Management Of Family Finances
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Islamic guidelines in managing family finances
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Management Of Family Finances
- 1. MANAGEMENT OF FAMILY FINANCES WITH SHRINKING INCOME
- 2. Noble peace prize winner’s book
- 3. Some of the ideas presented in this book Founder of Grameen Bank in Bangladesh, introduced microcredit. Innovative banking program provides small loans to poor people specially women to start their own business In the past 30 years, microcredit has spread to all the continents and has helped 100 million people and lifted them out of poverty Now, he has pioneered the idea of social business This idea takes vibrancy of business to tackle the problems of poverty, pollution, healthcare and lack of education.
- 4. Causes of present financial crisis Greed, Exploitation of society (by creating needs, advertisements, interest based loans etc) Profit driven businesses regardless of its ill effects on the society ( alcohol, gambling, porn) Inequality in opportunities Unchecked individual liberties Excessive indulgence in non affordable luxuries
- 5. Islamic guidelines A- Spiritual and devotional B- Related to practical life
- 6. Spiritual 1- Purpose of life is Ibadah. 2- Whatever you have is from and belongs to Allah (SWT) and is an amanah. 3- Whatever is in your hand is going to end and whatever is with Allah (SWT) is going to last for ever. 4- You are going to be tested in different circumstances ( poverty and affluence). 5- No one will die before getting the last part of sustenance destined for him/her. 6- So, do not have prioritize this material world neglecting your hereafter.
- 7. Islamic Guidelines related to practical life 1) Macroeconomic System – the economics of states 2) Microeconomic System – the economics of individual households
- 8. Guiding principles at state level Macroeconomic System (These guidelines also apply at family level since family is like a mini state)
- 9. AIM #1Right of every person to have basic necessities 118 "There is therein (enough provision) for thee not to go hungry nor to go naked" 2642 "Nor to suffer from thirst nor from the sun's heat. SurahTaha 20:118-119
- 10. Aim#2 Equal Opportunity It is He who hath created for you all things that are on earth;
- 11. Islamic Economic System 5 characteristics
- 12. 1-Simple living and avoid excesses and spending beyond means eat and drink: but waste not by excess for Allah loves not the wasters. Araaf 7:31
- 13. Do not be spendthrift And render to the kindred their due rights as (also) to those in want and to the wayfarer: but squander not (your wealth) in the manner of a spendthrift. Verily spendthrifts are brothers of the Evil Ones; and the Evil One is to his Lord (Himself) ungrateful. BaniIsarael 17:26-27
- 14. Islamic Economic System 1) Simple Living Prohibits luxuries and indulgences specially if these are beyond your means. Do not get loans unless absolutely necessary Rich will contribute surplus to relief of poor Poor will not be tempted to imitate the rich
- 15. 2) Forbids lending of money on interest Those who devour usury will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: "Trade is like usury but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord desist shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (the offence) are companions of the fire: they will abide therein (for ever). 276 Allah will deprive usury of all blessing but will give increase for deeds of charity: for He loves not creatures ungrateful and wicked. Al Baqarah 2:275-276
- 16. Riba or interest based transactions are like declaration of war against Allah (SWT) and His Prophet (SAW) O ye who believe! fear Allah and give up what remains of your demand for usury/interest if ye are indeed believers. If ye do it not take notice of war from Allah and his Apostle: but if ye turn back ye shall have your capital sums; deal not unjustly and ye shall not be dealt with unjustly. Al Baqarah 2:278-279
- 17. Why is Riba/interest forbidden? To prevent accumulation of wealth in few hands To prevent gradual crippling of poor To narrow the gap between haves and have not.
