Budgeting and the Bible
Practical Household Budgeting for Christian Families
The Biblical Case for Budgeting
“Know well the condition of your flocks, and give attention to your herds, for riches do not last forever”
-- Proverbs 27:23–24
Most of us no longer measure our wealth in sheep and goats, but Solomon's advice remains as practical today as it was three thousand years ago. An Israelite farmer needed to know the condition of his livestock, what they cost to maintain, and what they could reasonably be expected to produce. Neglecting these matters could result in the gradual depletion of the very resources upon which his family depended. The same principles apply to the resources entrusted to our households today, whether those resources consist of livestock, farmland, investment accounts, or an ordinary paycheck.
Scripture repeatedly commends thrift, preparation, and the preservation of productive resources. Proverbs 6:6–8 praises the ant for preparing its provisions in advance, while Proverbs 21:20 contrasts the wise man who retains valuable resources with the fool who consumes them. Joseph's administration of Egypt offers a particularly substantial example, as he preserved the abundance of seven prosperous years to provide for seven years of famine. These passages establish the importance of preparing for future obligations rather than consuming everything presently available. A household that consumes everything it produces will have very little available when the next opportunity or obligation arises.
The household itself should also be understood as an institution of productive activity. Adam was placed in the garden to “work it and keep it” (Genesis 2:15), establishing cultivation and preservation as responsibilities of mankind before the Fall. The household described in Proverbs 31 produces clothing, manages property, conducts commerce, and provides for its members. Modern households accomplish these things through employment, business ownership, investment, education, domestic labor, and numerous other productive activities. The household ought to cultivate its resources for the good of its members and the generations that follow.
The Westminster Larger Catechism, in its exposition of the eighth commandment, identifies among our duties a provident concern to acquire, preserve, use, and dispose of material resources appropriately. It commends diligence and frugality while condemning wastefulness and the improper use of wealth. Christians ought to seek the prudent administration of everything entrusted to them, employing their resources toward the responsibilities and productive activities of their calling. Household budgeting is one relatively simple means of fulfilling that responsibility.
What Is a Budget Actually For?
Most popular budgeting advice begins with some variation of the 50/30/20 rule. This method recommends allocating 50% of take-home income toward necessities, 30% toward discretionary wants, and 20% toward savings and debt repayment. It provides a useful starting point for someone who has never seriously evaluated their finances, but its simplicity also limits its usefulness. Household expenses do not necessarily increase proportionately with income, nor should they increase simply because a budgeting formula permits that additional spending.
Suppose your household brings home $8,000 per month and comfortably provides for your family's needs on $5,000. What purpose would be served by allocating another $1,400 toward consumption simply because your budgeting formula allows it? Conversely, a family bringing home $4,000 might already spend half its income securing adequate housing, leaving little opportunity to follow the prescribed percentages. Telling that family to spend a smaller percentage on housing does nothing to reduce its existing mortgage or rent. We must work with the financial circumstances households actually face, rather than those a budgeting formula assumes they ought to have.
Our agents and I regularly work with Reformed households across the country reviewing their income, ordinary expenditures, debts, insurance arrangements, and other financial commitments. Through these consultations, we have developed a useful understanding of what reasonably frugal households tend to spend on groceries, utilities, transportation, and other common expenses. We also have considerable experience identifying categories where spending is frequently underestimated or where meaningful savings may be available. These observations inform our recommendations, although every household has circumstances that deserve individual consideration.
We treat a household budget primarily as an auditing tool, not an instruction manual for spending. Our first objective is to determine where the money actually goes, whether those expenses are reasonable, and where opportunities exist to reduce unnecessary consumption. Once we have established an accurate picture of the household's finances, we can calculate its discretionary income. From there, we can begin making recommendations about savings, investments, additional debt repayment, charitable giving, and other productive uses of the available resources.
Ideally, we want to maximize that discretionary income as much as prudence permits. This does not mean eliminating every expense that is not strictly necessary for survival, as there are many worthwhile things that contribute to a household's well-being. Rather, we want to avoid consuming resources unnecessarily when they might be employed toward something more valuable. A good budget helps us distinguish between the expenses necessary to provide well for our families and those we might reasonably reduce.
Building an Accurate Household Budget
We generally begin with the household's normal monthly take-home income, meaning whatever remains after taxes and payroll deductions. From there, we account for the ordinary expenses necessary to operate the household, along with any existing financial obligations. When reviewing debts, we want the minimum required payments rather than whatever additional amount someone has chosen to pay. If a credit card requires $75 per month but the household voluntarily pays $300, we initially record the $75 obligation and consider the additional $225 separately. This allows us to distinguish between money the household is obligated to spend, and money it has chosen to employ for another purpose.
