Details, details, details

Now where were we? Ah yes - the budget. Take a deep breath and we'll dive right in...

First we gather our supplies: a notepad, pencil, pay stubs and bills from last month. Our budget begins with the income. Write down all sources of income - one per line. You have a salary. Does your spouse also have a salary? Stocks, bonds? Me neither.

Now write the amount next to each item. This is the total amount each month. After the amount, write how often. For example, I'm paid the 15th and last day. Are you paid weekly? Write down weekly. This isn't so hard.

Next come our expenses. Where do we spend our money? Don't worry about the order. Just write them in the order they come to mind: food, clothes, gas, oil changes, car insurance, mortgage, home insurance, renter's insurance, electricity, natural gas, Internet, cable, water, sewer, trash pickup, gifts (birthday, Christmas, anniversary), hair cuts, and all of the other things your family uses.

Next to each write down the amount you will spend this month. If your amount goes down to the penny, you are a nerd. At least round it up to the next whole dollar.

With a calculator, add up the monthly income. Write that number at the bottom of your list. Now add up all of the expenses. Write that number below the income. Subtract the total expenses from the total income.

Negative numbers are bad. You cannot spend more than you make. Here comes the hard part... Go back and cut expenses. Your total expenses must equal your total income. We call this a zero based budget. Income minus outgo equals zero.

What happens to positive numbers (income > expenses)? You spend more! No, no, don't rush out to the mall. I mean spend the money on paper - in your budget. Set the money aside for savings. Things break and children get sick. Whatever you call these funds, do it on paper, on purpose.

Unsteady Income

Invariably, someone has an irregular income. They earn commission, and their income depends on the sales that month. Or hours vary week to week. Either way, you can't really predict how much money arrives.

Start with a low average for the income. Do you work between 32 and 38 hours a week? Budget for 32. That is your most likely minimum. What about commission? Calculate your average for the last two months. For the cautious, ignore your 2 best weeks when calculating the average. That weights your budget towards the lower end.

Now list expenses just as we explained above. Do not put dollar amounts next to them yet. First we prioritize the expenses. Tithe goes at the top - we honor God above all else. Next build the four walls: food, shelter, transportation, and clothing. Write these expenses into your budget.

Okay, now add more categories based on the welfare of your family. Yes, Visa wants their money back. They will sue you if you don't pay them. And that doesn't really matter when your baby's cold turns into pneumonia. Take care of your family. This is your money, not Visa's.

List debts - except the mortgage - at the bottom. The mortgage counts towards the shelter wall. Credit cards, bank loans, and financing all go on the end.

Finally start down the expenses list with the amounts. Go until you reach zero. Just under the zero, draw a line across the page. Any extra money above what the budget shows applies underneath the line in the order shown. Always pay the highest priorities first. Do not let American Express take away money for your glasses. Because then you fail the eye exam at the BMV and lose your license. Makes getting to work all the more difficult.

Sample Forms

The Lampo Group, LLC, provides excellent budget forms. Their forms already list the most common expenses (utilities, food, etc.). It's easier than writing the budget out long hand every month.

• Budget Form: http://www.daveramsey.com/media/pdf/fpu_qbudget.pdf
  
• Irregular Income Budget: http://www.daveramsey.com/media/pdf/irregular_income_planning.pdf
  

Mathematically, a budget is simple. Discipline wise, however, is a completely different ball game.

Software Servant

I am a strange person - or so my daughter tells me. I enjoy learning how things work. Seeing what makes them tick. Because some day I'll run across a problem that bit of information solves. I am a problem solver, a designer, an architect. All of those random jigsaw pieces create a real, vivid picture.

Instincts play an important role. You read an article on the web and say yeah, that works. It's the kind of thing you can not explain logically. You see the right answer, but not why that solution works.

Instincts work in the other direction too. Some solutions never feel right. Again, you can't bullet point why. Your gut just says this isn't right. The infamous software EULA always struck me that way. It never felt right. And I never understood why.

Then my wife and I attended a Financial Peace University class. The teacher - Dave Ramsey - gives a lesson entitled Dumping Debt. He describes debt as a chain on your life. The class is worth your time just to see Dave twist himself up in the prop chain. But during the lesson, Dave emphasizes Proverbs 22:7...

The rich rule over the poor, and the borrower is servant to the lender.

The software companies who peddle an EULA understand that concept. It's not head knowledge to them. They have it in their hearts. The very essence of an EULA is that you, the consumer, borrow their property. Read that legalese in the tiny text box very carefully. Read it, understand it, and tell me who owns the software.

