by Crown Financial Ministries (http://crown.org/)

Although most American residents expect increases in energy costs with the coming of winter, dramatic increase above those anticipated have the ability to catch families off guard.

When energy costs increase dramatically, how do average American families cope with such potentially drastic lifestyle changes?

The answer is by budgeting and preparing for "emergencies" in advance.

Be prepared
The Scriptures encourage us to plan for the unexpected and equate planning with being wise. “Go to the ant, O sluggard, observe her ways and be wise, which, having no chief, officer or ruler, prepares her food in the summer and gathers her provision in the harvest” (Proverbs 6:6-8).

Unexpected expenses are not only bitter disappointments, but they can cause a painful realization if people do not have funds set aside to cover the expenses. Even if some surplus has been set aside, there is little escape from personal or family difficulties that result from unexpected expenses, such as dramatic energy price increases.

When there are crises or unexpected expenses, much frustration can be avoided if a contingency fund has been established to help absorb the distress of the crisis.

This type of fund is not long-range savings for college or retirement; it is nonallocated, short-term emergency savings. Without this type of emergency reserve fund, borrowing would be a foregone conclusion, the use of credit would become a lifelong necessity, and debt would be a way of life. “The rich rules over the poor, and the borrower becomes the lender’s slave” (Proverbs 22:7).

The common attitude presented in the Bible is to save on a regular basis. Therefore, it is important that Christians develop good habits to replace bad habits. “There is precious treasure and oil in the dwelling of the wise, but a foolish man swallows it up” (Proverbs 21:20).

The discipline it takes to save on a consistent basis can be very difficult, but laying this foundation is vitally important. If it can be managed, emergency reserve funds can give families the ability to absorb financial shock when they find themselves facing unexpected expenses.

Every family should allocate a percentage of its income to emergency savings. Everyone in our society living above the poverty level has the capability to save money; yet many fail to do so because they believe that the amount they can save is so small it is meaningless.

No amount is insignificant. Even $5 per month will add up.

Families need to work toward setting aside an amount equal to three to six months’ salary for emergency savings, for those who have a steady income; for those who have a fluctuating or seasonal income, six months’ salary is best.

Establish a budget
Although establishing an emergency reserve fund is absolutely mandatory to safeguard against potentially financially devastating emergency expenditures, the emergency reserve fund should be only a part of a more specified family budget.

Simply put, a budget is a written guide that divides household incomes into expenditure categories and determines what percent of families” Net Spendable Income—income after tithes and taxes have been deducted—should be spent for items in a particular category. The category percentages should be tailored to meet individual or family needs.

The bottom line, regardless of annual income, is to make sure that all percentages in all categories combined total 100 percent and that spending does not exceed income.

Getting started
Before developing a budget, it is necessary to assess where the household money is going, so it may be helpful to keep diaries of every expenditure for the next 30 days, no matter how small.

Divide the diaries into basic categories of a budget: Housing, Automobiles, Clothing, Food, Entertainment, and the rest. Anything that does not fit logically into one of those categories is Miscellaneous.

By the end of the month you will know how much is spent in each category.

Then put into envelopes the money you have set aside from one pay-period to the next for spending in each category, based on the previous 30-day period. When you run out of money in a particular envelope, spend no more.

Use only the money in the envelopes and put the change back that you do not use. Then, as you spend it, write on the envelope where your money went.

This will enable you to determine whether enough or too much is being allocated to each category, and you can make adjustments. Spend, based on the budgeted amount, not on what is in your checking account. “Know well the condition of your flocks, and pay attention to your herds” (Proverbs 27:23).

A primary goal in establishing a budget should be to establish it based on the husband’s income only, because too many times the wife’s income is interrupted by illness, pregnancy, or a change in the husband’s employment location. The wife’s income could be applied to one-time purchases only, such as vacations, furniture, cars, or to savings or debt reduction.

If families are accustomed to a lifestyle based on two incomes, establishing a budget based on one may be very difficult and may involve strict discipline. However, if couples pray and seek God’s wisdom and direction ahead of time, they can perhaps avoid the problems that arise with a change in income. “The mind of man plans his way, but the Lord directs his steps” (Proverbs 16:9).

Although very little can be done when price increases beyond our control threaten our accustomed standard of living, we can ease the trauma of those potentially devastating and unexpected occurrences by developing a household budget that incorporates emergency reserve funds. Then faithfully stick to that budget, regardless of circumstances.