Christian Financial Stewardship

Revealing Principles of Financial Management from a Christian’s Perspective

By: William R. Cunningham
1997, 1998, 1999, 2000
All Rights Reserved

Introduction

One of the areas that we all need to be estute in is the management of our money. We all have bills to pay, goals to attain, and toys to buy. However, if we are poor stewarts with our money then we are more likely to miss out on many of the things that we otherwise could have obtained. Therefore, we as Christians need to be effective financial stewarts so that we could do and have all that God has for us and wants us to do.

There are many that are vying for your money. Just turn on the television and notice all of the comercials. Listen to the radio and notice the commercials. They are all trying to convince you to purchase their products. They ultimately want your money so that they would grow as a company and make more profit. Unfortunately the church in many cases is in the same category. Many men are vying for your money. They teach you to give your money to a local church and you will be blessed. They tell you to support the man of God and you will be blessed. These and many other teachings the present to you in an effort to win your resources.

Well enough is enough. It is time for us to get smart and be good stewarts of what God has given us. We may make mistakes and we may have milestones, but the important thing is to at least know the truth so that you would have something to guide you overall. Stop blindly giving your money to the store, the gambling places, and even to your church. Give with purpose. Give with decision. God has given you resources and it is your responsibility to be a good stewart of those resources.

I will share with you some principles that I have learned over the years in regards to financial management. This is not a "how to invest your money" course, but rather basic principles that you could use to help you better manage your money. With me it all began with my mother and watching how she managed her money. You will learn more of the resulting system from those observations later in this study. I also learned from my father as he used a little filing box when he payed the bills. Between my mother and father I learned responsiblity and organization in regards to financial management. I also learned how to save for specific things from my mom. So let's get started in our study of Christian Financil Management.

The Scriptural Component

The first thing I would like to do is develop a spiritual/biblical foundation for the Christian Financial Management system. This is important because as Christians we surely desire to do things God's way. Note that these are principles that you can learn for yourself by studying the Bible so I encourage you to do just that in addition to reading and studying this document.

My View on Prosperity

Since the 1980's there has been a teaching in the Christian community regarding prosperity.  This prosperity teaching refers to our ability to have wealth from God through our faith.  The faith and prosperity teachings states that we can have the nice cars, big homes, and great lifestyle if we have faith in God and plant seeds.  Usually this teaching involves the tithe and giving to ministries.   For example, we are taught that we must tithe to our local church in order to prosper and in order to receive from God.  There was a time when I actually believed this since tithing is after all in the Bible.  However, after studying the subject in its proper context in the Bible and other historical resources, I have found that the tithing law that the church teaches is not Biblically sound.  I have also found that the prosperity teaching in itself is not biblically sound.

True prosperity is not measured in dollars and cents.  It is measured, I believe, as the fulfillment of your God given purpose.  One prospers by progressing in the things that he is doing according to God's will.  This is true prosperity and one that is not taught that much in the church community.  The Bible does not teach that God wants us rich and that God will give us all of the desires of our hearts including the new car, the new house, and the jewelry.  Therefore, prosperity is not riches and having riches is not necessarily prosperity.

Yes it is OK to have nice things if you can afford it and yes God will give us things just for our pleasure.  I am convinced that we do not serve a tyrant God who cares nothing for us except using us to accomplish his will.  He does care for us and he does give us gifts in addition to providing for us.  However, the Bible does not indicate that God will grant us all of our desires just because we claim to have "mountain moving faith."  So do not think that having a lot of money means that you are prosperous.  Ultimately our goal is to do the will of God and not to pursue riches.

Proper Perspective

You must have the proper perspective about money and prosperity before you will be able to benefit from the information in this study. Proper perspective will allow you to see your finances in a whole new light based on God’s view of your finances and not the world’s view. What’s important here is that you see yourself and everything about you the way God sees you and not the way the world sees you. Only after you have done that will you be able to change your financial situation.

Focus

The Christian has to have the proper focus if he/she expects to live according to God’s will and thus his provision. Whatever you are focused on will determine where you will Go. If you are focused on the world and what it has to offer than you will progress according to the world and in the world.  However, the Christian does not operate by worldly principles. The Christian should walk according to the Spirit and thus focus on God and his purposes.

Focus On God

The first step to changing your financial situation is to know your heavenly Father on a personal basis. The life of a Christian should be focused on God the Father and his purpose for you individually. Christians many times focus on situations instead of God. We focus on our bills and our ability to pay them instead of focusing on God.

How do you focus on God? Focusing on God means that God is the center of your life. He is the one that you ultimately trust regardless of the situation. He has the final word concerning your finances and not your checkbook or paycheck. This can only happen if you know God personally. In order to know God personally, you have to spend quality time with him as often as you can. You have to meditate on his word day and night until his word is deep in your mind and spirit and effects and influences your life. The bible says,

Don’t totally rely on your logical deductions and abilities. Trust God to do what he promised. Trust him fully with no doubt. If we do this then we will go where God wants us to go and therefore have confidence knowing that God will take care of us. God is not some spiritual entity in the heavens (the man upstairs). God is our heavenly Father who is personally involved in our lives. We have to be involved with his purpose and stay focused on him and that purpose. Consider what the Bible says about God’s purposes.

"Many are the plans in a man's heart, but it is the Lord's purpose that prevails." (Proverbs 19:21 NIV)

So if God’s purpose will stand, then you should get in agreement with his purpose. Then you and your finances will stand and prosper as God’s purpose prevails.

Walk According To God’s Purpose

Solomon - Read 1 Kings 3:5-15. God appeared to Solomon in a dream and told him to ask anything he wanted God to give him. Solomon asked for discernment in order to rule God’s people. God did grant his request along with great wealth. The key here is that Solomon knew what God wanted him to do, namely to be king, and Solomon’s request was based on that purpose. His prosperity was directly related to God’s purpose for him and overall.

