4 Keys to Financial Freedom
Key #1: Spend Less than you Make (Proverbs 21:20)
Remember the money bucket. You have money coming in the top (income) and money leaking out the bottom (expenses). Financial freedom comes as over time the level of money is staying constant or rising. Financial trouble comes when the level drops and continues to drop.Â
If a person is spending more than make, they must either increase income or plug the holes.
A second job or the wife working can raise the level, but it is not always easy. See why it is difficult to raise the level here: Taxes and increasing income
Also calculate the hidden costs of the wife working outside the home: http://www.crown.org/Tools/mommake.asp
The alternative is to cut expenses. Though tough, it can be done and in many cases has to be done
See articles at: http://www.crown.org/library/default.aspx?catId=19
Key #2: Be Content and Save (Phil 4:11-13).
The key to living within income is to learn contentment. Contentment is choosing to be content with current circumstances. It is a choice and must be learned. Paul required Christ’s strength to be content.
However, as mentioned in 1 Cor 7:8, a person can and should seek to wisely change what they can.
When a person is content, they can save. See the power of savings here:Savings
A free savings calculator can be found here: http://www.math.com/students/calculators/source/compound.htm
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Key #3: Run From Debt (Proverbs 22:7)
Biblically, I do not believe it is wrong to go in to debt, but it is discouraged and the negative consequences are pointed out. Many of the top financial guru’s (Larry Burkette and Dave Ramsey) discourage debt and caution against it.
From a financial standpoint, a person should only consider borrowing for:
- Things that go up in value (House, etc).
- Things that make money (Business, etc).
See how long it takes to pay off a credit card:Credit Card
Learn how much you really pay for a house:House
A banker shared this scenario on the advantages of buying a car debt free:Car
Key #4: Give (2 Corinthians 9:6-8; Phil 4:15-19)
Larry Burkette, before he died, challenged people many times on his program to take one month and give the first 10% to God (the local church not to his radio program). If after one month a person is worse off financially, they should never tithe again and send Larry the a bill for the shortfall.
After sharing this a couple years ago, a man told me that he has noticed that when gives, he does not receive more money. However, what he does have lasts longer.
According to Philippians 4:17 Paul said he was glad for the churches gift. Why? The profit that came to them as the result of giving. There is joy in giving. As one person said, “God will give through a person more than he will ever give to a personâ€.
More info here: http://www.crown.org/library/default.aspx?catId=16
Practical Steps:
Step #1: Use 10 minutes a a week to track your spending.
Step #2: Have a spending plan.
Budgets and spending plans bring freedom if followed.
See a Budget calculator here: http://www.crown.org/Tools/budgetguide.asp
Learn how to setup a spending plan/budge here: http://www.crown.org/Library/default.aspx?catId=31
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Links:
Free articles: http://www.crown.org
Great home study course: http://www.goodsenseministry.com/resources/budcourseSG.asp
Given at Berean’s Chapel. Fall 06.Â
(C) 2006 Arlen Busenitz. This article may be freely linked to.Â
July 29th, 2007 at 7:39 pm
These are all wonderful ideas! I would add just a few things from my experiences working with families:
1) Don’t be afraid to educate yourself. Finances don’t have to be overly complex! Although many institutions develop products that confuse the consumer, whomever you work with should be able to explain things in a way you can understand. If you don’t understand what you are doing (or what they are asking you to do), you are probably doing the wrong thing! Work with someone who is willing to speak in your terms.
2) Educate your children. Speaking with children about money can have a profound impact on their financial decisions as they get older. Good habits and bad habits start early!
3) Find someone else to encourage you. Maybe you have a friend interested in making more financial progress, or a group of friends interested in learning more about financial topics. Together you can give each other ideas and help keep each other accountable. This is another reason to have a good financial coach!
4) A real eye-opening experience for most people is to track spending for just one day. Often, it is the little things that have a big impact! Keep in mind that even if you are not a “spender,” making progress means moving forward.
5) Make it automatic! If you have trouble being disciplined with money, make as much of it automatic as possible. This removes much of the discipline factor as you work those issues out.
6) Lastly, make sure you allow yourself some flexibility and fun. Most people continue doing things they enjoy. Whether that means seeing a goal accomplished, or planning for a certain amount to be spent freely, this can keep you headed in the right direction!