Budgeting gets a bad rap. For most people, it’s associated with being denied something you’d like to have. But let’s flip that concept around, and look at a more powerful way to view budgeting.
Budgeting Means Control
Budgeting is really nothing more than understanding where you spend your money and making intentional decisions on what you want to do with your money, so let’s call is something else that doesn’t bring up negative associations. Let’s call is cash flow record keeping instead. What that looks like will be unique for each person. But the end resutl will be the same for everyone. You will feel more in control of your money, and how you spend your money will be more in line with what’s most important to you, which feels a lot better than reaction to expenses as they come up.
The Basics of Budgeting
There are lots of ways to approach cash flow records, but they all boil down to keeping a record of your income and your expenses on a consistent basis. This sounds like a pain, and I totally get it that it’s hard to add another task to your day, but once you get a system that works for you then you will feel less stress around surprise expenses which is a great feeling. Update your cash flow record often enough to catch anything that is a problem while it’s still a small problem and it’s more easy to deal with. Update your records on a weekly basis if possible or, at a minimum, on a monthly basis.
Popular Methods to Keep Track of Money
Any system that works for you and you can stay consistent with is the perfect system for cash flow record keeping. The man who cuts my son’s hair uses paper and pen because he likes to see if all written down and he updates it daily. A friend of mine uses the app You Need A Budget, which is a great tool.
Another person I know uses the envelope method, where any money that she earns she divides into envelopes. Each envelope has a specific purpose, such as rent, groceries, electric bill, etc. The money in each envelope is only for the stated purpose. She can’t take money out of the groceries envelope to pay for clothes, for example. An app called mEnvelope uses the envelope system if you like using an app for it.
Once you know your on-going living expenses, you can see how it matches up to your income, which then allows you to make intentional choices on how to make any needed adjustments. Most people are very unaware of where their money is really going. Even if you think you know where you are spending it, chances are you really don’t. All the little expenses add up more quickly than many people realize.
Once you see the bigger picture of where it’s going, you can then make deliberate, intentional choices to spend your money in a way that feels better to you. But it’s impossible to make those choices if you don’t know how all the pieces fit together. So try a 30 day challenge. Keep track of your income and expenses for 30 days. Then look at it to see the patterns in your spending. If your spending doesn’t match up to what’s most important, then start making some adjustments.
Start with small, manageable adjustments and stay consistent. You’ll see big results from the small, consistent steps. The relief you feel once you are intentionally deciding where your money goes will be well worth the effort.
As always, if you would like more information on this topic please contact me.
Disclaimer: This article is provided for general information and illustrations purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult with a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Tricia Rosen, and all rights are reserved. Read the full disclaimer.