Ahh, the dreaded “B” word? Not that “B” word you filthy animal. Get your head out of the gutter!
Here’s the bottom line: a budget is a necessary evil if you are going to win with money. But for most of us, we think we can live without that budget. We assume we won’t stick to it, so what’s the point of making one in the first place? We assume it never works the way we wrote it out. We figure that if we’re not good with numbers or that we have to use our fingers and toes for counting, we’ll be a disaster at putting together a budget. But creating a budget and sticking to it can be done and done well. Here are a few principles for making a budget:
- Make a new budget every month – Sometimes we think we can make this error-free budget from heaven that will work on any given month. But I think we’re all smart enough to realize there is no such thing as a perfect month. Your income and expenses will almost always vary, and that is something you have to plan for. At the end of every month, my wife and I sit down and make a new budget. Every month is different, and you ought to plan accordingly.
- Write it down – A lot of us like to think we have our budget in our head. It’s stuck up there, and we can remember it perfectly. But that just doesn’t work! You have to write it down. Part of the reason you’re doing this is to create a visual goal for yourself. According to Brian Tracy, a motivational speaker, a recent study of Harvard graduates found that after two years, the three percent who had written down their goals achieved more financially than the other 97 percent combined!
- Spend every dollar before the month begins – You want to create a zero-based budget. In one month, you figure every dollar of income you have coming in and every dollar of expenses going out. Then you do the math to make a zero come out at the bottom. Your income minus your expenses should equal zero for that month. When you pay attention to where your money is going, you will be shocked at how much you spend in some areas, and how little you spend in others. But you don’t know unless you write it down and have a plan.
Let me reiterate. If you want to win with money, you’ve got to make a budget. Every month. Accounting for every dollar. You have to do it. The first couple of times you make a budget, it may be a complete disaster. You may even prefer to have a root canal instead. But I promise you, if you work at it and stick to it, each month you make a budget will be a little easier than the previous. Before long, you’ll be able to do a budget in your sleep. And when that happens, you’re on your way to being wealthy well into the future!
YOUR 2 CENTS – Do you currently use a budget? Why or why not?
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