Are you one of those who always manage to have more month by the end of your money? Do you wonder where it all went but are not sure how to track all the "stuff" you pay for? Would you like to know how to keep up with how much you spent on the dentist last year? Then chances are you need a budget! Here are a few questions I always get from people I counsel.
Where did it all go? A lot of people I meet everyday ask me the same question, "Where did it all go?" Inevitably, they tell me how hard they worked and how they can't enjoy their life more because they are broke all the time. After asking them a few questions, the issue always comes down to a few things that are very controllable and easy to correct. If you are a self-employed person (as my brother is), then I know how hard it is to keep up with what you spend. He is a small business owner that basically lives out of his car and at the end of the day can't tell you where he spent his money and how much it was. I have found receipts in his car, home and grocery bags. He actually makes more than I do, but can't seem to pay all his bills each month. Sound familiar? Don't know where it all went? Then read on, because you definitely need a budget!
How can I keep more of my money? The purpose of a budget is to help you keep more of your hard earned money, not the bankers and not the government. Once you know where your money is going, you can then start to take control of where it goes. That's
right...you, and not anyone else.
Does a budget really work? I get asked this question a lot because people are skeptical that a budget will work. Honestly, most people think it won't, and that is sad because if people only knew how easy it was, then they would begin their journey towards greater control and far less pain in their lives much sooner.
If a budget sounds like something for you, then follow these easy steps to get started in creating a budget to take back control of your life. I promise that these steps do not take any time at all and are free, so what are you waiting for?
- You MUST make the decision to try to do a budget. Sounds easy, but actually this is the hardest step! Most people desperately want to budget, but stop. Not because it is hard, mind you, but because it involves changing small habits you do on a daily basis, some of which you may not know about. These habits did not start overnight and some may take a while to change. Those who are willing to make a conscious decision to stick to a realistic budget are those that will eventually have more money on the same income and a lot less financial stress (which means they enjoy what they have even more). The choice is yours.
You must develop one important habit in doing a budget and that is changing your habit of not doing one and making up your mind that you will. Unless you purpose in your mind to do a budget, even for a week, don't read any further. What do you want--financial freedom or the uneasy frustration you feel now? After all, it's your money, right?
- Keep all receipts (even the small ones). Most people I see at a gas station rarely get receipts. Do you keep receipts? This is the only way to know what you spent and where. It involves changing habits that have been going on for many years. Changing the habit of not getting a receipt at the convenience store or spending for shaving cream at Wal-Mart is the key step after you have made a conscious decision to make a budget.
People tell me that they do not need receipts for candy bars, etc. This is wrong and it is the people who are frustrated over finances that tell me this. Let me give you an example of why this is so important. If you spend 85 cents for coffee and 75 cents for soda six days a week, then in a month you will have spent 38.40! That, my friend, is a tank of gas, even at today's prices. Now tell me again why not keeping receipts will make your life better? I don't think so!
- Put the receipts in one location. It could be a file folder, plastic box, table drawer or whatever you feel comfortable with. Wherever it is, keep all the receipts there. This means that you must develop a habit of emptying your pockets, the car, purse, wallet and wherever else but keep all the receipts together. If you lose one, then write down on a piece of paper where and the approximate amount and put it with the other receipts. It is normal to miss a few when you get started, so don't let it get you down. Remember the goal--find out where the money went from a budget by keeping a record of receipts.
Notice I did not say you had to buy software or books or a DVD. You don't need any of those things. If someone says you do, chances are they are trying to take more of your money than help you manage it. This procedure is simple but changing your habit to do this is the hard part. Remember step 1? You must purpose that you will stay the course.
- Weekly review. This is where the payoff is. Many people tell me they have a record for the past week "in their head," to which I reply, "That is nice for this week but how about 3 weeks ago? Did you have any unusual expenses? Compare 3 weeks ago to today." Of course, they cannot.
At the end of the week, sit down at the kitchen table. Take your receipts and combine them with a paper clip according to how YOU feel they should be. I do it by personal, household and unusual because that is how I like to look at things. You can do it any way you want. Afterwards, write down on a post-it note and attach the totals to the paper clipped receipts.
Just doing one week may not tell you what you want but as you compare them to each successive week, you will begin to see spending patterns you may not have been aware of or see spending patterns that cost you more than you thought. The amounts now tell you how you want to change your spending habits so that your money works more for you and not against you. You now know that the credit cards are taking all your money and so you stop using them or that the car is costing you more each month than a new car payment.
While some spending patterns take time to correct, at least with your budget, you can take charge of your life and have a plan to manage. This alone has given many of my clients a good night's sleep that they have not had in a while. I have yet to have a person come back to me and say that the budget did not ease his mind or help him get a handle on his spending.
You now know how to do a basic budget, so let me leave you with some practical advice. A budget is a tool and not a problem solver. You are still responsible for changing bad spending habits the budget shows. This is harder than you think because your spending habits may have developed over time and are not something easily erased. Again, go back to step 1. How badly do you really want to get control over your spending habits and live a less stressful life?
Also, if you have a spouse, that person must be as committed as you are, or else the missing receipts will not allow you to see his/her spending habits. This can be very touchy for some couples. If one spouse does not want to do this, I suggest that you sit down and discuss money issues and how each one of you feels about it. Otherwise, the budget may tell you things you wanted to know but you can't change because of the inability of one spouse to change.
I hope this information helps you in reducing the frustration of dealing with finances!
For more detailed information, I have a book you can use which has some of
the standard worksheets you can print out. I also have a web address.
It is email@example.com. My website is currently under construction and will be available in future articles.