This video segment is one of five lessons in the “Creating a Gospel-Centered Marriage: Finances” seminar.
The GCM series are marriage preparation and marriage enrichment level resources. If your marriage needs restoration level care consider one of the other options available at summitchurch.com/counseling, or visit bradhambrick.com/findacounselor for help finding a counselor near you.
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In Lesson 3 we will take the journey from numbers on a piece of paper to a living document that directs your life towards your family mission and values. Embracing this distinction is the difference between something you will try-and-quit and a lifestyle change that you’ll embrace. The purpose of a budget is more than mere number-awareness, but spending your life on purpose.
Lesson 3 will read like “step work,” but it is not a recovery program. We are going to try to be highly practical and assume nothing. It takes an average of 3 months before these steps are smooth enough to only take 30 minutes per week, but they will get you to the place that you can run your home finances in less time than it takes to watch a sitcom.
STEP ONE: Get to Know the Monthly Budgeting Form
Most people who don’t use a budget haven’t ever gotten familiar with their tool (assuming they had a tool they were trying to use). You won’t be consistent with something that feels foreign or you don’t understand. The “Monthly Operating Budget” form, which can be downloaded at bradhambrick.com/GCMfinances, is meant to be very user friendly.
It is created as an Excel document, because Excel is one of the most universally used and basic computer programs. All the formulas are already in place. Once you define your line items and fill in the “Proposed” column (step two) this document will do all the math for you.
At the top of the document you would type your name in the first row – “Smith Family Monthly Operating Budget.” In the second row, type the month and year – “August 20##.” As you type your name and the date, realize you are taking a powerful step to tame a significant part of your life.
In the next section you record each source of income and the amount. When you enter the amount it will automatically add up the total and update the “Total Income” figure at the bottom of the budget. You would replace the word “Source” with a reference to the type of pay (i.e., “Husband Check 1” or “Side Job Check”).
The next and largest section of the budgeting form tracks your expenditures. The major headings (fixed necessities, variable necessities, fixed luxuries, and variable luxuries) should be familiar to you from Lesson 2.
The column labeled “%” provides the maximum recommended percentage of your income for that expense. These are taken from Dave Ramsey’s Financial Peace University and are meant to help you determine if your proposed budget is financially sound.
The columns “Amount,” “Date,” and “Type” are where you put how much, when, and with what (i.e., cash, check, credit, auto draft, etc…) you paid for something. If the line item is preceded by three asterisks (***), then the amount is pulled from a back page of this Excel document. These are for expenses that cannot be captured by a single entry. For instance, you will get gas and groceries multiple times per month, so a separate page is made to record those receipts.
The “Proposed” column will be discussed in step two.
The “Difference” column tells you how your actual spending on each line item compared with your proposed spending. These cells automatically tabulate the difference as you enter your actual spending. It is important to be able to see this each month. This is an “alarm system” that sounds when your proposed budget no longer corresponds with your actual spending.
At the bottom of the budget cover page you find, “Total Income,” “Total Expenditures,” and “Monthly Balance.” These cells are all automatically tabulated as you enter the raw data. With this complete you will be able to see how your actual month compared with your planned month on a single piece of paper. The value of seeing your month (proposed and actual) on a single, simple piece of paper can hardly be over-stated.
STEP TWO: Define Line Items and the “Proposed” Column
Now that you are familiar with your budget it is time to make it your own. The first way that you make it your own is to decide which line items are needed under each of the four major headings. Most of this work you did in chapter two when you began writing out your actual spending. Here you are making the line items in the electronic document match your life.
The second way that you make it your own is to fill in the “Proposed” column. This column is what most people think of as a budget. Hopefully, you can now see that this column is for your budget what your skeleton is for your body; a key part of the whole, but lifeless by itself.
