Episode 52 — Budgeting: The Key to Financial Peace and Generosity

Many people start budgeting when life forces them to — a new job, retirement, a growing family, or an unexpected financial challenge.

But budgeting isn’t just about reacting to life’s changes. It’s about living intentionally.

When we create a plan for our money and build margin into our finances, we gain the freedom to respond to whatever the Lord places in front of us.

In this episode of Catholic Money Talk, we explore how budgeting helps us move from simply getting by to managing our money with purpose, peace, and generosity.

Transcript

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Paul, Welcome to Catholic money talk, where we talk about all things money and finance, and we try to do it through a lens of being Catholic, where our ultimate goal is to one day be in Heaven with the Lord. I am your host. Paul Scarfone, thank you for being here today. Today, I want to talk about budgeting, but particularly when it's something new to us, because there's a change going on in our life. But before we do that, let's say a prayer in the name of the Father and of the Son of the Holy Spirit. Amen, Heavenly Father. We thank you for this day. We thank you for all the ways you love and bless us. Lord, Lord, whatever situation we're dealing with, whatever challenges that is in front of us, allow us to surrender it to you, Jesus, we trust you. Take care of everything. Fill us with hope, fill us with joy, fill us with peace. Come Holy Spirit. We ask all this in Jesus name, amen, in the name of the Father and of the Son of the Holy Spirit. Amen. So for today, I want to talk about, again, this perspective when we're starting a budget. Now, there are three stages of budgeting. We've spoke about this. The first stage is, we have no idea about anything, right? We have no idea how much money comes in. We have no idea how much money is we're spending. The third stage is, yeah, we have an idea. We kind of track things. And at the end of the month, we look back and we go, oh, this was a good month. Like, let's do this again. Or, Whoo, that was a bad month. We can't allow that to happen again. And then the third stage is, we make a plan, we stick to it, we inspect it as we go along through the month. We get to the end of the month, we make a new plan, we stick to it, we inspect it as we go along, right? So the first one is, I have no idea. Second one is, we kind of look back and grade how we did the third stage is, we create a plan, we stick to it, right? So someone's working with me, their goal is to get to that third stage. And that's what we kind of build the habits and behaviors for to create that behavior. So when we're starting to budget or trying to go from one stage to the third stage, right, it doesn't matter which one we can we can jump right to the third stage. We don't have to like move through this. But what happens is, there's certain fundamental things right that we've believed or we've allowed to influence and direct our behaviors, and we need to look at them differently. We need a paradigm shift. We need to be able to look at the situation differently. And sometimes there's, there's when people find me or they're Googling like, how do you start budgeting, or, How do I up my game with managing my finances? There's usually some transition or some life event that is happening. They graduated college, they got married, they're buying a home, they're having a child, they're retiring, whatever the situation might be, and we want to be able to figure out what is there a perspective we should have that maybe we're not looking at. So the one I want to look at today is when I was just walking some people through just last week, and that is like when we're entering retirement. So imagine, if you would a couple who has gone their whole life, they've never been budgeting. You know, they always had an idea of what they should or shouldn't be spending. They always lived on less than they make, right? So it's just that kind of like mental restriction, like, oh, we probably can't afford that. We're not going to do that. Which is, which is good to have, that's really good to have. You need to have stronger intentionality if you're trying to accelerate towards goals, but you can get through life just living on less than you make. And for some people, they kind of do that, but when they want to up their game, they get more intentional, right? They start creating a plan for the month and sticking to it. But there's plenty of people that make it through life just living on less than they make, living simply. These are, these are good character qualities. These are good things to have, but when you live on less than the make, and you've been working, and you can work more hours or get a bigger bonus or sell more things, or, you know, pay yourself more if you're self employed, whatever it might be, we, as particularly as guys, tend to think we can just go, you know, leave the cave, kill something, drag it back, go hunting again, right? And sometimes, when we just get used to life like that, just kind of going along, we're pretty comfortable with it, but when we get to a point where that changes. And so imagine a married couple, they're retiring, and all of a sudden, that flexibility they may have had an additional income at times is going to be permanently gone, right? They're now in Social Security. Maybe they have some type of pension. Maybe there's a nice nest egg. That they can draw down on if they need it, but it's a new moment for them to say, Wow, we can't tap the business, or we can't tap the, you know, extra sales commission or the annual bonus to catch some slack in our life like we used to, and so then we have to get a better process. We have to implement better behaviors, to be more intentional managing our money. And that's very, very