Money Lesson 8 Everyone Needs a Budget
What is it about the word ‘budget’ that sends people straight to thoughts of poverty and desperation? Instantly feeling like your straight into a work house movie scene of complete financial destitute? Unable to pay the bills but worse perhaps for many, unable to have fun and enjoy life. What if I told you that budgeting was like dieting? Anther dread word. Who wants to be on a diet and say no to the cake? Where is the fun in this?
Firstly budgeting is like a diet and just like a diet it is essential to your overall well being and to stay healthy. Yes sure I could not diet and eat enough chocolate to feed a small country but what outcome could I expect? Well the outcome would be an overweight me with added worry for my health. The same with budgeting except a very empty bank account and my mental health would be at risk through excessive worry.
So what I am saying is treat budgeting with the same principles of a diet. A little bit of what you fancy will never harm you too much but it is when it becomes excessive, this where the problem is. Like any diet the start is the most painful part, however once you develop the habit of sitting down and doing out a budget, like anything else it will become second nature.
Right let us start. Exactly the same as weight watchers (past member here) the first thing you need to do is track your spending. Instead of a food diary you will have a spending diary. This should be done long before you take out that pen and paper and write a budget. Spend at least one month if not three months tracking and analyzing every aspect of your spending. What is coming in and where is it going out.
The big question then is, can you actually afford your lifestyle? You can as easily be bringing 120k a year but living a 200k lifestyle as you could be earning 20k and living a 15k lifestyle. Which one do you think is better off? I would pick the 20k as they are living within their means. This one of the most important aspects of money management.
If living above your means you are left with two choices. You can either cut back on expenses or earn more money. These topics I have planned for a different post so I am only touching on them today.
Now is the time to do out a written budget. I am a big fan of pen and paper here as for me it makes the figures more real. But do what feel’s right for you. I am also not going to say to you my method is more superior to Joe Blog down the road. Again this is personal to you and only you. However, what I will say is find a method that works for you and that you enjoy. WHAT?? Enjoy budgeting? Yes enjoy budgeting. It can and most likely will become something that you enjoy doing. There is the sense of personal achievement that comes with budgeting and as a reformed non budgeter, I can tell you it is one of my personal favorites in terms of achievement.
I look around at the things I own and purchased through budgeting and I get this massive sense of satisfaction. I also look at older purchases where I had used a credit card and I feel this sense of dread. This is because I remember exactly how long I spent paying off that flipping credit card. I love all the bits and pieces but the sense of pride I get from large purchases paid for in full makes me smile on the inside.
Finally I am going to stress the importance of analyzing your budget at the end of the month. People often just burst into the next month without looking back on what worked for them, what didn’t and how they felt about their spending. The most under explored aspect of spending is feelings. To understand your spending, you also need to understand yourself. It is perfectly ok to have a bad months spending if life has thrown some hard balls at you as it is equally ok to have a brilliant months spending habits if life was good or vice versus. The important part is to get to know you and your triggers so you can best prepare yourself for situations. A type of risk assessment.
It doesn’t matter if your rolling in money or living on the bare minimum, you need some sort of budget in place to be successful with your personal finances.
