Above Yourself

The third step of our Family Finance Overview is to use a budget. This is one of my favorite of the five beginning steps to finances, probably because it is one that we have recently implemented in our household. Although financial stress will always arise, having a budget will greatly relieve that stress.

Our first adventures in budgeting were triggered by some exceptionally large medical bills from unexpected complications at our daughter’s birth. We realized that if we wanted to give our daughter the best life possible, we would have to budget.

Make a plan

Dave Ramsey calls this “giving every dollar a name”. I’ve found that it’s best for us to plan out our expenses monthly for our family budget. Our monthly budget is divided into several categories such as rent, gas, etc. We spend every dollar on paper at the beginning of the month, including tithing money and money for savings. Every time we spend money on something it goes into our budget, which then calculates how much money we have remaining. At the end of the month we assess how we did, discuss how to make improvements, and adjust next month’s budget.

Spread out the occasional expenses

We have several expenses that we don’t pay every month, but are too large to be included in a single month’s budget. Our car insurance payment is a good example of this. Since we pay every six months, we divide our total payment by six and put money into the “car insurance fund” every month. This money sits in the bank until it’s time to write the check, and our current total is kept in our budget as well so that we get it in our minds that this money is already spent.

Make room for fun

When my wife and I were about to get married, her bishop suggested that we plan our finances so that we each would have a little money to spend by ourselves, unquestioned by the other. This doesn’t have to be a lot of money, but it can add up as we save for new “toys” or other things.

Do what works for you

We do our budgeting in Google Docs & Spreadsheets so that we can have easy access to it anywhere we have the Internet. Others I know use Quicken, Microsoft Money, or even paper. Everyone has their own style of how to do this, and it’s best to find what works for you. If you won’t use fancy budgeting software, don’t buy it. Be sure to explore others’ ideas of tools to use, but when you find one, make it your own.

Be sure to communicate

As with so many aspects in marriage, be sure to communicate when budgeting. The idea of a budget is to have a plan, not a strict set of guidelines. Be forgiving to yourselves when you spend over your budget, but be ready to make the adjustments necessary and accept the fact that this budget belongs to both of you. Plan it together, and don’t leave it to just one spouse to do all the budgeting. If you’re not married you can ask these same questions of yourself.

Using a budget is hard work, but the rewards are great. It can be fun to track your progress and see how your budget influences your spending habits, and it’s a great way to apply the previous steps mentioned in our
Family Finances Overview series. Use it to get out of debt, and use it to save for the future.

The second step of our Family Finance Overview is to avoid debt. This might sound like an oversimplification, but avoiding debt is all about spending less than you earn. The key here is that you must have a plan for your money. If you are in debt, set up a timeline to move out of debt, such as a debt-elimination calendar. Regardless of your debt situation, you should also have a family budget so that you can measure your progress toward becoming debt free and saving what you earn.

Determine your needs and wants

When you are paying of debt, you can’t afford to buy everything you want. Train yourself to tell the difference between your needs and wants. Basic needs include shelter (your rent or mortgage payment), food, and transportation. Wants can sometimes sneak their way in to these categories when we want to rent or buy houses beyond our needs, eat out at restaurants, or drive fancy cars, especially if they are leased. It’s not wrong to have these things, but they can turn our wants into needs in our mind.

Getting and Staying out of debt

From Provident Living:

We should avoid debt. There is nothing that will cause greater tensions in life than grinding debt, which will make the debtor a slave to creditors. A specific goal, careful planning, and determined self-discipline are required to accomplish this.

President N. Eldon Tanner taught: “Those who structure their standard of living to allow a little surplus, control their circumstances. Those who spend a little more than they earn are controlled by their circumstances. They are in bondage” (“Constancy Amid Change,” Ensign, Nov. 1979, 81).

Staying in control

Debt has a way of causing rifts in marriages and enslaving us. If we do not control our debt, it will easily take over and control us. In the May 2004 Ensign, Elder Joseph B. Wirthlin states:

Remember this: debt is a form of bondage. It is a financial termite. When we make purchases on credit, they give us only an illusion of prosperity. We think we own things, but the reality is, our things own us.

Some debt—such as for a modest home, expenses for education, perhaps for a needed first car—may be necessary. But never should we enter into financial bondage through consumer debt without carefully weighing the costs.

Avoiding debt is the second step in the Family Finances Overview series.

From the LDS Church pamphlet “If Ye Are Prepared”, the first step to family finances is to pay tithes and offerings. This pamphlet is accompanied by an online lesson financial course entitled “Peace in Your Hearts“.

Paying tithing shows our faith

As seen in the Bible, tithing is a commandment from God. When we fulfill any of God’s commandments with purpose, we show our faith in Him. Also, his promises are great for us. As the apostle Elder Joseph B. Wirthlin reminds us,

“First, pay your tithing. Do you want the windows of heaven opened to you? Do you wish to receive blessings so great there is not room enough to receive them? 7 Always pay your tithing and leave the outcome in the hands of the Lord.

Obedience to God’s commandments is the foundation for a happy life. Surely we will be blessed with the gifts of heaven for our obedience. Failure to pay tithing by those who know the principle can lead to heartache in this life and perhaps sorrow in the next.”

