FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT

INTRODUCTION

Financial management is the process of wisely budgeting, spending, saving, and investing the money you earn. Managing money is an important part of being in a relationship. Finances can affect the health of your relationship.

For example: When you and your partner want to spend money in different ways, it can lead to disagreements.

Healthy financial management in a relationship involves learning how to spend and manage your money wisely, using communication and conflict management skills, and building and maintaining a strong foundation of trust with your partner. Couples who communicate openly about money, have little or no debt (or who are actively working toward paying off their debt), and don’t spend more than they earn tend to be happier and more stable in their relationships. Couples who struggle with financial issues often have increased stress and tension in their relationships.

What is financial management?

All income, expenses, and financial accounts related to the maintenance and upkeep of an entire family household. This includes all sources of income including wages, investments, savings accounts, and trusts. Expenses include items such as mortgage or lease payments, car payments, utility bills, grocery bills, retirement plan contributions, insurance, education, taxes, credit card payments, clothing and other sundry purchases.

TIPS FOR HEALTHY FINANCIAL MANAGEMENT BY MEN

Organize Your Finances

Organizing your finances is the first step to creating wealth. Credit cards, bank accounts, personal loans, brokerage accounts, mortgages, car loans and retirement accounts should to be tracked.

Give to God first

As Christians, our first financial priority, just as in every other area of life, should be God and His work. The issue of managing all of our gifts, including our finances, is of great importance to God. Figuring out how much to give as a minimum is fairly easy, as the Bible instructs us to give a tithe, or one tenth or our income back to God. This is a great starting point for Christian giving and should be calculated on the gross salary (or on net income before taxes for those in businesses for themselves).

Now, you may be thinking: How can we possibly do that when we are already struggling to make ends meet? I thought you were going to tell us how to get out of financial trouble, not make it worse! The truth is there will never be “enough” to give. If we wait until all of our needs and desires are met before we start to give, it will never happen. In fact, statistics show that in Canada, the more a person makes, the less they are likely to give, percentage-wise. The more we have, the more we think we need.

Interestingly, people today talk very little about their actual salary or how much they are worth. Like all secrets, this gives far more power to money than it actually deserves. Similarly, and more properly, people who tithe do not go around boasting about it. But I would like to challenge you to ask people you trust whether or not they tithe. If they do tithe, ask them about their experience. In all my discussions with people about money I have never heard anyone say that their financial problems started or got worse once they started to tithe. On the contrary, people who tithe seem to be better off than those who don’t. It is one of the many mysteries of how God works.

FINANCIAL MANAGEMENT

Identify money habits and attitudes

 You and your partner will be more likely to handle financial discussions and conflicts in healthy ways if you both have a good understanding of each other’s habits and attitudes towards money.

Prioritize spending and live within your means

Living within your means requires that you spend less than you earn. To do this, you need to sit down with your partner to discuss your household’s needs (what is necessary) versus wants (what is desired).

Spend Less Than You Earn

Personal financial software provides powerful tools to help you track and budget your spending and take steps to achieve your long-term goals. If you learn to track your finances and know where you spend the most, you'll be able to control your money. "The best way to ensure that you either overcome debt or avoid it in the first place is to never spend more than you make," Morris says.

Put Your Money to Work

Take advantage of the time value of money. Morris gives the following example: "A 21-year-old who invests $17.50 a day until retiring at the age of 65 at a 5 percent average annual investment return can be a millionaire. At age 30, the required daily savings amount almost doubles. At age 40 the amount quadruples." So save early and often, even if the amount is small.

Limit Debt to Income-Producing Assets

With credit cards and car loans, every penny you spend to repay that debt is money flushed down the drain. All but a few models of cars depreciate to zero and require more in repairs and finance charges than can be reasonably expected to be returned to the owner upon being sold. Morris explains, "With their ultra-high interest rates, credit cards utilized to buy household goods and clothes that quickly wear out are bad bargains. If you have to be in debt, stick to financing items that retain their value over time, like real estate and education."

Continuously Educate Yourself

Budgeting software often links to hoards of research that puts the collective knowledge of Wall Street at your fingertips. "Read every financial periodical, book and blog you can find from well-regarded financial authors," Morris recommends. "Understand why you are investing so that you will stick to your plan. Periodically gather research so you do not miss excellent investment opportunities."

Understand Risk

The key to understanding return on investments is that the more you risk, the better the return should be. This is called a risk-return trade-off. Investments like stock and bonds that have a higher rate of return often have a higher risk of losing the principal that you invested. Investments like certificates of deposit and money market accounts with a lower rate of return have a lower risk of losing principal. Since no one knows the future, you cannot be 100 percent sure any investment will do well. Morris explains, "If you diversify your investments, one can go sour without severe impact to your overall portfolio."

