If a business owner said to you that they run their business without a budget, what would you think? You would think they were incompetent! Or perhaps lazy, or even both? What do most families do? When you think about it, a family is actually like a mini business. There is income, expenses, and hopefully, something left over to invest and to enjoy. So why don’t most families operate to a budget? After all, a personal budget helps you to see your financial direction, and helps you stay (or get back!) on track. It is a great comfort. One reason some people do not put together a budget is because, it makes them feel overwhelmed, or too busy, and leaves them feeling like life is too complex to keep track of all that. Well the good news is, we can hold your hand through the process, which in turn, makes it easier for you. Before we look at the ‘how’ aspects, let’s consider 3 more reasons why a personal budget is such an important tool in helping you achieve your financial goals and dreams. 1. Most of your money is already spoken for long before you get it The money you earn has already been promised to keep the electricity on, make the loan repayments, and pay for the insurance. What most people don’t realise about budgeting is that, it is really honouring the commitments you already have. Now since we are all honest people and plan to pay these bills, the first step is to track these bills, and see what is left over for your day-to-day living. 2. Your day-to-day living money is spread all over the place Some of your day-to-day living money is in the bank, and some is in your purse or wallet. Some may even be with your partner or children, if you have them. You need a simple system that allows you to track day-to-day expenses, such as fuel for your car, shopping, and discretionary spending expenses. We do not suggest you try to keep track of every cent of your day-to-day living money, as this would provide little benefit for the amount of effort that would be required to obtain that level of detail. Instead, you need to identify your main day-to-day expenses, and make allowance for all other minor day-to-day expenses. Here’s a key: You need a system that is so easy to use, that you keep using it. You can track the day-to-day expenses by entering them into a spreadsheet, or better yet, use a tool like MyProsperity. MyProsperity can automatically pull in bank feeds, which can save you a lot of data entry. 3. The Number 1 reason people give up on their budgets is that they don’t have the right attitude It is ALL in the attitude! Have you ever attempted to budget and given up in frustration? What is the reason your budgeting attempt failed? What will make you stick to it? Think about this… One of the reasons, if not the top reason so many people give up at budgeting, is attitude. If you think of it as a penny-pinching sacrifice instead of a means for achieving your financial goals and dreams, how long are you likely to stick with it? Think about the difference between going on a diet, and eating healthy. One is negative and restrictive; the other is positive, and allows you to indulge every now and then while still achieving your goals. To increase your chances of success, work on your attitude first. Many people refuse to budget because of budgeting’s negative connotation. If you are one of those people, try thinking of it as a ‘spending plan’ instead of a ‘budget’. Once you have attempted to budget and failed, the bad feelings associated with any type of failure can keep you from trying again. Don’t give up! The cold hard reality Let’s face it. Money is a tool that enables you to reach your goals in life. But the cold hard reality is that, until you know where your money goes, you cannot make conscious decisions about how to use this tool effectively. A budget (or spending plan!) shows you exactly where your money goes and provides a clear plan. It also lets you save for the things that are important to you, like a new house, a new car, a comfortable retirement, a tertiary education, high quality health care, travel, or whatever your particular goals and dreams happen to be. Now that is exciting! Whatever YOU decide you want to achieve and save for, you can. All you need is the right attitude, a goal to aim for, and a (spending!) plan. Avoid This Pitfall There are several universal budgeting concepts that every successful budget will include. But one of the most important features of a successful budget is, for it to be easy to use and suitable for your needs. Trying to use a generic, complex, one-size-fits-all budget won’t work. A simpler approach makes it easier to stay committed. If you stick to a realistic and effective budget long enough, the rewards will keep you motivated. In the meantime, do whatever it takes to keep yourself going. To summarise, the 3 steps for effective personal budgeting (spending planning!) are: Build a Budget, Track Income and Spending, and Compare Budget to Actual. Once you start budgeting with a positive attitude, you will see the difference a budget (or spending plan) can make in your life. Your next step is to call us on 03 5134 1778 and organise a time to have a chat. We would love to discuss this with you further, and help you to get on track towards achieving your financial goals.