No one likes the idea of budgeting. One of my life’s ambitions is to find better ways to think about managing money — without using the “B” word.
Instead of budgeting, create a spending plan, which is really the same thing. Build a cash flow statement to determine where you are now, and then decide where your money needs to go each month. Think of it as giving your money a job to do. If you don’t help your money be productive, it’s liable to slip away and get into trouble.
Manage your money by always staying a step ahead of your income. Most people have some idea of how much income they are expecting in the next month. Therefore, the most successful approach is to delegate your dollars ahead of time, so you know where your money is going.
Just remember: you’re the boss. Not your money.
Too often people get their paycheck and start paying bills, crossing their fingers that there might be something, anything, left over for saving or spending. This is the wrong approach. Plan ahead. Think through the bills you have coming up and allocate those already promised dollars. Then determine what your remaining dollars should do.
If you don’t expect any dollars to remain, that is another issue all together. A situation like that requires intervention to restructure your fixed monthly expenses. For the sake of this blog post, I’m assuming you have fixed expenses you can cover (such as a mortgage, a car payment, the light bill) as well as discretionary expenses (such as groceries, dining out, and splurge money).
Once you have accounted for the fixed expenses, determine how much you are willing to allot to things like groceries, eating out, and entertainment. Just don’t forget your debt pay down and saving goals! Divvy up the expected bucket of money, regardless how small the bucket might be, with a mind toward your goals.
Give those lazy slacker dollars a job. The days of hanging out on your couch all day eating chips before slipping out the door when your back is turned are over.
How about you – do you approach the “B” word with enthusiasm or dread? Share your thoughts.