Transcript Living Within Your Means

Stephen Bauer
School of Religion
Departmental Assembly
April 25, 2013
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Working for the Church is not the usual
strategy to get rich
◦ "sacrificial wage scale"
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Depending on the region, you will likely be
paid approx. $40,000-$55,000 per year
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I married in the Christmas break of my junior
year of college.
My wife and are both frugal by nature and
upbringing, which was very helpful for
avoiding arguing over money.
For the first 10-12 years together, our
budget was simply this:
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If we don't really, really, REALLY need it,
don't buy it.
Tithe, housing, food and transportation
were the first priorities (no church school
issues yet)
Pay your bills when they come
Only use credit cards when you have the
money in hand to cover the cost
Avoid debt like the plague
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The result:
◦ Every month we were eking by, living always near
the financial edge.
◦ Certain parts of the year were tough
 Winter heating season
 We did try to bulk up the checking account in advance
but there was no set system
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We never seemed to have money for saving
or fun
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Then, while in Seminary, our small group at
church did an outreach project on teaching
people how to make a home budget.
◦ Led by fellow seminarian in group with good
financial skills
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The result changed our life and got rid of
that "living on the edge" tension.
We learned to make a real budget and
follow it
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Income
Expenses
The object is to keep Income greater than
Expenses
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Increase income
◦ Problem is that by policy, full-time pastors cannot
moonlight (unless writing a ministry related
book/article)
◦ Your spouse may already be working full time and
be unable to expand his/her income generation
◦ For most of us, increasing income is nearly
impossible
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Cutting expenses
◦ This can be done much more readily
 Coupons
 Sales
 Doing without (no A/C in summer; no cable TV; use dumb
phone, no house phone; no cable TV; have older car; 1 car; etc.)
 Doing for yourself (basic car maintenance, basic home repairs,
cooking – minimal eating out, etc.).
 With infants: If you have your own laundry, cloth diapers save
big $ over disposable if mom is not working outside full time.
 For men: can your wife cut your hair (and feel comfortable doing
it).
 Buy program cars or used cars, never brand new.
 Buy a basic car, not an expensive one
 A Honda or Toyota will last just as long as a Volvo or Mercedes for
less money in purchase and maintenance
 Don’t lease (in most cases)
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Some conferences pay 2 times per month (24
paychecks per year)
Some pay every 2 weeks (26 paychecks per
year)
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Example:
◦ $42,000 per year after taxes:
 2 checks per month = $1,750 per check
(42,000÷24=1750)
 Every two weeks = $1,615.38 per check
(42,000÷26=1615.38)
 Net difference = $134.62 per check
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If you are receiving 26 checks per year:
◦ 10 months you receive two checks per month
◦ 2 months you get three checks in the month.
◦ If you budget based on 2 per month for 12 months,
you can bank the two extra checks (savings or
investments)
 = $3,230.76 per year towards savings or investments
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You can simulate this in a 24 check per year
system by systematically putting $134.62 per
check into savings or investments.
You must however, make your budget on
take-home pay after taxes are withheld. In
this example you will likely need to earn
around or a bit over $48K in gross income to
take home $42k/year (net income) after
taxes.
$42K in gross income, plan on about $36K
for take home income.
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Newly-wed, no children:
◦ Resist temptation to move into house, or bigger
apartment
◦ Try to live on one salary and bank/invest the
other
 It is even better if you can live on the smaller salary
◦ If you bank/invest $30k/year in 5 years you can
purchase a home with a mortgage smaller than
your rent.
◦ Or you can build an investment portfolio that will
produce near one salary level of income so the
wife can afford to be home as a mother
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Predictable, constant monthly expenses like
Rent, Mortgage, or Car payments can be
divided by 2 checks per month
Example:
◦ Rent = $1000 per month
◦ You need to budget $500 per check
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The most accurate means of budgeting
variable items (heat, phones, etc.) is to take
12 months of a given expense and divide by
the number of checks per year.
◦ Quicken is a great program for tracking actual
expenses by category
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Example:
Electric bill was $1800 per year
Based on budgeting on 24 pay checks per year
this is $75 per check you need to budget. (26
checks would be $70 per check [69.23 to be
exact])
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You will do better if you can figure out your
own budget for utilities (gas, electric, etc.)
instead of doing their budget plan.
