KNS Financial

Personal Finance From a Biblical Perspective

5 Reasons Why You Need a Budget!

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If I asked you to tell me how much you spend eating out or buying gas each month, could you tell me? What about your household’s true cost of living?

This is the most basic reason you need a budget: To be able to plan and track where your money goes! Most people who I speak to about their finances have no clue how much they spend on a monthly basis. All they know is that by the end of the month, their bank accounts are nearly empty and they are waiting for their next paycheck.

Even if you don’t find yourself scraping together pennies at the end of the month, you still need to have a budget in place. In order to take control of your finances you need to come up with a plan. This means assigning a job to every dollar that you receive before you ever receive it.

How? You need to create and update a budget in order to plan and keep track of your spending. This goes both ways – if you don’t keep track of your spending, then creating a budget is pointless. You have to periodically evaluate your spending to ensure that you are staying on track.

Why You Need A Budget

Budgeting - You Need A Budget

You Need A Budget To Accomplish A Financial Goal

It will be nearly impossible to accomplish a financial goal without a budget – of course it can be done, but with a lot more hassle and waste. With a budget, you can allocate a specific amount toward your goal – whether it be savings or debt repayment – and ensure that it is reasonable.

It will also be easier to accelerate your plan by reducing spending in one or more areas and funneling that money into your “main goal”.

If you look at our 52-week savings challenge results, you’ll see an example of how budgeting can help you reach a financial goal.

You Need A Budget To Help Handle “Shocks” To Your Finances

If you find out today that your job will be cutting your salary, or implementing furloughs (mandatory, unpaid days off), how would you handle it? Would you be able to make the necessary adjustments?

If you keep track of your spending (which will be necessary to follow a budget), it will be easy for you to make these adjustments. You will be able to look at every area of spending and determine where you need to cut back – or even if it’s worth it to try to increase your income.

Learn how to set up a financial contingency plan (and no, it’s not as simple as having an emergency fund)!

You Need A Budget To Identify Areas Of Waste

Waste Money

Most people who make small daily purchases (like coffee, breakfast, or lunch), are shocked to see how much they’re really spending in these areas. It’s easy to spend $5 on a cup of coffee and a bagel in the morning, $3 on a candy bar and soda from the vending machine, and then spend $6-$10 on lunch without even thinking about it.

However, if you have established a budget, it will become increasingly difficult for these expenses to escape your attention.

The first month after you set up your budget will probably be a big eye-opener for you (it definitely was for me). Remember that coffee, candy and lunch from above? You would probably budget about $50 or $75 to that category. However, 22 days (the typical amount of work days in a month) of that type of spending will cost you nearly $400 every month!

Committing to (and adjusting when necessary) a budget will help you to evaluate this type of spending and decide if you should divert money from another category, or change your habits!

You Need A Budget To Ensure That Any Surplus Is Not Spent On Frivolous Items

Similar to looking for areas of waste, this will call for you to identify areas where you can reduce or eliminate spending. Once you allocate your income across living expenses, giving, debt repayment and savings, you may find that you have money left over (a problem that we all would love to have).

Instead of this money just being absorbed into your spending (something that usually happens without a budget), you will be able to give this surplus a new assignment. This, of course, depends on your exact situation and level of risk aversion.

You may choose to give more, accelerate your debt repayment, increase your savings, or master your investment strategy. The point is that having a budget will easily allow you to identify these opportunities.

You Need A Budget To Help Develop Discipline In Multiple Areas

Value of Time

This is accomplished in a few ways. First, you are forcing yourself to tightly control your spending, which will call for discipline – especially if this is the first time you have done this.

Secondly, by constantly monitoring your finances and having to make small adjustments, you are more aware of every financial decision you make.

By holding yourself accountable for every dollar that you spend, you will tend to evaluate your free time in the same manner. For instance, you will begin to consider the value of your time in terms of money and lost opportunity, which may cause you to re-evaluate your decisions.

These are just some of the reasons why you need to develop a budget. Over the next few days, we will look a few painless steps you can take to create a budget, and also to change your thinking about money!

