The "B" word

For many folks, the word “budget” conjures up images of straight jackets and handcuffs. They think of a budget as something for nerds, or those types that simply don’t know how to relax. In reality, however, a budget can be a liberating experience as the budgeter begins to assume responsibility for his personal finances. Budgeting enables a person to untangle himself from a web of payments; payments that have imperceptibly begun robbing him of his ability to enjoy a rich and meaningful life.

During the past 30 years or so, debt has become the preferred means to getting what we want, fast. With billions of dollars spent on advertising and marketing each year, it’s no wonder, that so many have fallen victim to their perceived desires. Today, with new products and innovations being developed at an ever increasing pace, many folks are beginning to find that they simply can not afford to keep up. We are awakening to the realization that we can’t continue to outspend our incomes. Luckily, there is a way out of this mess. For many, the simple answer is to develop a written budget. A written budget provides a fairly accurate means to determine how much money you can and cannot afford to spend. A budget enables the user to establish his priorities, and provides a means of accountability.

So, let’s take a look at how one begins to initiate a budget. Before you make that first pass, I suggest creating a list of what’s important to you. Then make a list of all of your monthly expenses, or payments. Compare the two lists, and ask yourself, “Do my spending habits reflect my priorities”? If you’re like many, the answer is “No”. You’ve likely become entangled in the Payment Trap. Paying on stuff that has little or meaning to you now; stuff that was purchased through impulse buying, or was sold to you through some clever marketing Ad.

The next step in preparing a budget is to write down your monthly income from all sources. Now subtract your expenses from your income. Hopefully, you’ve arrived at a positive number. If so, then this is the amount available for you to direct toward your goals. Before embarking on this journey, I suggest that you first begin ridding yourself of debt. The less you owe, the more able you will be to work towards your priorities. If you’ve discovered that you are spending more than you make, then drastic steps need to be taken. The first is reducing, or eliminating payments in areas such as Cable TV, Cell Phones, Internet, etc. In more dire situations, more dramatic steps might have to be taken. These might include selling a car, or even your home, and purchasing something that is more in line with your means.

This advice might be contrary to the messages that you’ve received in the past, but those messages have led to actions that have been counter productive to living the life of your desires. If you are overwhelmed by payments to Creditors, I suggest using the “Debt Snowball”. For more on this method, check out this link: http://kimstaudenraus.com/get-out-of-debt-using-the-snowball-method/. Another tool that can assist you with budgeting is the “Envelope System”. The envelope system provides a means for developing good saving and spending habits. Simply write down each of your variable expense categories on separate envelopes. These might include items such as gas, food, entertainment, clothes, birthdays, vacation, etc. Determine the dollar amount that you want to add to each area for the pay period. On pay day, fund each of your envelopes with the predetermined amount. Money spent on that category should come from the appropriate envelope. When all of the money has been spent from that envelope, no more is spent in that category, until the following pay period. At that time, the envelopes will again be refilled. Following this system will reduce instances of compulsive buying, and create a more balanced pattern of spending, since the money has to last over an entire pay period.

Don’t be discouraged, if at first you struggle with your budget. You'll have areas for which you’ve allocated too little, or too much. It might take several months for you to have a workable budget in place. Have patience with yourself. More importantly, be flexible. Understand that it took a while to create your present circumstances, and it will take some time to develop good saving and spending habits.