Monday, December 29, 2014

A budget is like a diet, we need one at this time of year

One of the resolutions many make at this time of year is to get control of our money.  First step is to write it down and that means making a budget. The biggest issue many of us face is once we have made a budget how do we make it work for our family and us.

As we move ahead with our plan, life gets in the way: we forget to document a few expenses, we overspend, and pretty soon we are back to square one – frustrated with and wondering what went wrong.

A budget is a lot like a diet. You can have the best intentions to follow it and stick it out, but it only works if you actually do it and have support of others when you are doing it, that is why Jenny Craig and other diet services work better than going it alone.

Old  view of budgets
  • I’m going to learn some unpleasant news, so I should not look at it
  • I’m going to have to spend one entire weekend a month staring at spreadsheets and getting frustrated like my parents always did
  • There are going to be a hundred categories to track
  • I have to know where every cent is going
  • Since it’s so hard, I need it all super-automated so I have some hope of keeping track of it
The truth about budgets
  • The point is to help me know where my money is going in general and make sure I’m not spending beyond my means
  • I do need a spreadsheet with a bunch of categories
  • I need to look at my budget frequently for it to help me adjust my spending habits, so automating it is out of the question
To create an effective budget go online and do a Google search for free budget spreadsheets, or go to Google Documents Template Gallery and do a search for “Budget” find one that suits your family and download it.The templates are easy to read, simple to follow, and as uncomplicated as possible.

While your budget should be simple, it should be inclusive. Be sure to have categories for not only your income and regular expenses (mortgage, rent, car payment, monthly bills, etc.) but also your irregular expenses such as gifts, holiday spending, and medical. Every item of your income should fit into a category – from bills, to daily expenses, and beyond. If there’s any income left over after all of your expenses put that money into your savings category, which can be sub categorized. For example, I have a savings category set aside just for my Golf holiday and another for Taxes and one for Travel so that I am saving all year long.

A key point is that your Budget will change – often by the month! Maybe you have started a new job, moved to a new home, or paid off a small debt – your expenses and incomes may be constantly changing and so your budget should be flexible. So adapt your budget each month to reflect the changes and shift your spending accordingly. No family has a budget that stays static every single month, so do not expect yours to. Review your budget, if not once a month, every two months so you can update it to reflect your current circumstances.

Define Your Goals
What is your family hoping to save for? Perhaps you dream of buying a house, taking your family on an overseas adventure, helping your kids graduate from university debt-free, or maybe you want to pay off that credit card debt! If you write out or visualize, or talk about your goals, you’ll find it much easier to muster the discipline to make it happen.

A budget is not yours alone, it belongs to the entire family and the family that plans together, saves together. Find a time to sit down with your family to go over each aspect of your budget, from creation and implementation. Let everyone get involved! You cannot expect anyone to follow a budget they do not understand, if you’re all on the same page when it comes to spending and saving, you’re already one step closer to your goals!

There is no sense in creating a budget if no one is going to track his or her spending! Making sure that the budget is accessible to your family (you can share a document via Google Drive or in Drop-box very easily!) means that you can update it anytime and keep an eye on where you need to make changes.

If you do not want to put the document online then keep pages in a budget binder at home that you can add to as you perfect your budgeting strategy.

Like all plans your budget may not work out the way you’d hoped. Give it time. You might find you have been unrealistic about how much you spend eating at restaurants, or entertainment. Your first few months are your adjustment phase and you can rest easy knowing that it’s perfectly fine to do a lot of budget tweaking during this time.

This is a great opportunity to trim the fat from your budgeting. For instance, if your family is eating out too much, make your budget smaller in this area and let your budget force you to cook meals together at home. Dig through your spending habits and find the places where you can trim away needless spending.

Talk to your family about the things you can all give up in order to save your hard-earned money. Try library memberships instead of magazine subscriptions, walking instead of driving, or hosting a clothing swap instead of buying brand new clothes!

There will be issues and problems  as you work on your family budget, but your ultimate goal here is to never give up. Money and budgeting does not have to be such a taboo topic, so talk with neighbours or friends about how they make their family budgets work! You may just be surprised at what they tell you. Get help, help each other, and work together to reach your goals. You can do it!

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