The basic tool for managing finances is a budget. Budgeting means different things to different people, but almost everyone can agree that the first step in developing financial plans is creating a workable budget. This article deals with the first phase of budgeting (planning) and the next article will look at the second phase (control). How detailed a budget you need is a personal decision. But the more detailed your tool, the better it will serve for making financial decisions.

Why Budget?

What are the advantages of budgeting? First, it helps formalize plans. Second, it provides benchmarks by which to measure progress. Third, it helps show where problems exist or could arise. Prov. 16:3 says, “Commit to the Lord whatever you do, and your plans will succeed.” If you have made a solid financial plan (budget) you can, with a clear conscience, commit it to God and ask Him to bless it.

How to Make a Budget

There are several factors to consider when planning a budget. First is the time frame. A good policy is to have the budget cover either the usual pay cycle (often two weeks or one month). Whatever time period you choose, it should be consistent.

The second consideration is dividing expenses into the categories of “fixed” or “variable.” This can be somewhat challenging. Should tithe be considered fixed (since it’s always 10%) or variable if your income fluctuates? My preference is fixed, since it will always be 10% of our income—but you have to figure out what works in your situation. Things like “car payment” and “mortgage” will be fixed until the term of the loan is repaid or for some reason you refinance.

Every budget should include “savings” for at least two reasons. First, you need a plan for purchasing large-ticket items, and second you need a fall back for emergencies. “Mad money” is another useful category; it allows for a small amount of money to be spent without justification. The reason for including this in the fixed portion of the budget is to control how much is spent.


The variable expenses are the most important part of the plan because most of them can be influenced. You can decide how much money you will spend for food or entertainment or leisure. Just be reasonable. If you normally spend $100 dollars a week for groceries, it probably won’t work to only budget $25.

Items that don’t fit neatly into any category can be lumped under “miscellaneous.” However, if this category gets very large you will need to determine some of the significant factors there and separate them out.

The reason for separating fixed expenses from variable expenses is that when it comes to planning your budget you have little control over the fixed expenses, but you have a significant amount of control over the variable expenses. They need closer monitoring because they are the ones that usually cause people to go over budget.

Three Rules for Financial Success

Finally, it goes without saying that you should never create a budget that has more expenses than income. According to a banker friend of ours, there are only three rules to financial success: One, spend less than you earn. Two, spend less than you earn. And three, (you guessed it) spend less than you earn.