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General Bible Courses > Living by the Book > Finances by the Book

Chapter 1: A Biblical View of Money Management

Overview

IN THIS CHAPTER, you will discover how to:

  • Apply four basic biblical principles of money management to your personal financial plan.
  • Determine your short-term and long-term objectives
  • Set up a budget and put it into action.

A Biblical View of Money Management

Key Scripture:
No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and money. Matthew 6:24

Jesus presented a choice to his disciples: They could serve God or money—one or the other—but never both. Christians are thus encouraged to hold every possession with an open hand as a testimony to the world. The amount of material goods, whether great or small, never distinguishes a believer from an unbeliever. That distinction comes from the richness of God’s presence in their midst.

How we view, handle, and use money reveals our heart attitudes. Today many people have their hearts centered on themselves as they desperately seek significance and security. These two basic needs cross the lines separating race, creed, or culture, for people in every walk of life have the drive to be recognized and to feel secure. Attempting to meet these needs through the accumulation of money and possessions, many have lost their spiritual perspective. Money, after all, is not an end in itself; it is simply a tool to accomplish God’s plans and purposes.

There is no reason to "do" or to "acquire" for the sake of security, because, for Christians, that need has already been met. "Keep your lives free from the love of money and be content with what you have, because God has said, ‘Never will I leave you; never will I forsake you’ " (Heb. 13:5). Likewise, the search for significance is futile, for the Creator of the universe has already declared your great worth: "You made him a little lower than the heavenly beings and crowned him with glory and honor" (Ps. 8:5).

Often wealthy people have a difficult time acknowledging God as their source and using money as merely a tool. Such an attitude is depicted in Jesus’ parable of the rich fool (Luke 12:18-19). Only wealth toward God is what finally counts.

Others, especially those with few financial resources, believe that only the rich have a problem with greed. But a person with a low income, who hoards money and refuses to help others, worships money along with a millionaire who spends every waking minute consumed with stocks and bonds. Money itself is not the source of greed. "For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs" (1 Tim. 6:10).

The foundation of personal money management is that God is in control. He is more interested in each individual than in any failure or success in the economic system. God is interested in how you glorify him wherever you live and under whatever system. As a Christian, you have been called to a unique role in an uncertain economy. Following the crash of every type of investment (collectibles, gold, oil, stock market, and real estate), even Christians may ask: "Will I ever have enough?"; "If I have enough now, will it be enough at retirement?"; or "How much is enough?"

Christians must ask an additional question: "What is the appropriate lifestyle for me as a believer?" Christian teachings regarding lifestyle run the gamut of extremes. Some believers live in a communal environment in which all material possessions are shared. Others adhere to the "positive confession" approach in which believers may claim what is due them as children of the King. Both approaches (and all the ones in between) are attempts to discover God’s views on handling money. Neither poverty nor luxury can be described as a Christian lifestyle since God has entrusted each person with different resources. The one noteworthy attribute of a Christian is the absence of anxiety over the acquiring and loss of things, even when God denies something. Christians are not possessed by temporal acquisitions, for their treasure is laid up in heaven (Matt. 6:20-21).

A Financial Planning Overview

Everyone has limited resources, yet the possible uses of money are innumerable. As a result, every financial decision made today affects any decisions concerning resources tomorrow. (Decisions determine destiny.) Once you spend a dollar, it is no longer available to purchase something else in the future. Therefore, the longer the term of your perspective, the better your financial decisions will be.

Financial planning is simply allocating your limited financial resources among various unlimited alternatives. But accumulating financial resources should never be an end in itself. In the short-range, there are only five spending objectives or alternative uses for the money that comes into your household. Income can be (1) given away, (2) spent to support a lifestyle, (3) used for the repayment of debt, (4) used to meet tax obligations, or (5) accumulated. Lifestyle expenditures, debt repayment, and taxes are all consumptive in nature. Once the money is spent, it is gone forever. Only accumulation (savings) and giving are productive uses of money.

As you accumulate money from your cash flow margin, your net worth grows. This allows you to meet one or more of the six long-term financial objectives: (1) financial independence, (2) college education for your children, (3) paying off debt, (4) major lifestyle desires, (5) major charitable giving, and (6) owning your own business. If you can define and quantify your long-term goals, then you can answer the question, "How much is enough?"