Joseph - Read Genesis chapter 37 and chapters 39 through 47. Joseph was sold by his brothers only to end up in prison. However, when all was done, Joseph was very prosperous, along with those associated with him (Potiphar for example). Joseph was walking according to God’s purpose. Notice what he says here.

Abraham - Abraham is the father of faith. Abraham is the father of those who believe. His purpose was to be the originator of those who would be of faith. Jesus Christ is a descendant of Abraham. We see the ultimate purpose of Abraham was:

We also see that Abraham (Abram) became very prosperous. The bible says,

He was prosperous because he was living according to God’s will and he was accomplishing God’s purpose overall and for him personally.

Jesus Christ - Jesus Christ walked totally in God’s purpose for his life and therefore received all of God’s provisions for his life. He knew what he was supposed to do and he did it. Don’t think for a moment that Jesus was poor just because the Bible does not say that he had great wealth. Jesus had all that he needed at all times. He walked in total submission to God’s will and purpose. If God said it then Jesus did it. God had already provided whatever Jesus needed to fulfill his purpose. The same holds true for us today. If we would walk according to God’s purpose then we too will walk in total provision.

Ecclesiastes 12:13 KJV) "Let us hear the conclusion of the whole matter: Fear God, and keep his commandments: for this is the whole duty of man."

Note that you don’t obey God as though you are a puppet and you heed your master’s every command. You obey God because you trust God and you love God. Jesus said,

Vision

If you do not have vision then you will not progress. The bible says,

We are taught much about having faith in God. We are taught to have faith in God for healing, meeting our needs, and much more. However, this scripture tells us that without hope faith has nothing to do. Faith is the substance of things hoped for. Therefore, if there is hope than faith brings substance to it. If there is no hope then there is no substance. What is hope? Hope is the vision. Hope is the picture of the thing that you believe God for. Hope is the blueprint that faith operates on to bring what is hoped for to pass. Therefore, you must see yourself as debt free and financially free in order to realize it. You have to have an active biblical hope in order for your faith in God to manifest into financial freedom.

Hoarding Wealth

Jesus warns us about greed in Luke 12:14-21. Wealth that is kept in storage is not being used to fulfill God’s purpose. This type of wealth will eventually be lost. The bible says,

Don’t desire to be prosperous simply to be prosperous. Desire to prosper so that you can be a blessing to others. Note what the bible says about obtaining wealth.

God is the one who gives us the ABILITY to obtain wealth. What is the purpose of God doing this? To establish his covenant! What is the covenant? This is referring to the Abrahamic covenant and not the blessings given in Deuteronomy. The bible says,

You can see here what God had in mind. He would bless Abraham (Abram) so that Abraham would be a blessing to all nations. He didn’t bless Abraham so that Abraham simply would be blessed (prosperous).

Wealth is OK

Religion has taught many people that it is evil to have a lot of money. You hear terms such as "Filthy rich" for example. We are subconsciously programmed to believe that wealth is of the world and poverty and lack is of God. Having wealth is OK. There is nothing evil or ungodly about having an abundance. Sometimes God is behind the financial wealth that some people have.  Therefore, we cannot say that all financial abundance is evil.

Let’s look at an example from Jesus’ teaching.

This man was storing up his wealth for himself. Instead of meeting the needs of others and being a blessing, he decided to hoard all that he had. The end of all that was death. The outcome that this man experienced will be the outcome to all that practice greed.

The Rich Young Ruler

Religion many times uses the incident of the rich ruler to justify its teaching of wealth being evil. However, a close look at that situation (See Matthew 19:16-26) will reveal that the man’s problem was not his money. The problem was his attitude. Look at what Jesus told him.

Jesus told this man that he did not have treasure in heaven. Jesus was trying to get this man focused on God instead of his money. Recall what Jesus said in another teaching.

This man had his treasures stored on earth instead of heaven. In order for him to effectively walk with Jesus Christ and according to His ways, the rich ruler would have to change his attitude about money. He, in effect, had to switch gods. His god was his money and Jesus was trying to get his god to be God the Father. So the money wasn’t the problem. The man’s focus was the problem.

The Love of Money

The root cause of many problems involving money is revealed in both of the examples above. This root cause is the love of money, wealth, and possessions. The root cause principle is lust. The bible says,

Notice that Paul said "they that will be rich." This refers to people who are seeking riches instead of those who are already rich, though the principle applies in both cases. The object (money) was not and is not the problem. There is nothing that a one thousand-dollar bill can do to anyone. People that are motivated by greed and lust will kill and steal for that thousand-dollar bill. It is the lust for riches that motivates people to do evil.

Desires of the Heart

Religion has also taught us that God will meet your needs but not your wants or desires. This is also a lie from Satan. God does not care what type of car you drive, house you live in, or clothes you wear as long as you are walking according to his purpose. You may desire a new suit or a new home. This is OK. God desires the best so we should desire the best. Don’t settle for second best when God is your Father. God will tell you, by his Holy Spirit, if you are going off track (if your motive is wrong). Note what the bible says about our desires.

Note that the desires of your heart are granted AFTER you have delighted and trusted in the Lord as well as doing good. The bible also says,

Therefore, if you are righteous, don’t be afraid to desire things. Your God given desires will be granted. They have to because they come from God.  I believe that some of our desires are a direct result of the purpose that God has on our lives.

Sacrificial Giving Misconception

How many times have you heard that you have to give something up in order to give to the kingdom of God? How many times have you heard that you have to give a sacrifice offering in order to move God or something like that? The principle of sacrificial giving is not biblically accurate. No one wants to give something up just to give to another cause. I will be reluctant to make a sacrifice offering (above my tithe and regular offerings) if I want or need a new suit. I don’t see the reality of my giving nor the true spiritual purpose or operation.

