FPU Week 3: Cash Flow Planning

This weeks lesson was on cash flow planning (budgeting).  Creating and staying on a budget is the key to success in Financial Peace University and winning with your money.  Dave Ramsey says, "money makes a fantastic servant, but it is a horrible master."  If you don't tell your money what do to in your budget then your money (or lack of money) will control you.

The key to a good budget is that you tell your money where to go at the beginning of the month instead of trying to figure out where it went at the end of the month.  Lots of people think they budget but are actually tracking their expenses  In order to be a good steward of God's money you need to take control and tell it where to go at the beginning of the month.

One way to do this is to convert some areas of your life to cash.  Using a cash envelope system would be a way to limit your spending in categories to just what you have budgeted.  In order for this to work, you cannot cheat.  No using credit cards, debt cards, or cash from other envelopes when you come out short.  You are the manager of your finances, don't make it so you feel like firing yourself!

Some of the common reasons that cash flow plans or budgets don't work are:

1. We leave things out (this will happen often at first, but you will get better at it).
2. We overcomplicate the plan.  I know at first I spend a lot of time getting very detailed, but have simplified our budget and it has helped us be more successful.  
3. We don't actually budget.  This goes back to the problem of just track our spending.  We need to actually create a plan on what our money will be spent on each month. 
4. We don't actually live on the budget.  A plan doesn't help if you don't stick to it!

Make sure the necessities are a priority in your budget.  After our tithe, we make sure to our "Four Walls" are protected first.  As 1 Timothy 5:8 says, "If anyone does not provide for his own, and especially those of his household, he has denied the faith and is worse than an unbeliever".  You do this by making food, shelter, basic clothing, transportation and utilities priorities in your budget before other bills and expenses.  

Creating a budget will help you gain power and control over your money.  The easiest and most powerful plan, according to Dave Ramsey, is the zero-based budget in conjunction with the envelope system.  We have found this to be true with our family.  When we switched to a zero-based budget we were able to eliminate our debt, save and give like never before.  We felt like we got a raise!   One area that we are going to focus some intentional effort on in 2013 is to do more with the cash envelope system.  We will begin January using our envelope system instead of our debt card on for our Entertainment, Food, Gift categories and continue to use cash for our personal fun money.  After the month is over we will decide if we want to expand to more categories or even reduce the categories   

What are some strategies you use to be successful with how your handle your money?