Start Your Financial Planning Out Right
When you’re starting out, you might not have a lot of resources to work with, so the idea of financial planning could seem unnecessary. But this is not the case! Since God owns everything, and we are just stewarding what we have been entrusted with, it’s important to steward everything – big or small – in a way that honors Him. Ron Blue, renowned Christian financial planner, and author, has valuable insights on the objectives of financial planning.
One principle I have been implying so far but have never actually stated is that accumulating financial resources should never be an end in itself. They are accumulated solely for the reason of using them to accomplish some purpose, goal, or objective. For example, you do not take a vacation or buy a car just to spend money but rather to provide something else such as recreation or transportation. Many people ask me how to spend money, and I always make it a practice to ask, “What are you really trying to accomplish?” This question helps to focus the decision on real objectives.
In the short-term, there are basically only five spending objectives; in the long-term, only six. Every spending decision or use of money accomplishes one of these eleven objectives.
Short-Term Objectives
This graph illustrates that there are only five short-term uses for all income coming into a household. It can be:
Given away
Spent to support a lifestyle
Used for the repayment of debt
Used to meet tax obligations
Saved (cash-flow margin)
Every spending decision, in the short term, will fit into one of these five categories.
How my money is allocated among the five categories is a function of just two factors: the commitments I already have and my priorities…Many people would state their priorities are giving and saving, but in reality, these uses wind up at the bottom of the priority ladder. I have observed that most American Christians have lifestyle as their top priority, and second, because of their lifestyle, debt repayment. Taxes would be a third priority because they have no choice; fourth would be saving; and finally, giving. The flawed line of reasoning goes this way: I am already committed to a certain lifestyle and debt schedule, which God surely wouldn’t want me to change. I would gladly give up paying my taxes, but I can’t. I am giving and would give more if I didn’t have to pay all these taxes and didn’t need to set money aside for the future, which is really just good stewardship.
Of the five short-term uses, three are consumptive in nature and two are productive. Lifestyle expenditures, debt repayment, and taxes are all consumptive in nature; when the money is spent, it is gone forever. Both saving and giving are productive uses of money. Money that is put into saving is much like planting a crop—later on, much more than what was planted could come up and can be used again for either consumption or production.
One of the best ways I have seen the concept of no independent financial decisions illustrated is through a pie diagram. The diagram below helps you see that as you allocate your financial resources among the five uses of money, there is a limited pie, and when you allocate your resources in one area, you are, by default, taking those resources out of all of the other areas.
The Bible gives us many principles and guidelines about each one of these five areas, but very little in the way of direct commandment. To determine what God would have us do in balancing our priorities requires the discipline of spending time with Him. No one other person, including your financial planner, can tell you how to prioritize your spending. Why? God has not entrusted the resource you possess (but do not own) to someone else; only you are accountable to managing the use of God’s resources entrusted to you. You must ask the question yourself: “God, what would You have me do with the money You entrusted to me?” Now listen.
Faith & Finance Perspective:
When you’re starting out, the idea of “mastering your money” can be intimidating. Like anything else, it takes practice, discipline, faithfulness—and sometimes a little guidance from those who may be a little further on in their financial planning journey. Establishing good habits early is key to long-term success. Have you really looked at your resources through the lens that God owns it all? For more guidance on taking the next step, read Master Your Money by Ron Blue or contact Orchard Alliance at 855-948-5258 or hello@faithandfinance.org.
To the Lord your God belong the heavens, even the highest heavens, the earth and everything in it. – Deuteronomy 10:14
