[Editor's Note: The following article is adapted from Chiseled: A Young Man's Guide to Shaping Character, True Toughness and a Life That Matters, Regal Books, 2008]

How do you develop a wise, skillful approach to finances? It’s not as confusing as it often seems. Basically there are six main areas about money to study and learn about. Keep these six areas in balance, and your finances will fall into place. Here are the basics:

Spending

By itself, money is just a blip on a computer screen or a wad of green paper. Money only becomes worthwhile when it can be exchanged for something.

What is of value to you? Education? Transportation? Necessities such as food and clothing? Helping other people? It’s okay to make and spend money. The love of money is wrong, but money in and of itself isn’t wrong. Money is just a tool. No more, no less.

The key with spending--and this can’t be screamed loudly enough--is to spend less than you earn. It’s so simple that it sounds so basic to say it, but you’d be surprised how few people do it.

Budgeting

Budgeting means that you allocate money for certain things. You decide how to spend the money you have, rather than let stuff or impulses decide for you. Budgeting is the key that much of financial balance hinges on. It doesn’t matter what type of budget you develop. What’s important is that you know what’s coming in and where it’s going.

Here’s one way, called the envelope method. It’s an easy, practical and hands-on approach to budgeting.

a. Estimate how much money you’ll need for each group of expenses each month. Make up whatever categories are true to your life. It might be: gasoline, car repairs, food, entertainment, clothes, insurance, rent, etc. You might need to track your expenses for a month or two and tweak the amounts accordingly.

b. Get a box of envelopes and write the name of each of your spending categories on an envelope—each category on a separate envelope.

c. Get your paycheck, cash it, and put in each envelope the amount of cash you’ve previously decided goes into that envelope. When you need money for an item, pull out the envelope from that category and spend away. If there’s no money in that envelope, then don’t spend.

Saving

Saving is different from investing. Savings are used for several things: accumulating funds so you don’t have to buy things on credit; emergencies, such as your car overheating, and;

Content provided by: Christianity.com