The word sacrifice does not refer to financial giving at all in the entire New Testament of the Bible. Sacrifice implies giving something up for another. There are times, however, where you will reprioritize your money when you see someone in need. For example, I may forfeit a new suit to help my church meet a ministry need. Is this a sacrifice? NO! Look at what the bible says,

So you see that you are really not giving anything up absolutely. The only thing you are doing is putting someone else’s need above your need or desire. God will still give you what he has for you even if you help someone else. Do not think for a moment that if you give to your church or help someone in a time of need that you are forfeiting something that you need or want. You will only forfeit what God didn’t intend for you to have in the first place. The bible says,

You will only receive from God what he intends for you to receive. Therefore, discard the concept of sacrificial giving. You do not have to sacrifice anything that God has for you.

Giving From our own Resources

We fear sometimes when we think of giving the church or someone in need $500, $1000, or more. Why? We think that this will somehow deprive us. We think of it as a sacrifice. We only see our financial accomplishments based on our own resources (paycheck, bank account, business, etc.). We don’t see our accomplishments coming from God. We don’t see the things we need to purchase as coming from God. We don’t see that new suit as a gift from God. We don’t see the new home as a gift from God. The bible says,

God provides the money that he wants us to give. If God tells you to give $500 to the church then he will give you $500 to give. If God says that you can go and get a new suit or prompts you to get a new suit then he will provide the money to acquire that suit (whether you buy it or someone else). Our giving by God’s direction is an act of obedience as God works through us. It is not a matter of self-sacrifice as an indication of our self-righteousness that we give. We give because God says so and we obey.

Scriptural Truths About Finances

Let’s move into some specific teachings about finances from the bible.

Stewardship

The word steward means: manager, custodian, caretaker, administrator, or trustee. The steward is the person that effectively and efficiently uses the money and resources that God has given him/her. Your paycheck has been given to you by God’s intervention. Never think that you have done anything on your own.

How do you manage the money that you receive from your paycheck or income from your personal business? How do you manage the monetary gifts that you receive? If you do not manage these very well then how do you expect to manage an abundance? Why would you think that God would give you more if you waste what you have now? The fundamental principle of stewardship as it relates to prosperity is as follows:

We can see here that the fundamental prerequisite for prosperity in God’s kingdom is to be an effective steward with what you currently have so that you will be able to manage more.

FINANCIAL WISDOM

The following discussion will reveal some practical principles that you can use in managing your finances. Proverbs teach us that wisdom is the beginning of our prosperity. See Proverbs 4:7, 3:13-15, and 8:14-36 concerning wisdom and Proverbs 1:7, 9:10, 10:23, and Job 28:28. First we seek. Then we obtain knowledge followed by understanding and then wisdom. Wisdom is followed by actions. Therefore, it is imperative that you obtain financial wisdom so that financial prosperity can be achieved (fulfill God's purpose in your life financially).

1. Place the needs of people ahead of profit when possible (Proverbs 11:26). See also Genesis 41:56-57. This is especially applicable to those who are in business for themselves. Always consider the needs of the people and use wisdom in your decisions.
2. Avoid securing debts for another person (Proverbs 17:18, 6:1-5, 11:15, 22:26-27). When you secure a debt (loan) for someone, you are in effect placing your money on the line. If you want to help the person purchase something then just give him/her some money.
3. Save for future projects and goals (Proverbs 21:20, 8:21). I do not believe in saving money just to be saving it. Always have a purpose for the money that you are saving. For example you may be saving for a new home in a few years.
4. Do not accept bribes (Proverbs 17:23, Exodus 28:8, Deuteronomy 27:25). This is a dishonest act that could bring about a curse on your life. Also do not bribe anyone else for your own motives.
5. Do not charge people interest when you lend them money (Deuteronomy 22:25-27, Leviticus 25:35-37). See also Nehemiah 5:1-12 for an example of this very act. The opportunity to meet the needs of the people should not be an opportunity for profit.

How Is Money Acquired?

The Three primary ways that a Christian acquires money are:

1. Working - The foremost method used to acquire money is to work. Work does not necessarily indicate a "9-to-5" job. It indicates the process of obtaining increase for something that you have done. This could be your regular occupational job, part-time job, running your own business, cutting grass on weekends, ministry, etc. The bible says:

Other references are 1 Thessalonians 4:11-12, Ephesians 4:28, and Proverbs 13:11.

On the other side of the issue, the bible says...

We see here that laziness is a sure way to obtain poverty and lose what you currently have and that work is a biblical way to obtain prosperity. See also (Proverbs 24:30-34, 20:13, 6:10-11).

2. Investments - The Use of your money to get something in return whether monetary or not is an investment. You can invest in the stock market, business, your home, or kingdom building (See Matthew 25:14-18). Always use wisdom and remember to seek God's direction before committing your money to any investment opportunity. The greatest investment that you can have is the investment in kingdom building including your local church (See Proverbs 13:11).

3. Harvesting - Harvesting is the process of receiving from the seeds that you have sown. This process is basically the manifestation of the blessing for being obedient to God. This manifestation occurs in many different forms. It could be a phenomenal growth in your business, a major promotion on your job, or gifts for example. If you have not been a giver than you should not expect a harvest just as a farmer who does not sow his seed should not expect to reap a harvest.

Our harvest is not a result of work alone. Notice, in Haggai 1:1-11, that the people planted seed but their seeds did not produce much fruit. This seems to contradict the spiritual principle of sowing and reaping. Why did they not reap an abundant harvest? God says that they were taking care of themselves in luxury while God's house (Today this would be the church building) was in ruin. The people were not concerned about God's house. They took what they had and spent it on themselves. Note in particular verses 5 and 6 that illustrate how our increase can be dissipated regardless of how hard we work.

