You may be beginning to see how your income fares against your expenses. Don’t fret just yet! Keep plugging away at your budget, and you’ll find ways to get the two in line.
Following are the categories suggested by Crown Financial Ministries™
for your budgeted expenses, and reasons for their importance.
Tithe and Contributions -- Giving is a faithful steward’s joy. While the word “tithe” means “a tenth”, its purpose is to serve as a testimony of God’s ownership, and as such, is meant to be individualized. The Jews gave far in excess of one-tenth. According to Scripture, even with limited resources, they gave a tenth to the temple storehouse, a tenth to the Hebrew widows and orphans, and a tenth to the widows and orphans of the Gentiles. Shouldn’t we, in the grace given us, aim to do as well in this area? Aim for at least 10% of your gross income, then watch how God provides for your needs.
Taxes -- While paying taxes is not something we like to do, we are admonished to pay what we owe by law to the government. We may question the use of these taxes, and do what we can to see to it that taxes remain fair, but none of that should ever reduce our commitment to pay. The percentage here, of course, depends on your level of income. Plan it accordingly. Fortunately, your employer usually takes care of deducting the right amount. Just make sure you’re only paying what you should, not more. Review your deductions and make any changes that are necessary to ensure this.
Housing – mortgage/rent, utilities, maintenance, improvements – This is one of the most important and expensive categories. A common rule-of-thumb is to keep it under 35% of your net family budget (after tithe and taxes).
Food – groceries, lunch money -- Here’s a category that often has a lot of wiggle room, especially when you’re open to eating more real foods, growing your own vegetables, clipping coupons, packing a lunch, and the like. 15% of your net budget is a good guideline.
Automobile – insurance, car payments, maintenance – Aim to always be ahead in this category. You want to pay your insurance premiums all at once to avoid those pesky fees that really add up over time. You will have to take your car to the shop at some point. Plan accordingly. And you want to get to the point where you’re saving to replace your car, rather than making payments on the one that’s on its last legs. Put about 15% into this category and begin building it up.
Insurance – dental, life, health -- Don’t skip this category just because everything else seems more urgent. Planning ahead is much less costly than letting life lead you around by the nose! Plan on about 5% every month.
Debts -- If your debts are fairly reasonable, a 5% allocation works for this category. However, this is one category that deserves your full attention initially to make the rest work! Your ultimate goal is to eliminate this category for good. See the page on Debt Elimination for further study.
Recreation/Entertainment – activities, hobbies, vacations, movie rentals – This is the category that usually gets the better of us. We want all these things to “make us happy”, when in fact, while enjoyable, they are not necessary and do not ultimately make us happy. This is the category that is best put on hold until debt is paid off. Otherwise, keep it down to about 5% of your net family budget. That way you’ll be able to enjoy some recreation without it taking over your finances and commitment to more important things.
Clothing – clothes and shoes – Be reasonable here. Having decent clothes to wear is not the same as filling your closet with the latest fashions. The most important clothes are for work and school, so stay focused on those, and how to make them last longer. Stick to about 5% here.
Savings – emergencies, car replacement, etc. – This category is a very important one, because how you handle this one will have a domino effect on the rest of your budget. It’s all about planning ahead and avoiding losses. Once you have a workable emergency fund in place, plan on continually putting in at least 5%. See page on Emergency Savings for further study (under construction).
Medical Expenses -- doctor visits, prescriptions, optometry -- This one won’t be too difficult if you’re healthy and don’t have to see the doctor much. On the other hand, if you or someone in your family has a medical condition, this category will take a much higher priority. The rule-of-thumb is about 5% of your budget, but if you know you’ll need more than that, skim off of other categories by decreasing their percentages.
Miscellaneous – Christmas, household expenses, pets, special purchases (gifts, etc.) – Here again is a category that has a lot of wiggle room. These expenses generally are not necessary, so you can cut back severely here if you need to. Once your debt is eliminated and your emergency savings is beefed up, you’ll have much more leeway in this category. In the meantime, try to stay within 5% of your budget.
School/Childcare – supplies, school photos, fundraisers, lessons/tuition – This oft-forgotten category can cause you some problems if you’re not paying attention. The expenses in this category are irregular, and sometimes large. But if you add them up, they can be quite reasonable over a year’s time. Figure out what you usually spend in a year and divide that number by 12. Plan on re-using school supplies to save some money --- all those crayons really add up when you buy them year after year. (Besides, they just end up in a bucket at home anyway, right?) This percentage will depend on things like private lessons or tuition. But generally about 8% will do.
Investments -- This category will only be viable once your debts and savings are well in hand. There is no percentage to use at this point – investing will be done out of any surplus, and of course through your 401(k). See pages on Investing and Providing for the Future.
Unallocated Surplus Income -- This is the fun place! A temporary job, selling something on Ebay, an unexpected windfall. Here is where you put your budgeting wisdom to work! Do you have holes in your budget you need to fill? Do you have a debt you can pay down with it? Spending it on yourself is a no-no unless your budget is on track and under control. Use this money wisely to get you that much closer to your goals and to financial freedom!
Now that we’ve examined what makes a budget work,
let’s take a look at what can bust your budget.