I have learned a lot about budgeting over the years. Some of it was learned from the example of my parents and some was taught to me formally in college, but a lot of it was learned by experience as I tried to put those learned principles into action. After learning lessons from experiences of failure and success, I now have a system that works very well for our family and I would love to teach you what I have learned, but before we can get down to the details, we need to lay a groundwork of the principles of budgeting.
The same principles work for time management that work for money management. It is all about how we manage our finite resources. Whether you have plenty or little, the principles stay the same, and, in both cases, require self-control.
Because you are alive now does not mean you have plenty of time left and because you have money now does not mean something will not come along to take it away. The best we can do is to do the best we can with what we know that we have right now. We have all seen how millionaires can go bankrupt by poorly managing their money and how paupers have all they need through wisely managing what little they have. Whether it is time or money, it all belongs to God. We are simply stewards (managers) of the amount of time and money He entrusts to us.
We truly should go to the ant for management wisdom.
Go to the ant, thou sluggard; consider her ways, and be wise: Which having no guide, overseer, or ruler, Provideth her meat in the summer, and gathereth her food in the harvest. ~Proverbs 6:6-8
The ant prepares ahead for the needs she will have later. She doesn't need someone telling her what to do. She is "her own mother". She seizes opportunities and works hard. She is focused on her task because she knows how very important it is. She helps herself and doesn't rely on others to meet her needs.
Some people are managers by profession. They have work responsibilities and people working under them that call on their managerial skills. However, every person is a manager. You manage your sleep, wardrobe, grooming, relationships, diet, and many other elements of your life. Whether you are a good or a bad manager of those things tells the story of your character.
Money management has a huge effect on our lives and the lives of those around us. It is important to gain good money management skills and parents should be sure to teach them to their children. Good money management can be a great blessing in provision, being prepared, blessing others, and peace of mind. Poor money management can be the cause of much sorrow and strife. Besides these repercussions, our goal should be to hear our "Well done" from our Lord as to how we managed what He entrusted to us, because it's not about the money; it's about how we reflect God's character back to Him.
I would like to focus on two principles in this post which go hand in hand: reality and commitment.
Reality
To budget well, you need a good dose of reality. I would venture to say that we all wish we had more money than we have. We have an ideal lifestyle in our heads of how we think we ought to live. However, our income does not always support that ideal lifestyle and I'm pretty sure the ideal moves beyond our reach as we go.
Some personalities have more trouble than others coming to grips with reality. Some want others to think of them as Big Daddy and want to pay the check and give very nice gifts, and some just have generous hearts and want to give more than they have to give. Either type can get into real financial trouble very quickly.
We must realize (there's that REAL word again) that our spending must be kept in proportion to our income. You can budget only what you actually have, not what you wish you had or might one day have. Keeping income and expense at a right ratio or proportion is the key to staying within your means. This is like the plea of every altar call and every good counselor: to face the reality of what is really true right now.
Those who are not real about what they have to spend will eventually reach the end of their proverbial financial ropes. Unfortunately, it takes a lot longer to get out of financial trouble than it does to get into it. You can spend a decade or more of your life just to get back up to level ground--where the income covers the REAL expenses without relying on a credit card. This emphasizes the importance of starting off in life with good money management skills.
Financial desperation can tempt you to do things you would not typically do, like ask for money from friends or family (a sure way to destroy relationships), sell beloved or needed belongings, and even immoral acts of cheating and stealing. We should consider it a very serious business to prevent ourselves from ever being in such dire straits.
My husband and I are givers. Our parents have always been examples of generosity and we caught the giving bug from them. We have also gone through financial struggles, especially early in our marriage when we were just starting out, and feel blessed now that we have something to share, and we feel for those who are now going through what we went through then. As Christians, we know these truths:
God is love.
Love gives.
God is in us.
There's no way around it: we are programmed to give. It is right to give and good to give, but even with all this good will toward men, we have to be real about what we are free to give. Some would advocate giving when you do not know where it will come from. I believe God gives us common sense and tells us to count the cost. To leave your money decisions up to your emotions will get you into trouble. God gave us brains for a reason. It is giving by faith to give at all, not knowing for sure that your income will continue or that your needs will increase. We consider how He would have us to give while trusting that He will take care of us in return. Giving should be part of budgeting. God moves on our hearts to know how to give the money we have budgeted for giving. We have a family to support and the responsibility to use our money wisely. We have to keep things proportional to our other obligations.
Even in giving gifts, we must be real. Does it make sense to give a more expensive gift to a friend than to your dad? Can you go on giving a Christmas gift to all your siblings and their spouses and their children and their spouses and their children? Do they all get a birthday gift, too? Do you expect gifts from your now-adult siblings or nieces and nephews who are just starting out in life? What about all those graduation invitations? How do you decide who to give to and how much? Check your logic by listing out those to whom you give in a year's time and how much. We should not be providing for others at the unnecessary expense of our own dependents. You will have to set your own parameters as things change over time so that your expenditures are not out of balance.
This issue of reality comes into play over and over in budgeting. Be sure the amount you plan to spend for a vacation is reasonable, considering all of the other expenses you must cover. You may have the attitude that "someone who makes as much as I do should be able to buy a _______ if they want to." The problem with this line of thought is that it would be true if you hadn't already decided how all that money would be spent. If you have already committed to monthly payments and obligations, all your choices have already been made and there is no room in the budget for impulse buying. Thus, the connection between reality and commitment is made.
Commitment
The problem that comes from not being real about our finances is overcommitment. We sign up for too much recurring expense (monthly bills) and are not left with enough money to cover our remaining expenses. This is a formula for taking on credit card debt.
When you say "yes" to one thing, you say "no" to something else. When the cashier asks me if I would like to round up my total to donate to a worthy cause, I have no problem telling her "no" because I know that we are already giving to causes that are in line with our beliefs. Every cent given on a whim is a cent that I can no longer make a calculated decision for giving to causes in which I truly feel led to invest. Saying "yes" to buying those doughnuts means saying "no" to paying for a friend's meal. We need to consider what we are saying "yes" to so we can make conscious decisions. We have to come to terms with the fact that we cannot do it all. Every decision to spend is a CHOICE: a choice between this and that. You can't have (keep) your dollar and spend it, too. You have the privilege of spending it once. We simply have too many good choices.
How tight do you want your budget to be? If you budget it all for recurring bills, then you are not free to make spontaneous decisions. You will have already made the decisions of how to spend your money and there will be none left.
When committing to an expense, we also need to be real about how much money it will cost. Take a child being in a sport, for instance. "May I play on the baseball team?" "Sure." It's only an $80 fee and he would enjoy that. Well, he also needs cleats ($75). He's got to have several pairs of baseball pants ($60), a team hat ($5), meals for away games ($40), money for picture day ($20). We are up to $280 and that's without baseball socks, a new glove, admission fees for us to watch him play, and his own helmet and bat. I'm not complaining about the cost, but I am trying to illustrate that many endeavors have necessary costs that may not be evident up front. It takes experience or research (like asking another parent in this case) to know the full cost. Be sure to take notes as you go so you will be armed with knowledge next time. You now see how a budget can be blown by things you have to pay for but have no idea of their extent. Expect things to cost more than you think.
I hope I have effectively alerted you to what your "yes" may mean. Making financial choices takes a lot of thought, prayer, and experience. There are lots of good things to do with money but you will not be free to do those things if you are foolish with it. It is easy to make a foolish decision that will take you many years to overcome. Bondage is a horrible way to live and we have some ability to choose our degree of bondage. A lot of that has to do with self-control, but life shows us that self-control used presently will free us later to enjoy its ongoing benefits.