Presentation on theme: "1 Family Budgets That Work Materials adapted by Jim Lamar for the Christian Women’s Job Corps from the Tyndale House Pocket Guide™ of the same name written."— Presentation transcript:
1 Family Budgets That Work Materials adapted by Jim Lamar for the Christian Women’s Job Corps from the Tyndale House Pocket Guide™ of the same name written by Larry Burkett September 2004
2 Financial Problems: How they start The root of the problem is ATTITUDE greed – wanting the best ignorance – we didn’t know covetousness – keeping up with the Joneses indulgence – indulging your desires impatience – getting rich quick
3 What the Bible Says About it all... Greed – I Timothy 6:10 Ignorance – II Timothy 2:15; Romans 1:13 Covetousness – Exodus 20:17 Indulgence – Luke 9:23 Impatience – Matthew 6:20
4 How to Avoid Financial Traps First and foremost - a relationship with Jesus Christ is needed to overcome the World’s attitudes toward money Then you can apply sound financial principles that will keep you out of trouble Never risk money you cannot afford to lose Avoid things you don’t understand Demand information to evaluate opportunities Seek good, noninvolved Christian counsel Set time to pray and seek God’s direction
5 The Basics of Family Budgets What is a budget? A budget is a financial plan to balance spending with income for controlling spending to manage your money Planning how you will use the finances God blesses you with is a wise choice. Failure to plan ahead often causes problems. Over 70% of divorces site financial problems as a major contributor to the failure of the marriage.
6 Two Common Tendencies Establish a plan but never follow it. Establish an unrealistic plan that allows nothing for a balanced family life. Both of these lead to more frustration and discouragement. Your plans must be both realistic and applied.
7 Getting Started – An Expense Diary For 30 to 60 days Record every dime spent Categorize the expenditures Housing Food Automobiles Insurance Debts Entertainment Clothing Medical Savings Miscellaneous
8 What’s your income? What’s your outgo? Pages 28 – 29 in your book $3,000 $300 $450 $2,250 $600 $300 $400 $100 $200 $100 $2,400 -$150
9 Once you know how much you are spending, you can check to see how this spending pattern compares to the guidelines on pages 32-33. Where’s your money going?
11 Percentage Guide (Using Gross Income of $25,000) Housing – 38% maybe a little more or less – if it gets above 40% it is very difficult to balance your budget Food – 12% try making daily menus to watch what you buy Autos – 15% - not a lot of money, treat a car as a Point A to Point B contrivance – not a luxury item Debts – 5% MAXIMUM – best to stay out of debt
12 Percentage Guide (Using Gross Income of $25,000) Insurance – 5% Life and health, doesn’t count home or auto Entertainment & Recreation – 5% watch it carefully and enjoy it while keeping it under control (never go into debt for E&R) Clothing – 5% don’t be a slave to latest fashion fads
13 Percentage Guide (Using Gross Income of $25,000) Medical & Dental – 5% even more if you don’t have a group insurance program Miscellaneous – 5% for all those things you don’t know about until they happen Savings – 5% very important that you save something for a rainy day, because it will rain eventually and you don’t want to increase your debt just to buy an umbrella.
14 Starting a New Budget After you know what your current level of spending is... And you know what the guidelines say your spending should be based on your income... You can develop a budget that handles the areas of overspending. SPENDING LIMIT 10
16 It’s okay if your new budget doesn’t exactly match the guidelines. The key is to make sure your new budget does not exceed your Net Spendable Income. This is called “balancing your budget.” Remember: If your outgo exceeds your income - your upkeep will become your downfall!
17 Key Points About Budgets 1.Use a written plan 2.Provide for God’s work 3.Limit your credit 4.Consider purchases carefully – Is it necessary? Is it the best buy? Is it an impulse buy? 5.Save some 6.Set your own goals 7.Get out of debt 8.Avoid indulgences 9.Seek counsel 10.Stick to your plan 11.Avoid ATM’s 12.Avoid automatic overdraft protection 13.Balance your check book to the penny EVERY month 14.Use duplicate copy checkbook 15.Have a designated bookkeeper The Budget Tamer
18 Eight Steps to Budgets that Work Don’t forget hidden debts for example: Quarterly payments for insurance Annual real estate taxes Annual property taxes Set aside money every month to cover the bills BEFORE they come.
