Are you ruled by the academic school calendar? Do you live by the football calendar? Maybe you begin planning your next year’s budget when the Pumpkin Spice Latte is back on the menu.
Whatever it is that motivates you to organize, plan, and get on a consistent schedule, I want to challenge you to include creating a BUDGET. Understanding where your money is going and where you would like it to go in the future is the beginning of empowering you and your money.
Following a budget helps you proactively save, spend, and grow your money. Most people don’t have a clear understanding of their monthly spending habits and may actually feel they are spending too much. Some are pleasantly surprised to find that they have more money in their budget allowing for increased savings. So, the first task I ask my new clients is to spend the time to create their budget.
Two things happen when clients create a budget:
1.First, most people find areas in which they are overspending and immediately make adjustments resulting in savings.
2.Second, they have more clarity about their financial situation.
Sometimes during this process I see the “deer in the headlights” look and the “stop” statement: “I don’t know how to create a budget.” Your budget does not have to be perfect and it does not have to track every penny. The best plan is the one you will stick to on a consistent basis.
With today’s technology, there are a number of budgeting tools that can help automate the process. Your bank or credit union usually offers a budget tracker and of course I offer a simple Monthly Budget spreadsheet that can easily be adjusted to meet your needs. I even support the old school pen and paper method as long as it works for you. Whatever you use, the important point is that you DO IT.
Yes, creating a budget may require some work and effort, but the benefits can have long-term life-enhancing effects. A few of those benefits are:
- Control over your money
- Focus on your financial goals and objectives
- Awareness of where your money is spent
- Organization of your spending, saving and investing
- Proactive investment, spending decisions
- Plan for unexpected costs
Keep in mind a budget won’t really save you from bad spending habits. But, it will give you a goal and plan to keep you focused. Financial knowledge is not about prevention, but instead about empowerment. The more you understand your personal finances, the more opportunity you have to make smart and effective money decisions.