I love this quote from Charles Dickens' book David Copperfield.
"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." It is so true! The key to financial wisdom is to simply spend less than you make. The only way to really have a handle on what you're spending is to have a spending plan (aka budget).
Crown Financial Ministries has several free online tools that will help you create a budget based on your income. Whether you make a lot or a little, the key to a balanced budget is all about percentages. Here is what Crown Financial suggests for a $35,000 annual income (after *tithe and income taxes). These are just suggestions - as long as it all adds up to 100%, you're solid.
Spend 36% ($945 per month) on housing - house payment, insurance, maintenance, Utilities, etc.
Spend 12% ($315 per month)on food - groceries, laundry supplies, hygiene products, diapers, etc. For the record, our household spends more than 12% on food, but we also rarely go out to eat and have the flexibility in our budget to spend a greater percent in this category.
Spend 12% ($315 per month) on automobiles - car payment, insurance, gasoline, maintenance, and saving to replace a car.
Spend 5% ($131 per month) on insurance - life insurance
Spend 5% ($131 per month)on debts - the goal is to live debt-free, but debt happens.
Spend 6% ($158 per month) on entertainment - movie tickets and rentals, eating at restaurants, etc.
Spend 5% ($131 per month) on clothing - buy clothes to satisfy a need, not just a desire
Spend 5% ($131 per month) on savings - sounds weird to spend on savings, but feeding your savings account is an expenditure of your budget.
Spend 4% ($105 per month) on medical/dental - insurance premiums, prescriptions, fees, etc. Our family is forced to spend more on this category because our employer's health insurance is poor. We have to make it up in other categories.
Spend 5% ($131 per month) on miscellaneous - gifts (plan ahead for Christmas), allowances, etc.
Spend 6% ($158 per month) on childcare/school expenses (if you use this, you must decrease another category) - tuition, text books, etc.
Spend 5% ($131 per month) on investments - company 401k/403b, IRAs, Roth IRAs, bank CDs, etc.
*A tithe is literally 10%. When a family commits to tithing, they commit to giving 10% of their gross income (before taxes) to the work of the Lord. The annual tithe of a family making $35,000 a year would be $3,500 (or about $290 a month). As a Christian, I feel it is IMPERATIVE to tell anyone considering a tithe commitment the following:
Your salvation is secure because of Christ's finished work on the cross. You do not earn your salvation by tithing or otherwise being a "good person". You don't lose your salvation for not tithing.
Giving is important even if you can't start out at 10%. Just start giving, and you'll work your way up to it. Don't give on credit! Bad, bad, bad idea.
You can give more than 10%!!! God has blessed some people with the ability to make some serious money. The Bible does not say it is a sin to be wealthy; rather, it is sinful to be stingy and to make money your god. What a blessing it would be to learn to live a modest life, then be given a huge pay increase! Instead of raising your standard of living, consider giving more than 10%.
Although I feel it is vitally important that you support your local church, you do not have to give all of your tithe to one charity. In our family, we like to spread it among our church (it gets the lion's share), missionaries we know personally, and a couple local charities that minister to the homeless. We also listen to a few podcasts (Focus on the Family, for example) that provide free information. We feel it is important to support ministries like that, too. Always research your charities. Many big charities are more like businesses with CEOs making hundreds of thousands of dollars a year, plus bonuses.
Personally, I like to give to Christian organizations. It's not that I ill-wish secular organizations, but I feel there are many non-Christians in this world that are giving to the secular ones. Christians are the only ones giving to Christian organizations.
Even if you are in debt, it is still important to give while you repay the debt. If we all waited to be debt-free before we started giving, charities would not exist long.
There is a difference between a tithe and a one-time gift. Sometimes a charity that you support will ask you to give a one-time gift in addition to your tithe. For example, many homeless ministries ask for extra money during long stretches of cold weather because they have an increased volume of people to serve.
Not only is it good to think of your giving in terms of a monthly amount ($290 vs. $3,500 seems more do-able), it is also important to give frequently rather than writing one check at the end of the year. Where your treasure is, your heart is also - giving money to a charity helps for your heart to be with the charity as well.