Now you want to make sure that your anticipated income is greater than your proposed spending. This is when budgeting hurts, because it often requires cutting and always requires saying “no” to some things so we can say “yes” to other things. This is when we adjust our expectations to the size of our incomes. Until your proposed spending is less than your regular income you do not have a budget; you have a fantasy awkwardly squeezed into an Excel document.
There are three line items that are notorious budget busters. These require explanation or they will undermine all the hard work you’ve put into this point.
- Miscellaneous – If you overuse this line item, there is no reason to have a budget. But without this line item a budget can become so cumbersome it requires a CPA to administrate it. This is where you designate an amount each month for small irregular expenses (i.e., kids sports league, minor home repair, etc.). If you have allowances for each spouse, then this category should not be tapped into for personal enjoyment spending.
You should have two pre-determined figures for managing this line item. These numbers will vary from family to family, but they are an important part of having unity and shared expectations.
- We will spend no more than $ ______ from miscellaneous without consulting with our spouse.
- If a purchase exceeds $ _______ we will purchase it through designated savings (Lesson 5).
- Special – This line item is where you record expenditures from your designated savings (Lesson 5). For instance, if you save for a vacation you record those receipts here on the month when you take your vacation. You would then record the money you pulled from savings as “income” for that month in order to have an accurate picture of your financial status for that month.
- Gifts – Budgeting is compatible with generosity. We can give nice things to those that we love and honor our budget. But we must plan ahead if we are going to do so. You know to whom and when you will give gifts each year. You can decide how much to allocate monthly for gifts using a four-part process and then allow “gifts” to be treated as a category within designated savings.
- Part One: List of gift giving occasions; birthdays, Christmas, Valentine’s, anniversaries, Mother’s Day, etc.
- Part Two: For each gift giving occasion make a list of people to whom you will give gifts. Add in a few for unexpected baby showers, kid’s birthdays, weddings, etc…
- Part Three: Designate how much you intend to spend on each person for each occasion.
- Part Four: Add up what you have intended to spend on gifts, divide by twelve, and set that much aside each month for gifts.
STEP THREE: Decide Who Will Administrate the Budget
If a church can have a male or female accountant, then either husband or wife can administrate the family budget. A husband leads his family well by initiating the budgeting process, leading in sacrifice and difficult decisions, and ensuring that monthly meetings are conducted to review spending, make adjustments, and designate savings.
Determining who will administrate the family budget should be determined by asking questions like:
- Who enjoys paying attention to details? Who is more disciplined about consistently engaging repetitive tasks? Who is better with numbers? Does dealing with finances make either of you fearful? Would administrating the finances exacerbate control issues for either of you?
The other spouse does not get a “Get Out of Jail Free” card from financial awareness and responsibility. If the financial administrator is deemed the “responsible spouse” then you are setting up a parent-child dynamic in your marriage that will be destructive. The non-administrating spouse still has the responsibility to (1) remain informed about family finances, (2) honor the family budget by not spending beyond what it allotted, and (3) participate in the monthly budget meeting.
STEP FOUR: Designate a Place for Receipts
Every purchase comes with a receipt for a reason (not because there are hungry trashcans). Every time you spend money you have done something significant enough that there is a universal expectation that a written record should be provided to you. You should consider giving your money away as significant as the person receiving it does.
Unless you have one place that every receipt always goes without exception, information will get lost. The inability to get needed information is another common budget killer. Once you allow for the category of an “unimportant receipt” (that phrase should resonate with you as an oxymoron), that category will expand. A habit of financial laziness will permeate your home.
In most cases, the receipts should be placed in a closable box (i.e., something like an index card box) next to the computer where the finances are recorded. This makes it easy for the spouse who administrates the budget to find them.
If it is not clear on the receipt what line item the purchase should be applied to, write this on top of the receipt. This is standard practice for any business or ministry and is not too much to ask. It is a way for the non-administrating spouse to honor the time and effort the administrating spouse spends serving the family through accounting.
