Although it might seem like a prerequisite, budgeting doesn’t have to be complicated. First of all, why do I even need a budget? You’ve heard the saying:
When you fail to plan, you plan to fail.
I have plans for other things in my life. I had plans to retire. I had plans to become a life coach. I had plans to live an amazing life. Why do I have those plans? Because I care about these things and I want to be successful at achieving them. These are the same reasons I need a budget. Because I care about my financial peace and security and I want to be successful achieving them.
If I’m going on a trip, I don’t wake and just expect everything to fall into place. I need to make plans ahead of time. I may need to book tickets to fly to my destination, or a rental car to get around once I arrive at my destination, I need to know what to pack and then pack those things; in other words, I need to have a plan.
How I budget or how I plan what to do with my money will depend on my financial goals, so it’s also a good idea to know what your goals are. I’ll talk more about this next week, but for now just know that it’s difficult to build an effective budget without knowing what your goals are for your financial future.
Sticking with my trip analogy, goals are like your destination. If you don’t know where you’re going, it will be difficult to know how to get there and what to pack for the trip. If I’m going to the beach, or a warm destination, I will need shorts, a bathing suit and flip flops, but if I’m going to a cold destination, like the North Pole, I will need warm clothes, a parka and warm boots. If I pack as if I’m going to the beach and I end up at the North Pole, I will be grossly ill-equipped and really miserable.
Likewise, my budget will look very different if my goal is to retire at age 55 than if I want to save for some new living room furniture. I need to know what I’m shooting for in order to draft an effective budget.
I also need to know where I’m starting from. I need to know what my current financial picture looks like, how much savings I have, how much debt I have, how much money/income I have to work with, what my current spending is, what I am willing to sacrifice if needed. You won’t need to do this every month necessarily, just when your financial picture changes significantly. Most of this stays fairly consistent from one month to the next and only needs periodic assessment. The reason this is important is when you’re going on a trip, you need to know your current location in order to get directions to where you’re headed.
The budgeting process doesn’t have to be stressful. It is always our thinking about the budgeting that makes it stressful. How are you choosing to think about your budget?
Find out how I can help you get back on track. Email me now at MoreMoneyCents@gmail.com to schedule your free mini coaching session.