Financial Peace: A Godly Approach to Money Management
“The rich rule over the poor, and the borrower is slave to the lender. ”
Did you know are over 2,000 Bible passages about money? That’s almost twice as many as faith and prayer combined! In fact, money is the subject of 16 of Jesus’ 38 parables, so our stewardship of money is very important.
Since Americans owe just over $1 trillion in credit card debt, $1.6 trillion in student loans, and $1.55 trillion in vehicle loans, how do you obtain financial peace?
Dave Ramsey, radio talk show host and author of The Total Money Makeover, says obtaining financial peace is 20% knowledge and 80% behavior.
But first, obtaining financial peace takes a decision to change, determination, and focus.
Prep Work for Financial Peace
Before beginning the journey to financial peace, there are some to-dos you must complete.
1. Overcome Hurdles
Denial that you have a problem: The first step in fixing a problem is admitting you have one. You must admit you caused your own financial situation and realize that you need to change your financial behavior.
Debt Myths: The American culture believes and teaches that debt is okay—maybe even healthy. The truth is that the risks of running up debt are much higher than any advantage.
Money Myths: These are the untruths culture teaches us about money. These include:
“Creating a budget is difficult and I don’t have time to do it.” The truth is that without a budget, you will most likely never gain control over your money.
“Everyone has credit card debt.” This is not true, and credit card debt is one of the worst types of debt. Most people use credit cards because they are not living within their means. And with double-digit interest rates, credit card debt can easily get out of control.
Ignorance: No one is born with financial intelligence. It must be learned. People have financial problems because they were never taught to manage money.
2. Create a Budget
“A budget is people telling their money where to go instead of wondering where it went.”
We must tell our money where to go and we must learn to live within our means in order to have financial peace.
Begin by creating a monthly budget. List all your bills, savings and debts. Now place a dollar amount next to each category until the total amount is equal to your household income.
If you’re married, both of you must agree on your budget. Pray about it, talk about it, do whatever it takes to agree on a budget both of you will follow. The budget won’t work if you don’t follow it.
If there is a financial emergency during the month, both of you must decide together how to manage it.
The budget can be changed if both of you agree to the change, and the total spent for the month is equal to your income.
If you need money for an emergent household expense, such as a broken refrigerator, you must lower the amount of money you’re spending on something else.
Income minus the total monthly budget must always equal zero.
3. Get Current On All Bills and Debts
Work on necessities first (food, shelter, utilities, etc.). Once these are caught up, work on credit card debt and loans. Once everything is current, you are ready for step one of achieving financial peace!
Step 1: Start an Emergency Fund
Financial experts agree that everyone should have an emergency fund. Ideally, this should be equal to three to six months of your income.
However, start by saving $1,000 cash (or $500 if your income is less than $20,000 per year). Use this only for true emergencies, like a job layoff or blown transmission. Don’t cheat and use this money for expenses you should plan for, like vacation or routine car maintenance. These should be in your budget.
While the starter fund won’t pay for every big emergency, it will pay for smaller emergencies until you’re able to fully fund your emergency savings. It’s important to create this emergency fund before paying off debt. Without it, most people will pull out a credit card for the first emergency, feel defeated, and give up. With it, you can stop emergencies from turning into more debt.
Step 2: Eliminate Debt
This step takes determination and focus. It’s the type of determination and focus Elisha had after the prophet Elijah told him that he would get a double portion of Elijah’s spirit if he saw Elijah taken up to heaven. Elisha didn’t take his eyes off Elijah until he saw a chariot and horses of fire, and then Elijah was taken to heaven by a whirlwind. You need that kind of determination and focus.
There are several ways to tackle debt, but Dave Ramsey recommends listing all your debts (except your mortgage) in order from the smallest payoff balance to the largest. Ignore loan interest rate or payment amount. And remember that all of these debts should be listed in your budget.
Now begin by paying the minimum payment on all your debts except for the top one on your list, which has the smallest balance. Find every dollar you can in your budget and pay the most you can on that bill until it is paid. That’s a win!
Then focus on the next bill on your list, which should now have the smallest balance. Direct the payment from the first paid-off debt plus any other money you can find in your budget to this debt until it is paid off. Again, pay the minimum payment on all other bills. Repeat this process until the only debt left is your mortgage.
Step 3: Finish Your Emergency Fund
Now that you already have a starter emergency fund and paid off all debt, it’s time to finish funding your emergency savings. Remember, “A wise man saves for the future” (Proverbs 21:20).
Experts recommend that an emergency fund should cover three to six months of your monthly expenses. This money should be “liquid,” which means it’s easy to access; and there are no penalties to withdraw it.
Ready to Achieve Financial Peace the God Way?
There is no such thing as getting rich quick to solve debt problems. The Bible confirms this in Proverbs 28:20 which tells us, “…he that maketh haste to be rich shall not be innocent.” Proverbs also tells us (13:11) that “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.”
The entire Financial Peace program might sound overwhelming, so tackle it one step at a time. God is not only faithful to help us, but is also “able to do immeasurably more than all we ask or imagine” (Ephesians 3:20).