The foundational Scripture on budgeting is found in Proverbs 27:23-24: “Know well the condition of your flocks, and pay attention to your herds; for riches are not forever, nor does a crown endure to all generations.” In today’s vernacular, this verse confirms that we should know where our money is going versus wondering where it went.

Any system is an “envelope” system

Once you have established your living expenses [i.e., you know your actual cost of living], it’s time to develop a system to ensure you stay within your spending targets.

A traditional “envelope” system is when you store cash in separate envelopes to meet different categories of expenses. It doesn’t matter if you use sophisticated software, a simple spreadsheet, or actual envelopes; the principle is the same. You decide what goes into each budget category — such as utilities, gasoline, vacation savings, clothing, gifts, allowances, or insurance — and you put that dollar amount into each “envelope.” After establishing your categories, you spend against what you have allocated in each area.

Tracking is not the same as budgeting

Be careful not to simply track what you have spent. That is not budgeting but rather record keeping.

What do I mean by that? Occasionally, when I ask people if they are on a budget they reply, “Yes, we track our expenses through an app.” It’s fine that they track their spending in an app, but that’s not a budget system. It may help them set their budget amounts more realistically, but it doesn’t help them stay within their planned budget.

For a budget system to function, you must be able to answer the question, “How much do I have left to spend in each category?” At any time during the month or year, you should be able to review your finances and know how you are doing against what you planned to spend. It’s important to say no to items that are not in the budget or that would increase your expenses beyond your income level — for example, a bigger house, a new car, or the latest technology.

Common budget-related questions

  • Can I start using a budgeting system anytime during the year? Although it’s easiest to start a budget at the beginning of a calendar year, you can start anytime. Regardless of when you start, you will go through the same process to determine the calendar-year spending amounts and then allocate them monthly.
     
  • What if I don’t have a set salary because I work on commission or do freelance work? If you have a variable income, you can begin by putting more money into your savings. You can then deposit your variable checks into your savings account and, in essence, “salary yourself” out of the savings account each month. In other words, you put yourself on a set salary each month, thus removing the monthly variability. You still have to earn a certain total income annually to cover your expenses (living, giving, taxes, and debt payments), but paying yourself a fixed salary should make budgeting easier and less stressful.
     
  • How do I handle items deducted from my paycheck, such as insurance premiums? Make sure you include these items in your budget as living expenses. A common mistake people make is to forget to include these categories because they are withheld from the gross paycheck. [Your budget should be based on your gross income, so] these deducted amounts must be accounted for.
     
  • What if I’m running out of money before the end of the month? There are only two possibilities: Either you don’t have realistic amounts allocated for expenses and need to increase them, or you have set realistic amounts and just aren’t following them. In either case, you need to track the details to see exactly where your money is going so that you can either adjust the funds allocated or cut back on your spending.
     
  • What are major budget breakers to watch for? Budget breakers are generally found among discretionary, non-monthly budget items. These items are primarily gifts, clothing, vacations, and house furnishings.

    It’s interesting to note that the non-discretionary items (fixed expenses such as utilities, mortgage, and gas for vehicles) seldom are the culprits. It’s also interesting that most expenses in the budget are fixed. So the key to avoiding budget breakers is to control the few unfixed expenses that tend to blow the budget. However, if your fixed expenses are too high — perhaps you live in a house that is too much for your income or have car payments that are too high — they will contribute to your budget problems.
     
  • Is there an amount that is too much for Christians to spend on living expenses? As with many areas of the Christian life, it would be much easier if there were definitive answers, but there is no clear answer to this question. God allows us a great deal of freedom in the lifestyle area. He only gives us these definitive boundaries: Spend less than you make and be content (1 Timothy 6:8), give to the Lord (Luke 6:38), pay the lender (Proverbs 22:7), and pay your taxes (Romans 13:7).

Once we do these things, the amount left over is ours to do with as the Lord leads. Maybe we should give more. Maybe we should take more family vacations. These decisions are between God and you. As long as you seek His direction and wisdom and are tuned in to His desires, you have freedom in this area.

It is important to make the lifestyle decisions that work best for you, your family, and your current station in life, and know that they may need to be adjusted. You may strive for a simpler lifestyle, but someone in the world will probably always have a simpler one. You may strive to elevate your lifestyle, but someone in the world likely has a higher standard of living. The best answer and choice is simply to walk with God daily and seek contentment.

Accountability in this area will also help make sure you’re on track. What do I mean by accountability? Having someone in your life who will be honest regarding your budget may provide extra insight. On our own, we can justify any amount as “needed” in an expense category. It can be helpful to have someone periodically check our thinking for realism and balance.