Budgeting: Plan Your Life Don’t Stop Living It
Budgeting is one of the most important skills that can help ensure financial success over a lifetime.
After all, “Those who do not economize will agonize.” Confuscius
Here are eight strategies they use that work for them—perhaps they can work for you.
1. Write it all down.
First, list your Income. Second, list your Have To’s (Mortgage, Utilities, Childcare, Insurance, etc.). List things even if they’re a yearly or a once-every-6-months expense. Divide those Have To’s into a monthly total.
Next is your Adjustable Needs like Food and Gas, which are adjustable because they can change month to month and because you do have some control over them. Finally, list a fair Discretionary Budget for everyone in the household that includes all of those Wants or Extras.
“A successful man is one who can lay a firm foundation with the bricks others have thrown at him.” David Brinkley
“Beware of any enterprise requiring new clothes.” Henry Thoreau
2. Don’t try to cut all the fat at once.
Give yourself a workable budget, especially at first when you may still be trying to figure out the difference between Wants and Needs. We have found that the biggest help to the pocketbook is the monthly feedback you get when you go back to your budget and see how well you’ve stayed within your limits. Give yourself time to adjust your spending habits.
“In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.” Proverbs 21:20
3. If there is a spouse involved, sit down, talk and agree.
It’s the only way a budget will work. A majority of marital challenges are finance related. Categorize your Wants and Needs, and discuss the areas where you have differences of opinion. (For example, if your spouse thinks a new car is a Want but you think it’s a Need.) If you agree to disagree, that’s why you have a Discretionary Budget factored in.
Your budget should stuff a little extra cash into the mattress, which can add some cushion in times of challenges. Having savings to cover unexpected expenses will help keep stress low and eliminate potential tension between you and your significant other.
“Some couples go over their budgets very carefully every month; others just go over them.” Sally Poplin
4. Most budgets are not set in stone—they move up and down a bit.
A budget should help you plan your life, not keep you from living it. Expenses in some categories may ebb and flow, and that’s OK—if you plan for it. For example, you may spend relatively little on your kids in February but significantly more in August for back-to-school. If you have a column that specifically states what you spend on your kids, it will help you to keep that spending in balance with your allotted budget. Which brings us to our next tip…
“The easiest way for your children to learn about money is for you not to have any.” Katharine Whitehorn
5. What you overspend this month comes off of next month.
If you overspend on your Kids category one month, that means your budget for the next month is reduced by the amount you went over. (So get ready for a lot of creative at-home crafts!) Set the goal and stick to it. You are accountable to yourself with a budget, so be kind to yourselves. Be honest with each other.
“A budget tells us what we can’t afford, but it doesn’t keep us from buying it.” William Feather
“Aim low, reach your goals, and avoid disappointment.” Scott Adams/Dilbert
6. Cook meals you love at home.
Keep track of what meals you like to eat at your favorite restaurants, and figure out what each meal costs you to make at home. You will find many meals that are cheap and easy to make yourself, you won’t feel cheated and you, coincidentally, will cut your grocery bill a ton.
MSN Money has great suggestions on how to trim your food budget in half.
“After a good dinner one can forgive anybody, even one’s own relations.” Oscar Wilde, A Woman of No Importance
“One cannot think well, love well, sleep well, if one has not dined well.” Virginia Woolf, A Room of One’s Own
7. Budget time for your budget.
Keep receipts and keep a spreadsheet of your costs. Use whichever method works best for your family. Keep your tallies on a notepad, keep them on your laptop or tablet, use Google Docs. Whatever system is the easiest for each of you to use frequently. Google Docs is free and can be accessed by spouses who may be traveling in different areas, which is especially helpful on the budget. A little time each day helps the upkeep and it gives you a win for the day.
“My problem lies in reconciling my gross habits with my net income.” Errol Flynn
8. Free month sprint.
Pick a month out of the year where you don’t normally do much and try to make it a free month—use zero discretionary spending and try to live off of the grocery/gas category. People do better at sprints like this that have a limited timeline. It can become a game for four weeks. Ask yourself, “What’s free that’s going on in the community that we can do?” Then take all the money you saved in that one month and use it toward something like a vacation.
“The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.” TT Munger
“The easiest way to double your money is to fold it in half and put it in your pocket.” Kim Hubbard
We threw in three bonus points on budgeting, if you’re really looking for some extra credit:
Tithing is about trusting a higher power to provide for you. It is about giving generously to others, because others have so generously given to you, even in their time of need.
“Now this I say, he who sows sparingly will also reap sparingly, and he who sows bountifully will also reap bountifully. Each one must do just as he has purposed in his heart, not grudgingly or under compulsion, for God loves a cheerful giver. And God is able to make all grace abound to you, so that always having all sufficiency in everything, you may have an abundance for every good deed.” 2 Corinthians 9:6-8
2. Plan your future. Leverage a qualified Financial Planner.
Finance, tax and law are their own separate languages, in which you must be well-versed in order to take advantage of the opportunities available to you and to help avoid pitfalls that are not obvious. Build a relationship with a fiduciary who speaks those languages, one who knows you and your goals. That continual, personal relationship is vital as your financial professional works to advocate on your behalf.
“By wisdom a house is built, and by understanding it is established; and by knowledge the rooms are filled with all precious and pleasant riches.” Proverbs 24:3-4
3. Families need to talk openly together, even when it’s difficult.
A financial planner who has excellent customer service can and should be available (and willing) to talk with families to answer questions, complex and simple. Building those open relationships and stating your long-term intentions ahead of time make all of the difference in the world when tragedy strikes. Talk about end-of-life planning, worst-case scenarios, why you’ve made the choices you’ve made and what your intentions are.
“Never say you know a man until you have divided an inheritance with him.” Johann Lavater
“The best way to resolve any problem in the human world is for all sides to sit down and talk.” Dalai Lama
“Growing old is not for sissies.” Bettie Davis
We know that you have lots of questions about your Life Planning. Investment Answers is here for you—don’t put it off any longer. Contact us or call our offices directly to schedule an appointment.
Are you in your 30s, 40s, 50s, 60s, 70s+? Budgeting, 401K Plans, Income Planning, Investments, Insurances, Social Security Planning, Retirement Planning…we’re here for you.
* Updated in January 2017
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