by Emily Stroud
Let’s declare this the year to become more confident and faithful with our finances. It really is a choice. You get to decide. Do you want to continue to live in fear as it relates to your finances, or do you want to take proactive steps to obtain financial freedom? Living one flat tire, medical bill, or broken household appliance away from financial devastation is not an ideal way to live.
Now take a deep breath, because I have good news for you. There is hope. Proper financial planning is the key to avoiding many financial pitfalls.
The most basic financial planning task, but the most critical for success, is creating a realistic monthly budget. No matter what your age or stage in life, you will never outgrow the need for a budget. The most important thing you can do to move from fearful insecurity regarding your personal finances to confident control is to create and live by a monthly budget.
I know creating a monthly budget can seem daunting. However, taking this first step will set you on a path to obtain financial freedom.
Do you know how much money you spend each month? If not, please don’t be embarrassed. Let’s figure it out together.
I suggest going to an all-cash system for a couple of months to track your expenses. If you’re very disciplined, you can use something as simple as a shoebox to store and save every receipt for a month. Don’t exclude any receipts or expenses. Place the shoebox next to the door of your home and empty your receipts from your purse or wallet every time you come home. If you spend $4.50 at your local coffee shop, then save the receipt. If you’re technologically savvy, there are also free apps you can download on your phone to track your expenses.
Becoming aware of our monthly spending habits is the only way to truly know how much money we’re spending each month. After this, you’ll be able to determine how much discretionary income you have.
Discretionary income is the amount of money you can afford to save or spend each month after all of your expenses are paid. Be prepared to be surprised. Many people are shocked to find out how much money they spend on miscellaneous items like lattes, dining out, shopping, or entertainment. None of these expenses are bad. You just need to make sure you’re spending less than you make. People often go over their monthly budget one small purchase at a time.
I want you to experience financial freedom by spending less than you earn, and not putting a deficit on credit cards each month. If you have money left over at the end of the month, you can then allocate it towards an emergency fund, savings goals, and giving to others.
The ONLY way you’ll ever achieve financial freedom is to spend less than you make each month.
One of the ways that money can be used to bless others is by tithing and charitable giving. I don’t want you to miss out on the JOY that comes from giving. When we become more outwardly focused on others, and upwardly focused on God, our spirits are lifted. We immediately feel more at peace and content.
I have definitely regretted some purchases in my life, such as a new handbag that quickly became out of style. I thought the new handbag would bring me JOY, but instead, it just brought me temporary happiness that quickly faded away. However, I have never regretted tithing and giving to those in need. If you have never given anything to anyone, just take the first step.
I also encourage you to make giving part of your regular monthly budget. Then giving becomes intentional in your life and not accidental or sporadic.
For a budget to work and benefit you or your family, it must be tailored to your unique lifestyle and situation.
What are your personal financial priorities? Is it getting out of debt from your student loans or paying off your credit cards? What are your dreams and aspirations? Is it purchasing a new home for your family, sending your child to college, or saving for a big vacation?
I want to encourage you to sit down with a notepad and pen and start dreaming. This is the fun part of financial planning. I want to encourage you to plan for living well now!
One slippery slope is to spend our days longing to be rich or comparing our financial situation to someone else’s life. This is both unproductive and unhealthy. Money is not inherently evil. Money is a tool that can be used to bless people and provide for basic human needs, such as food and shelter. What’s evil is when our heart desires money above all else. We can’t use money and possessions as a substitute for Jesus. True security and joy can only come from a relationship with Him. Ask yourself, what are you tempted to use as a substitute for Jesus in your life?
I believe this year is an opportunity to make some much-needed changes. Let’s go create that new budget and get started on transforming our financial lives. Honestly, it’s just like starting a new workout plan: the hardest part is putting on our tennis shoes. Once we start exercising, we actually feel better and it’s not nearly as bad as we thought it would be.
Emily Stroud, MBA, CFA is the host of the new TV series Faithful Finance LIVE now streaming on Pure Flix. She is the author of Faithful Finance: 10 Secrets to Move from Fearful Insecurity to Confident Control and owns and manages the financial services firm, Stroud Financial Management, Inc. Visit faithfulfinance.com to receive a free budget worksheet.