◦ On their plan they earn the interest on your excess
money
◦ You budget yourself and you get the interest
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Tithe and Offerings
Housing (rent or mortgage)
◦ Ideal =max 25%, absolutely not over 30% of income
Estimated Income Tax (pastors only)
Utilities (i.e. gas, oil, water, sewer, electric, garbage)
Phones
Car payments, maintenance, registration, and next car
Food
Hair cuts (for family of 4, this can easily be $700-$1000 per year
pending how many females you pay for)
Insurance (car, renter's – homeowners is part of mortgage)
Clothes
Student loans
Church school tuition
Savings/Investments
Property taxes (if not part of mortgage; taxes on cars, etc.)
Etc.
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The key is to 1st budget the essentials:
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Tithe
Housing
Food
Loans
Insurances
Etc.
Then savings
Then discretionary items like golf, eating
out, some clothes, Netflix, etc.
First, fill in your regular budget items
as per your plan
This budget has no categories for clothes,
entertainment, etc. It is for conceptual purposes
only.
Then, you can put the difference
between your budget items and
your check in Misc. This is your
discretionary money.
Check your accuracy by calculating
the sum of columns a given row.
Column G does this. Compare
Column G with F (master balance) in
the same row and they should match.
25% of MONTHY Income ($5550) is
$1375, so $1105 is nicely under max
allowable budget.
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I use a cash column for Grocery, gas, and
pocket money. We take out X amount per
check to our wallet/pocketbook.
If you can budget an extra $2-5 per check in
several categories, it helps build a small
cushion for the whole budget.
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Especially early, you may need to fine tune
several times in the first 3-4 months to
figure out what works.
Then you should be able to revise no more
than each 6-12 months under normal
circumstances.
A sudden change in circumstances (car
accident, pregnancy, etc.) can cause an
immediate need to adjust the budget.
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ASAP
A good time is in tax season:
◦ Divide your tax refund by % of budget and seed
each category (except for actual tithe)
◦ If Utilities are 14% of your total budget, then put
14% of your refund into utilities.
◦ This allows you to have some cushions from the
start for making adjustments.
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Run Budget in an interest bearing checking
account
You will soon have balances that give you free
checking at most banks, and you earn some
interest (which covers a chunk of the cost of
buying checks).
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Do stick closely to your budget plan
Don't make impulsive purchases
Don't get so rigid with the budget that cannot
adapt to changes as needed.
Your budget should be a firm guide to help
you be disciplined, but it should not a straitjacket
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You can arrange to withhold your own taxes.
Use the IRS Estimated Tax forms to calculate your
estimated tax
Save extra (I try for $500 extra, minimum) in case
you underestimated.
Keep it in a separate savings account to keep the
money from mixing into the family budget.
You will send in a quarterly payment to the IRS
When you do your taxes (or have them done) your
Form 1040 will inform you if you sent in enough
tax. If you did, then the extra in your account is an
instant refund – move it to family savings. If not,
adjust for next year.
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Check your conference/NAD policy book. If
they say ministers are required to pay tithe
to set an example for the members (which
is likely!), you can deduct the minister's
tithe (not the spouse's) as a business
expense on Schedule C instead of a
charitable contribution on Schedule A.
You must write a separate check just for
your tithe. Give offerings and spouses tithe
through a separate check.
Don't try to double deduct your tithe on
Schedule A and C in the same year.
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On Sched. C, you put this in the "Other" section,
which usually requires an explanation on the back
side of the form. I put "Required charitable
contributions".
The key is that Schedule C reduces your Schedule
SE tax (your version of FICA if under Schedule C
income), so $3000 tithe will save you about $450
in Schedule SE.
Schedule SE especially hurts because you must add
your parsonage allowance that was deducted from
your W-2 back into the income for Schedule SE (but
not for Schedule C).
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Plan your budget and work your plan
Don't try to live too high a lifestyle
Avoid debt like it is a plague – if you can do
without, do so to avoid debt.
Before kids, try to live on one salary and build
a nest egg for house, etc., from the 2nd
salary.
Plan your budget and work your plan!
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