Financial Planning

A significant part of your financial stewardship will include planning. Planning is the process of projecting, anticipating, and deciding on a particular financial path to accomplish a specified goal. For example you may plan a certain financial path to purchase a new home in five years. God must be involved with your plans in order for them to be effective. Remember that only God’s purposes will prevail. Don't just decide to do something. Pray about it and then act on the spiritual guidance that you receive. Seek Godly wisdom and counsel from others (Whom you feel are familiar with the subject matter). God must be involved with your financial plans or you risk wasting the money that he has given you thus missing the purpose he had for you. See Proverbs 16:9, 19:21, Psalms 37:23, Proverbs 27:23-27, and 21:5.

Anticipation

The art of anticipation is crucial to effective planning. A person who lives from one paycheck to another is not operating in financial planning nor is he/she anticipating anything. Anticipation looks in the future and sees probable events taking place. Those events are then accounted for in today’s plans so that when we reach the actual point of the event, we are ready for it (at least to some extent). Some things that you may anticipate are tax increases, increases in health insurance, increase in life insurance, etc. You may also anticipate pay raises or increases in your revenue from your business.

We begin to move into the realm of hope if we add a degree of faith to our anticipation. Now the event that we anticipate is not just a projected occurrence in time but an expected occurrence in time. This expectation is founded upon God’s word and manifests itself into hope, which is brought into existence by faith.

The Uses of Money

2. Kingdom Building - When we give to our local church, we are providing for the work of the Lord on the earth (Kingdom building) which results in the salvation of many. The Tithes and offerings are the main method that we invest or give for kingdom building. Kingdom building promotes the spread of the Gospel of Jesus Christ. It also promotes the building up (edifying) of people. With the word of God in their mind and spirit, people are able to over come obstacles and live unhindered according to God’s purpose.

3. Giving To Those In Need - When it is within your power to do good then do it (Proverbs 3:27,28). I believe that Christians everywhere should give to those who are in need. Our motivations for giving should not be for self gain, rather for the edification of the people in the kingdom of God.

The bible says:

4. Meet Our Desires - There is nothing wrong with having a desire for something as long as our motives are correct (See James 4:2-3). It is therefore important that God is involved with your goals and plans so that you are not pursuing desires against God's will and purpose and thus with wrong motives.

Sowing and Reaping

The concept of sowing and reaping has been corrupted in the Christian community.   Sowing reaping has degraded into a way to get something from God by giving something to your church or to someone else.  We are taught that in order to get that new home or that new job that we have to give a certain amount of money to our church.   The basic biblical principle of sowing and reaping has been perverted by such teachings.  Sowing and reaping is a very basic principle that describes the results of our sowing activities.  Read my study on "Tithing, Giving, Sowing and Reaping" for a detailed discussion on this topic.

Read the second part of this study on the actual management techniques that you can use to manage your finances.

The Management Component

Christians should know how to manage their money if we expect to be good stewards of that money. In this section we will reveal to you some techniques that you can use to help you manage your money more effectively.

Basic Financial Practices

The following are some basic financial practices that you should incorporate in your normal financial activities.

1. Have sufficient funds for all checks - Always have the money necessary to cover a check in your checking account at the time you write the check. Always take into account any other checks that you have written that have not cleared yet and assure that the money to cover the check has been allocated for the item that the check is written for (we will discuss this aspect later in this study guide). Keep your checkbook register current.
2. Never Predate Checks -In lieu of the previous principle, we see that predating checks is not acceptable. Predating a check means that you don’t have the money to cover the check but you will by the date of the check. Write a check only if the money is available at that time to cover the check and not before.
3. Do not write Faith Checks - These are checks people write knowing that the money is not in the bank to cover it but believe that, if they have faith in God, the money will somehow be deposited into the bank to clear it or they will miraculously get the money to cover the check at a later date.
4. Never Rob Peter to Pay Paul - Avoid using money allocated for one purpose to be used for another. For example, don't use your rent money to buy a new suit.
5. Avoid Impulse Buying - Purchasing something spontaneously or compulsively without consulting your priorities, availability of funds, plans, or God is impulse buying. Idle window-shopping and Mall floating are probably the greatest promotions for impulse buying. Always plan your purchases so that you protect yourself from buying things on impulse.
6. Keep your checkbook register current - Always record all transactions affecting your checking account. Maintain an up-to-date check book register.  Note that this could be in the form of a checking account program.  Regardless of how you do it, ensure that your checking account records are always up to date.
7. Always review your monthly bank statements - Bank errors and personal oversights can be corrected promptly if you compare your records with the bank records. This involves reconciling your checking account each month. We will discuss reconciliation later in this study.
8. Plan your purchases - Planning your purchases and sticking to your plans is a sure way to avoid squandering your money. Know what you want to purchase by developing a specification sheet. Know how much you plan to spend and do not go over that amount. Avoid compromises. I believe that it is important to purchase what you want and not settle for something else.
9. Keep Financial records centrally organized - Keep your financial records, receipts, bill stubs, etc. in one centralized location in your home for easy access.
10. Keep all significant receipts - This is good for tax purposes, item returns, and basic spending analysis.

Credit Cards

Credit cards are not money and they should not be treated as such. Credit cards should be used very cautiously and responsibly. Ideally, you should always have the money to cover the credit card purchase. Always remember that "an increase in your credit limit is not an increase in money that you have." An increased credit limit only means that more of someone else's money is available to you to borrow at a cost!

The Cost of the Credit Card

Look at your current monthly credit card statement. In particular, look at the amount that you paid and the amount that was applied to interest. You may be shocked when you see how much of what you paid actually was applied to your principle. This is how the world system makes it easy for you to purchase things and keep you in debt - in bondage. In general, the cost of using the credit card is very high.

Spending Practices

One of the greatest downfalls we have is uncontrolled spending. Before you make any purchase you should ask yourself the following questions.

1. Do I have the money to purchase this item?
2. Have I checked my priorities?
3. Have I shopped around for the best buy?
4. Do I hear a voice advising me not to purchase (God’s voice, your mother or father’s voice, etc.)?

