Do You View Personal Budgeting As Oppressive And Hard To Stick With?
Many people do.
This attitude is derived from a flawed concept about what personal budgeting is and how to do it.
The standard approach to personal budgeting is based on the idea of looking at the past and... in effect... attempting
to apply the past... through averages... to the future.
Secondly... once the current month is over... you tally up the results and compare it against what you had
hoped might happen.
There Are Two Major Conceptual Problems With This Sort of Approach To Personal Budgeting.
The first problem is that...
it attempts to force us to adhere to a historically average month.
The truth is... a historically average month may never occur.
The second problem is that...
waiting until the month is over to find out how you did... is too late.
We need a personal budgeting process that allows us to know "where we are at" and "how we are doing"... at any time... rather than
finding out "after the fact".
We need a plan that is "forward looking", dynamic, and proactive.
The Solution Is To Create A Spending Plan... Specifically For The Upcoming Month... And Only For The Upcoming Month.
Personal budgeting should be looked at as merely creating a budget or spending plan focused only and entirely on next month.
Do not try to plan any further out than for next month.
Just decide... this month... how you are going to spend every dollar of next month's income in advance.
Next... we must be able to know the status of "where we are" and "how we are doing" at any time throughout the month.
This will make the spending plan for next month relevant.
It will be "real time". It will work!
Create next month's spending plan just prior to the beginning of that month.
Making this fundamental shift in how you perceive personal budgeting is key to being able to create a home budget that works... and living on that budget successfully.
Once you correctly grasp the concept... living on a budget will not leave you feeling deprived or oppressed.
Instead you will feel empowered and in control.
So How Do You Go About Creating A Budget That Works?
Just sit down each month and create your cash flow or spending plan for the upcoming month.
Put on paper how you intend to spend each and every dollar of next month's net income (take home pay).
Spend every last dollar on paper before you actually
spend... the first dollar of next month's money.
Make your plan so that every dollar of net income is pre-assigned to a category.
In other words... give every income dollar a job or purpose.
If your net income (take home pay) is $4000 then... you must spend (assign, allocate) $4000 total to your spending plan.
For items that occur or come due once a year... divide the total amount by 12 and use that amount as a monthly figure in your budget in order to have the money when needed.
Each month will be different in some ways.
Some month's have birthdays, anniversaries, holidays, etc. that need to be addressed.
Decide in advance what you will
spend for each occurrence and where those dollars will come from.
For example... it may be necessary to perhaps eat out fewer
times this month in order to have the money for those special occurrences.
I recommend using the
envelope budgeting method
for controlling and monitoring the family budget.
You will find that... you can do a pretty good job of anticipating and creating a monthly spending plan... when that plan reaches no farther out than the next 30 days.
Here is a free
Personal Budgeting Plan Form
to help you get started with Next Month's Spending Plan.
|You will need Adobe Reader (the latest version is recommended) installed on your computer in order to open and read the Personal Budgeting Plan file. You can get Adobe Reader here (a new window will open so you can download without leaving this page).
In order to print, open the downloaded file, and select the "Print" option from the menu.
Now Remember... Most Of Us Have Lived Many Years Without Giving Much Thought To Where Each Dollar Goes And Certainly Are Not In The Habit Of Spending Money "On Purpose".
Once you have created your first months spending plan and are actually in that first month of personal budgeting... remember that...
Spending money "on purpose" or "with purpose" requires that you consider every dollar you spend against your plan... before you spend it.
It takes awhile to go from perhaps sloppy and/or undisciplined to controlled and on purpose.
The old habits will take a little while to break. So... be patient with yourself.
You will not do this well the first month that you try.
Normally it takes about 3 months before you start to really get a handle on the
process. Just remember... that's OK.
Don't give up and soon you will get it down and begin to see the fruits of your efforts.
The time that you will spend focusing on next month's spending will pay you back in spades.
Your Taking Control Of Your Money And Making It Do What You Want It To Do Is Normally An Eye Opening Experience.
You will be able to clearly see and better understand both... your current money challenges and... your potential new opportunities.
You may discover that you are consistently spending more than you take home.
You will find out if and to what degree you are
You may find that... with some changes... you have the opportunity to
get out of debt sooner than expected.
You may find that
you can save more
than you had ever imagined before.
You will make better decisions with your money.
By planning in advance how you will spend each and every dollar of next month's net income... you take control of your money
rather than allowing your money... or lack of it... to control you.
Being able to know where every dollar is going... and to also know... that you have told each dollar what to do is incredibly powerful.
It is therapeutic. You will feel more in control. You will be more confident. You will be happier.
Personal budgeting done right...
will change your life and your future.
Once you are in control... amazing things will begin to happen.
"Because It Matters"... Jim
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