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For which of you, desiring to build a tower, does not first sit down and count the
cost, whether he has enough to complete it? Otherwise, when he has laid a
foundation and is not able to finish, all who see it begin to mock him, saying,
“This man began to build and was not able to finish.”[1]
To summarize Christ’s point very succinctly: You must have a plan! Not having a
plan is planning to fail. So in this part of our series on personal finance, we want
to take a look at how to make appropriate plans with our money—also known as
budgeting.
3 Types of Plans
There are three general types of plans or budgets for our money:
Life Event Plans are budgets associated with specific things or events. Things like
home renovations, weddings, college bills, family vacations, or major purchases
would fall under this category. This type of budget is probably the most
analogous to Christ’s example of constructing the tower.
A Life Event Plan’s function is simply to help us know how much we need to
spend on something before it’s too late! It will help prevent us from being scoffed
at for not being able to finish, or more likely, keeps us from needing to borrow
money to accomplish it.
For example, the average American wedding in 2012 cost nearly $30,000,
excluding the honeymoon! For many of these high-cost weddings, having a
feasible wedding budget (Life Event Plan) would go a long way to helping the
marriage get started on a solid financial footing while also helping out the bride’s
poor dad!
While each specific situation may need to be planned for differently, there are
always a few basic questions to ask. And these questions will lead directly into
our next category of plans.
2. Savings Plans
Savings Plans are simply lists of savings goals. The Savings Plans should be made
up of things from our Life Event Plans along with anything else that we need to
save up for.
Savings Plans should list the amounts of each item we are saving for, when we
need them by, and how much we need to save monthly. They should form the
roadmap of how to get from where we are to where we can afford the things we
need in the future, without resorting to debt.
Savings Plans can be divided into two subcategories: Long-term and Short-term.
The following table summarizes the differences between the two:
Our Savings Plans then inform us as we manage our Monthly Spending Plan,
which is what most people commonly refer to as “the budget”. By this point you
might be wondering why we’ve put the Spending Plan so far down the list. This is
because we think slightly differently about the spending budget than most
people.
Besides, it’s far more motivating to focus on our goals rather than focusing on
what we’re restricted from doing.
So by the time we start crafting our Monthly Spending Plan, we should have a
clear idea of how much we will need to save each month to reach our goals. This
then helps us have concrete parameters around which to fit our spending.
As a practical example in our home, we not only pay $0 per month for our
electricity, the power company pay us, because we’ve invested in solar panels.
Obviously this isn’t a solution available to everyone, but it’s one example of how
it’s possible to color outside the lines of typical budgetary guidelines.
The interaction between the Savings Plan and the Monthly Spending Plan is
important. The Savings Plan helps us know how much surplus we need to save
each month after our expenses in order to achieve our goals. Our Monthly
Spending Plan also tells us whether we are realistic in our Savings Goals as well.
The interplay between these two categories of plans forms the primary point of
management in our month-to-month financial planning.
We’ve discussed how having a plan with our money is important, and have
broken the process down into 3 general categories of plans. Here’s a graphic that
illustrates the relationship between them:
3-CountingTheCost-Diagram.001
Relationship Between Savings Plans
Life Event Plans are those big things in our lives that we need to pay for. Those
items make up our overarching Savings Plan, which really can be thought of as a
snapshot of the values and priorities in our lives, then those saving goals inform
our monthly spending habits as encapsulated in our Monthly Spending Plan.
Finally, the surplus from our income above our monthly expenses then filter
back to start moving us toward the goals in our Savings Plans.
This arrangement helps keep the goals in mind and gives us a specific place to
apply any extra money we receive, like gifts or bonuses from work. It’s a great
way to prevent our money from being mindlessly spent away.
This was a rapid overview of a process to help “count the cost” as Jesus
recommended. It may be tweaked and modified to fit your specific needs, but if
you would like a more thorough explanation of this process along with example
plans and numbers to look at, please visit our article, “How to Budget for
Maximum Savings.”
At the conclusion of this article, I think it’s important to highlight the question of
“For what?”
In looking over all that’s been stated, it may seem daunting and a lot of hard
work. It’s tempting to think that it’s not worth the trouble. So why stress the
importance of saving so much? What’s it all for?
As described in our very first article in this series, we save for future needs or
wants, and we save in order to have money to give away. But I believe there’s
something even more compelling to save for: freedom.
Let’s listen to Jesus, let’s count the cost, let’s build the tower—and finish it![2]
Read the rest of the Money Management for End-Time Disciples series!
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Notes:
[1] All Biblical references are from the King James Version.
[2] This series of articles is adapted from Alistair Huong’s six-part seminar on
personal finance presented at GYC 2015.
Alistair Huong