Controlling Your Cash // Living Generously, Part 6

A Different Perspective Official Podcast

In business they say that cash is king. Forget profit, if you don’t keep an eye on the cash flow, you could be out of business in very quick order. Well, as it turns out, it’s not a lot different in our personal finances. Way too many people let their hard earned cash just slip through their fingers.

Berni: Alex, great to have you on the program again this week.

Alex: Thanks for having me back, Berni.

Berni: Hey, you run an organisation called ‘Wealth with Purpose’ which is about what?

Alex: Well, it’s about helping people manage their money wisely. And in particular, manage their money according to biblical principles. Because what we know is that the biblical principles – when we adopt them into our day-to-day finances – help you, if you like, live a very financially free life.

Berni: Yeah, that’s ... it’s easy to say, right.

Alex: It is!

Berni: But many of us feel like we have holes in our pockets. What are some of the things that we need to take back in control to manage to flow of cash through our personal finances?

Alex: Yeah, well I’ll start by giving a scripture actually, because this probably will really set the scene ...

Berni: You Christians are always ... quote the Bible.

Alex: I don’t know, fair dinkum. Well this one’s a great one from Luke Chapter 14 it says this, it says:

Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?

Now that’s very, very sensible advice. And really what it’s saying is, you need to know how much things cost and how much your life actually costs to run. So what I always encourage people to do firstly is to do a budget. And a budget is simply just a tool and what it does is it shows you how much money is coming in to your house. So your wages and so forth. Versus how much money is going out. And hopefully that’s a surplus.

Berni: Yeah

Alex: Because if you’re in deficit then clearly, you know, you’re starting to rack up debt and so forth and getting yourselves into financial difficulty. So the first thing is having that budget and learning and becoming aware of where your money is, where you’re spending it, what you’re spending it on, whether you’re spending too much in some areas, too little in other areas. And really just thinking it through and making a plan. So that’s the first thing.

Berni: It’s quite a ... It’s interesting I was sitting with someone recently and we were doing a bit of a budget for them and we just looked at how much money they spent on coffee and lunches, right. Just coffee and lunches, and when we added it up for the week they were appalled with how much money was just running through their fingers.

Alex: It’s amazing. I’ve done it for myself and I was absolutely staggered. We’re talking you know a four figure sum over the course of a year. It was just staggering how much money goes in those sort of things. And that’s one of the things that budgeting helps you do because it brings to light ...

Berni: Yeah.

Alex: Things and you think, "Oh, really, surely there’s a better way of doing that?"

Berni: And that’s not how I want to spend my money.

Alex: Yeah.

Berni: If you don’t know, well you’re just going to keep doing it.

Alex: Yeah, and of course it’s eating into your future when you’re spending money on things you shouldn’t.

Berni: So first thing is to do a budget. What comes next?

Alex: Secondly, I say to people, is to try and automate your finances, OK. And by that I really mean saying, "Well, we know how much money is coming in each month and we want to then direct it according to a specific purpose." So as Christians we say we want to live generously with the money, OK. So the money, we acknowledge it’s not ours, we’re called to be stewards. So how do we live generously with it? So I say to people, with your budget, try and allocate the first 10% to God as a way of honouring God and giving glory to Him. Now, that is not the limit, it’s just, you know, a recommended starting point. I don’t believe in having a legalistic rule around these sort of things.

Berni: Good on you.

Alex: The second ...

Berni: Otherwise I’d beat you out of the chair. Hey, listen. James L Kraft, the guy that started the Kraft food empire once said this, he said, "I don’t believe in tithing but I guess it’s not a bad place to start."

Alex: When you reflect on Jesus’ teaching, I think Jesus throughout the New Testament is really calling us to a higher standard in everything. In marriage, you know in the Old Testament you could send your wife away with a certificate of divorce but in the New Testament it’s a very different picture. It’s, you know, the only reason grounds for divorce is marital unfaithfulness.

And so I think it’s the same principle for our money. Jesus is actually calling us to a higher standard. And so I don’t think that standard is capped at 10%.

