Money Management

Making the Budget Commitment

Bad News, Good News:  Budget Baby Steps

The bad news?  Budgeting, certainly in the beginning of the process, can be confusing and overwhelming!  Even with the right attitude and information, there are LOTS of different ways to set a budget up and even more ways to get off track before really getting started. 

The good news?  If you are committed to creating and living on a budget, you have all the tools you need RIGHT NOW to be successful.

The best way to start any project is to jump in and do something.  These “budget baby steps” are designed to help you start fast so you can succeed early and often in your budgeting journey:

• Keep it simple!  One of the fastest ways to sabotage your efforts is to adapt some extremely detailed and complicated record keeping system.  Yes, you need a specific way to record, track and categorize your spending but don’t make the system any more difficult than it needs to be.  If you cannot understand it or if you find it too labor intensive, you won’t use it.

 

• Start small.  Effective budgeting is a process not an event!  Consequently, if you try to fix everything that is wrong with your finances at one time, it will be completely overwhelming and you will, likely, give up.  As you start budgeting, just choose 1 or 2 areas to start with (like recording income and tracking expenses).  Focus on those areas for the 1st month of the budget and get a handle on those things before moving on to the next issue.  

• Establish some type of “emergency fund”.  No matter what your finances look like, there should be some CASH that you can access immediately.  This “emergency” fund is to be used ONLY IN MATTERS OF EXTREME  EMERGENCY.  It does not have to be a large amount of money.  $500-$2000 should be plenty. It is nice if it earns some interest but that is NOT its primary purpose.  Its job is to sit wherever you put it and be available when and if you come back to get it.  If you do have an emergency and you have to dip into this fund, be sure to replace what you use so that you are ready for the next emergency.

 

• Create a “spending system” (envelopes, separate accounts, debit cards, etc.) that fits you.  Remember, a budget is an organized plan for managing your money.  That organization requires some form of system for spending money according to the plan.  Will you use cash only?  Debit cards?  Credit cards that are paid off each month?  Are your business and personal finances separate?  Where will you record your expenses and store your receipts?  Do you need to open additional accounts and/or consolidate and close others?  Spend some time answering these questions with everyone in your family that will be spending ANY budgeted money and come up with a system that is flexible, consistent and easily implemented.  Then, start using it ASAP!

• Keep your receipts and use the information they provide.  Especially in the beginning of the process, receipts will provide a wealth of necessary information.  This information will be helpful for determining spending categories and allocating money to each category.  The receipts are also a form of accountability.

 

• Specify a regular time for record keeping.  Decide who is responsible for which areas of keeping financial records and designate the times that those activities will take place.  Will receipts be collected and recorded each day? At the end of the week, etc?  When will budget planning take place for next month?  Who will pay bills (actually write the checks) and when will that happen?  Schedule these activities like you would schedule an appointment outside your home and attend it!

• Build accountability and evaluation into the process.  At some point, you will need to evaluate your budget and see if it is helping you to accomplish what you want it to.  As you set up your budget process, include some form(s) of accountability – collecting receipts, monitoring accounts, financial “meetings”, etc.  This is ESPECIALLY important if you are budgeting with your spouse and/or your entire family.  The extent to which budgeting becomes a “team activity” is the extent to which it will be successful.

 

• Create a list of alternatives to spending.  Without question, there will times while you are implementing your budget that you (and members of your family) will feel extremely deprived!  At these times, it is important to focus your attention on long-term financial goals and not short-term satisfaction.  BEFORE you face this, spend some time listing things you can do that do NOT involve spending.  Post the list and use it when you are discouraged about your budget. Every time you do something on the list, you will be developing a habit of not spending.  Over time, that will come more naturally.

• “Try, Try Again”.  You will not get your budget exactly right on the first try.  Be prepared to adjust everything about it SEVERALTIMES before you get it to the point that it fits your finances AND it  fits your schedule, philosophy, lifestyle, etc.  Be prepared to be frustrated.  Be prepared for your family to resist your efforts and voice their displeasure.  Be prepared to NOT do some things that you have always done.  Most of all, be prepared to try again and again and again until you get it right.  Eventually, you will!