Variable Income Budgeting

Many people are using the FaithFi app to help provide the wisdom, community, and money management to stay on track, financially speaking. To date, over 37,000 members are using its digital envelope system, participating in our community forums, and engaging in virtual workshops. And one of the most convenient features is the ability to keep all your accounts in one place for an easy-at-a-glance view. You can choose from one of three options, depending on your management style, and it's available on desktop or mobile.

Go to faithfi.com and click App to get started. So why don't budgets like trampolines? Well, it's because they can't stand the ups and downs. I'm Rob West. Getting aside, if your income goes up and down, you might find budgeting a bit more challenging. You need a variable income budget. I'll walk you through the process today, and then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Okay, if you're self-employed, a contractor or small business owner, you know there are months where your income is good, maybe even great. But other months are slow, and you might not meet expenses. You have variable income, so you need a variable income budget. Now, in one respect, all budgets are the same. They simply lay out how much you'll spend each month and where. But with variable income, setting up that budget requires a few extra steps.

But it's not difficult. So you start with what you know. Go back and look at what was your monthly income for the last six months at least. Twelve would be better. Total it up. Then simply divide the total by the number of months. That's the average monthly amount you can reasonably expect to earn. Then draw up your budget using that figure as your monthly income.

Again, some months it will be more, some less. In the months where you earn more, keep the excess in savings to fund the lean months. This is really the critical part of the variable income budget. You must stick to your spending limits even when you have money left over at the end of the month.

In that respect, it's really no different than when you have consistent income. Those months with extra income above your budgeted amount then go into savings to be drawn on in the lean months when your income falls below the budgeted amount. A good way to manage this cash flow is to have all of your income go into savings and then setting up an automatic transfer of your budgeted amount and only that amount from savings to checking. You then spend only from checking and only on budgeted expenses. When you first start this process you may be off a bit, so keep track of your spending and reassess your income every six months. You'll have to adjust your spending as you get a better picture of your average income over time. And that's how you budget on a variable income. Now the method you choose to draw up your spending plan is up to you. You can use pencil and paper or you can take a digital approach and for that we highly recommend the Faithfi app. It's simple to use and a powerful tool for setting up a budget.

Get it wherever you get your apps. Now here are a few general tips for setting up your budget, whether your income is variable or consistent. Start by tracking your spending for 30 days. Capture every expense no matter how small. Then think about the non-recurring expenses and add them in with a monthly amount needed to have what's necessary when that expense rolls around. For example, if you have an annual HOA fee, put one twelfth of that amount in your budget each month. The same for your Christmas fund. Then take your 30 days of actual spending plus the non-recurring expenses I just mentioned and build a budget by category.

Again, the Faithfi app will make this quick and easy for you. Once you take a first pass, you'll need to bring the budget in line with your income. And make sure that your spending reflects your goals and priorities.

If it doesn't, that's where you need to start trimming and making changes. By the way, if you choose to use the Faithfi app, you'll find its envelope system particularly helpful for controlling the flow of money in your discretionary categories, which are typically budget busters because they vary from month to month. These are things like eating out, shopping for clothes, maybe it's your gifts or entertainment and so on. And just in case you're thinking this is all too much trouble and you don't really need a budget, experience tells us otherwise. Living on a budget is critical because otherwise it's nearly impossible to spend less than you earn. And spending less than you earn is key to every financial success. It's the foundation that everything else is built upon. Without it, you can't stay out of debt and get ahead. A better term than budget might be spending plan.

It's a way to oversee the flow of money in and out of your accounts and give each dollar a function. You can't maximize your giving and saving without a spending plan. And as stewards of God's resources, we have a responsibility to be good stewards. This applies to everyone, whether you make a little or a lot. It's imperative for Christians to wisely manage the resources God gives us. Proverbs 27, 23 reads, know well the condition of your flocks and give attention to your herds.

For us, that means knowing how much we have coming in and going out and where those monies will be directed. All right, again, if you want to check out the Faithfi app, head to faithfi.com and click app or head to your app store and search for Faithfi. Your calls are next, 800-525-7000.

We'll be right back. Like-minded believers where you can ask questions, get answers and share what you're learning. Go to faithfi.com and click the word app to get started. Paying too much for health insurance, frustrated by high deductibles and increasing premiums?

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That's chministries.org slash faithfi. Hey, great to have you with us today on faith and finance for taking your calls and questions today. 800-525-7000. I've got one line open. We'd love to hear from you today. 800-525-7000. Let's dive in. We're going to begin today in Texas. Hi, Alex.