Life Application:

Stewardship has been defined as the use of God-given resources for the accomplishment of God-given goals. This definition declares that God is the owner and you are the steward of his resources. The words "use of" indicate that your faith requires action. On the deed that follows, list anything you formerly called "mine." Return ownership of these items to their rightful Owner by a simple prayer of commitment. The sign the deed and date it. You now own nothing and are prepared to be a steward.
 

Four Steps to Successful Financial Planning

Key Scripture:
"May he give you the desire of your heart and make all your plans succeed." Psalm 20:4

Step 1. Summarize Your Present Situation.
"Be sure you know the condition of your flocks, give careful attention to your herds." Proverbs 27:23

Your present financial standing can be determined by completing a statement of net worth and a summary of cash flow. It is important to complete these financial summaries if you are to gain the maximum benefit from this course. They will give you the figures needed to analyze where you are relative to where you want to be. A great model to follow is the Bob and Laura example found in Ron Blue's book.

Statement of net worth. The statement of net worth provides a summary of all of your financial decisions and transactions at a specific moment in time. A statement of net worth lists all your assets, then subtracts all of your liabilities. The difference is your net worth.

Two types of assets must be considered when preparing your statement of net worth. Liquid assets can be converted into cash immediately with no loss of principal. These include cash savings, certificates of deposit (CDs), checking accounts, and life insurance cash values. The more liquid your finances, the more flexible (and probably more secure) you are. Nonliquid assets are not easily converted to cash at their current fair market value. These include your home, personal property, individual retirement accounts (IRAs), and pension plans.

Gather the following resources: checkbook ledgers from all accounts, paycheck stubs, previous year’s tax returns, life insurance policies, and a financial statement (if you have one), as well as any other documents that may help determine your assets. If necessary, contact a professional such as a real estate agent or an automobile dealer to determine the worth of your nonliquid assets. When you have all your information together, complete Worksheet 1-A, "Assets."

You must next determine your liabilities. These include all your debts—from credit cards to the house mortgage. Next complete Worksheet 1-B, "Liabilities." You are probably surprised at the amount of interest you are now paying. Note that the balance due is the total of your liabilities.

To understand your present financial condition, it is important to know three key terms. The first is productive assets. These possessions generate or have the potential to generate income for investment purposes. These include all liquid assets plus real estate investments. The amount of your productive assets is $____________________ .

Your propensity to borrow is determined by dividing your liabilities by your assets. The lower the percentage of borrowing in order to accumulate, the better your financial situation. (Many people who have the propensity to borrow could not meet their debts, even if they sold everything they own.) Calculate your propensity to borrow and record it here. _________ %

On the positive side, your propensity to accumulate is calculated by dividing your net worth by the number of years worked. This indicates your average yearly accumulation. Before going any further, determine your propensity to accumulate. $__________

You will discover more about your financial "self" as you complete Worksheet 1-C, "Personal Balance Sheet Analysis."Transfer your liquid and nonliquid asset totals from Worksheet 1-A. Subtract the total liabilities (Worksheet 1-B) from the total assets to find your net worth. Liquidity will be the same as the amount of liquid assets. For productive assets use the liquid assets figure again. Add to it any real estate that you own. Insert the percentage figure for propensity to borrow and the dollar amount for propensity to accumulate. Don’t be discouraged; this is no place to stop. You can turn your finances around, but you must persist!

Complete Worksheet 1-C.

Summary of cash flow. The cash flow summary measures cash inflow and outflow over a defined period. It can either summarize a past time or project a future period. After completing Worksheet 1-C, you are ready to see where your money has actually been going. In order to do that, you need to determine both your inflow (salary, business income, earnings or investments, and personal retirement income) and your outflow (giving, taxes, debt repayment, living expenses, and savings or accumulation).

The completion of several additional worksheets will be necessary to summarize your cash flow. The first to complete is your inflow—Worksheet 1-D, "Projected Income." Each of the other worksheets is concerned with some aspect of your outflow—Worksheet 1-E, "Giving"; Worksheet 1-F, "Your Tax Summary"; Worksheet 1-G, "Your Debt Repayment"; and Worksheet 1-H, "Living Expenses." Each worksheet has been designed for clarity and simplicity. Precise figures can be used in most cases if you utilize vouchers, statements, etc. However, "Living Expenses" requires more thought since several items have to be estimated. Try to be at least 80 percent accurate on these estimates.

