Money Management 101
As you’ll notice as you go through life, most people will struggle with money and finances–and this is true regardless of how much they make or have. So, if you’d like to avoid that, you’ll want to follow a simple formula that, if followed, will ensure that you’ll never be in bondage to money and debt.
Now, I have to warn you, up front, that you and your friends will want to tip this formula on its head and follow it from the wrong direction–but don’t. Follow it as laid out and you’ll be richly blessed.
So, here’s the simple formula
- Give God the first 10% of what you make (from the gross amount)
- Put the second 10% in savings/investments
- Pay your taxes
- Pay your obligations (starting with your rent–and later, mortgage)
- Enjoy the rest
As I said, the temptation (which is what most people do) is to always reverse the order. Most people want to spend whatever they want on whatever they want, then they pay the least amount possible on their debts and obligations, then they begrudgingly pay their taxes, and then with what’s left over, they put a little away and maybe put a few dollars in the collection plate–and then they wonder why they’re in such a financial mess! Why? Because they reversed the order. So don’t!
Yes, it may be difficult at this stage to think about tithing (the first 10%) or of putting 10% of your money away for the future–but this is exactly when you need to learn to do this. If you don’t start tithing on $100, you won’t on $1,000 or $10,000 or $100,000 or $1,000,000. Remember, first you make your choices, then your choices make you.
Likewise, if you don’t start saving now, you won’t later. Remember, later never arrives. Also, the minimal amount of money that you ought to keep in your savings/checking account is three month’s worth of expenses (more is better). In other words, if your go through $2500/month right now, then you need to do everything you can to acquire $7,500 in your savings/checking account as soon as possible.
Why? Because life doesn’t always work out perfectly–and you want to be prepared for that. What happens if your job gets eliminated? Or your car breaks down and needs an expensive repair? Or you get sick and can’t work for awhile? You always want to be prepared ahead of time for the unexpected (which is called, life). Plus, when you do this, you’ll find that it’ll greatly reduce your stress. I’ve never understood why so many people choose to live paycheck by paycheck. You don’t want that–you want margin. And the more margin, the better (which, equates to less stress).
Now, if you’ve been following this argument, then you know that what this means is that you can’t simply spend what you want to spend on whatever you want to spend it on. What you get to spend (whether it’s on fast food or clothes or makeup or a car or a TV or …) is always based on the first four steps having been completed. In other words, if you haven’t honored God first or put money away second or paid your taxes third or paid off all your obligations fourth (starting with your rent/mortgage), then you shouldn’t be spending money going out with friends or buying a new outfit. You should only do those things with what’s left over AFTER the other four are met (not the other way around).
If you choose to follow this formula, you’ll be financially free. If you don’t, it’s your choice. But remember, first you make your choices, then your choices make you. So, choose wisely!