Giving Offerings helps you rise above yourself

Offerings are other donations given to The Church of Jesus Christ of Latter-day Saints to benefit others. There are several types of offerings that one can give to the church, and each of these are in turn given to those in need.

Fast offerings are one of the most common types of these donations, and we are encouraged to give a generous fast offering to accompany our monthly fasts. During these periods of fasting, we can give of ourself temporally (through these offerings) as well as spiritually (in dedication to the Lord and through prayer). This helps us to rise above ourselves and to increase our focus to those around us who might not have the means financially to provide for themselves.

President Gordon B. Hinckley, our current prophet, said:

“Think … of what would happen if the principles of fast day and the fast offering were observed throughout the world. The hungry would be fed, the naked clothed, the homeless sheltered. Our burden of taxes would be lightened. The giver would not suffer but would be blessed by his small abstinence. A new measure of concern and unselfishness would grow in the hearts of people everywhere” (in Conference Report, Apr. 1991, 73; or Ensign, May 1991, 52–53).

Follow the other sections in the Family Finance Overview.

In February, the leadership of the Mormon Church issued a pamphlet entitled “All is Safely Gathered In” to help families and individuals learn the basic principles of how to plan family finances. Although it does not go into a lot of detail, it provides basic principles on which finances can be rooted. Without this base, it is easy for us to become lost in debt or even bankruptcy. In explaining the purpose of this family finances overview, the First Presidency said:

“We encourage you wherever you may live in the world to prepare for adversity by looking to the condition of your finances. We urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt. . . . If you have paid your debts and have a financial reserve, even though it be small, you and your family will feel more secure and enjoy greater peace in your hearts.”

I can echo this statement wholeheartedly. Although ours wasn’t a drastic change, since my wife and I began implementing these steps with a budget and an emergency reserve, we have been able to focus on living life rather than worrying about it. Although much of it is echoed on the Family Finances channel on Provident Living.org, each of these principles from the pamphlet is essential, and I will look at them in more detail over the coming few days:

• Pay Tithes and Offerings
• Avoid Debt
• Use a Budget
• Build a Reserve
• Teach Family Members

I am very excited that the church has addressed this so straightforwardly. It has definitely become a problem in our credit card society where we can spend much more than we earn, so having a resource so straightforward as this pamphlet helps greatly as our families try to live debt-free.

I’m in the process of taking my life off of autopilot. My current mental mode is to live in the future, dreaming of what life might be like once it’s time for our little vacation, or what it could be like when I’m totally done with school. Only recently I realized that it’s so much better to live right now, and to enjoy everything I do. It really makes a difference, and I now look forward to work, play, and whatever. Life’s usually pretty fun (but don’t think that this doesn’t mean that I have ups and downs! We all get them.)

Start with goals.

Settings goals has been a key to enjoying life for me. I like to have goals in a few different categories, including financial, spiritual, personal, and education. In addition to your own goals for yourself, don’t forget family goals or any other type of goals that may apply to your situation. Think of different ways to improve yourself, and work consistently at these goals until they become habits. When I served as a missionary in Argentina, our mission president reminded us that “a goal that is not written down is a dream”. My problem had always been that I didn’t have goals, I had dreams. I wanted to dream about what the future would be like without doing anything now to change that.

Set good goals.

Good goals are SMART. This means that they are Specific, Measurable, Agreed upon, Realistic, and Time-based. These principles apply to all goals, not just personal ones.

Specific Goals

My wife and I are saving up for a new washer and dryer. Our goal is to buy one at the end of next month, but that’s not very specific. In our case we haven’t figured out exactly which one we want (that’s another goal), but once we do, we’ll specify what exactly we want, like “We will save money to buy the Whirlpool Duet Sport washer and dryer”.

Measurable Goals

When we started looking and washers and dryers, we realized that there was a huge price difference between all washers and dryers. Some were high-efficiency and others were top-loading. We want our goal to be measurable, so since we’re saving money for appliances, we want to add something measurable to our goal, such as “We will save $1500 to buy the Whirlpool Duet Sport washer and dryer”.

Agreed Upon Goals

Think of those around you when you make goals. If they are directly involved in the outcome, they should have some sort of say in your goal. In our case, my wife and I both have to agree upon the goal to buy a washer and dryer. This helps us both commit ourselves to saving money for this purpose.

Realistic Goals

If I wanted to buy a washer and dryer next week and hadn’t set aside any money at all for this, it wouldn’t be realistic. Make sure you don’t set yourself up for failure when you set your goals, because that takes all the enjoyment out of achieving it in the end.

Time-based Goals

Having a time-based goal means that you have a specific time in mind for when it should be completed. This way you can measure your progress at any point in time, and track yourself along the way toward this goal. For our goal, my wife and I can say “We will save $1500 by June 30th to buy the Whirlpool Duet Sport washer and dryer”. If the goal is a long way in sight (or even more than a week or so in the future), it’s often helpful to break up that task as well, and say “We will save $200 a week” or something similar, so we don’t end up trying to put together the money the last day of June and calling it saving.

After we have our SMART goals, we’ve got a good start, but we’ve completely left out the implementation. Remembering to address the five principles of SMART, however, will help us realize the interim steps we need to take on that way, and we can set up our own reflection time to track our progress and make sure we are working toward our goals. This process has helped me to enjoy the journey of achieving goals rather than just the end outcome.