You will also notice that we do not include savings or investments as a category of household spending. If someone transfers $500 into a Roth IRA or $300 into a savings account, that money has not been consumed; it has simply been moved into another account or asset. We want to determine how much income the household has available before deciding how much of it should be saved, invested, or otherwise employed. Savings and investments are allocations of discretionary income, not ordinary household expenditures, and so they don't belong as line items on an expenses sheet.
Wherever possible, we also prefer actual spending records over estimates or envelopes. Bank and credit card statements will provide a more accurate picture of a household's finances than just attempting to recall what was spent over the previous few months and ballparking the figure. For certain expenses, particularly vehicle maintenance, we may recommend reviewing five years or more to account for substantial expenses that occur irregularly. Our objective is to establish a realistic monthly average, even when the underlying expenses do not occur every month.
We also try to keep our budgets reasonably simple. I have encountered budgeting systems with separate categories for virtually every conceivable purchase, which generally becomes more trouble than it is worth. There is little reason to maintain individual allowances for toothpaste, laundry detergent, socks, and every other household purchase. A budget should be detailed enough to explain where the money is going without becoming an additional administrative burden.
The screenshot above illustrates the general format we use when reviewing household spending with our clients. Some categories have fairly consistent benchmarks, while others vary substantially according to family size, geography, employment, and personal circumstances. The following recommendations are based primarily on what we have encountered in our actual consultations, rather than prescribed national averages. They are intended to provide reasonable expectations and help identify expenses that might deserve additional attention.
Housing and Utilities
Housing is ordinarily the largest expense in a household budget, and frequently one of the most difficult to change. Ideally, we would prefer that families spend less than 27% of their take-home income securing adequate shelter, with anything below one-third remaining a reasonable objective. This calculation includes mortgage or rent payments, property taxes, homeowners or renters insurance, and applicable homeowners association dues. Utilities and ordinary household maintenance are accounted for separately. The less a family can reasonably spend securing adequate shelter, the more financial flexibility it will retain.
Unfortunately, that is not the reality for many households. We regularly encounter families spending 40% to 50% of their take-home income on housing before paying their first utility bill. We can recommend spending less than one-third, but that does little to change a mortgage they have already signed or the rent they are currently paying. Oftentimes the most reasonable approach is to work around the existing obligation and consider whether a more affordable arrangement might become practical in the future. A household can have an expensive mortgage without necessarily having made an irresponsible decision, but a larger than necessary housing cost can seriously limit otherwise available income.
Utilities are similarly dependent upon circumstances largely outside the client's control. We commonly encounter combined expenses of approximately $300 to $350 per month for electricity, natural gas, water, and trash collection, with many households spending somewhat less. However, a family in Phoenix might spend $500 per month while operating efficiently, and a family in rural Arkansas with a private well and wood heat might spend less than $150. There is little value in holding these households to identical expectations when their circumstances are substantially different.
If someone's utility expenses appear unusually high for their area, we generally recommend investigating the cause. Poor insulation, inadequately sealed windows, an aging HVAC system, or an undetected water leak can all contribute to excessive bills. Sometimes a professional energy audit is worthwhile, particularly when electricity expenses are substantially higher than we would expect for a comparable household. Otherwise, most families we work with are already reasonably conscientious about their utility consumption, and there may be little opportunity for substantial reductions.
Groceries and Household Supplies
Groceries are one of the categories where we have a fairly consistent expectation as prices are somewhat more homogenous across the country (sans Alaska where some of our clients have to fly them in). Across the households we serve, we generally find that $200 to $250 per person per month is a reasonable benchmark, particularly for families who regularly cook at home and shop somewhat intentionally. Very young children may require considerably less, teenagers considerably more, and larger families can often benefit from purchasing in bulk. For a family with two parents and three children, we would initially expect approximately $1,000 to $1,250 per month, depending on the ages of the children and their particular needs.
We also include most ordinary household supplies in this category. If someone purchases laundry detergent, toiletries, cleaning supplies, or vitamins during a regular trip to the grocery store, there is little reason to divide those purchases among several different budget categories. The $200 to $250 benchmark accounts for these ordinary purchases alongside groceries. There are numerous opportunities to reduce expenses through meal planning, purchasing in bulk, reducing food waste, and choosing less expensive alternatives, although the time and effort required should be considered as well.