important when we're retiring. That's a particularly important thing, to recognize that and see that. But it can also happen, if I probably share this story, one of my most fun clients I ever worked with, they had received an inheritance while one of them their their parent had passed away kind of suddenly, and they had left them as a beneficiary on their life insurance. And so they got this life insurance money, and they started spending it, and then quickly realized we should probably get someone to help us understand us understand this. And they came and found me and and we met, and it was really, really great. And what happened was quickly I recognized that they're spending after the inheritance. Their mind had kind of looked at that as we have got extra money, but it wasn't like they they they've got an increase in income for ever. It was just a few extra dollars came to them, which was beautiful, very beautiful legacy for their parents, who have left them the beneficiary on their life insurance. And so this is a really great blessing. And what happened was they recognized that if they lived, I'm going to make up some numbers here. Let's say it was $100,000 they received. If they started using $10,000 a month for the next 10 months, that would feel like a huge increase in lifestyle, right? We've spoken about lifestyle in the past, but they need to look at that is no right, if, really it should accelerate them towards their goals. Whether there's, you know, paying off debt or saving or investing, you know, if they're saving for a down payment, if they're saving for retirement, or maybe they're paying off student loan debt or paying off their mortgage, right, 100,000 boom falls in your lap. That should accelerate you towards your goals, it doesn't necessarily, can't increase your lifestyle, right? And sometimes, you know when you're retiring, you might have to shrink your lifestyle if your income is going down, right? If you're that could happen just within life, if you're changing jobs, right? And so having a good budgeting process, living on less than you make, but doing it very intentionally, budgeting, creating a plan, sticking to it. When these changes happen, it's much easier to adjust to it. So I'll share another little example. Recently talking to a friend, they were doing their taxes, and they seemed pretty just disappointed in the tax refund they were getting. And I was like, Dude, that's great to not get a big tax refund. That means you've had your money all year, right? Like, you don't want to get a huge tax refund from the government, because it's like you've been letting them use your money for free. And so when I why I said that to him, he looked at me, and he was like, No, you don't understand. Like, we count on that money. What do you mean? He's like, Well, every year we always get X amount. I forget the 7000 $8,000 every year we count on that. And this year, because of some some things, you know, certain adjustments, tax laws change our our life, our situations, change a little bit. Maybe what we're able to deduct or not, or different expenses, or a job change, and the withholding was different. And what happened was they got instead of, let's say, $7,000 of refund, they got 1000 and that felt like a tragedy to these people. I'm being a little exaggerating in My Word use of tragedy, but they were greatly disappointed. They thought they'd have 7000 Right? Which, again, if you're hoping additional money kind of comes in and cleans up whatever little mess we've created. And Taryn and I am raising my hand, we have been there where a tax refund or a bonus check comes in and tries to clean up the last few months of mess right before we kind of had our act together. We want to recognize that and say this is a moment where we need to change our perspective at how we're looking at things and up our game and how we're managing our finances. And we went on to have a little bit of a conversation, and they really were struggling with implementing a good process, and neither of them felt super gifted at Four. Figuring out the long term. It's just and we can be like that, right? Some of us in our situations in life, when Tara and I have been there, life can feel so desperate, like we're just trying to stay afloat. We feel like we don't have the luxury. I'm doing air quotes to spend time, to create a plan, to update a budget, to follow the budget. It just feels like we're on the beach just getting hammered, wave by wave by wave, and we just can't stand up. But what we have to do is understand we have to if you're listening to this and you think that you can't handle these constant financial waves that crash on you, medical bills, car repairs, home repairs, improvements, right? Appliances going on. You all these different things. If you feel like you just can't handle it, they just keep come crashing, crashing, crashing, stop for a second say, Do we have a plan where we're where we're properly handling these unexpected things? Are we? Is our budget built in a way that it's incorporating these recurring challenges into our life? A couple I was meeting with just recently, they have some savings. They haven't really been budgeting intentionally. They've always kind of known, you know, let's, let's not spend more than we're making. And, you know, if we need something, we can borrow, you know, take some money from savings or whatever. But they've always had this savings amount. When I was meeting with them, I said, Look, we can budget all your monthly income. We're going to create a budget all your monthly income. And we have to do that. First, we have to start to create a budget to understand what are the monthly expenses the household needs. And then we can determine how much of an emergency fund we need, which is going to be three to six months of expenses so if you go back to October 9, 