- 18. 3- Zakat- Right of the poor So establish regular Prayer and give regular Charity: and obey the Apostle; that ye may receive mercy. An Noor 24:56
- 19. Purpose of Zakat Secures circulation of wealth Secures money for the poor
- 20. 4- Islam discourages hoarding of money and Bukhal ( miserliness) Make not thy hand tied (like a miserly person) to thy neck nor stretch it forth to its utmost reach so that thou become blameworthy and destitute. Verily thy Lord doth provide sustenance in abundance for whom He pleases and He provides in a just measure: for He does know and regard all His servants.
- 21. 5) Encourages voluntary contributions to charity It is not thy responsibility to make them follow the right path; But Allah guides whomsoever He pleases. And whatever of wealth you spend, the benefit of it will be for yourselves, for, you spend not but to seek the favor of Allah. And whatever of wealth you spend, it shall be paid back to you in full and you shall not be wronged (2:272)
- 22. Charity will bring expiation of your sins If ye disclose (acts of) charity even so it is well but if ye conceal them and make them reach those (really) in need that is best for you: it will remove from you some of your (stains of) evil. And Allah is well acquainted with what ye do Al Baqarah 2:271
- 23. Islamic Economic System 5) Encourages voluntary contributions to charity To provide relief for poor Care for others
- 24. FINANCIAL MANAGEMENT AT FAMILY LEVEL 2) Microeconomic System
- 25. GUIDING PRINCIPLES FOR MANAGING FAMILY FINANCES Men and Women are equal in Islam Created from the same species: “He has made for you mates of your own kind” (42:12) E.g. spiritual capacity, reward in the hereafter, rights to education
- 26. Economic Peace in the household Islam recognizes men and women have been created differently, and their roles are different: Financial burden of household falls on men Women responsible for future generation of mankind
- 28. Priority – husband and children
- 29. May work
- 30. Financial responsibility not her obligation
- 31. May contribute to upkeep of household
- 33. Conclusion What can we do? Caring, not selfish, attitude Husband and wife recognize their roles and responsibilities Simple lifestyle and live within means. Avoid debt. Give charity Support Islamic organizations with charity work
Editor's Notes
- uThe two most common economic systemsPreviously, exploitation of poorer citizens by interest-based capitalism, led to socialist rebellion. But end of 80s and beginning of 90s Eastern bloc returned to capitalism.Still problems of capitalist society exist: current example of forec
- Growth and equalityPeaceful household. Provide for our families. In today’s society, husband and wife working hard to not deprive their children of anything
- Food, clothing, water, shelter
- Islam aims to bring about practical equality between the rich and the poor.It seeks to bring various sections of the community so close to one another that class distinctions should in practice disappear e.g prayer (stand shoulder-to-shoulder symbolising unity, regardless of age, color, wealth or social class), fasting (feel hunger of poor). verseThus, it is the responsibility of those who possess more than their needs to help others meet their basic needs. Creator-trustee relationship. All that is in heaven and earth created by God. Man is a trustee. God has favored some more than others. They will be held accountable for sharing their wealth with the needy who have a right to it.
- Islamic brings about equality by prohibiting luxuries and indulgences.It is much easier to enforce and maintain standards of simple living than to set limits to luxury and indulgence.Islam prohibits the wearing of silk by men; eating and drinking out of vessels of gold and silver; putting up stately buildings for the sake of show. Prohibits Muslim women from spending large sums upon ornaments. It makes the drinking of wine, gambling and betting unlawful. The object of these prohibitions is to enforce simple standards of living among the rich so that they canbe persuaded to contribute their surplus for the relief of the poor. the poor would have no desire to indulge in these luxuries as they will have no temptation to imitate the rich in respect of them.
- .
- The institution of interest results in accumulating wealth in comparatively fewer hands. It enables people with established custom and connections to go on multiplying their wealth practically without limit to the detriment of the rest of the community. Under the system now prevalent once a person is compelled to borrow, his savings are absorbed by interest on the loan, and even after he has repaid the amount of the loan, many times over in the shape of interest, the original loan still remains due from him. Interest is, therefore, a curse which like a leech goes on sucking the blood of the poor. If the world desires economic peace, interest must be abolished, so that wealth is not permitted by this means to be monopolized by a small section of the community. We can look to the example of the third world to see the effect of interest. Debt has crippled many developing countries. Often based on loans taken out by prior rulers and dictators (many of which various Western nations put into power to suit their interests), millions face poorer and poorer living standards as precious resources are diverted to debt repayment
- normally levied at 2.5% on disposable assets above specific thresholds, which have remained in the hands of owners beyond one year.