Managing Your Money

Now let's discuss the tools that you can use to help you manage your money. Note that the methods that are presented here are not exclusive. There are many other methods that you can use to effectively manage your money. Start with these and adapt them to your specific situation. The financial management system discussed in this study is composed of three separate components:

1. The Monthly expense list
2. The budget
3. The itemized account list.

The Monthly Expense List

The first step to financial management is to know how you spend your money. Therefore, list all of your monthly expenses to provide a foundation for your financial planning. Note that there are some expenses that may not be monthly. For example, your car insurance may be semi-annual and your life insurance may be annual expenses. These expenses will be translated into monthly expenses for consistency. The following example demonstrates this translation.

Assume that you have the following non-monthly expenses:

Car Insurance $1002.00 (Semi-annually)

Life Insurance $ 204.00 (Annually)

If the expense is paid quarterly then divide by 3, if semi-annually then divide by 6, and if annually then divide by 12. Therefore, you will divide the car insurance amount by six and the life insurance amount by twelve. This gives the corresponding translated monthly expenses of:

In this study you will use the following monthly expense list which includes the above translated expenses for illustration purposes. This list indicates what your money is spent on each month. Be sure that all regular expenses are in this list whether necessities or luxuries.

MONTHLY EXPENSES

We will also use a net income of $2000.00 per month in this study and we will deal only with a positive cash flow (Income greater than expenses).  If your expenses exceed your income then you are living above your means and you probably have high credit balances to pay, which continuously rise.  In this case your first priority is to lower you monthly expenses or increase your monthly income (legally of course).

The Budget

I have found that many people have the wrong concept of the budget.  They think of a budget as something that will limit you in your financial management endeavors.   However, that is not the definition of a budget.  Let's talk about the budget now.  Whenever you receive money, you should always ask yourself "What will I do with this money?" The budget only records your answer to this question. The budget discussed in this study will apply to your regular paycheck.  Other monies will have different budgets associated with them such as birthday gifts, bonus checks, and any other money that you receive. Think of it this way. You will make up a budget every time you receive money. When you receive a bonus check, for example, you will ask yourself what to do with the money and record your answer. I define a budget as a distribution list for a particular income, which allocates money to specified expense items. If your income and/or expenses change then the budget will change.

Note that if your paycheck or source of income is the same every week or regular then your budget will be the same. If all are constant then you won’t have to generate a new budget every time you are paid.  There are three reasons why your budget would change.

1. Your income changes
2. Your monthly expense changes
3. You decide to distribute your money differently

Again I think it is worth repeating here.  The budget is only a record of how YOU decide to spend YOUR money.  It is not a limiting device.  What limits you is the availability of funds and not your budget.  The budget is a distribution list of an income source. It records how you decided to distribute the money received from an income source, paycheck for example, among various expense items.

Generating A Budget

The budget is constructed by dividing each expense item amount in the monthly expense list by the number of paychecks you receive in one month. For example, if you are paid weekly then you receive about four paychecks per month. Therefore you will have to divide all of the dollar amounts in the monthly expense list by four. If you are paid bi-monthly then you are paid about two times per month and would therefore have to divide the expense item amounts by two.

Let's construct a budget for illustration. Let's use a weekly pay interval. Your net pay is $500.00 per week ($2000 per month divided by 4 paychecks per month). All you will have to do is to divide all of the dollar amounts in the monthly expense list by four. This gives you the budget shown below.

BUDGET FOR PAYCHECK

This budget shows how your paycheck will be distributed among the expense items. Notice that the total of the distribution amounts must be exactly the same as the paycheck amount, in this case $500.00.  It is very important that ALL money is allocated.   That means that the total of the budget amounts must be exactly the same as the paycheck amount.

Using the Budget

How do you use your budget?  The budget shows you how you will allocate (distribute among expense items) money from the income source for which the budget was designed (example: your paycheck).  Allocate to each expense item the amount indicated in the budget every time you receive a paycheck for example. In the budget above we see that $12.50 is allocated for gas, $12.50 for electric, $6.25 for phones, etc. Doing this will ensure that you will have the money needed to meet your financial obligations (bills) promptly. If any of your expenses or income changes then you will have to adjust the budget accordingly. Remember that the sum of all of the distribution amounts in the budget must be exactly the same as the income source..

Types of Budgets

There are two basic types of budgets that you should be aware of. They are the absolute and percentage budgets.

1. Absolute Budget -The absolute budget uses a fixed dollar amount to allocate to each expense item. This type of budget is mostly used for salaried workers who get the same amount of money on a regular interval (Weekly, bi-weekly, etc.). We used the absolute budget in our previous discussion of generating a budget.
2. Percentage Budget - The percentage budget uses percentages of the current income to allocate to each expense item. Unlike the absolute budget, the allocation (distribution) amounts in the percentage budget can be different for each income payment (paycheck). For example you may allocate 5% of your income for gas, 7% for electric, or 25% for mortgage. The total of the allocated percentages must add up to 100%. This type of budget is useful for those who do not receive the same amount of money each paycheck. It would be helpful if you translated your monthly expense list from absolute dollar amounts to percentages of the total monthly income. This provides consistency between the percentage budget and monthly expense list.  Note that a financial management system that uses the percentage budget requires more work to manage.   This is because you have to constantly monitor your expenses and allocated amounts to ensure that you will have enough to meet your financial obligations.

The Itemized Account List

The itemized account list is used to keep track of all of the accumulated dollar amounts for each budgeted expense item. An itemized account is a checking or savings account that has been divided into separate sub-accounts to accommodate each applicable budget item. It is very important that you are familiar with the following account balance types to effectively use the itemized account list.  There are at least three types of account balances, which are listed below.