2023 I talk about episode 29 emergency funds. So you want to have three to six months of emergency of your monthly expenses set aside as your emergency fund, not your monthly income, not three to six times of monthly income, three to six times of monthly expenses. And so what I was telling this couple is, let's first figure out what your monthly expenses are, and then we want to look at this money you have saved and carve out how much of it is emergency fund. So I'm going to make up numbers not to divulge my clients financial information, but let's just say they had $60,000 saved. And let's just say that three to six month of expenses for them was 30,000 right? So half of the money they have saved. So we 60,000 we take 30 we stick it over here. That's your emergency fund. The other 30,000 what is it? And their first response to me was, well, we'll just use that when we need money. I said, Yeah, that's not good enough, because what if we deplete that? And then what are we doing? We need money, right? We should have a We should call that what it is, right? So we could look at the remaining 30,000 and when I when, you know, part of their homework was, what are some of the things you need to save money for? Maybe there's a home improvement or maybe just a like, if your boiler goes or your water heater, right, furnace, something like that, right? So when I say home improvement, I'm not talking more of a project. I'm talking more of, you know, replacing something in the house. Maybe there's a Car Replacement, maybe there's kids college, maybe there's a wedding, maybe there's some vacation, trip, 50th anniversary, whatever, depending on your state and life. But what is that other money for? And then, you know, because some of those things aren't like buying a new car, or, you know, not necessarily a brand new car, but new to us. Car shouldn't feel like an emergency if we haven't been saving up for car and we need a car all of a sudden, yes, that might be an emergency. We spend, we take money out of emergency fund to make that happen, but then we have to stop and start putting every dollar we can back into the emergency fund to build it up, right? So certain things that might be longer term, that shouldn't surprise us would be things like replacing a dishwasher. Taryn and I just recently had to replace a dishwasher, or a, you know, refrigerator, some other appliance or like the utilities in the house, water heater, furnace, things like that, air conditioning, things like that, or major car repairs, tires, whatever they might be. We know some of those things are gonna be coming, a new roof every whatever 30 years. Like, if you know you're getting close that, start setting money aside for that, right? So you need to be intentional with your. Budget to grow savings, you always need to have savings in your budget. And so when you, when you when you're transitioning in life, having some transitional period, it's sometimes easy to feel like we're just in survival mode, and we're spending every dollar we have on the things that just seem to be flying into our face. And you know, might be, hey, I'm not going into debt. So we're doing okay, but we need to. We need to create more space in the budget for savings so that we're not the and not just savings for saving sake, but savings for things we know we're going to need in the future. We have to. It's so very important. And so if in your budgeting right now, you find yourself in that stage one where you're just, there is no budget. There's no idea, I have no idea how much money we're we're giving away, or how much money we're spending, or how much we're spending on groceries. Like, if you have no idea about that stuff you're in that first stage, you have to start doing this. If you're in the second stage, where you're just kind of every month, looking back and grading how the month went, start making a plan for the month, and then every week, when you update your your plan, yeah, tracking your expenses. Let that knowledge dictate your behavior and spending for the rest of the month. And if you're already doing that, but you're not saving money, you're going to have to go into your budget and shrink a few things to create space to save. You have to. You absolutely have to. Sometimes, if we're not saving it's because we don't have the right motivation. The motivation could be, we don't have any money. It'd be nice to have, like 10 grand just saved in case of an emergency. Let that start to be your motivation. Maybe you've got an emergency fund. You're just happy kind of spending. Well, why don't you start have a have a dream meeting. Why don't you set some goals. Sit down with your spouse and set some goals. Set some dreams, some big goals. Maybe we want to be more generous. Maybe we want to be able to help our kids with college. Maybe pay for a wedding. Maybe it's helping our grandkids. Maybe we want to buy a new car, buy a vacation home. Maybe we want to be able to help a friend or family member out with their finances, give them a gift. Maybe we want to donate something to our church or our faith community. But dream, pray, ask the Lord Holy Spirit inspire me. What do you want me to start saving for? What is something I should start saving for and create that space in your budget? It's one of the when I start working with people, I there's two forms I usually ask them for. The first is just your budget, your best guess, if you're not budgeting, if you are budgeting, great. Send me your budget so I can get a sense of where everything's going every month. And the second form I asked for is a personal financial statements, like a personal balance sheet, what do I have? What do I owe? Right? So it shows real estate, vehicles, cash, money, investments, right? All the assets I have, and that shows the liabilities, mortgage, car loans, student loans, credit card