You’ve said in the past that your “guideline budget” for insurance is only 3% of gross income. Our family spends substantially more than that. We’re wondering why your percentage is so low — and what we might be doing wrong.

The most important thing to remember about our guideline budget is that it should be used as a guide. Each family will have differing circumstances, and should go about developing a financial plan that meets its particular needs.

Certainly, there are principles inherent in our guideline budget that do apply universally, including giving to God first, living within your means, avoiding debt and prioritizing your spending in a manner consistent with your faith. But you may find that you need to spend more money in a particular category than our guideline budget provides for, which is fine. The key will be to offset any spending increase with a reduction in spending in another category so that your budget still balances.

Our guideline budget of 3% of gross income for insurance is meant to cover the cost of policies for life and disability insurance. We make an assumption that you have health insurance provided for you by your employer at either no cost or with a minor sharing in the monthly premium. (Remember that here we are talking only about the insurance cost and not the actual medical bills or co-pay charges related to medical bills).

If you are self-employed, or your employer does not provide health insurance coverage, you will need to increase the portion of your budget allocated to insurance by a fairly substantial amount. This will be a tremendous challenge for families with average incomes. When you combine the cost of health insurance for a whole family, life insurance, and disability insurance, you could easily have the cost approaching or exceeding 10% of your gross income.

In most cases, this will be unworkable, and you’ll have to search for ways to minimize your insurance cost. This may include purchasing policies with lower benefits, higher deductibles or a combination of the two. Most families will be better off purchasing term life insurance, which offers the greatest level of insurance for the least cost.

It may also mean reviewing the status of your career. If you are self-employed and you could otherwise find a job that pays the same as your gross income, but also offers benefits such as health insurance, it may be wise to consider changing jobs for the good of your family.

Proper planning is encouraged in sacred Scripture. Proverbs 21:5 says, “The plans of the diligent lead surely to abundance, but every one who is hasty comes only to want.” Appropriate insurance coverage is one component of a good financial plan. I encourage you to keep working with your budget so that you end up with a spending plan that uses your available resources in a responsible manner.

God love you!

Phil Lenahan is president of Veritas Financial Ministries (veritasfinancialministries.com) and author of 7 Steps to Becoming Financially Free (OSV).