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Recommended Resources
Additional Reading/Research
The book, “Your Money or Your Life” is considered to be a classic read on the subject. It talks about many of the principles I have mentioned in greater detail. The authors have used these principles (and several others) to become what they call “financially independent”. I highly recommend this book, but would caveat that some of their points are a little over zealously made and some of their assumptions are questionable. Still, many of the economic points are sound and good guidelines. Many of the activities they suggest are very effective.
Suzie Orman – For those with AFN, her program is broadcast on Sunday at several times during the day including 11 am Sunday on Channel 5. Susie is a well respected personal finance guru whose expertise comes from personal experience rather than academic training. I have never seen Susie make statements contrary to the core principles I have mentioned in dealing with finance and consider her opinion to be a good check on my own thinking.
The church's Provident Living website has a “family finances” section that covers the basics and provides church guidance concerning some of these topics.
Several other people have pursued similar interest in living frugally. Several of these people have blogs. One such blog is thesimpledollar.com. Another is http://elasticdollar.blogspot.com/
Tools
Recording and Tracking Expenses
Expense calendar – create a table with several columns. Each column is an expense category. Every row is either an individual expense or a time period, depending on what works best for you. In the appropriate cell in the table, record the cost amounts for the expense or the time period in question. For instance, if I were to buy $80 groceries on a particular date, I might make a row for the expenditure and put the “$80” in the column for groceries.
Expense notebook – carry in your pocket a notebook and pen. When you spend money, record the date, amount, location, category of the expense and any other information you might feel you need. At the end of the month, lay out each of these expenses into categories and see where your money is going. This is similar to the General Journal used in standard accounting practices.
Credit Cards – buy everything on your credit card (buy only what you have real money for). When you spend the money, deduct it from your funds as if it was paid on that day. Place the money aside to pay the bill. Use your credit card statement as record of expenses. Pay it off every month.
Budgets
The Envelope Method – Every pay day, withdraw in cash your budgetary items (things you wouldn't pay other ways) and place your budget amounts into envelopes labeled with the budget categories. When the money is gone, so is the budget item.
“Virtual” Accounts – create and track individual “account” balances with each account corresponding to a budget category. Every payday, deposit your budgetary amounts into each of these virtual accounts. Every month or so, verify that the total of your virtual account balances is equivalent to the total of your real bank account balances. If not, find and correct the discrepancy.
Software
To implement many of the activities that I have mentioned, you don't need any fancy software, just pen and paper. That said, software CAN be a benefit to you and make things easier if you do it right.
Spreadsheet programs – MS Excel, OpenOffice Calc, Gnumeric – These present information in a table format and allow you to specify functions in certain cells based on the value of other cells. For instance, if you want to place the sum of cells A1 and A2 in cell A3, you would put the formula “=A1+A2” or “=SUM(A1:A2)” in cell A3 and the program would do the work. Expense Calendars and Virtual account registers can be implemented using spreadsheet programs. MS Excel is perhaps the most functional for this purpose as information can be summarized from different sheets onto one.
Budget Programs – GNUcash, MS Money, Quicken – Can be useful in tracking expenses and implementing budgets. I use GNUcash as my primary tracking mechanism and have adapted it to tracking virtual accounts.
“My” Guidance
Pay Tithing – This is the NUMBER ONE thing I would emphasize. Pay an honest tithe, whatever this means to you (Malachi 3:10). Pay a generous fast offering.
Counsel with your spouse and older children – Make managing your finances a family affair. Your spouse should be an EQUAL partner. Proposals can be worked out individually but decisions should be made together or not at all. Without spousal support YOU WILL FAIL. Older children should be involved so that they can learn the skills themselves. They might also be able to give valuable insight.
Avoid Debt – There are acceptable forms of debt. Mortgages, Student Loans, and other loans to cover vital needs in times of crisis are all acceptable. However, care should be taken to avoid excesses and to pay down or eliminate even these types of debt as soon as possible. Pay off the most costly debts first. Use a debt reduction calendar if necessary.
Manage your money – Track your expenses, take control of your spending, budget you funds as appropriate to meet your needs without over extending yourself. Set up savings goals and track them using methods that work for you. Change them over time as things change and you gain experience in what works for you and what doesn't.
Build a Reserve – Save up enough money to cover your expenses for AT LEAST 6 months. Due to recent challenges in the economy, many experts are suggesting that these reserves be increased to at least 8 months, if not 12 months.
Pay yourself for anticipated large expenses – We own our own car. We don't have a car loan on it. However, we still have a car payment. Why? Eventually the car will wear out and need to be replaced. By paying ourselves a car payment now, we will have the money to replace the car with an equivalent or better vehicle without going into debt when that time comes.
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