Budgeting Fundamentals

Welcome to Lesson 1 of 4 in Financial Intelligence Foundations. It takes about 15 minutes.

A budget is simply a plan for your money, made before the money arrives instead of explained after it has gone. It is not only for people with a lot; people on small or irregular incomes often need one most. In this lesson you will trace one week of spending, then turn what you find into a simple budget in four lines.

Scripture comes from the King James Version. This is general education about handling money, not financial advice for your situation. It cannot promise particular results.

In this lesson you will

• Trace one week of spending and sort it into needs, wants and leaks.
• Explain how diligence and prudence, as Scripture describes them, apply to knowing and planning your money.
• Describe a simple budget in four lines, in order, built from what your trace shows.

Before you start

How true is each of these for you today, from 1 (not true) to 5 (very true)?

• I know roughly what I spend in a week.
• When money comes in, I decide where it goes before I spend it.
• I have something set aside for an emergency.

1. Know the state of your flocks

Many people avoid looking closely at their money. It feels uncomfortable, or there seems to be too little to bother. But what we do not look at, we cannot manage. Proverbs, written when wealth was mostly animals and fields, puts it plainly.

Proverbs 27:23–24 (KJV) 23 Be thou diligent to know the state of thy flocks, and look well to thy herds. 24 For riches are not for ever: and doth the crown endure to every generation?

Be thou diligent to know the state of thy flocks. Know what you have, and keep watching it, for riches are not for ever.

For us, the flocks are what comes in and what goes out. The simplest way to know their state is a one-week spend trace:

• Write down every amount you spend for seven days, however small, in a notebook or in the notes on your phone.
• Do not change anything yet. Just record.
• At the end of the week, mark each item need, want or leak (small, frequent spending you did not really choose).

Imagine a young man who earns a modest wage and is always short before payday. He is sure his rent is the problem. After a week of writing things down, he finds that snacks, drinks and small data top-ups add up to more than his transport. Now he knows where to start.

Think about it: If someone asked you exactly what you spent last week, how close could you get?

Try this week: Starting today, write down every amount you spend for the next seven days, however small. Do not change anything yet; only record.

2. From trace to budget: set aside first

Most of us spend first and save whatever is left over. Usually nothing is left over. A budget turns the order round. Once your trace shows where the money goes, write a simple budget in four lines, in this order:

1. Set aside. As soon as money comes in, put aside what you have decided to give and to save.
2. Needs. Housing, food, transport, what you owe, the people who depend on you.
3. Known costs ahead. Fees, festivals, repairs: split a large cost into small amounts and put them aside each time.
4. Everything else, with a limit you choose.

You decide the amounts. They can start very small; the habit matters more than the size. If your income goes up and down, plan your needs on your lowest month, not your best.

Then use the trace: find your two biggest leaks and close one. The Financial Intelligence Track gives you a full tracking spreadsheet when you are ready for more detail.

Think about it: When money comes in, what happens to it first? Is that the order you would choose?

Try this week: On your next income day, set aside the amount you have decided first, before you spend anything else.

3. The prudent foresee

One more line protects every budget: being ready for trouble.

Proverbs 22:3 (KJV) 3 A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.

A prudent man foreseeth the evil, and hideth himself. He sees trouble coming and prepares; the simple pass on, and are punished. Illness, a lost job, a broken tool, a family emergency: none is certain in a given month, but over the years most of us meet them.

A reserve is money set aside only for emergencies. It is how a household stays out of panic borrowing when trouble comes.

• Build it slowly, a little each time money comes in.
• Keep it separate from everyday money, so you are not tempted to spend it.
• Use it for real emergencies only, and refill it afterwards.

Imagine a woman who sells clothes from a market stall. Before, every quiet month or sick child meant borrowing. Now a small envelope, filled a little each week, carries her through.

Think about it: If an emergency cost you a month's income tomorrow, what would you do?

Try this week: Choose a separate place for your reserve this week (an envelope, a separate account or wallet) and put something in it, however small.

Activities

Reflection

• What makes it hard for you to look closely at your money? What would change if you did?

Key takeaways

• A budget is a plan for money made before it arrives.
• Trace one week of spending before you change anything: needs, wants and leaks.
• Set aside first, then needs, then known costs, then everything else within a limit.
• Keep a separate reserve for emergencies, and close one leak at a time.

Your next step

You have finished Lesson 1. You are on the path of growth: your week of spending is being traced, and you know the four lines of a simple budget.

These lessons give you the everyday basics. To keep growing, KMA offers two next steps:

Mentorship. Grow with a KMA mentor who helps you apply these habits to your own situation and follows up with you on what you tried. See KMA's mentorship packages. See the mentorship packages

Or: the Financial Intelligence Track (monthly Learning membership). Prefer to learn on your own first? The Financial Intelligence Track goes further: the money mindset behind our habits, and debt management with a full tracking spreadsheet you keep. See the Financial Intelligence Track