If you're like most people, having enough money for a decent and secure life is one of your major concerns. Those on fixed incomes may be especially worried about creeping inflation, the rising costs of goods and services. The threat of unemployment or job loss (or business failure) also causes the jitters.
Perhaps you're a single mother with several children and in great danger of falling under the poverty line. What will you do about improving your financial situation? Or you're deeply in debt. How will you make your payments and become debt-free?
Reasonable prosperity is something all of us would like to achieve and hold on to. But, in many nations, people face nearly insurmountable financial problems. The things that most people in the developed nations take for granted — automobiles, electronic gadgets, savings accounts, adequate clothing and furniture — are out of reach for vast numbers of the human race.
Many developing nations face staggering poverty, near runaway inflation, unpayable national debts, vast unemployment and underemployment. People in such nations must think in terms of basic survival rather than financial prosperity.
To some degree, as they read these articles, they will have to look over the shoulders of those who live in the well-off nations and who have an opportunity to improve their financial situation.
Let's, then, look at six financial principles that can help a person become more financially secure.
1) Budget Money Wisely
A most important point to remember: Make the most from the money you already earn. To spend one's money more effectively is the same as increasing one's salary. How's your "money management quotient"? One well-known family financial counselor wrote, "Managing your money may well be the single most important thing you can do today."
We may learn to be money earners, but can still end up as paupers. We have to become wise money spenders as well. Studies show that even those individuals who earn large salaries still feel financially strapped. It seems that many people's outgo for needs and wants exceeds their income.
Sound money management teaches us a basic financial maxim: There is never enough money for everything we might want or need. So we need a sensible spending plan.
A spending plan is like a road map. A budget helps us arrive at our financial destination, safe and sound. Every business and government must have a spending plan and must strive to follow it. Such a plan guides the effective use of money in many ways. It helps us:
Live within our means. A plan gives us greater control over our financial resources. We can immediately know whether something we desire to purchase is affordable.
Realize personal goals. With a spending budget, we can plan purchases properly, service debt payments, accumulate savings, save for the future.
Spend money effectively. Merchandisers know that shoppers make spur-of-the-moment purchases. Items on the supermarket counters are often positioned in such a way as to encourage purchases. A spending plan helps us to circumvent impulse buying. We buy only what we planned to buy and only those things our plan tells us we can afford.
A spending plan helps us to ask the right questions about our money. Is this the time to buy this product? Is this the most economical way to buy it? Would we rather have this product than something else? Do we have the money to buy it? Does it fit in with our goals in life?
A spending plan helps us to balance the desire for present enjoyment with long- and short-term financial needs. Instead of buying now and paying later, we begin to think of saving first and then buying when we can afford it.
If you don't know where the money goes, you can't get it to go where it should. A budget or spending plan should include three important areas:
Emergencies. We should put money away each month for unforeseen circumstances such as car and house repairs.
High-cost items. Don't buy that new television today. Each month put money into a savings account. Buy the television for cash — on your terms, without interest and at the most financially appropriate time, such as during a timely sale. Don't buy that new television today. Each month put money into a savings account. Buy the television for cash — on your terms, without interest and at the most financially appropriate time, such as during a timely sale.
Annual or periodic bills. Put away money each week, month or pay period for a future bill such as insurance or taxes. For example, if you pay an insurance bill once each year, put away one twelfth of the total in your savings each month.
2) Increase Income
Another step toward financial security has to do with maximizing our income. We need to have enough money and resources to make life what it should be without jeopardizing our mental, social and spiritual needs.
Most people are paid an hourly wage or work on salary for someone else. If you're in this situation, your chances for suddenly increasing your income by a large amount may not be particularly promising. You may receive automatic but small raises based on a company formula or union-management agreement. In some cases, your company may grant built-in cost-of-living increases.
If there is a possibility of "moving up" financially, you will have to demonstrate your usefulness. Make yourself more valuable to your boss or company. Put the emphasis on helping your organization earn more money, save money or improve its product or performance. Earn a raise.
