Saturday, May 12, 2012, AM | Leave Comment
If you buy because you need something, then you don’t need to develop a budget for your income and expenses. Like following your next diet, budget can be followed for a month or two and then most folks stop following it.
Before you get some fruits of your work budgeting, you have already quit following it.
Even though living and following a budget is the most important aspect of your personal finances, very few people follow it through consistently.
However, if you spend according to your needs and not your wishes, then you can avoid having a budget and following your needs through all your life will still help you lead a financially satisfied life.
Folks hate budgets
Budget like diet is very hard to follow. At the most two months and then people quit following budget just as they quit on a certain diet. Budget confines you.
But in today’s environment, consumers’ hung over is two-fold. One, unemployment is still quite high and two, a multi-year credit binge that is still hanging over. Therefore, a budget is the very tonic many households need to strengthen their family finances.
Budgeting doesn’t have to be painful if you understand one simple fact: You control your budget; it does not control you.
Have control over your budget if you do decide to have one
Remember not a single soul has unlimited resources of any kind. We must have our own way to live under the constraints of external forces. However, you are the one and only one who can control your expenses. In most people lives, our income are quite fixed in a sense that we get regular paycheck of the same amount.
But we can control our spending. You are the only one to dictate how you spend your limited financial resources. Your budget has no control over that. You choose how to spend your money, period. Not a single software like Mint can help you organize your finances if you are not up to it.
Your resources are limited…
Most people have just one paycheck income coming in every week. Too many people want their paycheck to cover everything they want. If the money is not in the budget, they turn to the good old credit cards. That’s an extremely bad idea. The credit-reliant mindset got the American people into the mess they are in now.
You do have control over your discretionary spending…
To figure out the discretionary spending, add up all your fixed monthly expenses, for example, mortgage/rent, a car note, insurance payments, electricity and groceries.
Now subtract your fixed expenses from your monthly take-home pay. The result is your discretionary income. If you exceed that amount, you are living beyond your means. And if your fixed costs exceed your income, you have some serious issues to tackle. You must then find a good financial adviser to help you lower your fixed expenses.
The Goal of successful budgeting…
We all know the goal of successful budgeting is learning to live within the bounds of your discretionary income. Every month make lists of your needs and your wants.
Spend on your needs first. If you run out of discretionary income before all your needs are met, then you must prioritize spending on your needs. You and only you can determine which needs are the most important that you genuinely must have.
In a Nutshell
Be in a position to have control over your budget and not the other way around. Take care of your financial needs first. You do not have to spend on your wants. Instead, save the money and invest it. Investing is the way to grow your money.