One recommendation I frequently make to larger families is to consider purchasing meat in bulk from a local farmer or butcher if they have sufficient freezer space. Rice, flour, and other staples can often be purchased in larger quantities at lower unit costs as well. Naturally, the actual price per unit should be compared before assuming that a larger purchase represents a better value, and ingredient quality also should not be overlooked for the sake of price.
Dining Out and Childcare
One expense I am generally reluctant to eliminate is the money a husband and wife spend dating one another. Whenever reasonably feasible, I recommend maintaining at least $120 per month for dining out, specifically so that married couples can continue spending time together. My somewhat tongue-in-cheek recommendation is that a husband ought to be able to take his wife somewhere with white tablecloths and candles at least once a month.
Continue to date your spouse, and account for those expenses in your household budget.
For families with young children, that may also mean paying for a babysitter, so we generally recommend allowing approximately $300 per month for date nights including childcare, when the household can comfortably afford it. Thankfully, many of the families we serve have relatives or friends who are happy to watch the children, which can reduce that expense considerably. Regardless of the arrangement, I encourage married couples to make a deliberate effort to preserve intentional time together.
John Calvin, in his Institutes of the Christian Religion (III.10.2), observes that God provided material goods for our enjoyment and delight as well as our necessity. Good food, recreation, hospitality, and the ordinary pleasures of family life are all reasonable things upon which to spend money. We ought to enjoy these blessings with gratitude, moderation, and proper regard for our other responsibilities. The purpose of financial discipline is to better provide for your household, including the things that make your household worth providing for.
Transportation
Transportation is another substantial expense for most households, particularly when multiple vehicles are necessary. Ideally, we recommend purchasing reliable used vehicles with cash, preferably something a few years old with plenty of useful life remaining. Financing a depreciating asset is generally something we prefer to avoid, although there are circumstances where a loan below approximately 6% might make financial sense. The interest rate is only one consideration, however, and favorable financing does not make an otherwise unaffordable vehicle affordable.
Of course, many clients already have vehicle payments when they come to us. It is not uncommon to encounter a car purchased within the previous year or two that is now worth less than the outstanding loan balance. Recommending that someone sell the vehicle and purchase something cheaper is not particularly helpful when doing so would require several thousand extra dollars just to satisfy the existing loan. Sometimes the appropriate recommendation is simply to keep the car, maintain it properly, and work around the payment until a better opportunity presents itself.
Vehicle maintenance is another expense that households frequently underestimate. When we review approximately five years of maintenance history, we generally find that ordinary repairs and maintenance average $100 to $110 per vehicle per month across a variety of makes, models, and ages. That includes tires, brakes, oil changes, spark plugs, and other routine work, although local conditions can certainly affect the results. A household might spend very little for several months before replacing tires and brakes in the same week, so we want to account for those costs even when they are not regular monthly payments.
For vehicle insurance, we commonly encounter premiums around $115 to $120 per month among clients with two paid-off vehicles worth approximately $5,000 to $15,000 each, two drivers with clean records, and relatively modest coverage. Depending on the state, premiums closer to $180 or $200 are not unusual either. Once a household begins spending substantially more than $200, we generally recommend comparing policies to determine whether similar coverage is available for less. Naturally, the appropriate amount of insurance depends upon the household's assets, liabilities, and other circumstances, so the cheapest policy is not necessarily the most prudent one.
Gasoline and diesel are somewhat different because most households have relatively little control over their necessary driving. If both parents commute an hour to work, I can tell them they are spending more at the pump than average, but that does not provide a solution. Purchasing another vehicle or changing employment could help, but that is a substantially larger decision. We generally use the household's actual historical spending and investigate further only when it seems unusual for their circumstances.
Cellular Service, Internet, and Digital Subscriptions
Cellular service is one of the more accessible opportunities for reducing household expenses, particularly when a family has been using the same provider for several years. We generally prefer to see phone service below $50 per line, and ideally closer to $15 or $20 when appropriate coverage is available. A husband and wife each spending $60 or $70 per month may find that another provider offers functionally comparable service at a substantially lower price. In many cases, switching carriers can produce meaningful savings without requiring significant changes to how the household uses its phones.