Read The Rest Of The Series

Reader Questions

  1. What are some of the benefits that you see in having a budget?
  2. How often to you review your spending to ensure that you are within your budget?
  3. Have you ever discovered that your budget was unrealistic?

I look forward to your comments.

Have You Committed Financial Infidelity?

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By now, we have all heard that financial issues are the most common reason for divorce, many times with underlying financial infidelity as a cause. With a society that is built on credit and sustaining debt, it isn’t surprising that the stress of this “normalcy” would affect our relationships.

I was reading a newsletter the other day and found interesting survey results by Nefe.org:

Financial infidelity can be just as significant among couples as emotional/sexual infidelity. This survey finds that one in three people who combine finances with their partner admit to committing a financial deception. The study also finds that 76 percent of these secretive behaviors are having an effect on the relationship.
I have often thought about this issue in my own life, not realizing this is a serious issue in the life of many people! So much so that Wikipedia even has a definition for financial infidelity:
Financial infidelity is the secretive act of spending money, possessing credit and credit cards, holding secret accounts or stashes of money, borrowing money, or otherwise incurring debt unknown to one’s spouse, partner, or significant other. Adding to the monetary strain commonly associated with financial infidelity in a relationship is a subsequent loss of intimacy and trust in the relationship. Financial infidelity appears to be on the rise, with a 2005 study showing that 30% of respondents had lied about financial information and 25% had withheld information,whereas a 2008 study showed that half the respondents had committed some form of financial infidelity.

Financial Infidelity

Financial Infidelity – My Story

I wish I could say I haven’t been guilty of this, but I have been. There are a couple issues I’ve had to face in figuring out how to work with my husband and our finances. One got sorted out before we got married. The other came in time, quite a bit of time 😳 .

Financial independence has been something my mother instilled in me since a young child. She would always quote my grandmother (Imagine an older Jamaican woman of Indian descent) saying something like, “Whenever you go out with a guy, make sure you have enough money to take a taxi home.”  For my mom, and later myself, the lesson was to never allow yourself to be totally dependent on anyone for anything – EVER.

I grew up being used to my mom having stashes of money kept away for emergencies. When I became an adult, she and I even opened up a savings account for her to stock pile emergency funds. My father always knew she always had some money ferreted away, but I honestly don’t know how he felt about it. I thought it was smart because she would never drown, or cause her family to drown, if she didn’t agree with some of my dad’s financial decisions.

While Khaleef and I were dating and he came to know more about my family, he let me know that ferreting away wasn’t acceptable. I remember feeling defiant, still deciding that I will always protect myself regardless of what he thought. After a lot of discussion, consideration, and prayer, I knew that behavior was dishonest and would diminish the trusting relationship we were trying to build.

The second behavior I had to curb was my “better to ask for forgiveness than permission” attitude. Anyone who knows Khaleef knows he is a very laid back guy (that is, unless he is watching a sport event or competing in one). Instead of discussing certain purchases with him and contemplating if we could afford it, I opted to buy things and just inform him afterward. There have been countless times when I have taken him for granted by purchasing items I’ve wanted, because he would never get angry with me.

I often justified my behavior by insisting it was not a big deal because I am not a big spender. I would spend a few dollars here or there, not considering how those little purchases were setting us back from our goal of getting out of debt. This only changed in my life because I came to realize how manipulative and selfish I was being, and through a lot of prayer and spiritual growth was it able to be overcome.

Although we did not deal with this together, a huge part of the change in my heart was confessing to him and asking for his forgiveness.

Steps to Recovering from Financial Infidelity

As you can see from my story and the definition, there are different ways of committing financial infidelity. As you traverse this landscape of getting your finances together, here are 3 things you should do to start mending your relationship if you have been financially unfaithful.

1. Confess – As I stated in my story, the beginning of my behavioral change was confessing and asking for forgiveness. This may be hard for many of us because our minds are great at justifying the behavior. Ask yourself, how important is your relationship? How important is your pride?

Some people keep things from their significant other, having convinced themselves that they are protecting the other person and can handle things alone. This attitude, for instance, does not build trust but tears it down. It diminishes the other person’s role and robs them of the chance of growing as a person, and as a couple, through the difficulties.