Diversification Is Not Just for Investments

Find creative ways to diversify your income. Everyone has a talent or special skill. "Turn your talents into a money-making opportunity. Investigate ways to make money from home and launch a home-based business," The extra income can supplement your full-time income or even result in an exciting career change. Good financial management software can show you how even a slight improvement in income can positively change your financial profile.

Maximize Your Employment Benefits

Employment benefits like a 401(k) plan, flexible spending accounts and medical and dental insurance yield some of the highest rates of return that you have access to. "Make sure you are taking advantage of all the ways benefits can save you money by reducing taxes or out-of-pocket expenses," says Morris.

Pay Attention to Taxes

Financial planning software helps you manage your tax information. For example, Quicken quickly analyzes taxable investments and provides powerful organizing tools that make year-end tax filings go much smoother. Morris emphasizes, "We all know that any money you make is going to be taxed. That is why it is important to consider the related tax implications for every investment."

Plan for the Unexpected

Despite of your best efforts, you'll face unforeseen emergencies. Morris urges, "Save enough money and stock up on insurance to be able to weather extended unemployment, accidents, catastrophic medical care, large car or house repairs and natural disasters." Increasing the amount of money you save when times are good can help you manage the cost impact of hedging against bumps in the road, making sure unexpected financial exposure does not derail your long-term goals and your family's financial security.

BIBLICAL MONEY MANAGEMENT TIPS FOR THE CHRISTIAN FAMILY

Having a good sense of money management skills is an effective way to reduce misery, save marriages, improve health and reduce stress. Raising a Christian family means remembering to incorporate good morals and ethics into your structured home – engulfed in those elements should be the beliefs centered within the Christian faith. Christians live at a high standard of honesty because God is always by their side. There will be times money will cause disagreements and/or episodes of frustration however, it’s important to know that even during these times God is surrounding us. Therefore, when Christians evaluate their financial situation God should also be considered in the equation.

God is the provider: Try to engulf Matthew 6:31 in your regiment of money management. Don’t become materialistic but keep in mind Christians are not supposed to constantly worry about money. Living by faith is no longer the way to manage your finances. God provides you with property to manage and it is your duty to be responsible for those blessings. People who live without being responsible for their funds and leaving it completely in God’s hands will end up being in debt. Be thankful for the opportunities within your career and the financial blessings that God provides but be willing to own your obligations.

Giving is important: Luke 6:38 says, “Give and it shall be given unto you; good measure, pressed down, and shaken together, and running over, shall men give unto your bosom. For with the same measure that ye mete withal it shall be measured to you again.” It’s important to factor in charity when organizing your funds. This is another way God is put first on a daily basis. As a Christian, it’s important to remember that God provides you with the strength to work each day therefore, it’s only right to give back to the church and to charities that have the intent to better the world.

Saving: It’s important to make your money work for you. Proverbs 21:20 says, “There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up.” Christians should be able to see the bigger picture and identify what saving a little money each month can equate to. As a family grows over time, parents will need to get their children ready for college or perhaps embark on new career adventures. Having a savings built up will provide the family with a foundation to stand tall on.

Stay Out of Debt: A lot of people get caught up with the concept of borrowing money. Borrowing funds for a house or a car is one thing however, when you’re borrowing to pay another debt that’s another. In many cases easy credit causes problems later because the amount you could save on the interest paid is substantial. Proverbs 22:7 says, “The rich ruleth over the poor, and the borrower is servant to the lender.”

Budget: In order to truly understand your financial situation you must keep and maintain a budget. Keep records so you can know where and what your funds are being spent on. Proverbs 24:3,4) says, “Through wisdom is an house builded; and by understanding it is established; and by knowledge shall the chambers be filled with all precious and pleasant riches.” Families will feel more secure knowing their income and debts – and will be less likely to get into financial troubles.

Money management tips are essential in Christian homes – especially the biblical aspect that’s associated with budgeting.  It’s important to remember God within everything we do – especially finances.

Finally, two more important points to consider:

Always discuss finances as a couple. One spouse likely has more financial skills than the other and will naturally take the lead, but this is no excuse for the other spouse not to be involved in the family financial situation. You both need to understand the issues that you are facing, and make decisions as a team. Financial problems are listed as a major cause of strife in the marriage relationship, and it often starts when one partner is being kept in the dark.

If you have financial problems, seek help before it is too late. Financial problems can be solved but it often means changes, some of which may not be that easy. A qualified financial planner can help you identify the problem areas and think through solutions that will work for your family.

Above all, listen to what God may be saying to you through your financial circumstances. Finances can be a dividing factor in marriage, but they can also bring you together in a new and deeper way, as you trust God together and follow His plan.

If you are willing follow this simple plan and begin to intelligently and prayerfully give away 10% of your income, I believe your financial situation will improve. More importantly, you will be storing up treasures in heaven, which is what really counts. After a few months, please write us and let us know what is happening to your financial position. I have never met an ex-tither and I would love to hear your story as you seek to control your finances and serve God in this way.

FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT