Avoiding a Cash-Flow Crisis

Here is a lesson in personal finances from the business world. Today, the economy is scary. Businesses are failing all around us. The story usually goes something like this: the company leadership decides to spend the profits and then borrow money to expand operations, expands too quickly, a negative event happens in the marketplace, cash flow dries up, the business finds itself in crisis, and to “fix” the problem, declares bankruptcy. The business model was flawed because it was operating too close to the edge-the plan was too optimistic. Perhaps a better way to plan for surprises is to assume income will be 20% less than expected and expenses will be 20% more. The Bible warns us about overspending in Proverbs 21:20:

“There is precious treasure and oil in the dwelling of the wise, but a foolish man swallows it up.”

Practical Help

When it comes to improving cash flow, there are only two choices: increase income or decrease spending. Let’s take a look at managing spending by studying how most people get overextended (and the results):

1. We desire things that we do not need and are not the will of God.
2. We are deceived by the desire for what we want and that we must have it now. (Since it’s easy to get credit, it must be easy to repay.)
3. We doubt that God could provide for us in our need.
4. We make a decision to purchase something that we’re going to struggle to pay for. (Surely we’ll have a “breakthrough” in our income soon.)
5. We delay or default on payments.
6. We find ourselves disobedient to God.
7. We damage our witness for Christ.

 

It’s interesting to note that most of the time when the Bible is talking about debt, it’s talking about financial bondage. Scripture doesn’t prohibit debt. It does, however, warn us to be extremely careful when borrowing. When you see the steps above happening in your own life – run! The Bible says it like this: “a prudent man sees evil and hides himself, the naïve proceed and pay the penalty.” (Prov 27:12) God’s Word is full of advice for managing money. Unless we have the power of Christ in our lives, however, we will not have the power to implement these principles.

Some notes from “Money Matters in Hard Times” by B. Keith Moore. For information on “Smart Giving” visit Stewardship.