Budgeting is like dieting, you know you need to, it will make you healthier (and wealthier), but the process is not always fun when starting out. If the diet is too strict it will fail, if it allows cheat days it will fail and if you are not committed to the end results it will fail. Lots of room for failure, but we are going to share a few tips that will set you up for success.
Define your Why
Why are you trying to budget? Don’t make it like a diet in that you are trying to look good at a friend’s wedding or at your class reunion. Your goal for budgeting should lead you to building wealth and help you achieve your dreams financial or non-financial. Here are few goals that you might set:
- Buying a home to build a legacy for our family
- Send our children to college or paying off your own student debt
- Take that dream vacation
- Retire on my terms
Once you have your Why clearly defined then set specific goals on how you will achieve that. How much money do you need to save to send your children to college? After you know that break it down to what you need to save annually, monthly and weekly. Seeing the goal in smaller pieces will demonstrate how achievable it can be.
Set a Plan
Just like there are different types of diets there are many different styles and resources for budgeting. Are you going to go Cold Turkey and cut out all non-essential spending? Are you going to specify a certain dollar amount each month to save and reach your goal?
When first developing a plan, you need to know where you are financially, just like getting on the scale. Make a list of all your assets, debts and calculate your monthly income. Take a look at your expenses in the last month and put them in two columns, needs and wants. Needs should include housing, utilities and food (not out to eat). Wants are everything else that is not on that list like restaurants, clothing and cable.
You also probably have a list of expenses that are in between needs and wants like student loan payments, your car and other debts. This list needs to be reviewed carefully, is there something you can take off the list, could you sell your car, how long will it take to get rid of your student debt. The point here is you are in charge of your money not the other way around.
The number one thing that makes popular diet programs work is the accountability of being in a group. Weight Watchers and Jenny Craig are built on group accountability. Popular diets have built Facebook groups to ask questions, share recipes and cheer each other along.
Share your big dream with your family and friends. Find a budgeting or debt slaying group online. Be prepared for a bit of push when you start changing your lifestyle. Your friends might question why you are not going out as much or why you sold your car. Simply share with them your big dream and ask for their support.
When your dream of financial freedom is bigger than that purchase in front of you will feel a sense of accomplishment in reaching your goals. One of my favorite diet quotes is, “Nothing tastes as good as being healthy feels.”
Continue the conversation with us at our podcast where we talk with Lorene Collier Purcy of Savvy Chicks Rule to ask her this question and more on budgeting.