Fed up with seeing your money just disappear?
It sure is frustrating, and that frustration alone is a good enough reason to start budgeting. But if you don’t think you’re ready, or don’t think you have the tools to do it, here are 4 big reasons to start right now.
Tracking your cash, or cost-tracking, is an important part of the budgeting process. It helps you audit and understand where you money comes from, and where it goes.
Additionally, the simple act of tracking your money makes you conscious of your spending habits. Like the person who changes behaviour when they see a camera, you’ll feel a subtle pressure from your financial audit and give deeper consideration to your purchases.
But a distinction needs to be made. Cost-tracking tells you where you money has gone. Budgeting tells your money where it should go.
So after you’ve tracked your cash, you need to start telling it where to go.
Budgeters don’t just sit back and let money come and go. They look at where money comes from, assess where it should go, divide it up, and allocate it to where it is needed.
By telling money where to go, budgeters optimise their financial life. Budgets make you spend more on the things that matter, and less on the things that don’t. They help you live within your means and reach your financial goals.
Which leads me to …
At one stage or another, we all want to reach some financial goal. It might be to pay off debt, save for a big purchase (house, car, wedding, dream holiday) or just save for a rainy day.
Setting a goal might be the best way to achieve it. Goals give you focus and dedication to a cause. They provide inspiration and incentive to reach your target.
How does a budget help you set and reach your goals?
Budgets ensure your goals are realistic.
Realistic is the key word. Plenty of scientific research finds that unrealistic goals act as a disincentive. If you have an accurate budget, you can pretty quickly determine a realistic savings goal.
The budget then allows you to dig deeper, analyse the way you spend, and dig around for ways to improve your spending. Every budget saving could then be allocated toward your goal, helping you reach it faster.
Understanding where your money goes, and where you want to send it, opens your eyes to worlds of possibility.
If you currently spend without a second thought, you probably think your money disappears. If you understood where it went, where it hid, you could make much better choices about how it should be working for you.
Would you cut out potentially harmful activities like gambling and smoking? Would you spend more on relaxation, holidays, friends or family? Would you pay off more debt, or apply for more debt?
Without a budget, you don’t understand your financial life. You don’t know where your money goes or how it should be working for you.
Once you set a budget and develop an understanding, you start to feel in control. In control of your money, your finances, and your life situation.
My sister had an interesting insight the other day; contestants on The Biggest Loser have issues with weight, and many of them have issues with money. It made me ponder; if we can get in control of one aspect of our lives would that impact our entire life?
If we form a habit around our budgeting and spending, do we develop a habit of better controlling all aspects of our lives?
There seems to be an explosion in capturing personal data. We’ve got the tools to track our calories, our cash, our steps, our sleep, our exercise, our social life and our favourite songs, programs, designs and habits.
We really do love ourselves.
Capturing all this data validates our existence. It tells us what we’ve done, who we are, and how we can improve. After all, we all want to lead fulfilled existences.
We have a desire to dictate the terms of our lives. We have a drive to not be wasteful.
Budgets help us reduce our personal waste.
Like the runner tracking his routes and times to push his personal limits. Like the dieter watching every calorie to optimise the way they eat. Like the Pinterest user gathering images that represent who they are and what they want.
The budgeter is hoping to reduce their financial waste, and use money to help them reach their potential.
Are you convinced yet? Are you ready to start budgeting? There’s no need to put it off any longer. Choose one of the following methods to get started right now.
We’ve all got access to this one. That is why you have no excuses!
Think about your last purchase today. That burger for lunch. That train ride to work. How many times has that happened this week? Did you do a weekly grocery shop or eat at the restaurant?
Now think about the last time you were paid. How much was it? How regularly does it occur?
What do you spend on rent? How much are your mortgage repayments? What about your last holiday? Accommodation and flights?
And your subscriptions! Spotify, internet, mobile phones, insurance. Have you bought any clothes lately? Furniture? Household items?
That is a pretty rough outline, but already you can probably identify areas you can improve. Simply thinking about your spending habits kick-starts the budgeting process.
Grab that pen and paper. Start writing down the things you just thought of. Scribble it anyway. By writing it down you make it real.
Want to go further? Create a notebook with a list of your incomes and your expenses.
Add it all up.
Norm Brodsky and Bo Burlingham, in the book Street Smarts, advise the reader to physically write down and add up all the finances of their business. They believe this gives you the best feel for your business. Give it a try with your own personal finances. Write the numbers. Make them real. Feel their impact and get in control.
Then there are many spreadsheets, online services and tools you can use to get help setting your budget.
Your bank probably has budgeting features built in to online accounts, spreadsheets in Microsoft Excel provide budget templates to give you a great starting point. Budgeting tools, like our very own ONENUMBR, allows you to track your costs on the go, allocate them to budget areas, and set and hit your financial goals.
Why are you still reading to here? You should be doing your budget!!
The 4 Big Reasons to Create a Budget by Glenn Hamblen