB (You Need A Budget), Mvelopes, and EEBA. All three have at least a trial period for you to check out. However, I didn’t go that route. At least, I haven’t yet. I stumbled across a great spreadsheet that implements the envelope system. Spreadsheet? You mean, in Excel? That program I never use but it came with Microsoft Office? Yep. That’s the one. Excel is a very powerful tool. And thanks to Excel gurus, you can check out a free spreadsheet that will help you implement the envelope system for absolutely nothing, for as long as you want. They have a paid version for 10 bucks that I haven’t needed yet. Also, if you’re a Linux user (I’m on Linux now and I love it), then they have a version that works with OpenOffice/LibreOffice. You can read all about it and download it here: http://www.mdmproofing.com/iym/products/envelope-check-register/
At first, it was a bit mystifying about how to use the spreadsheet. The author of the software explains it very thoroughly but I’d like to offer my version of the process. When you get paid you don’t enter in the entire amount on a line. Instead, you virtually split up the amount into your budgeted envelopes and enter them in each envelope column. 300 for groceries, 100 for clothes, until the amounts from each envelope totals your pay check. This may seem like a redundant process, but it accurately mimics your grandparents approach. You are ‘placing the money’ in envelopes and spending out of those envelopes. When you enter a purchase you do so in the envelope column. Excel does its magic and your total amount changes in the main ledger as well as reflecting how much you have left to spend from your envelope. It’s actually quite cool, and, you’re using software you probably already have on your computer. If not, LibreOffice is free and is a very adequate alternative to Microsoft Office. Perhaps I’ll blog in anther post about why I think open source software rocks. By the way, you can also download LibreOffice for Windows.
I use the spreadsheet on a bi-monthly basis. In other words, I enter in all my transactions for two months and then transfer any remaining envelope amounts to a new spreadsheet. It keeps the sheet a bit cleaner and avoids software bog from too many calculations. I can always check any month by opening up the sheet that is saved as Oct/Nov12 Budget (for example).
Those of you who use on-line software may think, “Dude! You’re working way to hard on this. My software imports all my transactions automatically and I just assign the categories to them.” True. But, this currently works for me. I know a guy who plays a guitar that is so beat up that it seems to have been dragged behind a truck. But, as he says, “It plays well, sounds good, and I like it.” Use what works for you. The alternative is doing nothing, and that doesn’t work at all.
In closing, why did I take the time to blog about all this? Because our finances matter. Your finances matter. If you’re a high school/traditional college student then you can start sound financial management early with free tools that won’t cost you a dime. If you’re an adult who finds yourself in a financial pit, then you can start to dig your way out. I understand there are a lot of great blogs and websites on this topic, but as always, you’re reading this particular blog. And maybe, just maybe, this particular post will give you some motivation to start thinking about your finances in a new way.
Many blessings to you and to your financial goals.