Budgeting is a method to make sure you're spending less than you earn and planning for both short-term and long-term goals. Consider these six basic steps in the personal budgeting process:
1. Identify your "WHY." Why do you want to have a budget? Don't stop with the obvious. What are the fears and desires that will genuinely motivate you to change your spending habits?
2. Set your PRIORITIES. Set goals. Identify what you value and what you want to accomplish and put it in order of priority. As a Christian, make sure your priorities include making a budget that reflects your Christian values. This will make difficult financial decisions easier to tackle.
3. Determine your BASELINE. Know how much money you have, how much you make, how much you owe, your net worth and average monthly recurring expenses. Then look at the bottom line. All of this will form your baseline. You'll build the budget based on that and have it as a measuring tool later to determine if the budget is working.
4. Choose your METHOD. One method allocates 50% for required expenses, 20% for savings and 30% for discretionary spending. (All the percentages are after deducting taxes and your tithe.)
Another method is called "zero sum" budgeting where every dollar is assigned a destination so that at the end the balance is 0. Another approach is called "anti-budget" where you simply identify your priorities and spend based on those priorities. The old envelope method or separate accounts method also works very well for many people. There are others. Pick the method that works for you.
5. LIVE with your budget. Take the chosen method and put it into practice. Don't worry about getting it perfect. There will be mistakes. But no budget or budget method works unless you use it. Keep track of the expenses with paper, software or apps. Unless you keep track of the expenses, you'll never be able to know if the budget is working.
Check to make sure your expenses are addressing your priorities, especially the priority of reflecting your commitment as a Christian.
There's always room for IMPROVEMENT, so make it a habit to review and revise your budget at regular intervals.
6. REVIEW. REVISE. IMPROVE. UPDATE. Allow for inflation and coming life changes which you anticipate. Budgeting is for everyone — rich or poor, young or old. Budgeting is not about deprivation. It's about putting your money to its highest and best purpose according to your values and goals.
Don Spencer is Kentucky Baptist Convention Church Financial Benefits Counselor.