Why most people stink at making a budget?
What is a budget? A budget is an estimate of income and expenditure for a set period of time. Why are some people much better at this then others? Some of it is upbringing, experiences and education. As children we grow up watching how parents live, work, love and manage their finances.
In my home our finances were limited. It always seemed we had just enough. However, I never remember seeing my mother sit down and make an actual budget.
You see in my house my mom didn’t use a checkbook to pay bills or keep a ledger of her expenses. I imagine she knew she made X her expenses were Y and if for some miracle she had an excess that was savings. I also recall my mother doing Xmas clubs and other short term goal savings plans. For big goals like a fridge or a TV she would save or use something like layaway.
My mother was never one to use credit. I don’t believe she ever had a credit card. I know she never had a mortgage because at 80 years old she has never owned property and she never will.
Your budget and why is it important?
Small goals build big dreams. Planning for short, midterm and long goals create a realistic plan to achieve all you want in life. A budget is a living document which will tell you where you are today and how you need to live. Initially it´s tiresome and many times it’s depressing.
The first time I sat down to work on my finances I felt sick to my stomach. It felt like climbing a 4000 step mountain and I was on step 1. But each day I would come back to this goal of improving my finances and each day I would work on making small adjustments.
Budget changes are never fast. They take time. It requires you to be flexible, things come up and sometimes your budget gets blown out of the water. We live in a time of easy (bad debt). It’s easy to add debt to your life when you know you want and need to eliminate debt. Don’t let small setbacks discourage you.
We are here at Budget Build Buy to help you achieve your ultimate goal. To buy a home in 24 months. That is our commitment to you. Always remember why you are here. Review your budget constantly. Stay on top of your spending. Together we will achieve the goals you set out.
Create your budget on Excel, Google Sheets or pen and paper?
I love paper and I love to write. However, a budget should be on Excel or Google Sheets. It allows for changes and it allows for progress to be measured. I included a free copy here: download it and begin to use it. Change it as needed.
I like to use one page specifically for debt. I never want to be surprised by how much debt I´m carrying and how it related to my usage. For more information on credit check this link. Make sure you track your interest if any. I use a separate sheet for my cash flow – similar to a cash flow statement for a business. Think of your life and your finances the same way you would run a business.
Like a business you want to be cash flow positive making smart investments which give you a positive return on investment. Debt is not evil or bad and well leveraged it can create wealth. Investing is also an important aspect of your financial life, something we will discuss in future posts.
You now have some simple tools to start your first successful budget and like I said and will say many times it won’t be easy initially, especially if you never worked with a budget before. If you come from a family like my family, which never made a budget and never did well with their finances it will be extra hard.
Stay focused on your goals
Don’t become disappointed when your budget gets out of whack or you’re not making progress on lowering your debt. It took my wife and I almost 2 years to get to where we wanted to be. Throughout that time it required making tough decisions. Small sacrifices which in the long run have paid off handsomely.
This is the key to your budget
Saying no. Saying no to your friends, family, children and many times to your spouse. But the most important person you must say no to is yourself. It takes courage and conviction to a higher purpose. However, those close to you will feel hurt, embarrassed or just plain mad at your reluctance to spend on things which to them seem within reach or a necessity.
In time others will come around to accept your decisions and will want to do the same, most times.
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