Budget. A word many of us cannot stand and something we often think just doesn’t fit into our reality. Well, today, all that can change! Having a strong budget is not out of reach! Budgeting is the answer. Let me set the record straight.
Here’s the truth. Budgeting is not a bad thing! So, stop looking at a budget like it’s a four-letter-word. Diets, for example, are always difficult to adopt, but making the change is good and healthy! In the beginning, you may feel as if you are robbing yourself when, in reality, you are doing the exact opposite.
Just as people often think diet communicates “eat less,” they assume budget communicates “spend less.” Well, that’s not what it’s about. Budgeting is so much more.
A budget is a tool to help you reach your goals.
Learning to live within your means, or budget, is critical to your livelihood both now and in the future. Here are some key steps to building a strong budget.
1. Define Your Goals
Is there a reason you are not experiencing traction in your finances? If you are going to get traction and get this budgeting thing worked out, you need to have goals. You will continue to live paycheck to paycheck and may even become a pro at paying your bills; but, you will never gain traction if you don’t define your goals. By defining your goals, you move beyond just having a budget and gain both a clear idea of those goals as well as develop a strategy at saving for those goals. Be sure to check out my previous Savvy Saturday video, “Why You’re Not Getting Traction.” Now, if you are thinking this is about frugality, I ask that you keep one thing in mind.
Frugality is a means to an end.
There is no point in being frugal unless you know where you are headed; thus, knowing your goals is imperative in accomplishing this.
2. Think Long Term
One of the most common mistakes I find with people and budgeting is they think short term. They look at this month and maybe a little into next month, but they don’t look at the big picture. For example, what about those yearly costs or semi-annual fees? If it’s not budgeted, you’re faced with that “oh crap, the payment is due” reaction. It is because you are not budgeting efficiently. Think long term when you are doing a budget.
3. Let It Roll
There are two types of categories in a healthy budget. The first is spend, which would include groceries, gas, and other items you purchase every month on a continual basis. The second is build. This would include things like annual fees (car registrations or taxes) and payments that are due every so often that you can slowly build up toward.
There are also a few hybrid expenses that you don’t typicall or texty need to cover every month but that need money set aside towards them regularly, like clothing. The main point is you need to have the ability in your budget to allow funds to roll forward. What happens if you spend less than you budgeted? Maybe even in an area like groceries? Great! Allow that money to roll over into your next month’s budget and keep budgeting the same for a few months until you get a better idea of how much you actually need and spend. Then you can simply reevaluate your budget amount and adjust as needed. Keep in mind that it takes more than one month to determine your budget.
4. Use a System for Budgeting
Yes, use a system. In fact, I believe S.Y.S.T.E.M. stands for…
- Energy and
Systems are your friend. Systems work for you. If you set a goal at the beginning of the month and half-way through you don’t know how much you’ve spent on groceries, you don’t have a system. You need to know where you are in your budget so you can stay in healthy boundaries and protect the money for your goals. Here is the thing about budgeting…
Every dollar you spend that isn’t budgeted or is overspent doesn’t go toward your goals.
You have to know what your goal is and how to get there, so don’t spend those goal dollars!
5. Stick With It
Listen. No perfect budget comes down from heaven. You have to be prepared to change because prices fluctuate. A budget is a living organism that evolves. You have to be on top of it. It takes more work up front but you will get to a point where you know it so well, you won’t have to change or adjust it very often. If there is anything to take away from this blog, it is this…
Always seek to be proactive, not perfect!
There is no such thing as a perfect budget. Things change. In fact, life changes. There is no perfect, unchanging budget; but, proactive and healthy budgeting can happen! You need to be able to change your budget as life changes. Not only is it realistic, but it is completely normal. So, stick with it and persevere. You and your future goals will be happy you did!
Question: So, do you have a budget in place? Does your budget match your life stage? And, does it make room for your goals? If not, I can help. Contact me today!
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This is a Guest Post by
Strength In Numbers: Financial Coaching