1. Effective Balance - This is the balance shown on your checking account register. This is the amount of money you would have in your checking account if all checks were cleared and all deposits and withdrawals were validated.
2. Actual Balance - This is the actual balance of your account at a specific time. This can be deceiving since this does not reflect checks that have not cleared. This is the balance that would be indicated if you go to the bank and inquired about your account balance.
3. Available Balance - This is the amount that the bank makes available to you. The bank requires a certain number of days for a deposited check or other similar DOCUMENT to clear before that money is available to you.

The Envelope System: An Illustration

Let me illustrate the itemized account concept by using an example that uses envelopes. Assume that you use regular mailing envelopes to store all of the money for each of your expense items (gas, electric, tithes, etc.).  Now let’s say that you get your weekly paycheck, you cash it at the bank and bring all of the money home. When you get home you know that you have to put money away for your expenses. So what you do next is to look at your budget and place the appropriate amount of money into each of the envelopes that you have set up for each expense.

When it is time to pay a bill, you will take the money out of the applicable envelope and go pay your bill. If you want to know how much money you have accumulated for an expense item, you would simply look in the appropriate envelope and count the money. If you are short a certain amount of dollars when it is time to pay a bill then you will have to find another place to get the money. You can't just take money out of another envelope because that may result in you being short for that expense when its bill is due.

The envelope system forces you to be conscious of each expense item and not focus on the total amount of money among the envelopes. This concept will be very important to you when you use the itemized account list. All aspects of the itemized account list are the same as the envelope system except you have to maintain the amount of money accumulated for each expense by your financial records since many of the expenses that you accumulate money for is paid by a check.

Types Of Itemized Account Lists

There are at least two types of itemized account lists that are available for you to use. The first is the Item Basis and the second is the Monthly Basis.

The Item Basis

The Item Basis is the detailed list for managing money for all expenses individually. The first thing you must do is create an itemized account list from scratch. This will give you the initial point necessary to use the list along with your budget. We will first initialize each expense item without considering the amount of money in the actual checking account. After we have created the itemized account list, we will make adjustments to establish consistency with the effective balance. Remember that the sum of the expense item amounts in the itemized checking account list must be the same as the checking account’s effective balance.

The following procedure will illustrate how to generate an itemized account list using the item basis.

The steps are as follows.

1. Determine the number of paychecks until the due date
2. Multiply the result in (a) by the budget distribution amount (the amount indicated in your budget for this item)
3. Subtract the result in (b) from the monthly expense amount for the item in the monthly expense list.
4. Set the initial balance for the item to the result in (c)

Arbitrarily set all other non-real expense item amounts until the sum of all expense item amounts is the same as the checking account effective balance. If some items cannot be set because of insufficient funds in the checking account, then you are going to have to deposit money into your checking account or adjust the itemized account list.   Right away, if that condition occurs, you know that you have been living above your means.

Let's determine the item balance for the Gas utility budget item for illustration. Assume that you have two more paychecks until the due date of the gas bill and that you are paid weekly. Looking at your budget, you find that you allocate $12.50 per paycheck for Gas. Therefore, you will accumulated $25.00 by the due date from your paychecks. However, your monthly expense list indicates that the gas bill will be about $50.00 per month, a $25.00 shortage. Now you need to initialize the gas item balance in the itemized account list to $25.00 to compensate for the $25.00 shortage. Now you will have $50.00 after the next two paychecks to pay the gas bill. Do the same type of calculations for each of the real expense items in the itemized account list.

How to Use the Itemized Account List

The itemized account list identifies the amount of money available for each expense item at any given time. For example, if you want to buy a new suit that costs $430 and you only have $350 set aside for clothes, then you do not have enough money for the suit. You will have to wait until you accumulate more money for clothes, get $50 from someplace else, or buy a less expensive suit. This is independent of how much money you have in the checking account.  Each item in the itemized account list is analogous to the envelopes in the envelope illustration given previously.

You never simply put money into your checking (or savings) account once you begin using the itemized account list. Money is always deposited into, withdrawn from, or check written against an item in the itemized account list. This indicates that each transaction must have a purpose and that purpose is indicated by the itemized account list item acted upon. For example, suppose the itemized account list indicates that you have set aside $50.00 for clothes. Let's say that you received a gift of  $50.00, which you promptly deposit into your checking account to help with the purchase of the new suit. Therefore, the clothes item balance will increase from $50.00 to $100.00 because of the deposit. The checking account balance will simply increase by $50.  If you then purchased a suit for $99.00, your clothes balance will decrease from $100.00 to $1.00 and the checking account balance will therefore decrease by $99.. Never just put money into or take it out of your checking account. All transactions are associated with an itemized account item.

Itemized Account List Transfers

There may be times when you have not accumulated enough money to pay a particular bill when it is due. For example, your Gas bill this month is $55.00 instead of $50.00 as indicated in the monthly expense list. You can't write a $55.00 Check to pay your gas bill because you don't have enough money for it even though your checking account balance is much greater than $50.00. What you will have to do is either deposit $5.00 for the Gas item or transfer $5.00 from another item in the itemized account list. Now suppose you have also accumulated $430 for savings. You can take $5.00 from the savings item and put it towards the Gas item. The savings item will now be $5.00 less, $395, and the Gas item will be $5.00 more, $55.00. This is a $5.00 transfer from the SAVINGS to GAS items. You can transfer from any non-essential expense item (clothes, savings, entertainment) for any reason as long as you are not "Robbing Peter to pay Paul". This would be similar to taking $5.00 out of the SAVINGS envelope and putting it into the CLOTHES envelope in the envelope illustration that we discussed earlier.

The Monthly Basis Itemized account list

The monthly basis of the itemized account list is a compacted version of the item basis. Instead of having individual expense items, you will group items into categories. This method can be used in the beginning so that you can get used to managing your money this way and if necessary switch to the item basis in the future. Remember that the monthly expense list, the budget, and the itemized account list are all linked and therefore must be consistent. As stated earlier, the monthly basis itemized account list can contain categories of expenses and not individual expense items. For example, instead of having GAS, ELECTRIC, and WATER expense items, you could group these into one expense called UTILITIES.

