In difficult times when income is likely to fall short or needs are likely to grow, planning becomes critical to ensure you do not make a bad situation worse. The nature of financial needs is that they are simultaneous and not sequential and all are important. Hence the need to reflect on your situation and not react in fear since fear leads to panic and irrational behavior causing mismanagement of scarce resources. Therefore, with all the uncertainties, go ahead and make a plan. Evaluate where you are, clarify what you want to achieve and how you will achieve it. The main challenge is likely to be how to balance the immediate needs without compromising your future.
Usually incomes goes into five main short-term uses, which have long-term impact. These are:
- Give:
Sharing what you have with others may take the form of tithes and offerings, giving to family and friends, compassionate giving to the needy in society as well as strategic giving to achieve specific goals such as giving to advance God’s kingdom or to eradicating a specific problem in society.
- Grow:
Setting aside and investing money to meet long-term needs such as family needs, lifestyle changes, eliminating debt, maximizing giving, starting a business or financial independence.
- Owe -Taxes:
A portion of income goes to the government in form of taxes.
- Owe Debt:
If you have borrowed money, you are obliged to make debt repayment as per your agreement with the lender.
- Live:
The largest portion of income funds your lifestyle providing for both your needs and wants.
Does a financial crisis require me to change my income allocation? If you have an emergency fund, you can tap into it to maintain your spending plan. However, if you are likely to have challenges meeting your regular expenses, this is a good time to make a new plan taking into consideration the needs of others as well.
You may be thinking; I barely have enough for my family, how do I incorporate the needs of others?
Below are some recommendations for your consideration:
Give: Guard against the urge to reduce giving by hoarding your resources so they can last longer. Rather, review your giving to ascertain if you can reschedule some until after the crisis especially those whose recipient will not enjoy them under current circumstances. Consider giving towards immediate needs and take care of the giving after the pandemic.
Grow: While it is important to continue spending less than you earn, plan to keep your savings in liquid assets that are easily converted into cash to meet urgent needs. Note to keep your obligations to your insurance contracts to avoid exposure to losses. Meanwhile if you had a well thought-out financial plan in place, avoid making drastic changes to it due to the temporary condition caused by the pandemic.
Taxes: If you benefit from government tax cuts, you will have more in disposable income. Consider increasing your giving and savings. Meanwhile continue paying your taxes faithfully.
Debt: For as long as you can, continue paying your debts as per your agreement with your lender. If you are having difficulties doing so, approach your lender and come up with a new agreement. If you are making extra payments and you are low on cash reserves, you may consider making minimum payments and increase your cash reserves and giving.
Live: Consider spending your income on priorities such as food, shelter and medical care. Plan your meals and shop according to plan to avoid wastage. Consider postponing discretionary spending such as lifestyle improvements until after the crisis.
The following Bible verses have been great reminders of how I need to set my priorities during this season.
- Proverbs 21:5 The plans of the diligent lead to profit as surely as haste leads to poverty.
- John 14:15 “If you love Me, you will keep My commandments.
- 1 Timothy 5:8 But if anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever.
- Romans 13:8 Owe nothing to anyone—except for your obligation to love one another. If you love your neighbor, you will fulfill the requirements of God’s law.
- Deuteronomy 15:11 For the poor will never cease to be in the land; therefore I command you, saying, ‘You shall freely open your hand to your brother, to your needy and poor in your land.’
In our next issue, we will delve deeper regarding giving when the resources are scarce.