Management of Personal Finance
Management of personal finance is the process of controlling personal or family financial resources through budgeting, income generation, spending, investment, saving, insurance, debt management and retirement planning. Sound personal financial management is not necessarily dependent on high level of education, but does require the individual to be both well-informed and possessed of personal discipline.
From the human point of view, finances or wealth is considered personal; thus personal finances. But biblical financial stewardship clearly spells out that God is the true owner of everything, including our financial resources. “For, the earth is the Lord’s, and everything in it.” (1 Cor. 10:26, Ps. 24:1-2). Personal finances are not in fact personal. The fact that you have legal ownership of some financial resources or property does not make them yours in a spiritual sense!
The Christian knows that even the power to create wealth or earn an income comes from the Lord (Deut. 8:18). God is the source of our blessings (Ps. 67:7). Our resources are personal only to the extent that a given person is a steward of some of what God created and provides (Gen. 2:15). So whatever human manages, it is on God’s instructions and for His glory. According to Apostle Paul, humanity was designed to glorify the name of the Lord in everything (1 Cor. 10:31).
Henceforth, personal or family financial practices like budgeting, income generation, spending, investment, saving, insurance, debt management and retirement plans must all be guided by the word of God and for His glory.
What is Jesus’ opinion on budgeting? (Luke 14:28-30)
Here, Jesus was fundamentally placing emphasis on the critical element of budgeting and planning. His idea is about budgeting and cost determination as one wisely considers financial issues.
Fundamentally, a budget is a spending plan based upon one’s financial goals or aspirations. It is informed by the income actually available to you.
Budget preparation is key to financial planning. It directs the spending process and enables one to arrive at rightly-guided and well-informed personal financial decisions, without which one will be subject to blind chance or sheer luck. In addition, it helps to decide how to allocate financial resources based on financial limitations. It will save from the grief of overspending, and keep individuals and families within their means and out of debt. Budgeting does not stop someone from enjoyment; it just ensures that you can actually afford what you want or need. As a result of budgeting, monitoring and evaluation at personal or family level, you control your money rather than your money controlling you.
Budgeting is essential to manage personal wealth for the glory of God. The additional work and discipline are overly rewarded.
2. Income Generation (I Tim. 5:8; I Thess. 4:11; 2Thess. 3:6-9)
In the passages above, Apostle Paul exhorts about the necessity for believers to generate income. It is a stepping stone towards personal financial success, and the doing and supporting of God’s mission. Without income generation, there are no resources to manage, no finances to budget. An income stream or streams is a must! It is the income generation that enhances financial stability and independence. Without it, one is dependent on the good will of others.
E.. G. White writes about the pertinence of generating income for believers:
“No man is excusable for being without financial ability” “If he cannot or does not have this ability, he is a mere child.” ¹ “Independence of this kind is praiseworthy. To desire to bear your own weight and not to eat the bread of dependence is right. It is a noble, generous ambition that dictates the wish to be self-supporting. Industrious habits and frugality are necessary.”²
Paul called upon the Corinthians to set aside a portion of their income for mission (1 Cor. 16:2). Mission is supported by the incomes generated by the faithful givers and worshipers of God.
3. Expenses (Prov. 22:17; Prov. 13:16; Isa. 55:2)
In any financial management engagement, the two giants, income and expenses, contend with each other. Expenses consume income; conversely, the only way to keep up with expenses is income generation. The ideal is to have enough income generated to pay expenses, with some left over to be used wisely or saved for future projects or goals.
It is therefore fundamental to keep expenses sustainable in light of future demands. Some expenses prove to be a mere waste as time goes on, even if they might have been justified at some point. An Expense is innocent until it is created. So, expenses must be prudently created with an eye to the future.
Spending on brand labels rather than value, impulsive buying, status seeking, or unneeded “upgrades” are major gateways to financial waste and imprudence, especially if one is still not reached the goal of full financial independence and sustainability. Spending should be need- or demand-driven.
As one handles expenses, these 7 tenets can serve as guidelines:
1. You have money until you determine where it needs to go. The Net Principle!
2. When no savings are made and no investment done, no financial harvest will be available tomorrow, and poverty and financial dependence will be the result.
