The measure of good stewardship boils down to how well someone manages what they have. It's not really about the numbers, but it certainly doesn't exclude them. If you had to give an account to God of how you're managing your money, how confident would you be standing before Him?

I don't believe God cares about money, but He cares about how we relate to it and how we use it. Why? Because it reveals our hearts, the wellspring of our desires and actions. As a loving Father, he is dedicated to our growth and maturity.

To believe and act as if God doesn't care how you manage money is to deny his word, which says, "I tell you, on the day of judgment people will give account for every careless word they speak." (Matthew 12:36 ESV) If God will judge every word we speak, will he not also judge every decision and action we take with money?

Good Stewardship Requires Planning and Execution

Let's start with the definition of a budget. A budget is a plan for the coordination of resources and expenditures over a specific period of time. In other words, a budget is intentionally directing your spending based on your income over a specific period of time.

There are countless apps and systems out there for managing money. Unfortunately, in my experience, a large majority of them are incomplete; they miss the most basic and crucial parts of a sound financial plan. A personal budget is a yearly plan, managed monthly, through individual categories. If a budget doesn't incorporate these three components, it will fail.

A Yearly Plan

The number one reason a budget fails is that it is thought of and used as a monthly budget. A budget is a yearly plan, not a monthly plan. We manage it monthly because it is easier to do so, but it will fail when it is not built and operated as a yearly plan.

In every budget, there are fixed and variable expenses. Fixed expenses are expenses like mortgage and car payments, insurance premiums, TV/streaming service, and anything due each month, and usually, though not always, are the same amount. Variable expenses are car repairs, entertainment, medical (out-of-pocket) costs, etc. These expenses happen infrequently, vary in cost, and are more challenging to plan for.

If at the beginning of the year you knew how much you would spend during the year on car repairs and when those expenses will occur, it would be easier to plan for them. You don't need to know the exact amounts and the months these expenses will occur. You can estimate the total yearly cost, divide the total by 12, and set that amount aside each month so that when the expense happens, you are better prepared to pay for them.

Taking each variable expense, estimating what it will cost you during an entire year, dividing it by 12, and setting that amount in your budget will make it feel more like a fixed expense. This one shift in planning and managing your variable expenses will make budgeting work!

A successful budget has every expense planned for and allocated for the entire year before the year begins.

Managing the Budget Monthly

No matter how good it is, a budget sitting on your computer or in your desk drawer will not work unless it is actively managed.

Occasionally, when I meet with a couple, the husband (it's always the husband 😁) pulls out his computer to show me a spreadsheet of their budget. Now, I love spreadsheets. However, I have yet to see one spreadsheet budget that incorporates tracking of expenses. This is a problem.

A budget must be managed, which means it must include an ongoing comparison of actual spending to planned spending. 

Most people who create a budget on a spreadsheet plan how they will spend their money each month. They include the income and expenses, allocating what they need or want to spend in each category. They then proceed to earn and spend for the entire month. 

At the end of the month, they total everything up, and you probably know what the outcome is. That's right! Their expenses have exceeded their income. This is frustrating because, after all, they now have a budget. They've planned for all their expenses, yet it never seems to be enough no matter how much money they make!

Here's the problem. When you don't manage your budget daily or weekly, you will always spend more than you planned. More specifically, you will always overspend when you don't compare what you've budgeted to what you're spending. It would help if you took every expense and, as soon as possible, enter it into your budget to tell you when it's time to stop spending.

The number two reason a budget fails is that it doesn’t incorporate frequent tracking of expenses. People believe creating the plan is enough to direct their spending, but it isn’t. What directs and controls spending is when you start with a budgeted amount, and as you spend, you subtract from that amount, so you know what remains; that's the information you need to control spending.

Budget By Categories

Research has shown that the human brain can only retain around seven items at one time in short-term memory. As soon as we add another thing, something will be forgotten. Why is this important to budgeting?

The average household budget has between 60 and 100 transactions per month, an average of 2-3 transactions per day. If our short-term memory can only retain seven items at one time, we can only remember what we spent in the past three days. You can see why managing money in your head by trying to remember what you've already spent is impossible.

Managing money is even more difficult because our expenses don't all fit into one group. We spend money on different things, and we do not value each of these the same. For example, a significant portion of our income goes to paying bills. Most people don't get excited about paying bills. Spending on fun stuff, the stuff we enjoy, is a different story.

Because of this, we will always gravitate to spending more on the stuff we enjoy. That's not a problem if we've planned for it and have the means to do so. The problem comes when we don't separate and set money aside for each of these different types of expenses we have.

The third main reason a budget fails is not categorizing and funding each expense separately and appropriately. I have witnessed many different ways that people manage their money. Some have a crazy amount of detail, incorporating so many categories that even I become overwhelmed, and I like details. Others divide their income into just 3 or 4 main areas like Personal Expenses, Bills, and Savings, giving each category a lump sum of money each month. Neither one of these approaches is ideal.

Categorizing your spending will help you manage your money better by keeping you from overspending in one or more areas of your budget. It also enables you to avoid accidentally spending money in one category by robbing it from another.

The average household budget has 8 to 10 main categories. Mine are as follows: Giving, Saving, Housing, Transportation, Food, Medical, Clothing, Entertainment, and Miscellaneous. In each of these main categories, there are several sub-categories. For example, the sub-categories for Transportation include Insurance, Fuel, Tags & Inspections, Maintenance & Repairs, Future Car Fund. 

Whether fixed or variable, I fund each of these sub-categories based on the estimated yearly total. I then divide that number by 12 and fund the sub-categories each month as the income comes in. I then track and record expenses for each sub-category to ensure I stick to the budget.

TWO IMPORTANT BENEFITS TO MANAGING MONEY THROUGH CATEGORIES

1) Confidence.

As you spend, you will know which category the expense will fit into and how much money is still available in that category to spend. This guides your spending to keep you safe and your budget from being wrecked.

2) Control 

Sometimes an expense is higher than what you expected. Because you're tracking (and recording) your spending, you will notice it right away and can take the appropriate action. You can either allow the expense to occur knowing that future monthly allocations in that category will cover this one over-expenditure, or you can move money from another category to cover the expense and stay within that month's budget.

Conclusion

There is no one-size-fits-all way of managing money. What works for me may not work for you. The best budget for you is the one you will ACTUALLY use. However, a budget must include the information that will help you manage your money well and do so easily. If the budget doesn't have all the information you need or is too difficult to keep up with, you won't stick with it.

Managing money successfully comes down to having a good and easy to execute plan. It must be a yearly plan, managed monthly through frequent tracking of spending, and should incorporate spending categories to give you confidence and control over each financial decision.

About the author: Leo Sabo is the president of the Christian Stewardship Network, where he gets to share the incredible impact financial stewardship and generosity can have in the Church. Leo loves to see people experience their own financial awakening. He’s spent the last 17 years working with couples, individuals and church leaders; helping them understand and manage finances conforming to Biblical principles.