by: Remie Longbrake | published: July 12, 2019
If you haven’t prepared a budget before the thought of doing one can be daunting. It probably seems like a huge task that is more difficult then it really is. Those who struggle with money often feel a budget won’t make much difference because all it will do is show them how little there really is.
Believe me, I was there, and I’ve had many conversations with those who felt the same way.
The biggest hurdle I’ve come across is that I’m not good with money, I don’t have enough to worry about to keep track of it, and I’m too busy working and shuffling kids around to have the time. And, I don’t have an idea of how to do one. Of course all of those are limiting beliefs, and often one of the reasons why the household is not financially successful.
Fortunately, these days there are apps to help track receipts, or if you prefer, write it out. Essentially what you are doing is logging your income and your expenses, the key is logging all of them. I’ve worked with couples who had a budget but withheld certain expenses so the spouse wouldn’t find out. Obviously, honesty will always work best. It’s your best bet. Be honest to yourself too, I mean if you find yourself short every month, but your spending money to many wants, that isn’t going to help you long term financially.
I’ve seen families struggle because they thought it was important to take the family out to eat ever Friday so they could bond. They were over spending each month. Eventually they cut back to once ever other week, chose less expensive options, cooked at home more, and we redirected the savings into a solid financial plan.
One of the biggest challenges is budgeting. Costs are going up, including rents, utilities, groceries. Paychecks are not necessarily keeping pace. It is important to spend wisely. Buy quality where it counts, but do what you can to save and live within the means of the family’s wealth.
I find it is important to budget. Not only for yourself and your spouse, but for your children. Help them be good money managers. Start young and build responsibility early. Many schools and colleges do not teach any money tips. It is crucial not only for your financial success but for your kids too. If you are consistently struggling and arguing, especially about money, that will effect the kids more then what you may realize. That is telling them that money is scarce, and it is likely the kids will treat money in the same manner.
I invite you to use these tips outlined below. Treat your family’s finances like a business. Be efficient and prepare for the unknowns of life because they will occur. Budgeting seems more difficult then it is. If you can get a handle on the finances, things should go much smoother. Like anything worth having, it is a skill set and with practice it does get easier to manage over time.
1. Seeing Money as a Tool
Many of us grow up in a stressful home with less then ideal finances. Depending on our background, we can think of money as difficult to get or much abundant. Money usually equates with freedom and having more options. Although possibly hard to comprehend, money is a tool. It is not the end all. Money by itself doesn’t have value, the value is in what the money affords. When you can get out of your head that money is a tool, you will be more likely to not think it is difficult to acquire. Money is everywhere, just because you may posses little now has no bearing on what the future holds.
2. Review Past Expenses and Income Sources
Before you start to plan out your budget. It’s critical to understand what you are typically spending each month. Do can do this in a couple ways. You can save receipts and/or pay stubs if available and add those up. If you have online banking, you could also pull up your previous months expenses and income that way. You may have a good idea on your monthly expenses already, however it’s important not to guess. Do your diligence.
3. Planning it Out
When you prepare your budget try to think about not only what you need right currently for the month but also those expenses that only come around every so often. Insurance for the home, the car, life insurance can be paid monthly, quarterly, bi or annually. Additionally, property taxes are another big expenses to consider. Family vacations, the kids’ summer activities all need to be considered. It’s best to keep a calendar and track these future expenditures and plan accordingly. As each new month progresses, as a family write down all the expected expenses for the month or months ahead. Then it’s advisable to save a little extra just in case. The more advanced planning is done the better.
4. Making Up a Budget
This is likely the most obvious step, and it's also the most important. No matter how you keep a budget, it’s important to keep it simple so you will stay consistent and on track.
There are different ways to keep a budget. A simple pen and paper will do just fine for most. You can incorporate the envelope system as well with this method. Basically you are are keeping a set of envelopes or an accordion binder to budget. Label each envelop with the expense, car payment, house, groceries, etc and you place the expected cash amount in each envelope to cover those expenses.
Electronically, there are options as well. A computer spreadsheet will work well. Also, online there are resources such as GoodBudget, Everydollar and Mint. Most have free options available. Many banks and credit unions have features available as well to track expenses. Some online options will work in the Cloud. That makes it easy, as you can add expenses on your cell phone as soon as you make a purchase and then you can log in on a home computer and pick up where you left off.
5. Know Where You Are At
It’s best to understand where you are at financially. Some applications will break down by category how much you spend. Once you have a budget you should be able to more easily access how much you are spending on luxuries, such as eating out, movie nights or shopping trips to the mall. You may be able to cut back in certain areas. See where you can save is important too. That could include utilities, groceries, insurance, car payment…pretty much anything.