3. Spending beyond your means is a superhighway to debt and financial bottomless pits.
4. All outflows are financed by inflows. Therefore, inflows (income) are a must!
5. Exercise caution as you spend.
6. Don’t spend money, convert it into the equivalents so it remains visible. Once you lose sight of your money, then you have lost your personal financial grid reference and financial success is hard to come by.
7. Keep your financial information available to you at all times. Don’t lose track of it!
These two quotes speak about the importance of tracking one’s expenses: “All should learn to keep accounts. Some neglect this work as nonessential, but this is wrong. All expenses should be accurately stated.” ³
4. Saving (Prov. 6:6-8; Prov. 20:4; Prov. 4:25)
Saving refers to the process of setting aside a portion of income not spent on current expenditure for future use.
One’s financial future is only guaranteed by one’s savings (Prov. 6:6-8). The arch rival for savings is spending. Keeping expenses under strict control or avoiding creation of unnecessary expenses is a prudent path to saving (Prov. 20:4).
Saving must come before spending. It lays a firm foundation for the financial future. Financial experts often encourage people to pay themselves first to build savings. It means to set aside resources for a rainy day (future time of need) before paying for other expenses. Following this simple piece of advice, can help build a future financial cushion.
The future inevitable. All of us are going there. You either find the future or the future finds you. Your savings make your future. We are encouraged to look ahead even financially, which makes saving crucial for the future demands of financial resources.
5. Investment (Matt. 25:14-28)
In the Parable of the Talents, Our master is clearly and practically teaching a lesson on investment.
Investing may be defined as postponing today’s consumption in order to produce value in the future, which can be consumed or otherwise used then. Investing is like planting a crop.
The food we are eating today was planted yesterday, what we will eat tomorrow should be planted today, If no planting is being done today, there should never be any expectation of food tomorrow. This makes investing a critical element of a person’s financial life. Income generation, savings and investments are the only trusted hard currencies one trades to achieve personal financial success.
Insurance is a special type of contract between an insurance company and its client in which the insurance company agrees that in case of certain events the insurance company will either make payment to its client or meet certain costs.
The advantage of being insured is that you will be compensated should your insured item become damaged, lost or stolen. This safeguards assets and accordingly, a critical step for personal financial management.
7. Debt management
(Prov. 22:7; Rom 13:8)
Simply put, debt is the amount of assets one owes to others. What is the Biblical position on debt? The Bible does not directly prohibit debt. However, everywhere debt is mentioned in scripture, it is discussed about the negative consequences of indebtedness. Scripture describes borrowing as slavery, one of the vilest forms of human’s exploitation.
The Bible discourages us from cosigning other people’s debts as well (Prov. 17:18, Prov. 22:26). The Spirit of Prophecy is not silent about the dangers of debts: “There must be a strict regard to economy or heavy debt will be incurred. Keep within bounds. Shun the incurring of debt as you would shun leprosy.” ⁴
No prohibition, no encouragement, great caution is in order!
8. Retirement (Num. 8: 23-26)
This passage is one instance in which God provides instructions about retirement. It is a period of a people’s life during which they retrieve from professional engagements. They spend more time at home. One’s circle of friends and acquaintances grows smaller by the day.
In retirement, one needs ample and stable financial resources. Medical bills escalate, in addition to continuing and changing needs for food, shelter, and transportation. At the same time, income streams shrink. This period proves the efficacy of one’s previous savings and investment strategies. Income generation, savings, investment and insurance are critical to a secure retirement. Retirement is not the time for one to worry about how to acquire the essentials of life, but time to eat crops which were planted yesterday.
There are three critical needs to ensure a peaceful retirement: God’s presence, the company of fellow human beings, and meaningful financial investments and income streams.
We hope the reader has gained from this article a sense of how fundamental sound financial planning is to one’s own well-being and one’s service to God throughout one’s life. Supporting principles can be easily found in both the Bible and the Spirit of Prophecy. We hope we have demonstrated this, and that readers will be encouraged to implement these principles in their own lives. ≤
¹ Ellen G. White, Adventist Home, 93.
² Ellen G. White, Adventist Home, 374.
³ White, Adventist Home, 374.
⁴ White, Counsels on Stewardship, 272.