Page 31 - The Standard Volume 4

calendar year. This allows us to calculate an average monthly expense which is the hard-and-fast number you’ll plug into your spreadsheet, budget worksheet, or digital application that you may use to track your expenses. Every month you’ll calculate how much you spent and tie that total to your set allocation. You may find that some months you will spend less than your average monthly expense. For instance, during the months of April, May, and June, you may have spent less on heating and electricity due to milder temperatures lending to a small surplus in that area of your budget. The wise course of action in this scenario is to have a secondary checking account that is used as an overflow account. The purpose of this account is collect the overflow from your budget items to help offset months where you overspend. This method will help you to rely less on your credit cards and alternative means of funding your lifestyle. Most people find themselves mired in debt not from frivolous spending, but often from unexpected expenses and events which have gone unplanned for. This leads us into the next area of allocation, the Special Events.
Special Events refers to any allocation need that is either random or on an annual or semi-annual basis. These events can range from anything such as car repairs, Christmas gifts, giving to church outside of tithes and offerings, children’s back-to-school clothes, etc. These expenses and allocations often throw our budgeting process out the window. They cause our credit card debt to rise as we scramble to get the brakes on our car repaired or buy clothes for our children who just experienced a growth spurt. Surveys have shown that almost 60-70% of Americans have less than $1,000 of liquid savings for emergencies. An emergency savings is different from the overflow account we spoke of earlier. This emergency account should be used for covering the expenses that arise unplanned—not for covering lapses in judgement from overspending. In the same manner, this emergency fund should be separate from a person’s retirement fund as well. Most retirement funds are qualified which means that the money used to fund them is not taxed so any withdrawal made will have to be taxed as well as potentially be subject to a penalty. Retirement funds are not considered liquid and should not be relied upon to cover your monthly expenses. Concerning retirement accounting funding, if you are finding your budget numbers to be tight, you may want to consider
reducing your contributions while ensuring the maximum matching contribution of your employer is still being made.
Finally the last category you should build into your budget is Leisure. There is a good chance that during the pandemic you may have added a few new hobbies, streaming services, or interests to your life. Everyone should plan into their budget a portion to enjoy these interests on a monthly basis. Overly aggressive restriction often leads to bouts of bingeing, which in turn leads to a budget being disregarded and financial challenges occurring. Remember what we stated earlier? A budget’s purpose is to achieve a goal(s). Your goals in life should go beyond simply paying your bills and surviving. Scripture states in Ecclesiastes that we should enjoy the fruits of our labors. If your budget does not include an appropriate amount of money set aside for personal enjoyment, I would encourage you to rework your numbers to accommodate for this category.
Regarding government stimulus payments and potential tax return refunds, if you qualify, these are unique opportunities to bolster your financial position. Potential opportunities include creating an emergency savings account, reducing outstanding debt, opening investing accounts (if your financial household is already in order), starting a business opportunity (that has been well planned out), funding insurance premiums, or taking care of deferred maintenance on your home or car that will save you higher costs further down the road.
In conclusion, there are no hard-and-fast rules to budgeting, no magic percentages or dollar values. Everything is dependent upon your situation, the cost of living in your area, your income, the makeup of your household, even down to how often you are paid. Your budget should also evolve with you and change as often as your goals change. I recommend that everyone review their budget on no less than an annual basis. It is always good to review your budget on a quarterly basis as well to spot trends of over or under spending and the reasons as to why. Ignoring your financial position is often the reason as to why your goals are not met. Whether you are ignoring opening your bills or ignoring how your money is spent, I hope that during the pandemic you take the opportunity to get your financial household in order and carry out these practices in whatever situation you find yourself in the future. S
June 2022 | THE STANDARD 31