The same consideration applies to the phones themselves. Does the household genuinely benefit from purchasing the newest flagship phone every year or two, or would its existing devices accomplish everything necessary? There are certainly people who benefit from newer technology, particularly when their employment depends upon it, but most people can comfortably use the same phone for several years. Once a phone is paid off, continuing to use it is generally preferable to immediately assuming another monthly payment.
Home internet expenses depend considerably on the availability of competing providers. Some households have several companies offering service, while others have little alternative to the one provider serving their neighborhood. Where competition exists, it can be worthwhile to compare prices or contact the existing provider's customer retention department to request a lower rate. We have encountered opportunities to reduce internet bills from $70 or $80 to approximately $30 or $40 per month, sometimes without changing providers, but by taking whatever deal retention was willing to offer.
Digital subscriptions are another category where expenses can accumulate without much thought. Streaming services were initially attractive partly because they offered an inexpensive alternative to traditional cable television, yet it is now quite possible to spend just as much maintaining several streaming subscriptions. Most of our clients are spending $50 to $75 per month, and we begin looking more closely when someone spends $100 or more per month on digital services, although that figure is not an absolute ceiling. Professional software, cloud storage, and other useful subscriptions may justify higher expenses, particularly when they are necessary for someone's employment or business.
My general recommendation is simple: If you have not used a streaming service in the last two months, consider canceling it. If there is a particular television series you enjoy, subscribe when the new season becomes available, watch it, and cancel afterward. Even if the month-to-month subscription costs somewhat more than the equivalent monthly price of an annual plan, paying for two months instead of twelve will frequently save you money. The same principle applies to other digital services that can be canceled and resumed without substantial penalties.
Miscellaneous Spending
Miscellaneous spending is probably the category where we find the greatest discrepancy between what people believe they spend and what their financial records actually show. Most households will estimate approximately $150 to $200 per month for clothing, shoes, haircuts, hobbies, online purchases, and other irregular expenses. That is a reasonable starting expectation, but it is not always accurate. When clients request a more detailed review of their bank statements, we sometimes discover that they are actually spending $500 or $600 per month in this category.
There may not be anything particularly extravagant among those transactions. A few purchases from Amazon, some new shoes for the children, a haircut, and a handful of other ordinary purchases can accumulate surprisingly quickly. My recommendation is to begin by recording what you actually spend, even if that figure is substantially higher than you would prefer. You can subsequently decide to reduce it, but a budget that says you spend $200 when you consistently spend $500 is just a lie you tell yourself.
Other Household Expenses
Some categories vary too substantially between households to justify a particular monthly allowance. Private Christian school tuition, homeschooling expenses, regular childcare, martial arts lessons, and other activities may all provide meaningful benefits. A basic gym membership costing $30 per month is generally reasonable for someone who regularly uses it, while an expensive country club membership may be appropriate for a wealthy household that uses it for recreation or professional networking. A family struggling to meet its ordinary financial obligations, however, may need to reconsider paying for several children's music lessons and sports programs. An expense can be otherwise worthwhile without being actually affordable under the household's present circumstances.
Pet care and livestock expenses are similarly dependent upon the household. We generally include animal feed, litter, ordinary veterinary expenses, and other maintenance in this category, whether someone owns a cat or raises chickens for eggs. Having grown up on a ranch, I tend to approach this category with a relatively practical disposition, as we saved a lot in vet bills for the low cost of a .357 round and digging a hole. Animals ought to provide some meaningful benefit to the household, whether companionship, protection, work, or food, and their care should remain proportionate to that benefit. If a family raises chickens to save money on eggs, for example, it is worth comparing the cost of feed and supplies against what those eggs would otherwise cost at the grocery store to say nothing of the opportunity cost of the time commitment.
Healthcare and insurance are also categories where we generally just record existing obligations and only investigate anything that appears unusually expensive. Many households receive health insurance through their employers, with premiums already deducted from their paychecks, while others purchase coverage independently or participate in healthcare-sharing arrangements. Those arrangements can become complicated enough that we generally prefer referring clients to a qualified health insurance specialist when a review is warranted. Existing life insurance premiums receive similar treatment during the initial budgeting exercise, and we review and compare policies through our insurance brokerage during the consultation.
Charitable contributions, tithes, offerings, and gifts are generally combined into one category. Most of the Christian households we serve give regularly, and we want to account for those contributions accurately. Occasionally, we encounter families whose giving is to their own detriment, which may warrant a conversation about biblical increase, the tithe, and their other obligations. Those discussions require theological care, particularly since Scripture commands both generosity and provision for one's household. Our objective is to provide families with an accurate understanding of their finances, and what the bible says about them, so they can make informed decisions about their giving.
