It’s pretty interesting to look at the mindsets of budget managers at various organizations. You’ve got your;
- Government budget people who like to use up their entire budget so they don’t lose their funding. Often times unnecessarily spending.
- Corporate guy who likes to run under budget to make the bottom line look great and increase chances of bonuses.
- The reckless budget bum who dishes out cash upon request and then realizes a month after that he went over.
- The frugal budget stickler who only spends if the result of not spending is death.
- Traditional budgeter who modestly uses the funds accordingly by the book.
- Then there’s you…
Do you see your own budget habits aligning with any of these or are you a unique budget breed? You’re probably thinking “…I don’t even have a budget…” Well if that’s what you’re thinking, guess what? You do have a budget. Just because it’s not on paper doesn’t mean its non-existent.
As humans, we make personal budgeting decisions everyday, acting in our rational self-interest. Whether it be spending or saving, we act while considering our mental budget. But… we are imperfect beings and unfortunately we are remarkably forgetful. We have a lot going on in life and keeping track of every little thing about our finances mentally along with everything else isn’t easy at all.
So do yourself a favor and organize your brain on paper by creating a budget.
Budgets are important, they are key to managing your funds and lifestyle effectively and responsibly. Don’t worry though, you can leave room for being impulsive in a budget too. In fact you can leave room for whatever you want. A lot of people think budgets are restricting and mundane, but the truth is; your budget is what you make it. Granted, you need your essentials; housing, food, phone, insurance, whatever. But you can really be creative and make it your own. So don’t be scared of a budget, take the bull by the horns and get started.
Here is an incredibly simplified, easy-reading, budget discussion. All of the information in these pictures are made up for the sake of this topic.
Monthly Budgeting Essentials:
First, you need to be aware of all your income. How much do you make consistently per month? If it varies, give a low estimate. Remember: This does not include money you have saved or money you have laying around.
Second, what are your monthly essential expenses? This would be your rent or mortgage, food, tithe, insurance, loan payments etc. Remember: the essentials only.
STOP. Now subtract the essential expenses from the monthly income. Boom! Now you have your remaining living money. Now ask yourself, is it negative or positive? If negative, read the next paragraph. If positive, you can skip the next paragraph or read Negative anyway.
IF NEGATIVE. If your remaining amount is negative we have a slight problem. But don’t worry! It can be solved. You need to do either 1 of 2 things here. You can 1) look for ways to increase your monthly income in order to meet or exceed your current essential expenses or 2) you’ll have to look for ways to decrease your essential expenses. Use your innovative and creative mind that you have and address each expense as such. Remember: It doesn’t happen overnight (usually) so you need to come up with a plan.
IF POSITIVE. Good! You made it in the green. You’re doing well. Now you are entering into the fun part; the Third, AMENITIES/GOALS portion of your budget. The cool thing is, this part can change monthly as freely as you wish. Some ways might be more beneficial than others, but it’s up to you. Here is what I recommend to do first with your left over money.
1.) Save! Throw some of your living money into a savings account or investment account. Savings is probably safer. You can decided on the amount you want to save, just remember (the more the better). You’ll thank me later.
2.) Goal savings. Do you have something you’re saving for like a car, down payment, traveling trip, Disney World, Hunting trip? If so, allocate some money here!
Now that this is out of the way, let’s get back to the amenities! What do you like to do? Shop for clothes? Go out to eat? Coffee from Starbucks or Dunkin every day? Or you can just categorize this all as your “daily whatever.” That’s the lazy way and perhaps a little less fun, but if you’re feeling it, go for it.
If you did all these steps, Congratulations! You just made a budget! Not so fast though….
Now you have to stick to it. So, with all of the info you created, record what you actually spend in the month and compare and contrast the difference. You’ll want the Budget and Actual to match as closely as possible.
With all that said, I challenge you to organize yourself and budget the healthy way so that you can effectively control your life. You need to tell your money where to go or else it’s going to stress you out, force you into bad decisions and slap you around. So, create your budget and discover your type of budget breed because long story short; you have to control your finances so they don’t control you!
If you really want to take your budgeting skills to the next level you should definitely get The Learn to Budget Workbook. Not only is this a great workbook to better your budgeting skills but it is also written for a great cause by a great author!
Cheers & God bless