The Family Budget (Part 2) - Creating and Using a Budget

Written by Gary Foreman
From his column Life Stewardship

life-stewardship-09-22_article.jpgIn our last article, we looked at different components of a budget. Today, let’s consider how to create and use one effectively.

Track Expenses
We begin by tracking expenses to see where the money is going. Fidelity Investments, the record-keeper of the Nazarene 403(b) Retirement Savings Plan, has a helpful sheet for tracking expenses, but others abound. We want to learn where our money is going so we can make decisions about how to adjust spending to accommodate our goals.

Percentages for allocating a budget vary. Fidelity suggests a 50/15/5 guideline. This means allocating no more than 50% of net income for essential expenses, 15% of pretax income (including employer contributions) for retirement, and 5% of take home pay in short-term savings for unplanned expenses.

Decrease Spending
Once we have the information on how we are using our money, we look for ways to decrease spending, especially in the area of discretionary items. It might mean using coupons, looking for sales, or postponing purchases. It could involve reducing the number of times we eat out, or changing a week-long vacation in Cancun to a few day-trips to places offering fun for the family.

One reason why a family budget is important is that it can alert us to potential problems.

As we work through our budget, we want to eliminate debt where possible. Scripture warns us that a debtor becomes a slave to the lender. If we are debt-free we can use that money for savings, a dream trip, or any other category. Getting out of debt may take time, but the reward in lowered stress and greater freedom to consider options like job or other life changes is worth the effort.

If we have credit card debt, we first want to work on reducing the balance of those cards with the highest rate of interest (APR). It might be we have more than one card. Work on eliminating the balance of each card to free up money to pay off the next highest APR card, etc. We keep at it until all are paid off, then try to avoid using them again unless absolutely necessary.

If an employer offers a match on contributions to a retirement plan, we should try to contribute at least to the limit of what is being matched. To not do so means we miss free money (and the earnings) for retirement. As we get our spending in line, and as salaries improve, we can increase this amount.

One thing we should mention is the importance of creating an emergency fund. If the garage door is not working or the car needs tires, we don’t want to incur new debt to cover the expense. Having an emergency fund can help. We create it by adding to an account on a regular basis with the funds we free from savings in other areas. The amount of such a fund can vary, but it’s a good idea for every family to have one.

One reason why a family budget is important is that it can alert us to potential problems. Comparing actual spending to a budget plan we create allows us to easily identify areas that could cause bigger financial pain later. We might think of it as an early warning system.

Using a budget can also alert us to spiritual danger. Suppose we find ourselves spending more than we should on clothing, housing, or cars. Are these signs we’ve become overly concerned about appearances or what others think of us?

Spending more than we’ve budgeted in any area is a warning sign. It might be nobody’s fault. Inflation, for instance is affecting everyone right now. In that case the warning is that we’ll spend more than we make if we don’t reduce overspending or make up the difference in another category.

But, spending more than we’ve budgeted might also be a warning sign that our priorities have changed, perhaps in ways we hadn’t noticed and should correct. Business managers measure a budget versus actual performance to look for potential problems or areas that can be improved.

Review Monthly
Once we have created our budget, it’s important to review it monthly. A budget is not a one and done deal. We need to track spending to see how we are doing and to make adjustments as needed.

The family budget is not a set of spending handcuffs, it’s a way to manage the resources God has entrusted to us in ways we hope will please Him. It can be a powerful factor in helping us to become better life stewards.

Gary Foreman is an assistant pastor, author, former financial planner, and founder of and

Editor’s note: Here are some ideas for cutting costs in budgets from The Dollar Stretcher, and a savings and spending check-up from Fidelity Investments.

Budgeting & Debt Management Tools – Fidelity
How to Create a Family Budget – Nerdwallet
10 Simple and Free Budgeting Tools – USNews
Best Budgeting Software – Investopedia
Best Budgeting Apps - CNBC
8 of the Best Budgeting Software Apps for Mac - Gadgetreview