What would you think if I told you that you have two sets of priorities? Or that you have two sets of values? Perhaps you will deny it—“of course not! I know what’s important to me, and my values are clearly sorted in my mind.” Maybe so, if you’re like many people, your bank statement will demonstrate quite a disparity between the list of priorities in your head and the true priorities according to which you spend your money.
Your Treasure and Your Heart
Jesus taught this principle quite clearly in Matthew 6:21 when he said, “where your treasure is, there your heart will be also.” For example, if I look at my bank statements and notice that I spend 5% of my household income on golf in an average month, this demonstrates that golf is important to me. Conversely, if I say, “international missions are very important to me,” yet none of my money is given to support international missions, I’ve demonstrated that my imagined priorities are quite different than my actual priorities. Your treasure will go to that which your heart values.
An Eye-Opening Experience
Now, if you’re anything like me, the first time you sit down to look at where your treasure went, you will be very disappointed with yourself. I remember the day, years ago, when I sat down to start getting my finances in order. I first developed an imaginary budget, allocating something like 2% of my salary to entertainment. This made my budget work out very well, apportioning a solid sum of money towards saving and paying off debt, which I thought were high priorities to me (my imagined priorities). Then, I looked at the previous month’s bank statement. To my chagrin, I found that my actions demonstrated a high priority of enjoying activities with friends and buying drinks at the bar. Instead of working toward a place of financial strength, I placed high value on having fun with money now.
If you find yourself in a place like I did—with “real” priorities rather far from the ideal you imagine, take heart, for change is quite within your reach. Start by creating your budget for next month, using your bank statement as a template. Then, adjust down slightly the categories that you think are too high (entertainment, in my case) and increase other more desirable categories by the same amount. The trick is to not go “scorched earth” in your first month. If you try to reduce entertainment from 5% of your budget to 1% on the first try, you’ll be tempted to “forget the whole thing” a few weeks from now. Instead, focus on incremental progress, one month at a time.
Some Practical Steps
Herein lies the beauty of a zero-based budget. Before the month begins, spend all the income you expect to receive on all the categories of expenses that you will have. Allocate every dollar to the appropriate category, then get several blank envelopes. Write the category name on each envelope, and withdraw the appropriate amount from the bank after each paycheck is deposited. Now, if you will restrain yourself to only spend from your envelopes, you have no choice but to follow your budgetted plan.
When something unexpected comes, as it always seems to, you may have to go back to your budget mid-month and reallocate. This is perfectly acceptable, so long as you reduce one category by the amount that’s needed in another category. Just make sure to do this with all your numbers in front of you, so as not to start the month with 2% allocated to clothing and find at the end of the month that you gradually ratcheted up to 7% by not paying attention.
All in all, this practice of advance cashflow planning is a great tool for spending your money on things that are truly important. The sense of accomplishment and satisfaction that comes with switching expenses which bring you little value for those that you truly care about is magnificent, and will serve you well on your path toward the thriving life.