By Art Rainer, Crosswalk.com
If you’re struggling to balance your monthly budget, you’ve likely heard the advice to stop the daily lattes or cut the cable cord.
But what if you’ve done all those things? Your spending is already bare bones: you don’t use a credit card, don’t buy frivolously on non-essentials, and already shop thrift stores and clip coupons.
You want to follow God’s design for your money. You want to give generously, save wisely, and live appropriately. You long to find yourself in a place where you can live the generous life that God created you to live for the sake of His kingdom.
But you need more money to get and stay financially healthy and advance God’s kingdom among the broken. So you need a specific money goal.
But before you make your money goal, get familiar with (and assess your progress along) a practical financial map for giving and living generously. This ‘money map’ is made up of these eight Money Milestones:
Milestone 1: Start Giving
Generosity is the foundation upon which real, biblical financial health is founded. According to the Bible, generosity is our priority. We are to give our first and our best. Wherever you find yourself financially, financial health starts with giving.
Milestone 2: Save $1,500 for a Minor Emergency
You will get hit with a financial emergency. Encouraging, right? Your dishwasher will break. A tire will go flat. When these minor emergencies happen, many resort to credit cards, perpetuating their financial challenges. Be different than everyone else. Set aside money so you can cover the emergency with cash.
Milestone 3: Max out Your 401(k) or 403(b) Match
If a company match is available to you, get it. It’s part of your employee benefit. Ignoring the match is ignoring your money. The long-term financial impact of maxing out your match is tremendous. Don’t miss out on it.
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Milestone 4: Pay off All debt except Your Mortgage
To pay off debt, I recommend a well-known method called the Snowball Method. This method encourages you to pay off debts from the smallest balance to the largest balance.
Once a debt is paid off, you apply the amount you were paying to the smaller debt to the larger debt. Like a snowball rolling down a hill, the amount you are able to put toward debt gradually increases.
Milestone 5: Save Three to Six Months of Living Expenses for a Job-Loss Level Emergency
If you are single and without children, lean toward the three-month end of the spectrum. If you are married with children, lean toward the six-month end of the spectrum. Let those for whom you are financially responsible help determine how much you need saved.
Milestone 6: Put 15 percent of Your Gross Income to Retirement
Plan on making your retirement years the most generous, open-handed years of your life. Set aside money for retirement so that you are not a financial burden on others and so that you can have even more time and money to put toward advancing God’s Kingdom.
Milestone 7: Save for College or Pay off your Mortgage
Too many assume mortgage payments are just like utility bills, payments that will be with them for the rest of their lives. Believe it or not, you don’t always have to have a mortgage payment. You can be mortgage-free. Sure, it takes time and intentionality, but it is worth it.
Imagine what life would look like without a mortgage payment. Imagine what your generosity would look like without a mortgage payment. Imagine what your retirement would look like without a mortgage payment.
If you have kids, consider initially focusing on college instead of your mortgage. More than likely, college expenses will be a more immediate issue.
Milestone 8: Live Generously
You achieve financial health. But not so that you can spend money on whatever you want. You have financial health so that you can give and live ridiculously generous lives, being a part of God’s mission in a way you never imagined.
Using these eight Money Milestones, let’s consider how much more money you need.
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Setting Your Money Goals
As you read through each of the milestones, you probably found yourself gauging where you stand in relation to the milestones.
Maybe you realized that generosity hasn’t been a part of your finances. According to the Bible, this is the priority for our finances.
Maybe you realized that you had yet to set aside money for a minor emergency. The good news is that this step is usually one of the quickest milestones for people to achieve.
Maybe you need to get rid of debt. Debt kills a person’s ability to give and save.
Maybe you need to set aside three to six months’ worth of living expenses, to guard against a major financial emergency.
Maybe you have yet to seriously save for retirement, and 15% of your gross income seems like a long way off.
Maybe you are concerned about your children’s college expenses.
Maybe you want to get rid of your mortgage.
There are two goals you need to identify—your Money Milestone Goal and Your Monthly Find More Money Goal. Both are monthly goals. Sometimes these goals are the same number, but they often differ. The Money Milestone Goal feeds into the Find More Money Goal.
It’s time to do an investigation on your finances. There is a financial gap between how much money you need each month and how much money you make each month. Knowing this gap will help identify your goals, your destination.
And the best way to see your gap is to create a monthly budget. Here’s how to do it:
Step 1: Determine your Monthly Milestone Goal
What are your financial goals? Think beyond just paying the bills. That should be a given. When considering your goal, use the eight Money Milestones as a guide.
How much money do you need to achieve your next Milestone? This is your Monthly Milestone Goal.
Do you desire to give more? Do you want to set aside $500 per month, reaching for your emergency savings goal? Do you want to have $1,000 going toward debts, crushing them quickly? Or retirement?
Just pick one Milestone Goal. If you find yourself desiring to hit multiple goals, refer to the 8 Money Milestones, and pick whatever takes place first. Once you hit your most pressing milestone, you can then move to the next.
Step 2: Determine Your Typical Monthly Income
For many, this is pretty simple—you look at your paycheck. You have a regular salary, and this is revealed on your monthly or bimonthly paychecks.
For some, each paycheck varies—maybe because you are a commission-based employee. For others, different seasons provide different income—maybe you are a teacher. If this is you, average your monthly paychecks. Or if there are consistently some months that result in higher income than others, adjust the budget accordingly.
Be sure to use net (after-tax) income. This is probably the amount that hits your bank account.
Step 3: Determine Your Typical Monthly Expenditures
Go back and look at all your past three month’s expenses: grocery, medical, utility, entertainment, etc. Try to group expenses into categories. You don’t want to go crazy with the categories. Keep it manageable. Then, by looking at the past three months, find the average expenditures for each category.
If you receive pre-tax (gross) income, be sure to include your taxes.
Now add it all up. This is how much, on average, you spend each month.
Step 4: Adjust Your Expenditures to Fit Your Income (and Your Ability to Give and Save)
Fair warning—this will be the frustrating part for you. Figure out how you can fit your expenditures into your income by reducing or eliminating. In other words, how you can live within your means.
And this is what will make it extra frustrating—you probably aren’t able to, even when reductions and eliminations are made.
Now I am going to ask you to do something even more frustrating—look at the monthly goal you identified. Put it in your budget as well. Again, I want your Find More Money goal to move you beyond just getting your bills paid.
That gap between your monthly income and your expenditures plus your monthly goal is your Monthly Find More Money Goal.
To put it into a formula:
(Adjusted Monthly Expenditures + Monthly Milestone Goal) – Monthly Income = Monthly Find More Money Goal
Knowing your Monthly Find More Money Goal will provide greater clarity as you move forward. You will have a better handle on your finances and be equipped to make planning decisions that are not based on a whim or a feeling.
Knowing your goal will help you find more money.
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Art Rainer is the Vice President for Institutional Advancement at Southeastern Baptist Theological Seminary. He holds a Doctor of Business Administration from Nova Southeastern University and an MBA from the University of Kentucky. He writes widely about issues related to finance, wealth and generosity, and is the author of The Money Challenge, The Marriage Challenge, and his latest book, Find More Money. Art lives in Wake Forest, North Carolina with his wife, Sarah, and their three children.