Here's the plan: When you're 30, start saving $434 a month. Invest it in a tax-deferred account such as an IRA, and earn an average return of 8% per year. When you turn 65, voilà, you'll have a million bucks (or so).

Of course, how much that $1 million will buy when you reach 65 is another story. Assuming 3% inflation, your cool million will have only about one-third the purchasing power that it would have today. We throw that in to impress upon you that while $434 is a nice starting point, you'll want to invest even more per month as time goes on.

For now, however, the question is this: Do you have an extra $434 each month? Let us put it this way: If your family were a business, would you be showing a profit of at least $434 a month? After all your income is received and all your bills are paid, is there money left over? There had better be, because having a monthly surplus is the key to building financial security.

If you're not sure you have a monthly surplus (let alone how much it is), then you have two choices. One, you can continue with an "easy come, easy go" approach, spending money according to your moods and whims. That's a fun way to go through life — until you begin drowning in debt. Meanwhile, you're robbing yourself of the opportunity to move toward financial stability and security. By the time you come to your senses, it may be very difficult to redeem the situation.

Or, two, you can buckle down and develop a plan to guide your spending decisions. Sure, creating a spending plan can be a hassle. But if you're tempted to skip this important step, you do so at your peril. For 99.9% of us, following a spending plan (i.e., a budget) is essential to financial progress. Why? A winning financial strategy begins with a monthly surplus. And making sure you have a monthly surplus begins with a workable budget — along with (there's no sense kidding yourself) a healthy dose of self-discipline.

A spending plan can help you to:

  • Apply your current income more strategically as you reduce or eliminate irresponsible spending;
  • Improve communication with your spouse as you set financial priorities;
  • Eliminate your debt;
  • Raise your standard of living;
  • Withstand economic downturns;
  • Increase your giving to the Lord and His work;
  • Stay motivated as you measure your progress;
  • Reach financial goals that would otherwise be unattainable;
  • Invest regularly.

Recommended resources

There are many resources that can guide you through the process of developing a spending plan. They typically follow an allocation-type strategy — i.e., all your expenditures are categorized and budgets assigned to each category. Spending is monitored weekly (or monthly) to make sure you're staying within the amounts allotted.

Two books that we highly recommend are written by friends of SMI who have many years of experience teaching financial how-to's to Christians.

In Your Money Counts, Howard Dayton, founder of Compass — finances God's way, presents a biblically solid overview of principles for money management. He explains where to start and how to stay on track. In the budgeting chapter, Howard lays out an easy-to-use format for creating a plan and offers guidelines for the percentages of your income that should be allocated to the various categories.

Howard is also the author of Navigating Your Finances God's Way, a Compass small-group study that we're featuring this year in the "Looking Ahead" column (see Introduction to Compass' Small Group Financial Study).

Money and Marriage by Matt Bell covers budgeting and other basics, but goes a step further to include advice about how couples can successfully communicate about their finances. By addressing common marital conflicts over money, this book provides practical advice and valuable tools couples can use to strengthen their marriages.

Planning tips

Here are additional pointers on setting up a workable spending plan:

  • Be conservative in your income expectations. (If you earn more than expected, you'll progress even faster!)
  • If you're self-employed, set money aside for taxes when your income first comes in. It's best to put this tax money into a special savings account so you don't spend it!
  • Be sure to reflect the needs of individual family members in the spending plan. One child may need money for sports equipment, for instance; another may need money for camp.
  • Give each responsible family member a certain amount of spending money that doesn't have to be specifically accounted for.
  • Stick with your plan until you have your income and expenses well in hand and can follow the basic plan naturally. If at any time you begin to lose control of your spending, return to the basics again.

Want to be a millionaire? The plan is before you. Whether you follow it or not is up to you.