Yes, this includes your personal allowance. If you and your spouse use these line items, then you are free to spend this money on anything morally agreeable to both of you. But it is unwise for a couple to have money that is not a part of the family accounting system. Most lies, affairs, and other major marital disruptions would be averted if couples would willingly engage in this type of perpetual transparency.
STEP FIVE: Record Receipts at Least Weekly
Procrastination is another family budget killer. This is why a key question on assigning the administrative role is, “Who is more disciplined about consistently engaging repetitive tasks?” If you get multiple weeks of back-receipts, it becomes increasingly unlikely that you will do a good job of recording that information. If information is lost or poorly recorded because of procrastination, you will blame the budget for “not working” and stop using it.
Recording the receipts should be very easy. Once the line items and allocations of your budget become stable, then you can actually record the receipts while you watch your favorite sitcom. All math will be done for you. You just have to get the numbers in the correct cells.
If you use a debit or credit card you should enter the expenses as you spend (the same way you do for a check). This will help you associate using your credit card with spending money. This helps to reduce (but not eliminate) the spending increase that occurs when we don’t spend cash. Remember, by recording credit card expenses this way you will not record the check you write to pay for your monthly credit card statement in your budget form.
STEP SIX: Review Budget Together at the End of the Month
At the end of every month both spouses should review their budget together. Once the budget is established this meeting may not take long (5-10 minutes), but even if it is brief it should never be skipped. If nothing else, this meeting is a marital accountability session where you remind each other, “We’re still committed to this budgeting thing.”
This meeting is when the two of you will make edits to your budget. If one line item has grown beyond its “proposed” amount, then you would need to increase that line item and correspondingly decrease another line item. If you are considering adding another line item, that should be discussed while reviewing the budget.
If you get a raise and want to expand the budget, that is discussed at the end-of-the-month budget meeting. However, if you get a bonus, it is best to discuss those funds in terms of designated savings (Lesson 5). Remember the purpose of the “Monthly Operating Budget” is for regular expenses. A bonus is irregular income and should therefore be used to put towards irregular expenses.
Most months, if you have planned your budget well and honored the commitments you defined, there should be more income than expenses. This should be the “pay off” of a good month. We will discuss how to manage these funds to invest in each other’s dreams, prepare for the future, and shape your heart in Christ-like ways in Lesson 5.
STEP SEVEN: Make a New Form for Next Month
The key to budgeting is doing it again… and again… and again. Budgeting is like cleaning your home. It’s not hard, but it requires consistency, or it becomes overwhelming.
If you use the Excel-based “Monthly Operating Budget” provided in this seminar, then making a new form for each month is relatively easy. Take the following steps:
- Click “Save As” and save the current month’s budget as a new file. For instance, change the document title “Smith Family Budget August 20##” to “Smith Family Budget September 20##.”
- Change the date on the second row of the budget cover page.
- Clear the content in the “Amount,” “Date,” and “Type” columns of the budget cover page.
- Clear the content for all your entries on the back pages of the budget.
- Use the budget as you did the month before.
Pro Tip: Once you are able to have confidence that your “Proposed” column accurately represents your normal spending, you can make several months of blank forms at once and save time.
You now have a process that will serve your marriage well “until death do you part.” With simple weekly maintenance you will know where your money has gone every month. You will have a sense of “our money” that will strengthen your “one flesh relationship.” Financial conversations will not require the solving of defensive money mystery.
There are two subjects we have not covered that may be on your mind. First, you may be asking, “How do we get out of our current financial mess (i.e., debt) so that our budget can ‘float’?” That will be the primary focus of Lesson 4. Second, you may be asking, “How do we handle irregular expenses and saving for things like a vacation, kids college fund, or retirement?” That will be the primary focus of Lesson 5.
What we have done to this point is to provide a functional system of capturing the information you need about your “normal” expenses. Getting this in working order and financially sound is the key to eliminating debt and wise planning. As with any part of life, we must do the day-to-day well before we will excel in our special tasks or callings.