- If a person has a certain amount of money accumulated in his hands or lying to his credit he will have to pay Zakat on it at the rate of about 2½% per annum, and gradually the money will begin to disappear in payment of the tax.Every normal person, therefore, is compelled to invest his money and to put it into circulation so that he may be able to meet this tax payment out of the profit earned. This results in a double benefit to the community as it secures the circulation of wealth and thus provides employment for all sections in addition secures 2½% of the capital and the profits made for the benefit of the poor.
- It directs that money should be constantly in circulation. It must either be spent or invested so that it constantly fulfils its primary object as a means of exchange, and should promote commercial and industrial activity. If money is put constantly back into circulation, it helps to promote beneficent activities, and thus serves to relieve poverty and distress by providing employment and stimulating effort. Take a simple illustration. If a person having a certain amount of money puts this money away for safekeeping after one year, he will pay tax of 2.5% on this, the following year, he will pay another 2.5% and so on, with his overall wealth decreasing. However, if he decides to build a residence for himself, or so construct a building for a public purpose, then, apart from achieving his objective, he will have provided employment for a number of brick-layers, masons carpenters, iron-smiths, and so on. This would not have been the case had he merely kept the money locked up in his house or in a bank. Thus Zakat is viewed as the driving force for investment.
- leaders of Islam from the earliest times have organized this in different ways and devoted to the service of society Thinking of others as we would of our own family
- Now I will move on to the economics of the individual household. In Islam the financial responsibility belongs to the man of the household. In today’s society many may criticize that gender roles should not be enforced, there should be greater equality between men and women and that women have as much right to work as men. These are some of the common misconceptions regarding the way a Muslim household is run. For this reason, I will put forward now an explanation of why the man is responsible for bearing the financial burden of the household, and how this does not in any way degrade women.
- Women have same right to education as men although in some Muslim societies this is undesirably neglected due to political reasons or extreme poverty. Here in our Seattle chapter of Ahmadi Muslims, we have 100% literacy of female members many of which have been educated in Pakistan, yet in Pakistan the literacy rate for women is a mere 42%.
- Men are stronger and more powerful and women must bear the responsibility of childbirth and enjoy a closer bond with children.The Holy Prophet Muhammad (PBUH) advised his followers: “…if the behavior of your wives is not such as would bring disgrace to their husbands, then your duty is to provide for them food and clothing and shelter, according to your own standard of living. Remember, you must always treat your wives well. God has charged you with the duty of looking after them. Woman is weak and cannot protect her own rights. When you married, God appointed you trustees of those rights. You brought your wives to your homes under the law of God. You must not, therefore, abuse the trust which God has placed in your hands.”
- Islam honors women for their roles as daughters, wives and mothers. A woman’s foremost responsibility is to her husband and children. She is permitted to work and may pursue any career as long as it does not conflict with her primary responsibility of looking after the future generation of mankind. Also, she is not obliged to shoulder financial responsibility for the household. A married women in possession of her own wealth may contribute to the upkeep of the household, but is under no obligation to do so. Khadija, wife of the Prophet Muhammad, PBUH, was a successful business woman and when she married the Holy Prophet, she sacrificed all of her wealth in his way for the release of slaves and service to the poor.
- Macro goals – responsibility of state, but what can we do as individualsUnderstand that our wealth is not just ours. Think of those less fortunate than ourselvesthose corporations which embed Corporate Social Responsibility into the core of their operations, make business decisions based on their impact on society and not merely to make huge profits and the expense of others