Finance 101

I spent the majority of yesterday afternoon going over our finances and budget (this is a peridioc necessity for organic eating!! LOL). This seems to be a major issue for a majority of our society today. When I got married, I was as financially sound as the Jones' (aka I was in pretty good debt!). Fortunately, God sent me a very responsible, plan-ahead kind of guy who rescued me from impending financial doom. Since we married, God has used my husband, a little conviction, and some real-life examples to really open my eyes to the Biblical principles of financial stewardship. In addition, we recently had our credit card number stolen. Apparently, someone used a "skimmer", which is a small, handheld machine that someone (in our case, probably a restaurant staff person) scans your card with and it stores the information. They can later use that information to create a fake copy of your card, that is readable by some machines. In our case, the fake card was then sold to someone in another state who used it to make a series of purchases before our credit card company notified us. This lesson taught us to be as careful as possible with our money. Since I worked primarily on our budget last night, I thought I would share some tips I have learned for starting a budget and protecting your hard-earned money.

1. Create a spreadsheet with designated categories for your life expenditures. A terrific one for getting started is http://www.crown.org/pamphlets/pdfs/MonthlyIncomeandExpenses.pdf
2. Use any records you have (receipts, credit card and bank statements, bills, pay stubs, etc.) to fill in the blanks. If you don't keep good records, you should begin for a minimum of 1 month. It is difficult to create a budget if you don't know where your money is going to begin with. You can get a better idea of your debt with this form: http://www.crown.org/pamphlets/pdfs/DebtList.pdf
3. Now calculate the percentage of your monthly income that is currently going into each category. Compare your results with this recommendation for a family of 4 (additional versions can be found on the crown website): http://www.crown.org/pamphlets/pdfs/PGI01(FamilyofFour).pdf
4. Once you have an accurate estimate as to where your money is going each month, start playing with the numbers. Figure out what your take home pay is each month. If you are a believer in tithing to a church, deduct your tithe from that amount. Then play with the numbers in each category until you find a budget that can work for you and your family. If you are severely in debt, or unable to get close to the recommended category percentages, you may have to consider making some lifestyle changes or decide where you want to sacrifice things.
5. When your Income is equal to or greater than your allocated category totals, CONGRATULATIONS, you have a monthly budget plan. Now try it out! After trying it out this year, I highly recommend using the "Cash method" via the "envelope system." In other words, total up your expenditures each month, and deduct the needed amount from each paycheck so you have cash on hand. Get a pile of envelopes and label them according to the categories on your budget spreadsheet. Divide the cash into the envelopes accordingly. Then, when you need to spend, take the appropriate envelope with you. For example, if you are going grocery shopping, take the "Grocery" envelope and pay for your groceries with that cash. This method also prevents people from stealing your credit card number like they did ours.
6. If you run out of money in one envelope before the end of the month, you have to decide whether to sacrifice from another category, or just not buy any more from the category you ran short for the rest of the month.
7. In addition to the given categories, I also created 2 additional envelopes. One is called "credit card reimbursement" and the other is "Carryover." The first I use when I have to use a credit card for something and then "pay it back" through the envelope. For example, I prefer to used a cc at the gas pump. Then when I get home, I can take the cash out of the "gas" envelope and put into cc reimbursement. I use this money to pay off the cc bill at the end of the month. The second "carryover" envelope is where I put cash leftover at the end of the month. We can then use that money to do something special, invest, pay off something, whatever. It is like getting a bonus at the end of the month.

I hope someone can find this system useful. I highly recommend it, and find it actually makes life a lot less stressful and less money-focused, interestingly enough. If I have money left over, I can go make a "convenience" purchase without feeling guilty now. Let me know if you try it or if you have any questions. I would be happy to try to answer based on my limited experience.