By Carl Lander, Owner/Personal Financial Coach C3 Financial Services
Recently, I heard a banging against the sliding glass door leading to our deck. It sounded like a big “thud” and then happened again before I went to investigate. As I approached the sliding glass door, I noticed a couple carpenter bees hovering nearby. One of them flew towards the glass and smacked into it, making the “thud” sound I heard earlier. The carpenter bees developed a plan and finally flew around the side of the house to get where they wanted to go.
This reminded me of what happens when you don’t have a budget and make a plan for your money. Without a plan, we can hit our heads against a wall (or glass in this case) trying to get from one place to another without realizing that way is blocked. You have to take a different path to get around the problem and find a solution. It’s the same with making a monthly budget to
control your money instead of it controlling you. Once you make a plan for your money by budgeting every dollar, on paper, on purpose, before the month begins, you start down the path to finding a solution. The budget is your roadmap for financial success!
If you’re figuratively hitting your head against the wall with your money, isn’t it time to take a different
approach? One that helps you win with money and become more successful in the long term? That’s what a budget does. A budget is nothing more than telling your money where to go instead of wondering where it went. When you make a monthly budget, it can feel like you’ve gotten a raise because now you have a plan.
The first priorities of your budget should be: food, shelter, clothing, transportation, and utilities. Everything else needs to get paid, but you need to have a plan. If you’ve never made a monthly budget before, there can be some growing pains. Just keep working on it and make adjustments as needed. After a couple of months (2-3), the monthly budget can take about 15 minutes to plan for the next month. The hard part is taking that first step towards controlling your money.
Your budget can be created using software, an excel spreadsheet, or a piece of paper. You make two columns, one for income and the other for expenses. List all of your income (take home pay) in one column and all of your expenses in the other. If you are married, this includes your spouse’s income, and any income from any side jobs. Add up all of the income and then subtract the expenses. You should have more income than expenses. If not, you have to cut expenses somewhere.
After all, you are not Congress. If you need to cut your expenses, be sure to cut wants and not needs. After writing all the income and expenses down, it should balance and equal zero.
If there is income left over after subtracting your expenses, you can do 3 things with it: spend it, save it, or give it
away. If you don’t have an emergency fund, you should start building one. A beginner emergency fund is $500-$1,000, depending on your annual income. A fully funded emergency fund is 3-6 months of expenses, regardless of your income.
If you are in debt, any leftover money should go towards paying that down after establishing a beginner emergency fund.
Once you have the budget created and balanced, track your spending to see where your money goes each month. Don’t spend any money unless it has a name
attached to it. When you have a plan for
your money, you have control over it and can make adjustments accordingly. If the numbers aren’t working, have a budget
committee meeting with your spouse (or accountability partner) to change the
budget and re-balance it.
Each month is different and you need to do a budget each month. The more you do it, the easier it becomes. Make a plan today
for your money in order to be more successful in the long term. Your income is your greatest wealth-building
tool. A working monthly budget is the most useful tool in your personal financial arsenal!