Berni: No, we’re not just tipping God. Mind you in the US you’ve got to tip 15 to 20% now, right. It’s not just tipping God, right?

Alex: Well, funnily enough when you talk about tithing in the Old Testament people think it was only 10%, a lot of people today. It was actually 23% because there were three tithes that we know about. Some scholars I’ve heard argue think there were even more than that. But we know there were three totalling over 23%. And I don’t think there’s too many Christians today giving 10% let alone 23%.

Berni: Sorry, I interrupted you.

Alex: Yeah, so as I said automating your finances I think is the thing. So we want to send the money off in different directions according to a set purpose. So first there’s giving to God.

The second thing is you need to save for the future, OK. Now that could be for your kids’ expenses, for their schooling, it could be saving for the say when you cease work. And that day comes to all of us be it, you know, ill health or redundancy and so forth.

And then you leave the remaining portion for your everyday expenses. Now as you get pay increases and your circumstances change then you may want to give more, you may want to save more, and ideally your living expenses on a day-to-day basis actually reduce as a percentage of your spending.

Berni: What about physically managing accounts? Should a couple have separate accounts, same accounts, how many bank accounts should we have, what do you advise people?

Alex: Yeah, well that’s a great question. To deal with the couple issue first and foremost. I believe couples should have joint accounts in most circumstances, not all but in most. Simply because it’s transparency and it’s sort of acknowledging that the money is not either his or hers but it’s ours for stewarding for God. So having joint accounts I think is very important.

There are some exceptions: if someone’s come from, say it’s a second marriage and the first marriage broke down due to distrust and unfaithfulness and all those sort of things. Some people can be, you know, very affected by those sort of things. And therefore you need to rebuild the trust before you do that. So I think there are circumstances where you need to be, you know, about reasonable about it.

The other thing, though, is how many accounts should you have? I believe in what I call the ‘kiss’ theory: keep it simple silly. OK and by keeping it ...

Berni: In the army we used to call it keep it simple stupid.

Alex: So keep it simple, so I would suggest that you have no more than two to three accounts. One account should be your emergency fund, where you put money aside and I say to people they should try and put six months’ worth of living expenses.

Berni: Ah.

Alex: Now for a lot of people, that sounds like a lot.

Berni: Yeah.

Alex: But the stats show that in many countries most people are broke within four to six weeks of losing their job because they don’t have money saved. And that puts enormous pressure on people and on relationships. So six months’ worth of living expenses in a bank account. That’s your first account.

The second one, your everyday account, OK. So your everyday account is for, you know, your rent, your mortgage and day-to-day spending.

And then the last account can be your combination of your giving to God account or your long term planning account. So long term saving for the future, for as I say your kids’ education and so forth. So that’s a simple way to do it. But no more than really two to three. But this is not about complicating it and for some people depending on how well they manage it, they may only need one account. For others, where they’re not so good at it, they need to put it out of sight out of mind and have it separate and isolated if you like so they don’t spend it.

Berni: I reckon it depends on how well you manage it. I reckon a lot of people just simply don’t manage it.

Alex: I would say probably, yes. In my experience probably 80%, 90% of people struggle.

Berni: So there’s a very clear message that I’m getting from what you’ve been saying is that we need to get on the front foot, we need to get proactive about ... If we’re serious, if I say I believe in Jesus. If I say that Jesus Christ is my Lord, that God comes first, then one of the things we need to get serious about is the purpose of our wealth. To get serious about that we really need to know what’s happening with the money.

Alex: Exactly right. I mean there’s no way you can have an eternal perspective of your money if you don’t know where your money’s going.

Berni: No.

Alex: It’s just impossible. So you know budget a very simple tool to actually make you aware and to then help you to ask honest questions. Am I honouring God with my money?

Berni: Yeah, that’s a tough question, hey?

Alex: It is, but it’s important.

Berni: Well let me ask you. You’re listening to this money expert here talk away, Alex Cook. Are you honouring God with your money? Now there’s something to think about and there’s something to pray about, hey?

Alex: Absolutely.