What if you cannot do better financially even though you work harder and smarter? You have two options. Stay put or move to another job or company. Do not consider quitting your present job, however, until you know a better and more secure position awaits you.
Perhaps your type of employment has only limited monetary value. And you've achieved the highest pay possible. Can you educate yourself and improve your value in the job marketplace?
Perhaps you have the ability to create your own job by starting a small business. To succeed, you will have to make your product or service valuable and desirable to the consumer. Beware, however, of the immense amount of paperwork involved in being self-employed.
Simply put, being able to earn more depends on your attitude of service to others. It also means making the most of your abilities and situation.
3) Use Credit Wisely
The proper use of credit has significantly facilitated the flow of goods and services. Long-term, low-interest loans have made it possible to purchase items such as homes or automobiles that otherwise would have required the accumulation of many years' savings.
Another credit mechanism, the credit card, has been a tremendous boon to the consumer who is temporarily low on cash. It has eliminated the danger of carrying large amounts of cash, especially during long periods of travel. And credit cards may even be required for some purchases. But buying on credit can be a financial curse as well as a convenience, particularly when a person falls behind in making payments.
Credit buying often creates the illusion of prosperity. The small size of the monthly installment, its delayed arrival at the end of the month and the lack of cash at the time of the purchase make luxuries seem suddenly within reach. These features persuade millions of families, with otherwise adequate incomes, to spend their paychecks before they even receive them.
Once you get trapped in installment payments, the money you could have in your savings account goes to a credit institution. In effect, you are paying a premium in order to own something now instead of later.
If you habitually use credit in this manner, it can often turn out to be an expensive proposition. Many credit cards, revolving charge accounts and automatic overdraft facilities require a minimum monthly interest charge on the outstanding balance. It sometimes adds up to a staggering 18 percent a year.
Shopping with cash, on the other hand, can often save the consumer more than just monthly interest charges. The person who pays cash can sometimes buy at a discount. Cash-conscious consumers can also take advantage of seasonal sales. They are able to shop around more freely and buy where their money has the most purchasing power. Individuals operating on credit are sometimes forced to purchase where they have their charge accounts, even though a sale may be going on next door.
Solomon wisely perceived that "the rich rule over the poor, and the borrower is servant to the lender" (Proverbs 22:7). A cash basis of financial management is a good way to avoid this type of financial bondage. Therefore, the question logically arises: Where do I start?
The average money manager first should realize that there are two types of family and personal expenses: needs and wants. It is important to know the difference. In today's society, credit buying for items such as a car or a home can be looked on as a necessity. Even these purchases, however, can sometimes be delayed until more cash is available to lessen the finance charges.
On the other hand, credit should rarely be used for wants. Families in trouble have often used too much credit on wants rather than on what they really needed. Until they can accumulate savings, they should adopt a policy of buying wants, such as television sets, sporting goods or excess furniture, strictly on a cash basis. Here's why: Saving cash for luxuries or desires puts a remarkably stabilizing influence on a family's monetary policy. By the time you have saved the cash, there will be little doubt in your mind whether you can afford the item or if, in fact, you really want it.
To use this approach, you must resolve not to purchase anything on credit until your accounts are all paid in full. At least limit the credit purchases during your transition period to an absolute minimum so you can get your credit accounts paid off as early as possible. Then, instead of immediately obligating yourself to more payments by purchasing additional items, let your savings accumulate until you can begin to buy these items for cash.
Remember: The wise family can learn to live with credit, but it should never live by it!
4) Trim Expenses
We live in an "Era of Aspirations," as one money management authority has called it. That is, we order our lives on the belief in and need for a constant upgrading of personal demands. We take this increase in our standard of living for granted. We spend our money on that assumption.
It may seem strange, then, to say that we should take a hard look at what we buy or use — and cut down expenses. Yet that is exactly what we should be doing if we want to increase the value of our money.