Finally, some expenses are too irregular to justify a dedicated monthly allocation. Families that take regular vacations or attend conferences every year should account for those costs, while those who travel only when finances permit can make those decisions from their available discretionary income. Major home repairs present a similar difficulty, since replacing a roof or HVAC system may cost several thousand dollars after years of relatively modest maintenance. We generally prefer maintaining adequate emergency reserves to cover these expenses rather than establishing a separate sinking fund for every conceivable irregular expense.
Maximizing Discretionary Income
Once we have accounted for the household's ordinary expenses and minimum debt obligations, we can calculate its discretionary income. This is the money remaining after the household has paid for its existing responsibilities and done it's normative spending. It is generally the figure we are most interested in improving, and we have historically averaged saving our clients $600 per month. We identify unnecessary spending, find opportunities for savings, and preserve as much income as reasonably possible for other purposes.
This is one of the reasons I dislike using fixed percentages for discretionary spending. A family earning $150,000 annually does not necessarily need to spend twice as much on groceries, transportation, and recreation as a family earning $75,000. They may reasonably choose to improve their standard of living, purchase a larger home, or enjoy more expensive hobbies, but those ought to be deliberate decisions. As their income increases, they should ordinarily have greater opportunities to save, invest, give generously, and provide for future generations. There is no particular virtue in spending more money simply because you have more of it.
Every expense also involves an opportunity cost. Spending an additional $500 per month on housing might provide a family with more space, but it also represents $6,000 annually that could have been directed toward investments, emergency reserves, charitable giving, or other worthwhile purposes. That larger home might be worth every penny, particularly for a family with several young children. What matters is that the household understands the cost and considers the benefit worthwhile, having also considered what those resources could accomplish elsewhere.
At the same time, there is little wisdom in accumulating substantial resources while neglecting the people and responsibilities for whose benefit those resources are being accumulated. Scripture commends preparation and diligence, but it also recognizes the enjoyment of one's labor as a gift from God (Ecclesiastes 5:18–19). A husband ought to take his wife on dates, children ought to have opportunities to develop their interests and abilities, and families ought to enjoy the blessings God has provided. We want to preserve resources for future needs while making reasonable use of them in the present.
What Should You Do With the Money That Remains?
Having established how much discretionary income the household actually has, we can begin deciding what to do with it. One of our first considerations is whether the family has sufficient liquid reserves to accommodate emergencies and interruptions in income. We generally recommend an emergency fund equivalent to three months of normal take-home pay, rounded up to the nearest $5,000, ordinarily held in a high-yield savings account. We also recommend a smaller buffer of approximately half a month's take-home pay for immediate liquidity needs, alongside maintaining one month's normal income, rounded up to the nearest $500, in checking at the beginning of each month.
Once those reserves have been established, we can consider additional debt repayment, investments, business opportunities, charitable giving, and other uses of the household's discretionary income. We generally favor addressing higher-interest debts first when accelerated repayment is appropriate, while recognizing that paying off inexpensive debt is not always the most productive use of available capital. The appropriate recommendation depends upon the household's interest rates, available liquidity, risk tolerance, financial objectives, and existing responsibilities. Those questions deserve their own consideration, and the budget gives us the information necessary to begin answering them.
The underlying objective is to cultivate the resources entrusted to our households and increase our capacity to accomplish the work God has given us. That includes adequately providing for our families, preparing for future obligations, building productive assets, and enjoying the blessings of our labor along the way. A household budget helps us understand what we are spending, what we might reasonably spend less on, and what remains available to employ toward those purposes.
A good budget should help you live well today while building something worthwhile for tomorrow.
Take Dominion Over Your Finances
If you are uncertain where your household's money is going, suspect that you are spending more than necessary, or would like assistance determining the best use of your discretionary income, we would be glad to help.
At Dominion, we work with families to review their existing finances, identify opportunities for improvement, and develop recommendations suited to their particular responsibilities and long-term objectives. Whether you are trying to reduce unnecessary expenses, establish emergency reserves, manage debt, or begin accumulating wealth for future generations, we can help you determine where to begin.
Schedule a free introductory overview and begin taking dominion over your finances.
Sources
The Holy Bible, English Standard Version. Crossway, 2016.
Calvin, John. Institutes of the Christian Religion. Book III, Chapter 10.
Westminster Assembly. The Westminster Larger Catechism. 1648, Questions 141–142.
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