As a lapsed budgeter that has gotten back in the groove lately, I've found myself wondering: why don't we track our spending and set budgets more often?
Because it's scary!
I was determined to track my spending many years ago during my senior year in college. That didn't last the first weekend. McKenzie's Party Store and Pizza Sam's made it on the spreadsheet a few times, and I quit. The next spring, I started budgeting again after taking my first job out of college. I was making $12 an hour, and lived in small one bedroom apartment above a Chinese restaurant in downtown Alma.
Does that experience sound familiar? Start budgeting, stop, and start again?
Sometimes there's enough of a cushion that we don't really need to budget. Sometimes we don't work on the budget and our spending because it's scary! We're afraid of what we might find out.
Tracking spending is painful because it's our own personal reckoning of past behavior that we may not want to face. We know we didn't need to buy "whatever", but we did. Writing it down brings back our own perceived failure. Tracking spending is also painful because it's tedious, so instead, we just "wing it".
Setting a budget can be even harder than tracking spending. Now we have the opportunity to mess up multiple times: planning perceived needs, being wrong about perceived needs, and then reflecting back on being wrong about perceived needs. Ouch!
A budget is a spending plan. Plans are made to show where we expect our money to go over a period of time - usually a month. Some of the planning is easy - there are regular bills. Some of the planning is more difficult, like expenses that are irregular (unexpected water heater problems, quarterly insurance premiums, semi-annual property taxes, etc.). Planning means looking ahead. Planning means adjusting. Planning means being more responsible. Planning means being more accountable to ourselves and perhaps others. It also takes time. And did I mention, plans change?
Why am I talking about budgets?
Personal finance is the foundation of financial planning. Working with clients of all different ages, incomes, and backgrounds, there is a common thread to those that are successful. Yeah, you guessed it: they have a good pulse on their spending. Some have elaborate spreadsheets or online systems. Others write down about 80% on a napkin and slide it across the table (or at least we used to). And for us to really do our jobs as your financial advisor, we need to know what your monthly "money in" and "money out" looks like.
A budget helps show that you know what is going on financially inside your own four walls.
Key things to remember for those wanting to start (again?) but are afraid:
- It takes time. Expect 3 to 4 months to really get close.
- Keep it simple to start with. There are diminishing returns on getting down to every last penny. Focus on the big stuff first.
- No two months are the same.
- Don't forget about annual or semi-annual payments like property taxes, annual dues, etc.
- If married, do this together in a JUDGEMENT FREE zone.
- Start by looking at prior months' expenses.
- Do this with grace.
- Stick with it!
By working through a budget, you'll find the financial freedom you've wanted. Don't let fear prevent you from taking this important step.
Make your money work for you by telling it where to go each month!