Do you ever see a friend in need and wish you could help, or desire to give to charity but your bank account is empty and your wallet’s hunger pangs are getting louder every day?
In today’s world our money seems to slip away before we know it. We make frequent impulse purchases at a favorite retailer and justify it by telling ourselves that we have earned a treat, or that we just can’t resist this deal.
Or we stay up late shopping or gaming online, then oversleep in the morning, so instead of enjoying breakfast at home and packing a healthy lunch, we grab a coffee and doughnut, then for lunch a burger and fries. The money is gone, and soon our health will follow.
Living this way does more than damage our bodies and bank accounts. It focuses our attention on material things instead of our spiritual well-being, and deprives us of opportunities to be charitable.
The importance of charity in Islam cannot be understated. Caring for orphans, widows, the poor and those in hardship has tremendous value in building a better world and more just society. It also invites powerful spiritual rewards from the All-Merciful. Charity is so important that our financial lives need to reflect this priority.
But how do we make that happen? How can a person who is barely able to pay the bills every month save enough money to be able to give charity?
A personal budget is the first step.
“Take benefit of five before five: Your youth before your old age, your health before your sickness, your wealth before your poverty, your free time before you are preoccupied, and your life before your death” – Narrated by Ibn Abbas and reported by Al Hakim
By creating a personal budget, we can track our personal spending and better control our finances. This allows us to move into a better position to afford to pay zakat and sadaqa, and give generously when our family, friends and neighbors need help. Of course, creating a personal budget also gives one the opportunity to allocate funds for new clothing, save for a vacation or make additional payments on debts.
Creating a personal budget:
1. First calculate what you have in the bank and what your weekly or monthly income is.
2. Next, calculate all of your expenses. You may need to collect and print out bank and credit card statements, receipts for anything you pay cash for, student loan statements and mortgage or rental receipts. How much have you spent on eating out, shopping for clothes, books, entertainment, gifts and personal care such as going to the salon? Some expenses occur only a few times a year, like insurance payments or vacations. Be sure to add the annual sum of these amounts, divide by twelve, and include that figure in your monthly expenses.
3. Now calculate your absolute minimum expenses; what you must have to survive. For example:
- Rent or mortgage payment
- Grocery and household expenses
- Utility bills
- Car maintenance, payment, gas and insurance
- Student loan or other loan payments
- School tuition and supplies if you or your children are in school
4. How much are you spending on non-essential purchases? For example, recreational activities such as dining out, going to movies, and electronics; gifts for weddings, birthdays and holidays; the cost of upgrading to a new phone whenever one comes out, in-app purchases and other online shopping.
5. Finish calculating and compare what you earn, what you spend, your basic living requirements, and your non-essential spending. Now you can create a budget.
6. How much is in your discretionary fund? The amount of income left over after your basic needs are covered is your discretionary fund. Your discretionary fund can grow if you reduce your basic living expenses by:
- Planning out your weekly meals and shopping accordingly
- Dining at home more often
- Setting aside a little bit each month for gifts
- Upgrading your phone only when the old one needs to be replaced
- Shopping for new shoes and clothes only when the old ones no longer fit or have worn out
- Moving to a cheaper apartment
- Shopping around for cheaper options and sales before making necessary purchases
- Taking advantage of nature walks, free museum days, libraries and other free and low-cost sources of enjoyment
7. With the amount of money in your discretionary fund, first set aside amounts for debt elimination, sadaqa and savings. Paying down your debt gives you greater financial freedom, giving to charity expresses your gratitude for God’s blessings, and saving lays the foundation for a stable future. You may also use this opportunity to decide how much you can put into a retirement fund. Subtract these amounts from your discretionary fund.
“And do not make your hand [as] chained to your neck or extend it completely and [thereby] become blamed and insolvent.” Quran 17:29
8. Plan for emergencies by setting aside something every month for those unpleasant surprises that life gives us at times. If your car breaks down or your microwave puts on a fireworks display, you will be ready.
9. With the remaining amount in your discretionary fund, decide what extras you will allow yourself every month. Maybe your streaming video service is a source of inexpensive entertainment, so that can go into the budget. If a monthly massage, pizza night with the family, or manicure helps you feel sane and your budget can handle it, add that in. Having a budget means you can enjoy life within your priorities without breaking the bank.
10. Now make a commitment to follow your budget. Commitment to your budget is how you can live a financially responsible and less stressful.
When you create a personal budget, you are making the decision to live a financially responsible lifestyle that reflects your priorities. Now you will have money to buy a bag of groceries for a friend who just lost his job, give a generous gift to a young person starting college, sponsor an orphan or help build a mosque. Instead of watching your money slip away, you can enjoy the important things in life, prepare for the future and receive the rewards that come from generously sharing what you have with those in need.