6. Whose in Charge?
If you are married, or living with a significant other, figure out who will be the primary budget recorder. That doesn’t mean the other party is off the hook. It’s likely one of you is more keen to detail work and writing things down. Share responsibilities and be accountable to yourself and each other. Work together in your goals, plan and do what it takes to be financially successful. If you find other party isn’t contributing as much, have a civil conversation about it. Express concern, re-evaluate the goals and recommit to them. Don’t be a dictator about it though. Things will come up, life is busy, especially with kids. Make a plan though, perhaps have an envelope in each car. Put receipts in there and weekly take the receipts out and record the transactions. Just do whatever works and everyone will stick with. Be sure to include the older kids as well. If they go out with friends or buy gas, teach them good habits and get them involved.
7. Have Some Fun Money
Without some extra free money to spend, you’re going to feel as if your budget is trying to rob you. Be sure to add a section to your budget to allow a little fun every now and then. If don’t have to be much money, however by rewarding yourself you are more likely to stick with the budget and not overspend. You will also be happier because you are allowing yourself to have some enjoyment. Spend it in ways however you want, but make sure you plan, as you don’t want to surprise yourself down the road with financial obligations that you didn’t bargain for.
8. Establish Your Goals
The act of having goals and direction is powerful. We should all have life goals, and our finances there is no exception. You’re goals are fully yours, make them fun, impactful and share them with others. Determine what you want and then find out a way to make it happen. The key is with the follow through however. I recommend writing out all of the goals on paper. Typing them is okay, but seeing them in your own penmanship is more powerful. Do you research on what you want, those motivating forces. It can be big or small. It may be a new car, a vacation with the kids, etc. Write that out, determine how much it is cost. Make a plan to save each week, bi-weekly, month. Take it a step farther, print out a picture of that goals, post it on your wall, at the office, in your car. Wherever you will see it the most.
The same goes for our debts too. Have an end goal in mind to pay off that bill sooner rather than later. Think of the feelings you will have when the car is paid off, the college education. Again, it doesn’t matter the size, what matters is taking the action and committing to getting it done. Accomplishment is a great feeling, one you will want to take part in as much as possible.
9. Be Disciplined
If you want to go far in anything, developing discipline can be a game changer. Especially relating to your goals, when you start writing down then achieving them you are making a huge mindset shift to yourself and to others that you are a doer and someone who is accountable. This will cross over into other areas as well. That could include eating better, going to the gym, being a better listener, preparing better, and of course having a budget.
Discipline is a skill, it’s not likely to happen in a day or two. Give it time, give yourself some breaks. Finances, whether in business or our personal life are never easy to clearly understand. There will be hiccups, unforeseen events and opportunities. Keep your goals in mind at every turn. Stay true to them as much as possible and you will find you are successful more often.
10. Dig a Little Deeper
If you find yourself struggling month and month, due some due diligence and find out the whys. Many people overspend, if that is you, you are not isolated. We are enticed with so many chooses, it can be exhausting, especially when it seems like your friends and neighbors have it all figured out. Realize that you are in charge of your own future, so ask yourself the hard questions.
Such as, Why am I spending this much on food? On entertainment? On gas? On coffee? Try to find out the source? It could be a lot of reasons. Really dig deep. Try to find the cause. It could be you are not satisfied in one area or another, or over stressed. Many times we buy stuff just to impress others, we may feel insecure about ourselves and our purpose. That alone can lead to financial hardship and it’s often unseen at the surface.
If you need to, get an outside perspective. Work with your spouse or a loved one on this. Evaluate, but don’t argue here. You are only asking questions to provide a solution. Where can I or we save money? Where can we take that vacation? Where can we do more and be happier doing it? Ask those questions, big and small. Don’t be afraid to talk, evaluate and take action because that is where results occur.
11. Always Look Ahead
Be open to new opportunities. We grow when we push ourselves forward. Just as in business, forecast the needs in the next year or years ahead. This includes our personal finances. If you own a home, there could be a new roof that will be needed. If kids headed to summer camp, plan for that in advance. Have open conversations ahead the needs of the family, have meetings. See future expenses coming up and plan accordingly. Same is true in our career. If you find your family having difficulty making ends meet, have a conversation with the family about those options. Be open to taking on a side gig, to changing employment, to going out less, to saving more, to moving, anything should be on the table if that will help meet goals, financial or otherwise.
Realize decisions are not always easy to make, however talk it out and plan, and a course of action and follow through. By being decisive and committed you are taking the necessarily steps to do great and be the best version of yourself. That is all you can ask of yourself and of others.
These tips should help move you forward towards your financial goals. A budget is a big step, it is a commitment, but one that can really set you up for success.
For more in depth solutions, the author offers financial coaching to individuals and families. Please contact him for further information and support.