What’s in a Budget? Part 1
Each time I hold my Family Plan in my hands, I’m amazed at its content. No matter what section, I see progress, where we were, where we are now and where we intend to go. The process works. Over the last several weeks we spent a lot of time talking about various banking strategies, tips you can use to help manage what you have. The previous set of posts and this set are both apart of the section of the Family Plan called, “Accounting/Fiscal: How We Manage Our Resources“. In this post, we will discuss budgeting, but before we do, I know how much of a disappointment hearing that word can be. So pretend that I didn’t use the word. If I had another word to better describe today’s topic, I’d use it. So let me get right to it, so that I don’t lose you in making explanations or excuses.
Know Where Your Money Is and Where It Goes
You’ve heard it said too often that you need a budget or to live by a budget. The problem is, if you don’t know how the process works or never seen it done, then you really don’t know how. By the way, forget that feeling like someone wants to restrict you, your life or any activities you do with a budget. A true budget has nothing to do with restricting you, but freeing you. The two most important reasons one needs a budget is: 1) to know where your money is and 2) to see where it all goes. A budget simply gives you eyes into how your money works for you. Your money doesn’t work for anyone else but you, so your budget and someone else’s will never be the same. Just like the amount of money you make and how you use it differs from the person next to you.
Where Is My Money?
It’s a good idea to know where your funds lie. All of it. Do you have money hidden under a mattress or in an envelope in the kitchen drawer? Do you invest in IRA’s and 401k accounts? Do you have money tied up in loans to family members? Where is your money? We know where (exactly) ours is.
Where Does My Money Go?
I didn’t know this at first but the best question I ever asked myself was this one. Where does my money, our money go? My wife, who handled the finances, struggled each month to give a good explanation of how our money seemed to disappear. I knew what she brought in and I knew what I brought in. I even knew where it all was. What I didn’t know is where it was going? To end our monthly frustrations, I set out on a journey to find our money. You will never guess in a million years what we discovered!
If you had to guess, where does the largest chunk of your income go? In other words, where does most of your money go? Bills? Your mortgage? Your car payment? For us it was none of the above. The bulk of our spending went to miscellaneous areas such as eating out, shopping and other personal spending. I was shocked. Here it is we’re struggling to pay our bills as if we didn’t make enough or had enough to pay them all.
We learned a serious lesson. Our priorities matter. We had our financial priorities on the things that mattered the least. So we decided to create a new habit. We decided to do what ordinary people don’t. We made a change to (not) what we spent, but when. We decided to make sure to pay the small budget items, our bills, first. Then we could use the rest for miscellaneous. This is what budgeting is all about. It gives you what you need to make a plan and execute your very own strategy.
Today is Friday!
At the end of the month, can you put your finger on where the money went? Are you struggling to pay your bills but have enough money flowing through your hands where it shouldn’t be a problem? Do as we did, start a budget. Add your own method of budgeting to your Family Plan.
Question: What first step can you take in preparing a budget that will work for your family? Leave a comment below or click here to email me.