We were broke, our credit card was maxed out, and we were $24,000 in debt. We knew it was time for drastic change. By creating and following a strict budget, within two years, we paid off all debt other than our mortgage.
Proverbs 27:23 urges us, Be sure you know the condition of your flocks, give careful attention to your herds (NIV). In other words, take a pro-active and alert stance when it comes to fiances. This begins with an awareness of our spending habits so that we can adjust our habits according to our income level.
Keep track of monthly spending.
According to Mike Harris, owner of Harris Family Capital Management, tracking spending is crucial to debt reduction. “Keeping a budget helps identify unnecessary spending so that more money can be used to reduce debt, and bad spending habits that created the debt can be eliminated,” Harris said.
This was true for us. Once we started tracking our expenditures, it became clear—we were spending a great deal on unnecessary items like sodas and coffee drinks. At $4.79, a latte doesn’t appear too expensive, but over the course of a month, we were spending $114.96. We also bought convenient store fountain drinks almost daily. Again, spending $2 per day didn’t seem like a big deal, but over a month, we blew $60! Combined, that was almost $200 per month on drinks alone.
That’s $200 a month, $2,400 a year that could go to paying off credit card debt.
Create a workable budget.
- Begin by listing all the categories you spend money in. For example, clothing, gas, electricity, groceries, and childcare, might occupy your list.
- Determine how much income you have coming in each month. If your income is variable, you will either need to rework your budget monthly so that income matches expenditures, or you will need to create a monthly average using an estimated annual income.
- Evaluate your spending in terms of percentages. How much of your monthly income goes to entertainment spending? How much are you spending annually on vacations or clothes? How much is going toward savings and investments? Ask yourself if these percentages are reasonable and if there’s a way you can reduce spending in various areas.
For example, remember the money our family spent on sodas each month? To change this, we began buying cases of water and keeping them in our vehicles. This saved us around $50 a month. To curb fast food spending, we began to keep snack items on hand. I also began packing my husband’s lunch, a savings of $10 per day, $50 per week, $200 per month, $2,400 per year. Those two changes alone saved us $3,000 per year.
We also cut off our cable and found ways to do other things cheaper such as buying our clothes off clearance wracks and in the off-seasons. With all the changes made, we were able to pay off our debt in under two years.
Plan for “emergency spending.”
This includes things like car and home repairs and unexpected medical costs. Estimate what you spend each year on unexpected necessities, divided this by twelve, and included this in your monthly budget.
Creating and maintaining a budget can be difficult and time-consuming, but the blessings of proper money-management far outweigh the struggles. By tracking your spending, creating and following a workable budget, and planning for long-term expenses, you can find financial freedom and the peace that comes with it.
Jennifer Slattery lives in the midwest with her husband and their teenage daughter. She writes for Christ to the World Ministries, the ACFW Journal, the Christian Pulse, and Internet Cafe Devotions. Her work has appeared in numerous publications and compilation projects. Visit her online at Jennifer Slattery Lives Out Loud.
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