Complete Worksheets 1-D through 1-H. Please click on the links above and below to open each worksheet. Remember to save each worksheet onto your desktop when done.

Now is a good time to pause and thank the Lord for his manifold blessings. Thinking of this exercise as an adventure rather than a drudgery will help you maintain an attitude of gratitude. Ask for clarity of thought and a freedom from fear as you prepare to fight the financial "good fight of the faith" (1 Tim. 6:12). Now to more worksheets!

At last, you are ready for Worksheet 1-I, "Your Cash Flow Analysis." Using the information from the previous worksheets, simply transfer the appropriate numbers to it. Existing margin commitments include payroll deductions for retirement programs, annuities, stock purchase plans, or other investments that require regular payments. Uncommitted margin represents funds allocated to credit unions, payroll savings plans, or deposited to savings accounts. These are uncommitted because they are available for reallocation.

Complete Worksheet 1-I.

Step 2. Develop Financial Goals.
"So we make it our goal to please him" - 2 Corinthians 5:9

There are four major reasons for setting goals:

Your choices for an activity become purposeful. You also have a much better chance of being God-directed. Otherwise, other people or circumstances might determine where you end up. "Many are the plans in a man’s heart, but it is the Lord’s purpose that prevails" (Prov. 19:21).

Recording your goals helps to crystallize your thinking. You determine what you really want to accomplish. "Since, then, you have been raised with Christ, set your hearts on things above, where Christ is seated at the right hand of God. Set your minds on things above, not on earthly things" (Col. 3:1-2).

Goals provide motivation. Paul, one of the most goal-oriented people of all time, said, "I press on toward the goal to win the prize for which God has called me heavenward in Christ Jesus" (Phil. 3:14).

Goals are a statement of God’s will for your life. Goals are always stated as future objectives, and only God lives in the future. Therefore, setting a goal is really saying, "God willing, I believe I should achieve the following . . ." Otherwise, a goal is presumption for a Christian. "Now it is God who has made us for this very purpose and has given us the Spirit as a deposit, guaranteeing what is to come" (2 Cor. 5:5).

Be Aware of Goal-Busters.

While almost everyone agrees that goals are important, less than 3 percent of all Americans have written goals. The question then is "Why?" Fear of failure is the prime reason for not setting goals. Another is the false assumption that it takes a lot of time. Actually, the writing process only takes a few minutes. You merely get the goals out of your head and onto paper. Without goals you will get caught up in unimportant matters, often leaving important things undone.

There are at least two legitimate reasons why people do not set goals. First, it is often difficult to know what goals to set, especially when so much advice—both good and bad—is available. And, second, most people do not set goals simply because they don’t know how. As you look at setting goals from a faith perspective, note these three cautions:

Do not focus on the past. "Forget the former things; do not dwell on the past" (Isa. 43:18). Focusing on the past limits your thinking to past experiences and past failures. God is not limited to the past; he wants to work in your life above and beyond anything you can comprehend. He "is able to do immeasurably more than all we ask or imagine, according to his power that is at work within us" (Eph. 3:20).

Do not focus on present resources. This is another way of limiting God. When Zechariah was promised a son, he questioned God’s ability to fulfill the promise because of the natural circumstances he was in. "Zechariah asked the angel, ‘How can I be sure of this? I am an old man and my wife is well along in years’ " (Luke 1:18). The real question is: What are God’s resources? What he can do is not limited by your present resources; it is only limited by his resources. "For every animal of the forest is mine, and the cattle on a thousand hills" (Ps. 50:10).

Do not set a goal apart from or in disagreement with your spouse. "May the God who gives endurance and encouragement give you a spirit of unity among yourselves as you follow Christ Jesus" (Rom. 15:5). God puts a man and woman together to build a one-flesh relationship, not to compete with each other. In marriage, the couple should set common goals and should agree perfectly concerning these goals. A couple with differing goals works at cross-purposes. "Again, I tell you that if two of you on earth agree about anything you ask for, it will be done for you by my Father in heaven" (Matt. 18:19).

Faith Goals

A faith goal is an objective toward which God gives you the grace to move. First, you must ask God, "What are your plans?" Then you can answer with the prophet Isaiah, "Here am I. Send me!" (Isa. 6:8). Setting faith goals requires a simple four-step process.

