Tuesday, January 11, 2011

The Goal – Living within our means

What does this mean?

It means to spend no more than we make on a monthly basis. Ideally that means to live on a cash basis and not to use credit or borrow money to provide normal living expenses. It also means the self-discipline to control spending and deep needs, wants, and desires in their proper relationship.


NEEDS
WANTS
DESIRES
These are the purchases necessary to provide your basic requirements such as food, clothing, home, medical coverage and others.
Wants involve choices about the quality of goods to be used. Dress clothes vs. work clothes, steak vs. hamburger, a new car vs. a used car, etc.
These are choices according to god’s plan that can be made only out of surplus funds after all other obligations have been met.



OBSTACLES TO GOOD PLANNING

à        Social pressure to own more “things”.
à        The attitude that “more is better” regardless of cost.
à        The use of credit to delay necessary decisions.
à        No surplus available to cope with rising prices and unexpected expenses.
à        We tend to offset increases in income by increasing our level of spending.

The spending attitude is a real problem because it leads to:

THE DANGER POINT
à        When income barely equals outgo
à        Break-even is not a living point but a decision point. If all the income is consumed in monthly expenses and something unusual happens, such as the family automobile breaking down, the result is additional debt.
à        A decision is necessary at this point: MAKE MORE MONEY OR SPEND LESS