A budget is simply a tool to forecast and track your income and expenses. Budgeting is actually a Biblical concept. Consider Luke 14:28:  “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?”

Budgeting is an important aspect of financial planning. How can you plan for the future if you are unaware of all your expenses in the present?

For normal day to day living, you need to earn more money than you are spending to survive financially. In other words, you should live beneath your means.

Cash flow is a slight variation on a budget. A budget shows your income and expenses on a fixed time scale.  A cash flow analysis adds an additional dimension–timing. A cash flow analysis can help people who have irregular income or irregular expenses identify when money is coming in and going out. By so doing, they can ensure there are sufficient funds to meet expenses as they fall due.

How to Prepare a Budget

Preparing a Budget is relatively easy. It may take a little while to do if this is your first time, but it will get much easier.

1. Gather Helpful Documentation
   • Bank Statements
   • Credit Card Statements
   • Bills
   • Insurance Policies
   • Dividend and Managed Fund Statements
2. Detail all Sources of Income
   • Salary/Wages
   • Dividends from Shares
   • Rent from Investment Property
   • Interest Income from Cash
   • Social Security Income
3.  Detail all Sources of Expenses (Monthly & Annually)
   • Giving to God
   • Mortgage Statements
   • Utilities
   • Car
   • Insurances
   • Miscellaneous (5-10%)
4. Prepare a Capital Expenditure List (Big Ticket Items)
   • New Car
   • Home Renovations
   • Home Purchase

As an additional tip, consider keeping a small journal of your expenses for one month. You will be surprised where your money goes, be it the morning coffee, the evening movie, a gift for the niece and so forth.

Budgeting Principles

Live Beneath your Means – a popular saying these days is “live within your means”.

When most people hear that, they think that they should not spend anymore than they earn. This means that they spend all that they earn and nothing is left over!

But sound money management involves living beneath your means, i.e. approximately 80% of your disposable income.

So what about the other 20%?

Giving to God – It is important to build a Biblical framework around your budget from the very start. How do you do this?

I suggest that a good starting amount is allocating 10% to “giving to God.” This a good starting point, but hopefully not the end point.

“Honor the Lord with your wealth, with the firstfruits of all your crops” (Proverbs 3:9).

Long-Term Saving – Set aside a minimum of 10% for long-term goals such as the achievement of financial independence (not independence from God).

Go to the ant, you sluggard; consider its ways and be wise!
It has no commander, no overseer or ruler, 8 yet it stores its provisions
in summer and gathers its food at harvest.
Proverbs 6:6-8 (NIV)

Accommodation Costs – Whether you own or rent your own home, it is best to keep your accommodation costs to less than 30% of your disposable income. Many people feel intense pressure from family and the broader society to live in a particular area or in a certain sized home, or to buy a home that they simply can’t afford.

Whatever your situation, don’t allow your budget to be eaten up by high rental or mortgage costs, leaving little money available for a reasonable lifestyle and, of course, to be truly generous!