Look at our society. Everyone wants to be thin, but nobody wants to diet. Everyone wants to live long, but few will exercise. Everybody wants money, yet seldom will anyone budget or control their spending.
-John C. Maxwell
Do You Really Want It
Controlling your money is not easy. Simple but not easy! As with many things simple yet challenging, discipline is required! Are you ready to get your budget on?
Less is More
Do you think it’s easier to budget with 1 account or 5? Take it easy on yourself and limit 100% of spending to one bank account.
Credit cards are not budget friendly! Put the cards up for a while. Points are great and it’s so easy but take a break while you clean house.
Everybody has a budget, but few know what it looks like. Start by taking inventory and determine where all your money is going. Use your method of choice: Excel, Mint, GuideFinancial, You Need A Budget or good ole fashioned paper.
Look at the past few months and document ALL the money that came into your accounts and ALL the money that went out. Separate it into calendar month periods. Take any big, annual, expected purchases and average them out as a monthly cost to provide a more accurate picture and limit surprises. Document these findings in your budgeting tool of choice.
Ultimately you’ll discover a budget surplus (if you spent less than you made) or deficit (if you spent more than you made). This is necessary in order to know where you currently stand! It’s like stepping on the scale when you’re over-weight and know you need to trim up – you have to start somewhere!
Now that you see where your money is going and have a CURRENT BUDGET, your ready to make a change.
What do you want to accomplish financially? Do you want to spend less so that you can give more, save more, pay down debt faster? What is your timeline? What is required to achieve these goals?
Document where you want to cut your budget to accomplish your financial goals. Do you want to spend less going out to dinner? If so, write down a plan for making this happen.
Ultimately, you want to come up with a TARGET BUDGET that you have created based on your current budget and goals.
You know where you are, you know where you want to go, and now you see what you must change to get there. It’s time to get it done!
Use your budgeting system of choice to document your target budget and measure each month’s actual spending. If your having trouble in a specific area, go to an all-cash setup for spending in that category for a few months. When the cash is gone, you’re not allowed to spend anymore. This will allow you to monitor progress.
Make It Fun
Create a competition, set a prize, make your goal visual. The fun part about budgeting is that in trimming it up, you free up cash to reward yourself… But don’t go overboard!
Monitoring Over Time
You have your target and now you’re measuring the results. You’re past the hard part, now keep up the good work! Remember to make adjustments as necessary. If you need to trim further, make realistic adjustments to your target budget as you make progress.
Schedule 1 hour per month to record your progress, update your results, document what went well and not so well. How can you improve? How can you make it fun? Add accountability?
Always include your spouse as you work through these steps. It’s a team effort!
Keep your eye on the prize. The hardest part is getting started. It’s like pumping the water well. Lots of pumping to get it going, not as much to keep it going – but if you stop altogether, you lose all the pressure and must start from scratch again.
Enjoy your results! Don’t get too serious. Life is about priorities and balance.
Now that your a budgeting pro, share the wealth! Teach someone else how to accomplish this and help make a positive change in their life.
Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this. –Dave Ramsey
Have questions or care to share your experience? Ask/share in the comments!
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