How can I help you? So my question for you is me and my wife are looking to try and make a budget. We actually, we just are not able to use Mint, which is an app that we used for years. And we are considering using the envelope system where we can just do everything cash. So that we can track it real time and that we don't have to worry about going over overspending.

I just wanted to hear your thoughts on that compared to other budgeting methods that you've used, like using a sheet or maybe using an app or something like that. Yeah, I like that a lot, Alex. You know, I prefer the envelope system.

You know, here's the thing. You've got to find the system that works for you. And the system that's the one that you will continue to use into the future is going to be the best option. Now, typically with a husband and wife, one tends to be more hands on, one more hands off. One might be the more detailed administrative type, the other not so much. And so the key is to find a system that works for you. One of the things we did when we built the Faithfi app is we recognize that people have different approaches. So there's actually three money management systems in one.

You choose the one that best fits your personality. So we've got the track only option where you actually just look at similar to meant where you're just seeing all the transactions come in. You securely connect all your bank and checking and savings accounts. And then as those transactions come in, they're categorized just so you can see, hey, how are we doing in this category or that category? It's the most hands off approach where you're just kind of watching it. Then the middle of the road is plan and track where you set a budget and then you track against it. That'd probably be, again, like meant where you're seeing based on the plan, here's what I'd like to spend, how did I do?

And you're just kind of comparing the two. The most hands on approach is the third option. And that's what I use, again, inside the Faithfi app. And it's our envelope system where you actually go in and through the onboarding process, you'll create all your digital envelopes. You'll create a plan which you can update month to month because some months might have a different plan than another.

You know you're going to have a bigger expense here or you're going to get a little extra income or a bonus. You create the plan and unless you tell it to, it'll just automatically roll over to the next month. And then as your transactions come in, the system learns what transactions go into what envelopes and you can override that. And then at any point in the month, you can say, OK, what's left in this envelope?

What's left in that envelope? You can carry balances over month to month, like with my vacation envelope. I'm building it up over time and then I'm using it all at once. You can even transfer between envelopes if you went over in one and you're a little under in another. You could transfer from one to another. So it's the system that I like the best.

Larry Burkett popularized that in the 70s and 80s with physical envelopes. This is just kind of a modern, beautiful expression of that on your smartphone. So I'd love for you to check it out. And if you'd like, Alex, I'd be happy to have one of our certified Christian financial counselors help you and your wife get it set up, help you understand the best way to use it based on your personalities, if that would be of interest to you.

Yeah, it definitely would. And it's kind of crazy. I've been praying since I lost that Mint app. Lord, how do I, what am I supposed to do with my budgeting?

How am I supposed to manage my finances now that our system that we have is just messed up? So I definitely think that this call is definitely an answer to prayer. So God bless you guys. Thank you so much. I'll be very, very interested in talking to somebody. Awesome.

So let's do this. You can go ahead and download it today if you want to get started. You just go to your app store, search for Faith Fi, Faith F-I, and you can get it downloaded. We just came out with Faith Fi 4.0 this week. You'll love it.

It has a lot of new features. And then if you stay on the line, our team will get your information and we'll get one of our certified Christian financial counselors in touch with you, somebody who specializes in the app and can answer any questions you have. Okay? Sounds great. Thank you so much, sir. Absolutely, Alex. Stay on the line. Let's go to Oregon. Hi, Lynn.

How can I help? I have a 403b, among other things, in their CD. I'm buying a piece of land and I need to take about $55,000 out of that Roth account. It's a Roth account. I have to take $55,000 out of it to pay for that piece of land. The money that I would like to take that's not already in stock would be a CD that matures. I do have some cash in there. Can I take, I think they call it an IRA rollover, can I temporarily take $55,000 out of there until the CD matures and then pay it back?

Yeah, probably not, but let me just clarify a couple of things. Did you say this money is currently in a 403b or is it currently in an IRA because you rolled it from a 403b to your IRA? It is actually, it is a Roth account. It wasn't a 403b.

I misspoke. Okay, so it was a Roth IRA? Yeah, it's just a Roth account that I've been putting into over the years.

Okay, alright. And so you can't borrow from an IRA, traditional or Roth. The only thing you could do would be to take a distribution and you'd have 60 days to get it back in there.

And so if you, after 60 days, it's going to be considered a distribution and in the event of a traditional IRA, it would be taxable to you. Are you over 59 and a half, Lynn? Yes. You are? Okay, so you would actually be able to pull that money, has that Roth, that's been open more than five years, right?