The following example illustrates a monthly basis monthly expense list where expense items have been grouped into categories.

MONTHLY BASIS MONTHLY EXPENSE LIST BUDGET

The Amount/Paycheck indicates the amount of money allocated for the particular item each time you receive a paycheck.

Since the monthly basis method contains categories of expense items, it is necessary to keep separate records for the amount you will spend on an individual item within a category. For example, you will have to know how much money you are spending on a particular Debt item if you are using the accelerated payments discussed later in this section.

System Operation

Now let’s put the monthly expense list, budget, and itemized account list together so that we can see how all of these entities work together to help you manage your money.

1. First you establish what your monthly expenses are by generating a monthly expense list.
2. Next you create a budget which documents the distribution of funds from your paychecks (or other income source).  this is how you decided to allocate your money for the various expense items.
3. You then distribute the money from your paycheck among the expensed items according to the budget.

Resources To Help You Manage Your Money

There are many resources that you can use to help you effectively manage your money. There are books and tapes from various ministers and financial organizations. You can purchase computer programs to manage your checking accounts (I have been using Quicken for many years and am very happy with it). You can buy computer programs that will enable you to pay your bills electronically and access your checking account.

Practical Examples

The purpose of this section is to illustrate the practical uses of the budget and the itemized account list. We will examine various financial cases involving the manipulation of funds that will effect the budget and itemized account list.

How a Paycheck Effects the Itemized Account List

Assume that you have been paid $500.00. The budget (third Column) will allocate money to each expense item in the current itemized account list (Two Leftmost Columns) resulting in an updated account list (rightmost column). Notice that the checking account effective balance is always equal to the sum of the expense items in the itemized account list.

Current Allocated = the amount of money that you have set aside (allocated) for the particular item.
Budget Amount = the amount of money added to the current allocation from your paycheck allocations
New Allocated = the resulting amount allocated for the item.

You have deposited a total of $393.75 into the checking account for the applicable expense items. Notice that you only included those items that are managed in the checking account. The rest of the money is not deposited into the checking account.  The expense items for groceries and car gas are kept in envelopes at home, and these envelopes will have the corresponding dollar amounts added to them as indicated by the budget. The sum of these items, from the budget is $106.25. The sum of this dollar amount and the amount you deposited into the checking account is indeed $500.00, the amount of your paycheck.

You have to keep track of the individual item balances at all times. This will be accomplished by one of two methods: 1) Computer Program or 2) Item Balance Sheets. We will discuss the item balance sheets in this study. You will record each deposit into each of the expense items in the itemized account list as directed by the budget (Middle Column). You should be able to examine any of the item balance sheets to determine the amount of money currently set aside for an item at any time. For ease of use, the order of the items in the item balance sheets should be in the same order as the budget.

Using the Item Balance Sheets

Record all transactions for the itemized checking account on the item balance sheets if they effect the checking account balance or any of the itemized account items. The steps for using the item balance sheets are as follows. For each deposit, withdrawal, and check written, record the date of the actual transaction, the check number if a check was written, the amount of the transaction (precede amount with a negative sign "-" for withdrawals or a positive sign "+" for deposits), adjust the item balance according to the transaction (add for deposits, subtract for withdrawals and checks), and record the reason or purpose of the transaction. Be sure that you update your checking account register and any other applicable records accordingly.

How an item transfer effects the Itemized Account List

The following case illustrates how you would update the itemized account list if you transfer funds from one item to another. Suppose your refrigerator malfunctioned and the cost to repair it is $75.00. There is only $56.25 accumulated so far for appliance maintenance according to the itemized account list. Therefore, you are short $18.75 and must make up the difference in order to pay the bill. You can use some of the money set aside for savings to make up the difference. You now have to transfer $18.75 from the savings item to the appliance maintenance item.

The transfer, as well as the previous financial activities, on the item balance sheets will look like the following:

Item Name: Savings

Item Name: Appliance Maintenance

Notice that after the repair bill was paid you withdrew $75.00 from the appliance maintenance item and the checking account. That is, you wrote a check (Check number 1134) for $75.00 against the appliance maintenance item. The appliance maintenance item balance becomes $0.00 and the checking account balance becomes $1520.75 ($1595.75 - $75.00).

Getting Out Of Debt

We will now discuss the process of debt elimination. What debt really is and what steps you can take will be revealed in this section so that you can take practical steps to experience a debt free and financially independent life-style.

Dream

Build your dreams and goals. For example, imagine yourself giving $20,000 to your church or $50,000 to your parents. If you want to live in the house of your dreams then you might want to drive around new home developments to look at your dream home. Imagine yourself completely out of debt. How will you spend your thousands and millions? Write it down on a piece of paper. Believe God for a debt free life and confess it to yourself. The bible says...

Mark 11:22 through Mark 11:23 (KJV) ²²And Jesus answering saith unto them, Have faith in God. ²³For verily I say unto you, That whosoever shall say unto this mountain, Be thou removed, and be thou cast into the sea; and shall not doubt in his heart, but shall believe that those things which he saith shall come to pass; he shall have whatsoever he saith.

In order to live a debt free life you are going to need the power of God constantly active in you so that you don't submit to the spirit of debt, pride and lust. Dream building is good on a practical level only. Don't be trapped by entertaining your lusts, which can easily happen. Stay focused on God and his purposes in all that you do.

What is Debt?

The word debt means something owed, as money, goods, or services; an obligation or liability to pay or render something to another.

There are two types of debt that you should be aware of: Good debt and bad debt. Good debt is money that you owe for something that appreciates or holds it purchase price value. If you were for some reason unable to pay what you owe on something that was purchased with credit (good debt), then you could sell the item to acquire the money to satisfy your debt. This is a sign of good debt. An example of good debt may be your home or a painting. Bad debt is money that you owe for something that depreciates in value. The item that you purchased on credit could not cover the cost of the loan if you had to sell it. A good example of bad debt is a car loan. You could not sell your car to acquire the money to satisfy your loan if you could no longer make the monthly payments.

