Dear Z, E, and T,
Many people don’t plan financially. Lots of people are anxious about their finances. There is a direct correlation. There isn’t any secret you need to learn or wisdom that you need to pay for to avoid this reality. Budgeting is simply planning. Your money will be spent. Spend it intentionally. Plan where your money will go. Don’t wing it. If you stick to these simple principles you won’t be anxious, you’ll experience tremendous freedom.
1) Give generously to God. You can do this in many ways and should do it through each way to some extent: to your church, to Kingdom ministries, to those in need. I recommend you give 10% of what the Lord provides as a starting point. Then give beyond as the Lord leads you (see #8). Don’t be legalistic about 10% and don’t think it earns you favor with God. Giving your first to God is simply the way of reminding yourself and acknowledging God owns and provides everything you have.
2) Save. Again, I’d recommend 10%. Put away 10% of everything you make. This will ensure that you live below/within your means (see #7). It will be available resources in case of an emergency or if a great opportunity comes your way. Invest some of the savings so that your money earns more money. I’ll give you more details on that in a later letter.
3) Spend on the things you need. Housing, food, clothing, transportation. Those are your needs. Be careful not to slip wants into the needs category. Be sure you budget these items before moving on to number 4.
4) Spend on things you want, guilt-free. If you’ve covered the first three items and there’s money left, spend on things you want. Feel the freedom to do so.
5) Avoid Debt. There’s nothing inherently wrong with debt. When you borrow money from someone, they control you and your opportunities to a certain extent. By avoiding debt you will avoid much heartache in life and experience a level of freedom that many never experience. I’ll get to buying a house later, but avoid debt for vehicles (It’s possible, I’ll show you how) and consumer goods like your life depends on it.
6) Track your expenses. This isn’t hard, get a program (we use YNAB, maybe it’ll still be around when you’re older) that imports straight from your bank and lets you really budget – carrying category balances over month to month. Your budget isn’t some static piece of paper you think about then stuff in a drawer. Set it, live by it, make adjustments, repeat. Your budget is your priorities, not someone else’s. If you change them, great!
7) Live within your means. This goes with give generously, save, and avoid debt. Many people think that after they cover their needs there isn’t any money left over for “fun stuff.” Be careful how you define “need”. Your housing cost is a major factor, if not the major factor in “what’s left over”. If you choose to live in a house that requires most of your money then you’ve prioritized your quality of housing over other things (such as travel, etc.). There is a sliding scale of quality that you can choose to move along that will significantly affect “what’s left over” for other things. Nothing wrong with sliding up that scale, as long as you realize and intentionally choose to give up other luxuries for that one. Be intentional.
8) Be generous. This is worth stating again and again. Money has the ability to really control you. By giving money away you will avoid this trap. Be kind to others. Give to those in need. Give to those you love. Use your finances to do good to others. Using your money on others will bring you more joy than using it for yourself. Material items and experiences never quite satisfy to the extent we expect them to.
It really is simple to live stress-free in your finances. There’s nothing complicated about it, but it is not easy. Knowing these principles is nothing impressive. Living them is the hard part. Continue reminding yourself of them. Be gracious to yourself when you wonder, read them again, get back on track.