Yes. Okay, so you could take the money out of the Roth and you would not have to pay tax on it because it's been open five years, you're over 59 and a half, so that money is available to you, but you couldn't borrow it and put it back in unless you did it within 60 days. It would actually be a permanent distribution, so that money's not going back in there when those CDs come due. So you might be better off looking at breaking the CDs and finding out what the penalty will be because it may not be bad and that way you can leave the money in the Roth and let it continue to grow. Let's go to Pennsylvania.

Hi, Ellen, go ahead. Hi, my brother and I were talking, he's 66 and plans to work till he's 70 and wants to be able to save in some kind of fund, like after he's gone, to help his adult autistic son. He's in like a group home, like a dorm building. So the best way to do that, I mean, there's something called an ABLE account, A-B-L-E, which is very easy to set up, very low cost. The problem is you're going to run into the limits on that pretty quickly and if it needs to last him the rest of his life, you may not be able to put enough in there. And so that then involves something a little more complicated and costly but will serve him well, which is a special needs trust and you'd want to go to an attorney who specializes in this area. Your brother would set it up or the two of you, you'd fund it with either cash or assets or investments or whatever it is. The individual with the special needs, his adult son would be named as the beneficiary and then one of the key features is that it's structured in a way that preserves the beneficiary's eligibility for means-tested government benefits. So it keeps the trust assets separate from his son's own assets. It limits the control and, you know, his control over the trust, but it doesn't count as a resource for the purposes of determining eligibility for benefits like Medicaid and SSI. So it's a complicated process.

It's going to be, you know, it's going to probably cost you a few thousand dollars, but it'll set him up so that when you and your brother are gone, his son will have the assets he needs once it's funded and it'll work well with the government assistance that will be available. Does that make sense? Great. Yep. That's what we were wanting.

So it's called a special needs trust and you're going to want to connect with an estate attorney to get that drawn up. Thank you for calling, Ellen. We appreciate it. All right.

All the lines are full. I've got questions waiting. I'll get to those in our final segment.

A quick break back with your questions right after this. Stay with us. Financial fear is real, but so is God's promise to provide at faith by we know the daily stress of money can overwhelm your heart. But Jesus reminds us to look at the birds of the air.

They don't worry. And yet our Heavenly Father feeds them in look at the sparrows, a 21 day devotional. You'll find peace by focusing on God's faithfulness as you discover how to overcome financial anxiety with faith. Visit faith by dot com slash sparrows and begin your journey with look at the sparrows today. Faith and finance is grateful for support from Sound Mind Investing. For more than 30 years, they've offered financial wisdom for living well. SMI provides step by step guidance for do it yourself investors from those just getting started to those getting ready for retirement. More information, including the short video webinar on profit and peace of mind, no matter what's happening in the market, is available at sound mind investing dot org. Great to have you with us today on faith and finance. I'm Rob West. We're taking your calls and questions today at eight hundred five two five seven thousand.

That's eight hundred five two five seven thousand. We'd love to hear from you with whatever is on your mind and your financial life today. A couple of email questions. These come into us regularly at Ask Rob at faith by dot com.

We try to get a few of them on the broadcast each day when we have an opportunity. This first one comes from Brian. He writes, I've read Ron Blues splitting errors. And let me just pause right there and say that I think this is the best book on wealth transfer from a biblical perspective. When we talk about wealth transfer, not the the actual legal side of it, the you know, the ins and outs of trusts and wills and estates and so forth. But all of the decisions that have to be made prior to putting those documents in place, how much to leave to the kids. And, you know, what do you do when you have one child who's not following the Lord? And, you know, just all these things around family communication and, you know, what do you tell the kids and errors ahead of time?

And what does that family meeting look like? All of this and so much more is covered in this book splitting errors from Ron Blue. You can pick it up wherever you buy books. All right, back to Brian's question.

I've read Ron Blues splitting errors. And I was wondering if you could recommend any other resources I can study to prepare to talk with my adult children about God's will and the estate plan I've set up. And Brian, it's a great question. There is kind of a next step to that, among other resources. One I might suggest is a book that you'll find, again, wherever you buy books, including Amazon and others, called Create a Thriving Family Legacy. And it's by my friend, Jeff Rogers, who's a certified kingdom advisor in Florida. Again, that book, Create a Thriving Family Legacy. And there's a chapter in there specifically called How Much is Enough? And it addresses the question of how much money is appropriate to leave to your children.