balances, whatever I might, you know, whatever the people might have, gives me a picture. So many times when I get those, the one the smallest things I see is the amount of savings that people are doing. Some of them feel like they've saved enough, which is great. But what's that used for? Give every dollar kind of a job, right? Which is great. You could have a savings account with a bunch of stuff in it, like the example I was just giving $60,000 30,000 emergency fund. What's the other 30,000 maybe 10,000 is car replacement fund. Maybe 10,000 is future home repairs. Maybe the other 10,000 is, you know, a mixture of that'll pay for car repairs, Christmas vacation, future kids wedding, you know, a wedding in the future for one of our kids, like, something like that. But give it all name, because then we'll look at it and go, Oh, we actually do need to save more for something else, right? And and you can always just, if you have nowhere to spend it, if you're already tithing and being generous, you've just got some extra money. It's not but you could pile it up and just say, Lord, we're going to save this money. Inspire us. Show us where you want us to use this? Maybe you'll be at church and some missionary will come and tell you about their mission, and you feel that tugging on your heart. Maybe you'll be at school pickup, and you hear one of the teachers is out of a vehicle, and they're trying to find a vehicle, and they. They don't know what to do. Or maybe you hear from a friend that someone's struggling to pay a certain medical bill or to buy medicine, right? And the Lord just kind of says, yeah, that money I had you saved, I want you to use it over here, right? But if we're not trying to put ourselves in those positions, that we can respond to the Lord, like, what are we doing? It's funny, just yesterday, yeah, it was yesterday. I'm thinking, like, was it yesterday? Yeah, just recently, make this a little more timeless, I was driving through the old neighborhood where I grew up, and I went down a kind of a off the main drag road to kind of cut through. And that road when I was a kid, to say 2025, years ago, had very modest homes on it. Now, these things are massive. These homes are massive. I don't know if they knocked it down and just built this huge thing, or it was just a massive addition that was thrown on this this house. And I was starting to think like there's no way the average family size in that town is greater than it was 25 or 30 years ago. There's no way people aren't getting married at the rate they were, they aren't having kids at the rate they were right. And this is, you go, you look up, you know, census statistics and stuff. These people, these houses, are massive. And I was just thinking like people, people are finances are tight, depending on, you know, the economy and the situation rates and this and that, and the other thing, inflation, these homes, these are 234,$100,000 probably even bigger. I'm not in the construction industry, but additions on these homes, it's just excessive. They probably didn't pay cash either. They probably got massive mortgages that they're just paying 1000s and 1000s of 1000s of dollars every month. But what it did to my did to me. I got me thinking, like these people are not putting themselves in a position to respond to the Lord, I'm not well, maybe I'm judging them a little bit. But like, it just doesn't make sense to me. Two, three people living in this house. It's just massive. What is our goal? I read a book earlier this year. A friend of mine gave it to me called unrepeatable, awesome, awesome book. It talked about how to cultivate the vocation in every person, and it reminded us that the our all of us have the same vocation, and that is to get to heaven. When God created us, He gave us our divine vocation, which is to get to heaven lived out, is going to look a little differently for all of us based on the gifts and talents that our Heavenly Father blessed us with. But in our vocation of trying to get to heaven, we need to be able to put ourselves in a position to respond to the Lord when He shows up in our lives. We want to be agile. We want to feel limber, particularly with our finances. So when the Lord shows up and says, Hey, I want you to go do this, we can go do it. We don't have to go first take care of well, Lord, that's awesome. Let me go, kind of get my financial house in order. No, let's start budgeting. Let's start creating a plan and sticking to it with the goal of creating space in that budget so that we can respond to Lord when He calls us, when he prompts us, that's what we have to do. That's what we're called to do. So that's what my challenge is for you today, budget. Get better at budgeting. Yes, if you're finding this podcast because you have are at a transition moment in life, and you're feeling the pinch, the squeeze, something's happened that you're like, I need to figure this out better. But if you're just listening to this and you're like, I think I'm pretty good, I'm going to challenge you. Get better at it. I think I'm pretty good at budgeting. I can still get better at it. Why? Because I want to put my family, Taryn and I, and our kids. I want to have us in a position that we can respond to the Lord. So that is my encouragement for you all today. Get better at budgeting. If you're not doing it, do it intentional on paper. Okay, it doesn't have to be physical paper. It can be a spreadsheet, it can be a budgeting app, but make a plan for the month. Check in weekly to make sure you're updating it and you're sticking to the plan and see it through. I hope this has been helpful. Today, thank you for joining me. God bless Thank you for listening to Catholic money talk. I hope you join us again next time, please click Subscribe in your podcast app to get notified of new episodes. God bless you and have a great day. You