You borrow their software. The rich rule over the poor, and the borrower is servant to the lender.

	You	=	Borrower
	Borrower	=	Servant
Then...	You	=	Servant

But, but, but... it's my software and my computer!

Not according to the contract you promised to uphold. That software belongs to them. And they will loan it to you on their own terms. The borrower is servant to the lender.

Well, if I don't like their terms then I'll just stop using their software.

And what will you do with all of the bank account history stored in QuickBooks? How do you intend to read the MS Word documents your boss sends? You borrowed their software. And that software is the only gateway to your information. The borrower is servant to the lender.

I learned about the GPL years ago when researching Red Hat Linux. I read the license itself - a chore and not terribly helpful. And I read the plain English explanation. It was one of those aha! moments when you know, in your gut, that this solution is right. The GPL felt right. Every instinct screamed here's a solution! But I could not understand why.

Now I do - The rich rule over the poor, and the borrower is servant to the lender.

Two Types of People

Can I Buy That covered why we keep a budget. Knowing it's a good idea, though, is a far cry from actually having a budget. And before we discuss real-life budget tips, we need to cover one other important topic.

Stop me if you've heard this one... there are two types of people in the world... Don't worry - no corny punch line. When it comes to a budget, there really are two types of people. For the sake of discussion, let us call them nerds and free spirits.

No, the nerds do not have pocket protectors, tape on their glasses, and a nasal laugh. Nerds like details. Nerds put things in their place - and everything has a place. They can read maps. And if you let a nerd loose on the budget, he/she will calculate it to the penny. I know - I'm a nerd.

Free spirits, on the other hand, look at the big picture. Those pesky details - like how much money is actually available - get in the way. Free spirits feel their finances, go with the flow, and live in the moment. Free spirits enjoy money.

Did you identify your spouse? Yeah, I did it too. Guess what? You're the other one! God has wisely complemented us with a spouse different than us. Neither the nerd nor the free spirit are wrong. And they are both right. Any well rounded budget needs a little of both.

So here is where we start... Nerds write the budget. The nerd calls a budget committee meeting. The nerd presents this budget to the free spirit. And then the nerd shuts up. You can not say one single, solitary word. Finally, the nerd must let the free spirit change something. Ah-ah, remember, not one word.

For their first step, the free spirit actually shows up at the budget meeting. Change anything you like. Your spouse may cringe the first few times. They'll recover - I did. And after all of your changes, the budget must balance. That means your income equals your outgo. This meeting does not end until that budget balances.

Sounds so easy, right? Next we'll get into some concrete budget writing tips.

Can I Buy That?

Twice last week, someone asked for permission for New Life to purchase some equipment. For those wondering, the correct answer is - as long as there's money in the budget. Truthfully, giving permission is not part of the treasurer's job. I can tell a ministry team if they have enough money in their budget (in these cases, they did). But permission comes from the church.

Did you realize that? New Life gave these teams the permission to buy something new. Last January, the Session approved a budget for this year. And that budget set spending parameters for every ministry team. We had a hearty discussion about it during the annual meeting.

Far too often, we view budgets as a chain. They restrain us from doing all of the cool and important stuff we want. Without such a tiny Worship team budget, we'd have a totally awesome mixer board, wireless gizmos, and hookups for all kinds of instruments. Imagine Bob's sermon in studio quality sound.

Now imagine there's no heat in December because New Life has zero cash left for the gas bill. And that fancy mixer board only produces silence without electricity. It's not so fun anymore, is it?

The budget is not a chain. The budget is a promise. Up until that final approval, every category is fair game for changes. But that approval, it seals the deal. It is a contract - a covenant - between the congregation, the church officers, and the ministry teams.

The contract does not prevent spending. It empowers spending. After that meeting, each team has the power to spend money on behalf of New Life Presbyterian. No permission necessary. The budget lets New Life spend without worry.

And the really cool part? This also works for your family. See, go back through the previous paragraphs. Everywhere it says New Life, replace it with your family name. Go on, I'll wait. Finished? Good.

Let this sink in a minute. You and your spouse covenant - promise - to spend money together. You agree on the limits. And then you spend it. Can you handle that? Couldn't you enjoy agreeing to spend money?

Without a budget, we argue about where the money went. "You spent $100 on shoes!" "Well, you spent $300 on a fishing pole. We don't even eat fish!" Yeah, I've survived those conversations too.

With a budget, we may argue over where the money will go. At some point we compromise and make a promise. And then we spend without fear, without worry, without stress.