19 Eight Steps to Budgets that Work Control impulse spending Use a delay purchase plan – 30 days Check & record 2 other prices Allow only 1 at a time NEVER use credit cards for these See chart on page 53 of the book
20 Eight Steps to Budgets that Work Plan Gift Giving Keep an event calendar – save up Make crafts – give personal time Draw names Do not use credit Help children earn money for gifts
21 Eight Steps to Budgets that Work Watch Miscellaneous Spending Follow the budget Record where you money goes Stay within your budget
22 Eight Steps to Budgets that Work Divide Responsibilities in the Home Husband and wife must work together The budget must be fair to everybody A good budget brings peace – not conflict
23 Eight Steps to Budgets that Work Develop Good Records It is impossible to manage your money without keeping good financial records. It is impossible to have a home budget without balancing your checkbook.
24 Eight Steps to Budgets that Work Get Out of Debt - (and stay out) Determine where you stand (page 62) Contact your creditors Reduce the debts Stick to your priorities Beware of borrowing more Cut up the credit cards
25 Eight Steps to Budgets that Work Set Family Goals 1.Trust 2.Savings 3.Family Share Time 4.Husband / Wife Time 5.Ministry to other people
26 Long Range Plans Life Insurance Cash Value, also called whole life, universal life, permanent insurance, etc. – relatively expensive initially, may be too much for younger families or those already in financial trouble to afford Term Insurance – cheaper to afford for younger families, can be set up as decreasing term (consistent cost but decreasing payout) or as level term (increasing cost but constant payout) The key to how much insurance you need is balance. Providing for a sudden loss is appropriate but be careful not to over insure.
27 Long Range Plans Health Insurance If a group plan is available this is almost always the best bet If a group plan is not available then a major medical plan is probably best. If you must use this option then you will need to make sure you have a savings equal to the cost of the deductible which you are responsible for.
28 Long Range Plans Disability Insurance As with health insurance, a group plan is desirable if available Balance is needed Be careful not to spend all your money on insurance
29 Long Range Plans Retirement Don’t rob your family of joy today while chasing an elusive retirement Nirvana later Save what makes sense for your family Annuities Endowment policies Mutual funds Don’t forget to enjoy the sunshine while saving for that rainy day!
30 Cost Saving Tips Food Don’t take children grocery shopping Never shop when hungry Shop food sales & advertised specials Use a written list Avoid processed and sugar coated cereals Use “house” brands Use coupons – ONLY if you were going to buy the item anyway Buy in bulk if possible, but check prices to make sure you are really getting a good deal
31 Cost Saving Tips Housing Look for an older house you can fix up Look in areas that are not growing Location – location – location Avoid paying for unnecessary frills Buy for your current (or immediately visible) need
32 Cost Saving Tips Automobiles Save first – buy later If you have to borrow, take the money with you and buy with cash Borrow against your savings if you can Do you really need a new car or just want one? Do you really need a fancy sports car or would a much cheaper sedan work?
33 Cost Saving Tips Entertainment & Recreation Relax at home Picnic or cook out instead of eat out Vacation during the off season Fly the “red eye” Be creative – entertainment doesn’t have to be expensive
34 Cost Saving Tips Clothing Budget your teenager’s clothing allowance and let them have a say in the selection Can you sew? Select outfits that can be mixed and matched Shop discount outlets and re-sale shops Select washable fabrics Beware the fashion fads
35 Cost Saving Tips Medical & Dental Get an annual checkup Practice preventive medicine Teach your kids proper dental care Use generic drugs – same benefit – lower cost
36 Beware of Advertisers Gimmicks Would you deprive your family? you (your family) deserve the very best... Sex appeal wear our clothes and you’ll be sexy, desirable... Super sale – prices rolled back! did they raise the price before they rolled it back? Strategic layout check the top shelf and bottom shelf out
37 Thank you for your kind attention. May God richly bless you as you work towards getting control of your finances. Any questions or comments?