Let’s get back to basics. When I teach my kids about money, we set up three piggy banks: one for spending money, one for savings, and one for giving. The same framework holds true as we become adults. But how much should we put in each? For a starting point, try to put 10% towards giving, 20% into savings, and live on (spend) the rest. The 20% for savings can be thought of as 10% set aside for emergencies and saving for large purchases like furniture or a car, and the other 10% towards long-term savings. The goal over many years is to grow the long-term savings to the point that it earns enough that we can place a larger percentage of income towards giving. Basically this means living on 70% of our income or less. Yes, it can be done! Some people may put 10%+ toward paying down debts instead of long-term savings until they’re debt free.
If you’re just starting down the path of understanding God’s view of personal finances, you may wonder why you always hear people talk about giving 10%, or tithing; and it might seem like a big number. The first thing to understand – to really take seriously – is how much a threat LOVING money is. It is the main competitor to God in our daily lives. When we decide where to put our faith, security, and trust, the most common choices are God and money. By giving money away, we declare that we don’t love it; we just recognize that it is a tool to simplify trade and nothing more. By not giving money away, we may be tempted to put our faith and trust in it. And giving too small an amount doesn’t protect us from the danger. Think of this as a prescription given to us by God; 10% is a good dosage to immunize against love of money. Too little and it may not be effective. The prescription calls for us to give this to our local church, which I encourage everyone to do.
Here’s another analogy: learning to give and save in this way is like training for a marathon. We don’t jump right into giving 10% and saving 20% because we will cramp up, quit, and say “I’m never doing that again!”. Let’s build up to it over time. We train our budget to live on less. We start giving and saving something (however modest) and do it consistently. Consistency is the key! Just as we would start out running 1 mile a day and increase the distance steadily over time, we increase the amount we give at regular intervals when we’ve built up the stamina that the amount is now easy. In time, we’ll be giving more than we ever thought possible, AND we won’t miss a single penny. At the same time we’re training to give more, let’s also start saving more too. We plan ahead for big purchases and start putting money aside right away so we can buy without debt.
When we save, we should have a plan for what the money is earmarked for. Have a plan for this year, next, and 3-5 years down the road. Start setting aside the funds you’ll need for that trip this winter, the new appliance next year, the surprise major repair, the car needed in three years. In this way, when something comes along that you really want to use that money for … insert your favorite indulgence … you’ll know not to spend that money because it’s already meant for another purpose. If we just save up money, but don’t have a goal attached to it, then it will be spent sooner or later for a purpose that doesn’t necessarily meet our goals. If we take the time to think ahead, then we can make those savings fulfill our goals. This doesn’t mean that you cannot change your plans once they’re made; just that you should think ahead and consider life changes that may be coming before you spend savings. Including a trusted friend to bounce ideas off of is always a good plan. Ideally this person would know your goals and ask some helpful questions about the plan to save up for them.
Last point about saving and planning: It’s important to save when times are good because there will always come a season when they are not. The best way through that season is to be prepared. Have at least 3 months of expenses saved. Have a plan for the expenses that can be cut quickly and the assets that can be sold in case of lost income. And continue to build a network of trustworthy people to advise you through good times and bad. Avoiding a bad decision can be more valuable than making a good one!
More on love of money here: http://matthew2521.wordpress.com/2010/05/25/money-as-idol/
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