Even though it may not be easy, convenient, or comfortable – by confessing, you are able to clear the air and make decisions based on truth, not deception.

2. Commit – After confessing, all is not well because you got it off your chest. The next step is committing to your partner to strive toward a new direction. My pastor always says “it’s not the perfection of your life, it’s the direction of your life” and I think it’s very poignant in this scenario.

You are not promising to be perfect, because we do make mistakes. What you are doing, is guaranteeing that your mind and convictions have changed about your behavior. You will no longer just settled for the way things were before.

3. Cooperate – Many times, financial infidelity occurs  because someone is leaving another person out of some financial details, or neither person knows how to have a discourse about the issues. Even though this may also be difficult, it is important that both parties be involved in what’s happening in your financial life. Even if one person handles the finances, it would be a worthy goal to ensure the other person is involved and equally able to identify and articulate the nuances of your finances.

As in other areas of relationships, there is always hope. Trust can be rebuilt, and in time (sometimes A LOT of time) broken situations can be healed. Identifying financial infidelity doesn’t have to be the end, it can be the building of a stronger relationship than ever before!

Have you committed financial infidelity? Are you the recipient of someone else’s financial dishonesty? How have you overcome these behaviors?

 

20 Money Saving Tips for Low Income Earners

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[The following is a guest post giving 20 great money saving tips for low-income earners!]

Many people across the country are having a hard time making ends meet at the end of each month. With the price of many goods and services increasing at a faster rate than people’s pay checks, it is easy to see why this has become an overwhelming problem for so many families.

This can be especially true for low income earners, who are already feeling stretched to the limit and have very little resources left after paying just their basic bills.

20 Money Saving Tips for Low Income Earners

The good news is that there are some basic ways that everyone can save money on their day-to-day purchases. Below is a look at the top twenty money saving tips that are perfect for anyone, including low-income earners.

Money Saving Tips

  1. Change to a bank account that does not charge account-keeping fees or requires a minimum balance in their accounts. Some banks also refrain from charging low-income people additional fees like overdraft charges.
  2. Look for ways to save on transport expenses like walking instead of driving, when possible, or using public transportation instead of driving yourself.
  3. See if a couple of co-workers are willing to carpool, so everyone can save on transport costs.
  4. Eliminate your Pay TV services and use Free-to-Air TV instead.
  5. Instead of stopping at the coffee shop for coffee on your way to work, make your coffee at home and take it with you or wait until you get to work.
  6. Instead of heading out to the movie theater where tickets are fairly expenses rent a movie or watch a free movie at home.
  7. Never run the washing machine or dishwater unless you have a full load to help reduce your water bill.
  8. If you have a cell phone plan already, you may be able to eliminate your home phone, or consider running your phone through your internet service at a reduced rate.
  9. Shop for sales items at the grocery store and purchase items in bulk, to get the cheaper per unit price.
  10. Rent books and movies at your local library instead of purchasing them at the store. They usually have a wide selection to choose from.
  11. Limit the number of times you eat out each month and choose to eat at home instead. When you do eat out, be sure to ask for water instead of more expensive drinks, and skip dessert at the end of your meal.
  12. Consider making homemade gifts or offer to provide a service, such as dog walking, instead of going out and purchasing a gift.
  13. Lower your energy bills, by turning down your thermostat when you are not home, turning off your air conditioner when you go to work, turning off your lights and TV when you are not in the room, and unplugging your appliances at the outlet when not in use.
  14. See if you can group all of your insurances into one package to get a reduced rate on all of them.
  15. Sell and buy items at a local consignment shop or thrift store when buying clothes, household furnishings and miscellaneous goods.
  16. Contact your utility companies and ask about bill smoothing to keep your bills consistent and budget better.
  17. Check your bank statement each month and make sure that no additional charges are added on. If you do have additional charge find out why and if they can be eliminated.
  18. Instead of going to the gym, start a walking club with some of your friends, or purchase inexpensive fitness videos that you can do at home.
  19. Purchase generic-named medications, cleaners and groceries instead of the more expensive brand-named products.
  20. Trade services with someone else. For example, maybe you can babysit a friend’s children in exchange for a manicure or haircut.