Spend time with God. "Ask and it will be given to you; seek and you will find; knock and the door will be opened to you" (Matt. 7:7). God’s Word says that when you seek his direction and will, he will guide you. "Do not conform any longer to the pattern of this world, but be transformed by the renewing of your mind. Then you will be able to test and approve what God’s will is—his good, pleasing and perfect will" (Rom. 12:2). Spending time alone with God is essential; otherwise, goal-setting is simply striving after your own dreams. A faith goal is a statement of God’s will.

Record your impressions. As you spend time with God, you need to record what he seems to be saying to you. You should be continually asking God, "What would you have me to do?" By recording his answers, you become more sure of your goal. "Now faith is being sure of what we hope for and certain of what we do not see" (Heb. 11:1).

Make the goal measurable. After recording your impressions, you are now ready to make a faith goal. It is important not to test God by dreaming up goals and then asking him for resources. Let God help you develop the goal; then trust him for the resources. Your objective must be measurable by time and quantity. A measurable goal gives a standard of accountability, because a goal that is not measurable is meaningless. For Jesus, the cross was a goal: "And on the third day I will reach my goal. In any case, I must keep going today and tomorrow and the next day—for surely no prophet can die outside Jerusalem!" (Luke 13:32-33).

Take action. The result of this process is that you now have a faith goal—an objective toward which you believe God wants you to move. What is required is to take a step of faith, believing that God will do his part by showing you the next step and the next. The means of accomplishing your goal may not be evident. (How could Noah have understood that God would flood the land where he lived?) Furthermore, you may not have adequate resources to accomplish the goal. (Remember Sarah who became a mother at ninety? From a human standpoint, it was impossible for her to bear a child.)

Finally, a faith goal typically requires setting an objective without fully understanding it. "By faith Abraham, when called to go to a place he would later receive as his inheritance, obeyed and went, even though he did not know where he was going" (Heb. 11:8).

Trust God to do his part and give him the flexibility to do things his way with his timing and resources. As a result, you will reach your goals, experience spiritual growth, and most importantly—glorify God! "Ascribe to the Lord the glory due his name" (Ps. 29:2).

Now that you realize the importance of both short-term and long-term goals, pause here and complete Worksheet 1-J, "My/Our Vision for the Future." Think of the goals you would like to reach in the next five years. Remember, never set your goals in concrete because life is a process. And God will be dealing with you throughout the process.

Complete Worksheet 1-J.

Step 3. Design a Personal Financial Plan. "Joseph collected all the food produced in those seven years of abundance in Egypt and stored it in the cities" (Gen. 41:48).

Your financial plan should have several basic objectives:
• To learn God’s principles, since the plan is from a biblical perspective.
• To view this as a process, not a project.
• To bring order out of confusion, using the tools you now have.
• To check periodically whether you are on track in meeting your goals.
• To serve as a basis for family discussions regarding the compatibility of financial goals.
• To guide you in making financial decisions.

An excellent example of a financial plan is found in Genesis 41:33-57. During seven years of plenty, Joseph stored grain in warehouses in Egypt. When the famine came, the nation of Egypt and the surrounding countries were saved from starvation. Later Joseph was able to witness to his brothers, "It was to save lives that God sent me ahead of you" (Gen. 45:5).

Three important principles are derived from this story:

There are no independent financial decisions. For example, if you choose to use your financial resources in any one area, you have actually chosen not to use these same resources in other areas.

The longer the term of your perspective, the better the possibility of making a good current financial decision. Giving up today’s desires for future benefits is an excellent definition of financial maturity.

Your destiny to a great extent is determined by your decisions today. It is important to realize the lifelong nature of your financial decisions.

A financial plan is an extended projection of cash inflow and outflow, representing the action to be taken in every area of financial planning. In turn, the action steps become a road map for the future. Once the plan has been determined, it should be evaluated in light of two things: (1) Does the plan improve my current situation? and (2) Does it help me achieve my goals?

A positive cash flow margin is essential for accomplishing either long-term or short-term financial goals. If you are constantly going in the hole through overspending, there is no way to get out of debt until you generate a positive cash flow. Living expenses and debt go hand in hand. Therefore, debt reduction and lifestyle reduction both have an immediate dollar-for-dollar impact on the cash flow margin. Such reductions release money to accomplish other goals such as tax reduction, increased giving, and accumulation.

