Create a spending plan
If you have copious income, abundant savings, no debt, a fully funded retirement, then it’s fair to say that you probably don’t need a budget. But for those of us out there that don’t fit that description, you might want to listen up.
You need a budget.
I like to call it a spending plan. It sounds less onerous.
Not only do you need one, but you actually need to engage with it. Plan it, follow it, adjust it.
If your money behaviors truly aren’t viable, facing up to that isn’t easy. Are you on cruise control hoping all will work out? If so, the downside of cruise control is that eventually you veer off course and get slammed. Having a spending plan is like following a map to get to your destination, safe and on time!
Budgeting really isn’t hard. So why do so many people fear it, avoid it or simply ignore it?
Here are some reasons why, and how to look at it differently:
1. It’s easier to ignore problems.
Let’s face it. Confronting debt, overspending, under earning, or being out of control isn’t easy. But, if you don’t enjoy worrying, juggling payments or arguing with your spouse, your only option is to buck up and look. You can only solve a problem by acknowledging it exists.
2. Believing a rough sense of your money is good enough.
Not usually. Most of my new clients are surprised at the real numbers when we do an initial spending plan. It’s easy to forget about the extra trip to the grocery store or the concert tickets for next month. You can lose track of hundreds of dollars before you know it, and find you can’t pay all your bills.
Try this: keep track of all your spending in detail and you’ll have a real sense of your money!
3. Your budget is too strict.
Here’s a big one. Be realistic. If you give up all your fun, you are bound to fail. It’s like being on a diet. Personally, if I restrict myself from all sugar (and I’ve tried!), it’s just a matter of time before I down a box of cookies in a burst of uncoiled deprivation.
Ironically, planning your spending frees you up to plan the good stuff also. My client Jennifer always felt guilty for buying clothing because she felt obligated to be ruthless with her spending. When we did a realistic spending plan, she was able to prioritize and make the necessary purchases guilt free.
4. It’s difficult to plan for non-monthly or unexpected expenses.
Some expenses are yearly or quarterly so aren’t in your view monthly. And then, of course, life happens. Unexpected events or emergencies cost money. Your spending plan can withstand these expenses if you include ongoing monthly savings to pay for non-monthly expenses and cushion you for the surprises.
5. You’ve tried and failed at your spending plan in the past, so why try again?
Because you can succeed the next time. It doesn’t work to do a budget and put it in a drawer. You need to stick with it, then reevaluate and adjust your numbers when necessary. There are tools online to help, everything from simple lists to more complete systems such asmoneyminderonline.com or YNAB.com. Or you can simply use paper and pencil. You can contact me for one on one help as well.
Take whatever steps you need to put a spending plan in place and be in control of your financial life. Cruise control can make driving easier, but when it comes to your money, it’s best you keep your feet (and hands) on the controls!