What’s in a Budget? Part 3
You’ve heard of superstars like MC Hammer who (with millions) went bankrupt. It sounds impossible, but it happens more than you think. There are many cases of people who hit the lottery with enough money to last a lifetime, but they end up back in the hole they came out of. How is this possible? The root cause is “out of sight, out of mind” budgeting.
These people all thought the same way, like every other normal person. They think they have more money than they actually have. For anyone who has ever bounded checks and incurred overdraft banking fees, they all thought the same thing. I have enough to cover this purchase. In this post, we want to give you the tools you need so this situation doesn’t happen to you. More importantly, we want to make you aware of the best tool of all, your attention to what’s going on. You need your head in the game or a way to make sure your head is in the game. Otherwise, MC Hammer’s story of bankruptcy could be your story.
Your Checkbook is a Tool
In high school, there used to be a class where balancing a checkbook was taught. Today this probably sounds foreign and unnecessary. This may be true, but the principle is one that’s good for life and helps ensure you have good financial habits.
The art of balancing a checkbook is a tool you need in your toolbox. “Toolbox” is a term we use around the office quit often. It refers to what you have to bring to the table. What do you have to add value to others?
I am not asking you to do this the old fashion way, with a checkbook check register. However, let’s revisit how the art of checkbook balancing works and can be used as a tool in your toolbox.
- Obtain a current balance. In order to know where you’re going, you need to 1st know where you are. Obtain the most recent bank balance.
- Determine what hasn’t cleared. Next, you want to know what hasn’t been accounted for by your bank. This is key. It’s these missing transactions that will throw your account out of sorts. It’s these transactions that will mess you up when not accounted for.
- Record missing transactions. Record the missing transactions and subtract the amounts from the current balance. This will give you an accurate account of what you have available.
- Adjust your records daily. This step is the most important and the part that matters most is “daily”. You must reevaluate your account daily or as often as you can.
There are some really great tools available out there to help. Two of these tools, I will mention, but go into more detail about them in my next post.
The first is an app called “Mint”. It’s the best tool I have in my toolbox for watching our finances and maintaining a budget. The second is an app called “EveryDollar”. This app helps make creating a budget simple and easy.
Today is Friday!
Regardless of what tool you have in your toolbox, you need one for maintaining your budget. Your toolbox is incomplete without having a way to manage the finances of your home, your business.
Question: what tool have you been using to keep up with your family’s budget? Leave a comment below or click here to email me.