How Can We Get Out of Debt?

Eliminating debt is straightforward: Simply pay off all of your loans. It is much more involved then that however.  It may mean a change of lifestyle especially if you are used to living above your means (on credit).  It may mean some sacrifices on your part.  It may mean one outing a month instead of five or six.  It may also mean more work if you are not used to actively managing your money.  You will find that you will have to take control of your spending practices if you expect to get out of debt and stay out of debt.  So getting out of debt simply means adjusting your spending practices so that you will have more money available to put towards a debt elimination program.  You can eliminate your debt much more effectively if you had proven tools and a plan to assist you. The purpose of this section is to present tools that you can immediately use to help you eliminate your debt.  Note that debt elimination does not happen overnight. It will take you time to eliminate your debt so be patient and consistent.

The following are some basic steps that you can use to begin your debt elimination journey.

1. Minimize the Monthly Expense List. Minimizing the expense list is done as follows: Set all expense amounts (monthly payments) to that necessary to pay only the minimum monthly amount or the minimum needed for the expense.

Eliminate or reduce all items that are not necessary (Movies, eating out, magazine subscriptions, cable, etc.).

2. Add all the new expense amounts and write down the result.
3. Subtract the result in (b) from your total monthly income and write it down.
4. Determine the order to pay your debt off. A crude way to do this is as follows:

• Gather all of your debt bills
• Using the Debt Status form, write down the name, total balance, minimum monthly payment, and the payoff interval (monthly payment divided by the total balance) for each debt bill. See example in appendix A.
• Number the debt items in the pay-off priority column in the order of the lowest payoff interval
• The order of the debts to pay off is identified by the lowest to the highest number line items in the pay-off priority column.

Add the result in step (c) to the expense amount of the item identified in step (d). This will give you a new and greater monthly expense for this item, which means it will be paid off faster.

Adjust the budget to reflect the changes in the monthly expense list. This will be your "Get Out Of Debt" (G.O.O.D.) budget.

Start accelerating payments using the new monthly expense list and the corresponding budget. When the first debt is paid off, use some of the "excess" money for benevolence (giving to your church, helping someone financially, etc.).  I will call this excess money a seed offering.  Of course you have the prerogative to use this excess money anyway that you like.  You may even decide to put all of it towards getting out of debt.  However, as a Christian, I recommend that you always have some money or other resources aside available to help someone else who may be in need.   Use the remainder, after you subtract your seed from the payment amount, to accelerate payments for the next debt item (next pay-off priority). Let's look at an illustration to help you understand this principle.

Assume that you have the following monthly expenses with the corresponding debt pay-off priories.

A note about the tithe item.  The tithe item is what you have decided to give to your church (in this case 10%).  Please note that I am not suggesting that Christians are obligated or even commanded to give 10% of their income to their local church.  See the study "Tithing, Giving, Sowing and Reaping" for a very detailed study on the topic of tithing.

Your minimized monthly expense list could look like this.

Your monthly expenses have been minimized by $112.00. You will apply this excess to the item with the smallest pay-off priority (or to the loan that will be paid off the fastest). You determine which item will be paid off fastest by applying the excess funds by manually calculating the effect of that excess on each item.  I find that a spreadsheet program helps greatly in doing this.  You could also simply use the item with the lowest balance as the highest priority.  Let’s assume that the visa will be paid off first if we accelerate payments. The Monthly expense list will now look like this.

You now have $300.00 per month to apply to your visa payments.

Determine what your seed offering will be after the Visa is paid off. Let's arbitrarily use 10% of the available amount as a seed offering. The amount of money that has been made available is the payment amount for the item just paid off, which in this case is the $300.00 for the visa. The seed offering is therefore $30.00 (10% of $300). The adjusted available amount is $270.00, which will be applied to the furniture bill for which you now have $530 per month. The monthly expenses are now.

$530 will be free after the furniture loan is paid. You will apply 10% of the original loan amount for the furniture loan and add that to the current seed offering. This amount is ($26.00) and the new seed offering will be $56.00 ($30 + $26). This will leave $504 to apply to the next loan payment. The monthly expenses are now.

Your seed offering will increase by $38.00 after you have paid off the car note. Your budget will then look like the following:

Not only are you significantly out of debt, you have extra money to invest and you have helped, and are still helping others financially. Once you are out of debt - Stay out of debt. Do not let yourself get back into debt once you have eliminated it. Save money for expenses that you plan. Don't purchase things with credit unless you will remit the entire loan amount when the bill comes. Above all stay in communion with God so that the spirit of debt does not overtake you again. At this point your fundamental mode of operation is a cash only mode.

Living Financially Free

What will you do with your money once you have eliminated all of your debt? The focus at this point is to use all available cash for building wealth. For the most part this means to invest your money (save with good interest). The following are some guidelines that you can use to help you remain financially independent (debt free).

1. Focus all available cash on building your wealth
2. Invest money in a liquid account for emergencies
3. Pay cash for everything.
4. Remain obedient to what God tells you.

The Cash Basis

It is very important that you live on a cash only basis once you have become debt free and financially independent. If you begin to use credit and revert to the old ways that got you in debt in the past, then you will end up as you did in the past—In debt and in bondage.

Learn to save money (put money purposely aside) for items that you desire or need.

No Credit Cards

Tear up all of your credit cards except one. I believe that you should, or it is beneficial to, have one credit card for emergencies. I do not believe in carrying a lot of cash around so the credit card becomes very convenient in this respect. Of course when your credit card bill comes you will pay the balance completely thus keeping your credit card balance to zero. In this case the credit card is used as a substitute for cash. However, if it is within your power to use cash (including checks) then do so.