Budgeting

As we start a new year and for many it’s not going to be a good place, maybe the pandemic of 2020 saw job loss or less money coming in and even a rise in personal debt. I think a good place to start with these articles is to write about budgeting.

Personal budgeting is something I have been doing for years, not always successful nor have I always been consistent in my approach. But as I’ve got older and found better ways to track money, I’ve been able to enjoy the benefits regular budgeting.

But this article is not about how to budget. My own method is quite complex and something I wouldn’t share with a beginner, but you can literally find thousands of ways to budget as you browse over the internet.

However, what this article will give you is 3 key pointers, that whichever method you use, these principles are always the same, they are what will make up the foundations of budget which will then help in your approach to your money.

So the first thing to remember when budgeting is that it’s tough, just because you are tracking income and expenses it will not automatically mean you will have more money or that your debt will be cleared overnight. And even further down the line, just when you think that things are getting easier, then suddenly something seems to go wrong. Its going to knock your morale, it’s going to make you want to stop because you think it’s not worth it.

So before you start you need to ground yourself in the “why’s”. it’s good to write them down and put them with your budget so when things do get tough you always have visual of your reasons. I have 2 reasons, the first is when I don’t know what money I have to spend, it causes me too much anxiety. When I am out with friends its all I will worry about, so I can’t enjoy the moment. The second is that I have a dream to achieve, and I need money to get there.

Other questions you need to ask are: Why do you want to budget? Why now? Why not wait another week, month or year? Why is it that you want to make yourself sit down every week, every month and look at what money has come in and gone out?

These are serious questions that need to be explored and you need to give yourself emphatic answers to get through tough times with your budget. Maybe it’s because you’re a spendaholic and you’re in huge debt or may because you’re on a low income, maybe it’s because you recently lost your job, and you need to know what going out and when. Or maybe it because you have a dream.

The second pointer or principle is too realistic. Both when you answer the why questions and when progressing through your budget. In wanting to begin to budget you have some sense of your own spending habits and answering the ‘why’ questions gives you a deeper understanding of your goal as you move into this new habit.

But also, our expectations in what your budget will achieve, and the time frame it all happens has to be realistic. You can’t expect debt to cleared or mass savings to happen overnight. Understand that it will take 2 maybe three years for you really begin to benefit from your budget. Its just the way it is, the first year shows your spending, then as you look back on this your second year of budgeting is about being smarter in your habits, and using those 2 years, the third year you really start to become the master of your money.

But this only works if you are honest with yourself at the beginning. Be realist about the debt you’re in, be realistic about amount you spend. But at the same time don’t be too hard on yourself, give yourself praise to the fact you want to sort things, forgive yourself when you have the moments of madness and spend instead of saving. We are all human, it happens. But you must always be willing to learn. Because that is what you are agreeing with yourself when you begin to budget.

Remember this budget is not going to be audited by anyone, the only person you are accountable to is yourself. So you will be able to hide debt from it, you can ‘accidently’ forget to declare that expensive treat, but the only person it will affect is yourself.

The last point I want to make on being realistic is about what you can afford. If you are paying off debt don’t try and get rid of it as quickly as possible, experience has shown me that by doing that it sometimes has a habit of coming back in worse ways. Be in the knowledge that its ok for a debt to take 2 years to be paid off, each week your bills must be paid before your debt. But don’t give everything you have to the debt; you still need money to live.

I found the advantage of paying debt off slower is that I got so used to not having that set amount each month, so it created a habit of saving almost straight away. When my debt was paid, instead of using the money I just redirected that set amount into savings.

The final pointer or principle is to ‘be in it for long haul’. Budgeting when done right, becomes a habit, almost an addiction, because you have visual of where your money is going and coming from you become proactive. Instead of spending you find yourself wanting to put extra money toward debt or into the savings. You see how much you bills rise over the year, and actively look for ways to reduce them, or even change supplier.

In your “whys” you may had said you are budgeting to clear debt, or for the holiday of lifetime. When your debt is cleared and when you’ve had that holiday, don’t stop budgeting, find a new “why”. Being the master of your money will make life easier, it’s the first step to becoming financially independent.

A final word, whatever way you decide to budget, whatever method and document you choose, make it a working document. By this I mean make as personalised as possible. I use the same document every year, but every year I change it very slightly, because life changes every year. So, the document I was using last year looks very different from the one I use now, in fact it 2021 looks different from 2020.

So, establish your “whys”, be realistic in your approach and remember it takes time, so be in it for the long haul. But above that its personal, its like journal, you’ll be able to look back and see the changes and you’ll wonder how you ever allowed yourself to be like that in the first place.