In designing your financial plan, you are at the most exciting point of this lesson. As you discover the necessary action steps and incorporate biblical principles into your daily life, you begin to realize the importance of being a good steward. Completing Worksheet 1-K, "Increasing Your Margin," will help you see how to increase your margin by reducing your major expenditures. (Caution: Be realistic. Can you really cut your entertainment down to zero and your clothing allowance in half?)

Complete Worksheet 1-K.

After you have finished, go on to Worksheet 1-L, "Your Cash Flow Analysis Summary." Use the previously calculated amounts in the Before Planning column. The After Planning column reflects your decreased goals. The most important part of this worksheet, however, is to state how you will reach your goals. What steps will you take?

Complete Worksheet 1-L.

Worksheet 1-M, "Your Personal Balance Sheet Analysis Summary," yields the bottom line. What is your current net worth, and what are you projecting it to be after careful planning? The Action Steps are very important. Subtract the liabilities from the assets in order to determine your financial net worth. As you look at those figures on paper, remember that you are priceless in God’s eyes. "You are not your own; you were bought at a price" (1 Cor. 6:19-20).

Complete Worksheet 1-M.

Step 4. Put Controls on the Plan.
She watches over the affairs of her household - Proverb 31:27.

Three basic principles, which our grandparents used in the "cookie jar" method of budgeting, can also be applied to your current cash flow control system. First, the money was always preallocated. Second, spending stopped when the cookie jar was empty. And third, there was always an awareness of the current financial situation.

Remember to let your own cash control process (budget) fit your particular temperament, style, and situation. The plan that you implement will be unique to you and should not be compared to anyone else’s budget. It will take at least two years to learn to live within your plan. At least six months will be required to determine what the plan should be. You will need another six months to set up the plan and another year to monitor it.

The five steps necessary for putting a budget into place are:

1. Estimate your living expenses. You have already done this when you completed Worksheet 1-H.

2. Record your actual expenses on Worksheet 1-N, "Living Expenses." Over a period of three to twelve months track your actual spending. For those with computers, Ron recommends the software program, "Managing Your Money," by Andrew Tobias as a helpful tool for your personal financial management.

Complete Worksheet 1-N.

3. Establish a budget. The percentage guide in Chart 1-A, will assist you in setting up your own budget.

4. Control the budget.

5. Evaluate and revise. In the beginning, you may want to do this monthly. Later, this evaluation could be done on a yearly basis.

The key to a workable budget is flexibility. As interest rates change or emergencies arise, you need to change accordingly. Therefore, you will never have a financial plan that is complete. Instead, you will be involved in a process.

By following these five simple rules, you will guarantee your financial success:
• Acknowledge that God owns it all.
• Spend less than you earn over a long period of time.
• Set your faith goals.
• Avoid the use of debt.
• Maintain good liquidity

Audio Lessons

Take the quiz

Quiz Instructions

Review Questions

1. The difference between a Christian's and a non-Christian's search for success is in their spending habits.

True

False

2. ......................... came to earth as a servant as an example for us.

Paul

Adam

David

Jesus

3. Time and talents are ................... enjoyed by Americans.

Resources

Values

Not

4. A steward has ....................

Rights

Responsibilities

5. Every spending decision is a spiritual one.

True

False

6. Your goals and priorities are reflected in your ..................... .

Checkbook

Face

7. Money and .......................... may be used by God as tools for growth.

Attitudes

Possessions

Debt

8. Stewardship is the use of God-given resources for the fulfillment of ..........-............ goals.

Man-made

Home-made

God-given

9. Today's decisions determine your financial ..................... .

Destiny

Attitude

Institution

10. Giving and accumulation are ..................... short-range goals.

Productive

Counterproductive

non-essential

11. In order to reach long-term objectives, we grow our net worth.

True

False

12. To determine your ......................., you must add up your assets and subtract your liabilities.

Gross income

Net worth

Lender rate

13. A person who is bankrupt probably has a propensity to ................... .

Save

Lend

Borrow

14. A .................... asset can be converted to cash immediately.

Solid

Liquid

Net

Concrete

15. The fear of ................... is still part of fallen man.

Success

Failure

16. God is left out of our planning when we focus on the ................... .

Future

Present

Past

17. A faith .................... is always a statement of God's will.

Goal

Thought

18. Every goal must be measurable by .................... and quantity.

Cost

Price

Value

Effort

Time

19. The cash control process is really a budget.

True

False

20. Vacations and car repairs may be ................... busters.

Gift

Borrow

Lending

Budget

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