Biblical Finance 101: Red Flags 5

Last month, I chased a “skinny rabbit” and now we’ll get back on track to finish the Red Flags to pending financial bondage. This red flag is pretty common and I suspect that as times roll along, it will become very extensive. Without adequate cash reserves, financial bondage is inevitable. Proverbs 21:20 says, “There is precious treasure and oil in the dwelling of the wise but a foolish man swallows it up.” Does your household consume every penny that comes in? Scripture says that one who does so is a fool. The wise person sets aside (saves) some of every paycheck. A cash reserve is the vehicle by which one gets weaned from and stays out of debt!

Every time a purchase is made with a credit card (debt), it is usually done for two reasons: convenience or lack of cash. All families will have unexpected expenses (OhNozs), sooner or later. If there is not sufficient cash to handle OhNozs, guess what happens? One whips out the plastic, a small payment gets added to an already tight budget, and the family adjusts. This scenario usually gets played over and over again, a term called “credit creep.” Unless professional help is sought, the problem gets too big for the family to handle…and you know the rest of the story.

The easiest way to create a cash reserve is to start a systematic savings plan with a per paycheck contribution and the amount needs to be as financially disruptive as possible. Proper budgeting and financial management will enable one to gradually increase this amount over time. If your financial problem is too big for you to visualize how this can work for you, then you need to seek professional counseling and guidance.

Gary Ellis, MBA, CFP
Association Stewardship Director