Budgeting: Why, Why Not, How & Pitfalls
How much can you afford to stash away each month towards a goal, whether it be paying off student debt or saving for a down-payment on your first house? If you don't know the answer to this question you aren't alone. How would someone easily find the answer to the question above? Budgeting.
No one likes the word budget. But, budgeting is your ticket for a lifelong ride on the financial freedom train, where the women instinctively flock like the salmon of Capistrano...
If you are budgeting regularly then continue reading for a free website that can save you hours of your time.
Whether you're making millions or minimum wage you need to budget. If you're cloer to making minimum wage you probably think you don't have enough money to budget, or you're afraid to budget because you think you'll never reach your financial goals. If this is how you feel then let me point out Theodore Johnson - the man who never made more than $14,000/yr yet amassed a fortune of more than $70 million.
Think you make enough, or have enough where you don't need a budget? Donald Trump, Mike Tyson, Willie Nelson and Michael Jackson all thought their fortunes would never end, yet they all filed for bankruptcy. If you think they're the exception rather than the rule then look at all the pro athletes that are consistently in financial trouble; Charles Barkley, Michael Jordan, the list goes on and on...
I think it's pretty clear; no matter your current financial situation you need a budget.
But what exactly is budgeting?
Budgeting is simple; understand where your money comes from and where it goes. It doesn't have to be a drastic lifestyle change (although for some it will) but it should give you some clarity as to what you're spending your money on. I used to budget by entering all my receipts into spreadsheets (what a tedious pain in the a$$) until I was introduced to a godsend...Mint.
Mint is a free online service with all your budgeting and personal finance needs, conveniently in one place, updated automatically. I have been using Mint for a few years now and I can't count the hours it has saved me. Did I mention it was free?
If you're against Mint then set yourself up a spreadsheet and track your purchases for one or two months. You will be amazed where your money goes. It was eyeopening (and frustrating) when I realized I could have paid off my student loans in one years worth of drinks I bought on the weekends...you're welcome Jimbo!
Another nifty trick is to place all your months spending money (cash) into an envelope (aside from the rent, utilities or any other fixed expenses). Once that envelope is empty, you are out of money until next months envelope. This is great for anyone who has a problem with credit card spending.
Again, let me emphasize that budgeting doesn't need to be a dramatic lifestyle change. As long as you know where your moneys going, and are content with it, your budget is accomplishing it's goal.
My fellow Marietta College grads might remember Jean Scott saying, "knowledge isn't power, applied knowledge is power." Budgeting brings clarity to your financial situation, which allows you to gauge where you are (knowledge). When you know where you are, and where you want to go, you can create a means to pull your desired future towards your present situation (applied knowledge).
In other words, when starting a road trip, how can you know which route to take if you don't know where you are? We have all been there when Siri is telling us to turn left, right, then she says "calculating route". She cannot know how to get you to where you want to be if she doesn't know where you are - the same applies with life and finances. Understand where you are and where you want to be, only then can you create a means to combine the two.
A side note:
You might find yourself becoming obsessed with checking your budget; I know I do, especially since I can see how much my net worth increased in real time by simply opening the Mint app on my iPhone. When I feel myself being consumed by my finances I remember what Sir Francis Bacon said, "money is a good servant but a bad master." Don't fall victim to being a slave to money, whether that's looking at everything in life from a monetary standpoint, or spending everything you have to keep up with the Joneses.
Oscar Wild said, "I pity the man who knows the price of everything but the value of nothing." And it was George Carlin who said,"trying to be happy by accumulating possessions is like trying to satisfy hunger by taping sandwiches all over your body." Find a happy, and healthy, median.
- No matter if you're a millionaire or a minimum wage employee you need a budget.
- Budgeting is simply understanding your income and expenses.
- Mint is a powerful tool for budgeting and other personal finance needs.
- Budgeting isn't living in scarcity, it's living in clarity.
- You must know where you are, to get where you want to be.
- Don't fall victim to being a slave to money.