Budgeting and Planning
Most people could probably name 100 things (or more) that they'd rather do besides put a budget together. We're not sure why that is. It's said that people spend more time planning a yearly vacation than they do planning their personal finances. I guess that's not hard to understand; vacations are much more fun than budgets. We associate a vacation with fun, family, relaxation and travel. What are the words we usually associate with the word budget? How about restriction, deprivation, pain and hardship? No wonder we prefer to think about fun in the sun (and we can worry about paying for it later.)
Is it possible that we can find new words to associate with a budget? We suggest these words: balance, debt-free, savings, goal achievement, possibilities, peace of mind, and freedom.
If you use our words you will see budgeting in a new light. A budget allows you to balance your income and expenses. A budget will help you to avoid, reduce and eliminate your debt. When you use a budget to prepare for the future, you can include savings in your plan and you will be able to reach (short-, mid- and long-term) goals. Using a budget opens up opportunities and possibilities for the present and the future. A balanced budget, no debt, savings and goal achievement—a budget brings peace of mind and financial freedom.
That said, and hopefully we've convinced you, if you are going to follow a budget you need some kind of recording system. A budget that is created but never recorded is just a wish! It doesn't have to be a complicated and difficult process. You just need to anticipate your income and expenses and then keep track of them. You can do this with a notebook and a pencil. If that is too "old school" for you, there are spreadsheets and software programs to help you keep track. They will do a lot of the calculations for you. Most software programs will let you download right from your bank and they will create graphs and do projections for you. You can keep track of your investments and your assets and liabilities so that you can see your net worth.
We believe that there are lots of great reasons to use budget software. In fact, Eric and Robin are so convinced of the benefits that they have created their own online budgeting software called CalendarBudget. You can read more about it by clicking the Money Planner tab on the menu. You can even give the program a try and see just what CalendarBudget can do for you!
Pen and paper. ledger book, spreadsheet, budget software, an envelope (cash) system—whatever you decide works best for you is alright. It just has to be used, on a regular basis, to be effective. It needs to be easy so that you will stick with it. So...budget, record, review and repeat...
Remember what a budget really stands for: financial freedom. Get started right away. Your wallet will thank you!
P.S. The second chapter of our personal finance book, Power Spending: Getting More For Less, is about building a secure foundation for your (financial) house. Without a budget you are building on the sand, instead of a rock. Emergency planning will provide a defense against the storms of life that often come our way. If you prepare for the unexpected you are much less likely to suffer a financial collapse in times of trouble. This chapter is divided into two sections: Use a budget and Emergency planning. Together they form a solid and secure base.