The Key To Financial Success
Admittedly, the title for this post is a bit “clickbaity,” but very few people will read a post titled “Budget’s Work.” That’s probably because so many people have negative emotions tied to the word budget. Words like restrictive, burdensome, ineffective, and the list goes on. And once someone creates a confirmation bias toward something like a budget, it’s challenging to change their mind. In fact, a recent article shows it’s not just challenging to fight confirmation bias; it’s painful. Angela Lee at Columbia Business School wrote, “Thanks to fMRI technology, we know that when you try to convince people to overcome their confirmation bias, to show that a fact does not confirm their bias, their brains react as if they were in pain.”
All Pain – No Gain
1995 was a pivotal year in my life. My wife Diane was pregnant, and I knew I needed to move on in my career to find a job with better health insurance and pay. I was beyond thrilled to land my dream job as the Help Desk Manager at Callaway Golf in January, and by June, my wife gave birth to our first daughter Samantha and two years after that, Mattie, daughter number two, joined the family. By most measurements, those eleven and a half years were successful. A trend line of my career and salary was up and to the right. Honestly, I did not have or think I needed to do a budget. It would have felt restrictive, time-consuming, and unnecessary.
In 2006 I felt called to go into full-time vocational ministry. After prayer and seeking wise counsel, I left my position at Callaway and joined the staff at Sunridge. I love that I get to be a part of what God is doing in and through our church, and I am still as passionate today about helping people find and follow Jesus as ever. But it was soon apparent that our financial picture had changed. Unfortunately, our expenses had not; they actually increased as things like braces and school activities became a reality. Our debt was mounting, as was our dependence on the generosity of close friends donating their daughters’ “experienced” clothing to us, yet I just didn’t see the value in creating a budget.
The sad truth is, this is not just my story – many people struggle to make ends meet because of a layoff, job change, life change, or even the effects of inflation. Their debt continues to grow as their savings and retirement (if they even have it) continue to shrink. The fact that a plan to intentionally predetermine where every dollar goes, also known as a budget, brings relief is too painful for their brain to accept, so the spiral continues.
Renew Your Mind
While the moment and circumstance to overcoming the mental wiring that substitutes pain for accepting facts that differ from our bias are different for everyone, the common denominator is to investigate opposing perspectives intentionally. If eating strawberries gives you a rash, the rash won’t go away by continuing to eat strawberries – even if you really love how strawberries taste. Eventually, the rash will become severe enough to cause you to get additional information by reading about food allergies or going to a doctor. Financial Peace University (FPU) provided the contrarian information I needed to overcome my bias and see the truth. Like most people in the class, I fought it at first. But the logical part of my brain said to try it, and if it didn’t work, I could always go back to my way of managing money. At the end of the nine weeks in FPU, my brain was re-wired, and I understood things I previously rejected. The Apostle Paul said it best in Romans 12:2, “Do not allow this world to mold you in its own image. Instead, be transformed from the inside out by renewing your mind. As a result, you will be able to discern what God wills and whatever God finds good, pleasing, and complete.”
The Budget is the Key
A proven plan is required to achieve success, even financial success. Diane and I follow and teach the seven baby steps taught in FPU:
- Build a $1,000 emergency fund.
- Eliminate all non-mortgage debt using the debt snowball.
- Build a fully-funded emergency fund of 3-6 months’ expenses.
- Invest 15% of your income in retirement.
- Save for the children’s college fund.
- Pay off the home early.
- Build wealth and give.
But the budget is the lynchpin within the steps. I love how John Maxwell defines a budget; he said a budget is telling your money where to go instead of wondering where it went. Let that sink in for a moment. Some people think of a budget as a report that provides information on spending at the end of the month – after you spend the money. A more helpful and effective way is to plan your cash flow before spending a single dollar. At the beginning of each month, list all sources of income. Then, start listing the upcoming bills, including charitable giving, rent/mortgage, utilities, groceries, restaurants, insurance, gasoline, gifts, entertainment, and debt (car payments, student loans, credit cards, etc.). The income, less the expenses, needs to be zero. Having more income than expenses means you still have money to assign. However, most people find they have more expenses than income, and that’s why they are in debt. For those in this situation, it’s time to find ways to cut expenses, increase income, or maybe both. It’s possible because we’ve been there, and it’s so much better on the other side. The funny thing is, what I thought would be restrictive, time-consuming, and unnecessary is now such an essential part of my life. I now recognize the facts about budgeting that I once rejected are the best way to manage the financial resources God has entrusted me.
When you finally get tired of watching your debt grow as your net worth shrinks, it’s time to look at opposing perspectives on budgeting. A great next step is to check the Sunridge website for the next session of FPU. We’d love to be a part of your journey in managing God’s money in a way that brings honor and glory to him.