Combined these twenty money savings tips can help you spend less on the everyday items you purchase, so you have more money available. While not all of the tips may be applicable to you, just doing five or ten of them on a regular basis can help you save a lot of money over the course of just a few weeks.  You should always be on the lookout for ways to save money, no matter how much you earn.

Finding Deals To Ease The Pain Of Spending Money

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If you are looking for the best deals, take the middle man out of the equation. Sites like Expedia and Travelocity can include transactions fees (though some have been reducing them or even eliminating them). Take a look at the prices directly available at the websites of the airlines and hotels you are considering. You may find that it is cheaper.

Target

There are millions of deals out on the market; you just have to find them. Peruse the Internet and newspapers for deals that will save you money on all kinds of things that you need…and you’ll still have time to play a few games of Gala Bingo or candy crush. 😉

If you are thinking about opening an account at a bank, look for the locations that offer free checking accounts. These accounts are beneficial, and can provide you with an additional 50-75 dollars to start up with when you open the account. These deals can give you a kick start to maximizing the balance in your account.

Electronics are extremely expensive and can set you back a lot of money if you do not get a good deal. Try to do all of your electronics shopping online, as you will find great deals and auctions, which will allow you to choose the price that you want to pay.

There are many ways that you can find great deals on clothes, to put more money in your pocket and limit overspending. Avoid shopping at the upscale stores in the mall and shop at a clearance store, which carries the same brand named items, at much lower prices to fit your budget.

If one wants to make the most of their own personal finances they need to be thrifty with their money. By looking for the best deals, or a way for one to save or make money, a person can always be making the most of their finances. Being conscious of one’s spending will keep them in control of their finances.

You can often find great deals if you go shopping on the infamous Black Friday. If you are truly dedicated, you can wake up at the crack of dawn to get into stores as they open up and be the first person to get the best deals, which will greatly improve your personal finances.

As seen in this article, the tips associated in being able to handle your personal finances are both practical and logical. This task is far from being impossible and can be done with proper drive and discipline. If these tips are followed, you will surely see how easy balancing your finances can be, for people in most situations.

Sponsored Video – When Credit Cards Can Help You

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The following post has been sponsored by Capital One, but all thoughts & experiences are my own. In fact, the great thing is that I’ve been a very happy customer of Capital One for years – with my business account (the account/card mentioned in the video below)!

As most of you already know, I’m no stranger to expensive car repairs. Keep in mind that anything over about $150 is expensive in my mind (one of the consequences of being broke and in debt). Well, we had to spend another $600 recently – this time on our SUV. Since we are trying to use every extra penny to pay off our debt and also build up an emergency savings account, we were putting off the repairs until they were absolutely necessary.

We had to get the air temperature door actuator replaced on our Ford Explorer – apparently, this is a common problem. We were originally told that it would cost about $750; mainly due to the labor involved – the center console and part of the dashboard had to be removed. Going through the winter without any heat is difficult in New Jersey, so once the temperature dropped down to the low 20s consistently (hitting the teens on a couple of days), we knew we couldn’t put it off any longer.

We have a credit card that is dedicated for car repairs. If our repair bill is over $299, then we have 6 months to pay off the balance before any interest is charged. So, in this case, our credit card has saved us from prematurely depleting our emergency fund or taking from our monthly budget, while allowing us to put heat in our vehicle!

We definitely plan to pay off the credit card before the 6 months are up – something that we have done each time we’ve used it – so we aren’t expecting to pay any interest for this loan. If we aren’t able to save enough in the 6 months by reducing our expenses (not likely since we don’t have many variable expenses), then we will still be in a better position to take money from our savings.

If we weren’t in debt, we would probably use credit cards for everything. We already use it for any online purchase (for security) or any other payment where we aren’t completely comfortable (like some gas stations, restaurants, etc.). Between the added security, the rewards, and the possible cash back, I am a big fan of credit cards.

Now obviously, this love only goes as far as the benefit gained combined with the responsibility of the user. To be fair, this can be said about most good things. Too much or a misuse of a good thing can easily make it detrimental. Someone once said that a credit card is like fire…useful, but handle with care.

photo credit: freedigitalphotos.net

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