Ron Blue, in fact, wrote the forward to it. But he also has in the book an intentional plan for a lasting legacy. So it really does walk you through how do you pass values and virtues and guiding principles to the next generation? How do you share your wisdom before wealth with your children and grandchildren and really gives you a detailed approach to seeing all of that transfer, not just your valuables, but your values.

And I would submit that's the most important part. So check out this book, Create a Thriving Family Legacy. All right, this one comes from Steve. He says, On your program, someone mentioned that a wife, a spouse, could receive half of her husband's Social Security. How does that work?

And does it relate to our ages? Well, yes, your wife can receive, and a spouse, you know, husband or wife, who's non-working, can receive up to one half of the spouse's, the working spouse's Social Security benefit. This is appropriately called the spousal benefit. So to qualify, you have to be married to someone eligible for Social Security benefits, generally for a year or more. You have to be at least 62, although claiming it at that age will permanently reduce your benefit compared to waiting to full retirement age. So I mentioned you can get up to 50% and then it comes down from there for every year you take it prior to full retirement age and that reduction is again permanent and will apply to your retirement benefits if you take them later. Now, if you're divorced, you can still qualify for spousal benefits based on your ex-spouse's record if you were married for at least 10 years, you're currently unmarried, and your ex-spouse is eligible for Social Security benefits, regardless of whether your spouse is taking those benefits.

So something that's often misunderstood, but could be a great blessing for someone who doesn't have the work record to get their own benefits, but can enjoy a spousal benefit. So really, really good to know. All right, let's head back to the phones to Louisiana.

Hi, Isaiah. Thanks for calling. Go ahead. Hi, so I had a question regarding my, I have some credit card debt that I accumulated, and it's around seven or $8,000. And basically, I will be moving and leaving my current job where I have a 401k about the same amount as my credit card debt. And I know that if you take out that 401k early, it will have some stipulations. And obviously, I will be, you know, taxed on that and everything like that. And I was wondering, would it be a right move to basically use that 401k whenever I do get it to pay off that credit card debt or if you have like, any things on that? Yeah, I have a better option for you, Isaiah. I love the fact that you have that 401k money.

I do agree with you. Let's try to get rid of that credit card debt as soon as you can. But the 401k is really not the place to go to pay that off.

And for two reasons, number three reasons. Number one, it's expensive money. You're going to it's all going to be taxable to you on top of the fact that you're going to have a 10% penalty when you take it out.

So let's say at a starting point at a minimum, that's probably 32% right off the top, that's going to be paid to the IRS when you pull that out. Second reason is that money is no longer available to compound and grow for your future. And when we look long term, you know, that is going to be a real benefit to you and you want to continue to fund that over time. The third reason is and this is a big one is I really want you to fix what got you into that credit card debt in the first place. And my experience and the studies say that if you come in and just wipe it out with kind of a quick fix, and that's what I would see pulling the money from the 401k to pay it off being, it just doesn't involve you changing your habits, dialing in your lifestyle spending, which is probably what got you into the credit card debt in the first place, spending beyond your means. And so I'd rather you take a more systematic approach to budgeting that allows you to pay this off quicker, but rights the ship, if you will, with regard to just your disciplines and your habits of money management. And so what I recommend is what's called debt management.

Our friends at Christian credit counselors.org can help with this. They're going to get that interest rate down. They'll probably in some cases even cut those interest rates in half or more. You're going to make one level monthly payment to them. And with the combination of the level monthly payment every month and the lower interest rates, you're going to pay it off 80 percent faster.

But they're going to help you work on your budget and get your spending in line, which I think is going to lead to a long term fix and change for you. So just go to Christian credit counselors.org. Well, folks, we are about out of time today.

You know what? As we step back, everything we do here at FaithFi is pointed in the direction of you seeing and I seeing God as our ultimate treasure. We want to be about kingdom building activities. We want to handle God's money in a way that it's evident that God is our ultimate treasure and not the things of this world. We don't want to build up those 10 story idols that King Nebuchadnezzar asked Shadrach, Meshach and Abednego to bow down to.

We only want to worship the one true God. And that means holding God's money loosely, seeing it as a tool to accomplish God's purposes. Let's look for ways not just to give a death. How can we give right now? Setting a financial finish line and participating in God's activity. Think about that.

Pray about it. Come back and join us tomorrow. Thank you to Gabby T., Dan, Amy and Jim. Couldn't do it without them. We'll see you next time. Bye bye. Faith and Finance is provided by FaithFi and listeners like you.