There are really only four things you can do with money and tracking them is a great way to assess your financial health. We’ll talk about that with Sharon Epps on this Faith and Finance.
Sharon Epps is President of Kingdom Advisors.
- THE 4 THINGS YOU CAN DO WITH MONEY
- There are only four things you can do with money: Live, Give, Owe, and Grow.
- We like to illustrate this as a pie. What happened when your brother cut a big ole piece of the pie at grandma’s house? You got less, right? The same is true with our finances when you cut a bigger piece of the Live slice, the remaining Give, Owe, Grow pieces must be smaller. If we spend more on lifestyle (or the “Live” piece of the pie), it reduces the amount available for giving, paying debt or saving.
- The live, give, owe, grow pie principle works whether you have $10,000, $100,000 or $1M in income. Your pie may be larger or smaller than someone else's but the pieces should never exceed 100% if you are going to achieve financial health.
- PRIORITIES
- Let’s remind ourselves of the biblical principles here.
- Psalm 24:1 The earth is the Lord’s and everything in it. Or as we like to say “God owns it all”.
- Our role is to be wise stewards of the entire live, give, owe, grow pie. The question we ask encourage you to ask frequently is: “What would God have me do with His money?”
- Each of us need to determine our personal convictions on this issue. A personal conviction is well-thought-out and prayerfully determined between you (and your spouse if applicable) and the Lord.
- God does not tell us a specific amount of money that we should spend on living expenses or lifestyle, but we do have guidance from biblical principles.
- HEALTHY EXPENSES?
- It can sometimes be quite challenging to keep your living expenses in a healthy range, especially with high inflation. There’s always one more thing we need or want to buy for the house, one more club soccer payment, more new clothes for the kids, etc.
- However, we’ve found that there are three key categories that are indicators of financial health in this Live slice of our pie. Those three categories are housing, car, and food.
- THE BIG 3
- We call these categories “the big 3”. After counseling thousands of families, we’ve found that if the Big 3 are out of control, then it’s very difficult to follow the biblical principle of spending less than you earn so that you can build margin.
- So how do you determine if your Big 3 are out of control?
- It’s very difficult to have balance in your Live/Give/Owe/Grow pie chart if the Big 3 (your house, car and food expenses) exceed 65% of your take-home pay. In fact, we would say you’re in the red zone if you are over 65%.
- DETERMINING YOUR BIG 3 PERCENTAGE
- So, how do you determine what percentage of your income is being spent on your Big 3?
- Start adding.
- You’ll want to include all of the expenses related to your house, such as your electric bill, your water bill, plus your mortgage payment in the housing category. And the same goes for your car. Include gas and insurance expenses as well. Then add your total housing, your total transportation, and your total food expense.
- Once you know the sum of your Big 3 expenses divide that number by your monthly household net income.
- If you’re a FaithFi app user, you can take the sum of your housing, transportation, and food envelopes and you’ve got your number.
- RED, YELLOW, OR GREEN?
- If your Big 3 are greater than 65% of your take-home pay, then you are in the red zone. If they are between 55 and 65%, then you are in the yellow zone, and if you are less than 55%, then you are in the green zone. Green is where you want to be!
- What should you do if you find yourself in the red zone?
- The red zone is just like a stop light. It says, stop and ask yourself some questions:
- Do I own more house than I can afford?
- Have I purchased cars that are more expensive than I really need?
- What am I doing to control food expenses?
- We have a free assessment to help you better understand your Big 3 Live, go to faithfi.com/live. You’ll find a simple assessment as well as content to help you take your next step.
On this program, Rob also answers listener questions:
- Should you put your adult child’s name on a property deed if you want him or her to inherit it, or is it best to simply include the property in your will?
- What should you do when the IRS appears to have inaccurate information about your taxes or personal financial picture?
- If you’re going to borrow for a car, is it better to borrow money from your 401k to pay for it or just take out an auto loan?
Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network as well as American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community, and give as we expand our outreach.
Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.
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