A few examples. Do you need that magazine subscription? Do you need the services of a gardener? Is it really necessary to have a new car? Why not purchase a good used one? New-car payments, plus the required total insurance coverage, have been the ruination of many personal budgets.
One important reason our money doesn't buy what it should is that we are using far more services than ever before. Most services depend heavily on labor costs. If we carefully budget our money, we can identify those services that lead to excess expenses. Then we can take appropriate action to change our spending habits.
One example of an area where you may be able to cut costs is by eating out less often. You might be astonished at what some people spend over a year's time eating in restaurants. Figure out the cost of a single meal at a restaurant. Then estimate how many times you do this weekly, and multiply the amount spent by 52. You will find the yearly sum spent on eating out can be astonishingly high.
5) Invest for the Future
In terms of financial goals, we must first plan for today. But we must also carefully consider the future. If we include a regular savings plan in our budget, we can build up a sizable nest egg over the years.
It's important to think through your goals in life as early as possible. However, it's never too late to do so. Consider your long-term financial goals. Make these a part of your spending and saving plan. What about a possible home purchase, the cost of educating children, and money for retirement?
Perhaps our income is not that large. Can we save at least a small portion each year? If we do this over a 30-year period, placing the money in a wise investment, we'd be surprised at how much we would have for the later years of our lives. From this nest egg, we could draw an income, upon retirement, from the interest we receive on our investment.
So far, we've considered several points on increasing income and spending it wisely. Now, let's turn to the most important consideration in managing your personal finances.
6) Make God Your Partner
Strange as it may seem, what we are able to earn depends little on us. Any income we produce depends on assets we did not create. And they don't really belong to any human being, corporation or government.
The fact is that a personal Creator God made and sustains all that exists. Would not this God, by virtue of having created everything, have good reason to claim that everything — including ourselves — belongs to him? God does make such a claim. "The earth is the Lord's, and everything in it, the world, and all who live in it" (Psalm 24:1). He says the wild animals and cattle are his (Psalm 50:10-12), and so is all the silver and gold (Haggai 2:8).
Everything that's produced depends on some element originating in the earth. Our product may be a tomato, a steel girder or even a piece of plastic. But the primary elements have already existed in some form. We may have used our energy to create a song or write a book, but where did that energy come from? Who made your hands, your eyes, your body — your ability to sell, manage, invent or create? God did.
Of course, we apply a certain thinking process to whatever we do. But God still has a prior claim. God created the human brain and mind that we use. Thus, we finally stand naked before God. We have brought nothing into the world. Everything we have has come as a gift from the Creator.
Out of this truth comes another basic and far-reaching income-generating and -spending principle: Since God ultimately gives us everything we need, we depend on him for our economic survival and prosperity.
God warned the Israelites before they entered the Promised Land: "When you have eaten and are satisfied, praise the Lord your God for the good land he has given you. Be careful that you do not forget the Lord your God, failing to observe his commands, his laws and his decrees that I am giving you this day" (Deuteronomy 8:10-11).
God warned them not to say, "My power and the strength of my hands have produced this wealth for me." He told them, "Remember the Lord your God, for it is he who gives you the ability to produce wealth" (verses 17-18).
We should think of God as our senior partner in any economic endeavor and prosperity we might achieve. Certainly, we should do our part in working harder and smarter both at earning and spending our income. But we must go on to acknowledge the important part God plays in our financial lives, and trust him to supply our needs.
Many people recognize the biblical practice of tithing as an act of honor and worship toward the Creator God who gives us all things. Tithing is the scriptural practice of giving a tenth of one's income to God. Tithes and offerings were commanded in the Old Testament. The New Testament, while not requiring an exact percentage, does command generosity — and it is appropriate for a new covenant Christian, with better blessings and promises from God, to be at least as generous as the old covenant Israelite was.
The church uses tithes and offerings to fulfill its God-given mission to preach the gospel. Tithes and offerings reflects the believer's worship, faith and love for God, who is the Source of salvation and Giver of all good things.