A reader recently wrote in saying I should take a look at a money management book put out by a current best-selling author. In the book, the author makes the argument that budgets don't work – basically because people won't take the time to keep up with them. So why bother? The author recommends learning to pay yourself first by putting savings on automatic with the use of direct deposit.
While I take issue that we should pay ourselves first – the Scriptures point to the principle of returning to God what is His first (Prv 3:9), I completely agree that learning to put saving on auto-pilot by using direct deposit is a great way to go. However, if you are going to be able to do that successfully over the long haul, you need to know that your spending patterns are such that you really do have the money to save. Otherwise, you'll end up continually seeing your college and retirement savings getting chewed up – whether it's by emergencies, irregular expenses or even those periodic big-ticket items such as cars, home improvements or expensive vacations.
Fail to Plan; Plan to Fail
I understand what the author is saying about the challenge of keeping a budget. Tracking income and expenses throughout the year is a hefty amount of work, and the last time I checked, only about five percent of Americans bothered maintaining a budget. But I also think that's a good part of the reason that so many Americans have difficulty with overspending and the accumulation of credit-card debt. Rather than accept the premise that budgets don't work, I think we need to dig a little deeper.
Managing finances is in many ways the adult equivalent of completing homework as a youngster in school. Some children find it pretty easy to manage their homework. Some just like school, others want to please the teacher, and others realize that to succeed at life, it's important that they do well in school. Then there is always the threat of getting a note from the teacher sent to your parents or a bad report card. For others however, it's just a lot more difficult to stay focused on the task at hand.
In many ways when we become an adult, it gets even harder. All of a sudden, what we do is up to us. Nobody is forcing us to sit down and pay our bills on time and follow up by recording them in our budget. It becomes an effort that we have to decide is worth it. A big incentive for us should be that what we do with our money matters to our Lord. It really is an outside indicator of what's going on with our interior life. Being a Steward of Providence – the first step of the seven steps to becoming financially free – is simply learning to use the resources the Lord has entrusted to us in ways pleasing to Him. Understanding where our money goes is a part of that responsibility.
Grow in Virtue: Handle the Details Well
Each year, our pastor sends all of the families in the parish a little Christmas present. Several years ago, he sent a small book on family life titled The Christian Home by Rev. Celestine Strub, O.F.M. In the book, the author says:
Keeping a home and a family is just as much a business as running a store; so why should it not be kept on a business basis? Many couples have had their eyes opened by keeping an itemized account of disbursements. They found that they had been extravagant without realizing it. But if keeping tab on one's expenses teaches economy, it should be done in every Christian home; for economy, supernaturalized, is nothing but the Christian virtue of moderation.
So while I understand that keeping a budget truly is work, it really is the best way to make sure you are on the path that leads you to where you want to go. What's a person to do who just doesn't have that "detail bent"? Here are a couple of ideas.
First, if married, sit down with your spouse and talk about the talents that each of you brings to the relationship. In most marriages, one of the two will have greater skills at handling details. I'd encourage this person to be the one who creates the budget, manages the bill-paying and tracking of expenses, and all of the other day-to-day financial duties. But it's really important that this person be able to summarize financial affairs in a simple way so that he or she can review it with his or her spouse periodically. I call these "family budget meetings."
New Tools Available at www.VeritasFinancialMinistries.com
If you find that you just can't bear tracking your expenses throughout the year, here is an alternative. Realize that compared to full-blown tracking, it's a long shot second, but it is much better than nothing. You'll use the same tools recommended in the 7 Steps materials. You'll complete a balance sheet, summary of debts and annual budget at least once per year to see if you are headed in the right direction.
Rather than tracking your income and expenses formally throughout the year, you'll only do so for 60 days. This will allow you to get a sense of your recurring expenses, especially those habitual ones that might need to be adjusted – frequent lattes for example. By combining the information from your 60-day tracking with estimates of other infrequent expenses (property tax and insurance bills come to mind), you can do a reasonably good job of estimating an annual budget.
Once you have your budget, you can review your spending priorities. Are you being as generous as the Lord wants you to be? If you have consumer credit, are you allocating enough to debt repayment based on the Accelerator Repayment Plan calculator at the Veritas website? Based on your savings needs for college and retirement, are you setting enough aside for the future? If as you go through the year, you find that your goals are going as planned, the 60-day tracking approach may work for you.
Veritas Financial Ministries has just made available a free and secure online budgeting application called My Veritas Plan. It is meant to provide the same time-tested tools that are included in the 7 Steps to Becoming Financially Free – Workbook, but add the efficiency of a computer-based program. It offers a simple alternative to some of the more complex computer-based programs available today. My Veritas Plan will work whether you want to track your income and expenses throughout the year (as I do and as I recommend), or even if you can only bring yourself to tracking for 60 days. So take My Veritas Plan for a test run and let us know how you like it. God bless you!
