Budgeting – The Forgotten Skill! What You Do Now Will Affect Your Future
A builder uses a set of plans to build a house. If he didn’t, the bathroom might get overlooked altogether
On the flip side of this, an architect puts a plan together which is then followed by the various tradespeople to get the result the architect has pictured.
You want to be the architect and the builder! Put a good plan in place and then follow it.
And yet most of us go blindly out into the world without an inkling of an idea about finances and without any plan at all.
Not very smart of us, is it? Many of us have the “it will all be alright” attitude.
A money plan is called a budget and it is crucial to get us to our desired financial goals. I always asked myself “how much am I saving?” And “how can I save more?”
First you have to know what your financial goals are, the ‘purpose’ to why you are doing this. Is it to buy a new car, a new house or (if you are like me) where can I travel too?
Without a plan we will drift without direction and end up marooned on a distant financial atoll.
If you have a spouse or a significant other, your budget should be made together. Sit down and figure out what your joint financial goals are … long term and short term.
Be careful of letting your egos get in the way, and not telling the whole truth about your financial predicament. This may put unwanted pressure on you and your partner’s plans for the future.
Then, plan a route to get to those goals. Every journey begins with one step and the first step to attaining your goals is to make a realistic budget that both of you can live with.
A budget should never be a financial starvation diet (like all diets, they will not work if you feel forced into doing it). That won’t work for the long haul. Make reasonable allocations for food, clothing, shelter, utilities and insurance and set aside a reasonable amount for entertainment and the occasional luxury item (I always put some fat on the figures so I will never leave myself short).
Savings should always come before any spending (even if you only put $5 to your savings, it is something). You also have to learn to never touch your savings account until you reach the goal you have been saving for.
Steps to Creating a Budget:
Step 1: Determine the goal you want to work towards
Step 2: Track your spending over the next 2 months – every cent
Step 3: Analyse what you spend your money on and work out whether it is all necessary
Step 4: Create a budget (base this on how frequently you get paid) for your basic living expenses (food, utilities, housing, transport etc)
Step 5: If you have outstanding debts, pay these off as quickly as possible
Step 6 SAVE toward your goal
Step 7: Keep tracking your spending and analyse where your money is now going
Step 8: Enjoy your goal once achieved
Step 9: Consider investment education (go to www.dynamitewealthcreation.com for more information on financial education)
Step 10: Start at Step 1 again
Always remember, if you make a mistake, tomorrow is a new day and you can start again!
