Coming up to the Holiday’s we see an increased need to be diligent on your budget and spending. Don’t get caught or in trouble by just “winging it”.
The first step is to look at your budget to see where it’s going. No budget? That could be part of the problem. Luckily setting up a budget isn’t as bad as it seems. There are many ways to budget your money, you just have to find which way works for you. Knowing what you have and what you can spend on any given day, week or month can help reduce money anxiety and stress.
But, there is a flaw (in my opinion) with the guidelines on budgeting-which is typically what causes people not to budget. You can’t control what you don’t know. In the words of Andy Stanley, “you gotta be knowin’ where your money’s goin’!”
To get started, gather all your numbers (do this over the course of a month). This includes money coming in (after taxes a.k.a “net income”) on a regular basis, current bank balances and all the payments you make every month (and when you pay them, as in dates). Then you can list these amounts. Do this with pen and paper, on your computer with a spreadsheet or with specific software. I am a simple person and so I typically like having clients start with a calendar…a red pen and a black pen (why the two pens?). You write down on the date you get paid in black pen the amount deposited into your account or given to you. Then in red pen, write down all your bills on the days they are due. This will help you see a huge tool…your cash flow!
Once you have things listed, see where the money is going. How much is going towards Groceries? Rent? Entertainment? After this is done, you will be able to see where you can cut back or add to. You will also notice what is fixed spending and what is discretionary. These are simply big words to describe, what you can change and what you have fixed.
Fixed spending are the amounts that have to go out every month. This could be rent or mortgage payments, insurance, utilities, etcetera. Discretionary spending, on the other hand, is money that is spent on items like gifts, clothing, eating out, travel and the like. Many times, people can reduce the amount of money that is directed towards discretionary spending and apply it to other projects, such as setting up a savings account or investments.
If you are feeling the weight of loans, credit cards or other debt, see if increasing your payment will fit into your budget. Any amount you pay over the minimum required goes to the principal of the debt. In the long run, this will reduce the amount of interest you will have to pay and the length of time you need to pay the debt off. Debt, especially personal/consumer debt (credit cards, car payments, etc) is sometimes the biggest drain (or direct cause) to your financial independence (or lack thereof). But remember, your debt did not appear overnight-it took time. It will be the same way for getting out of it, but you can control how fast that process goes. (My favorite Debt elimination tool is using a Debt Snowball).
If you are still feeling at loose ends after setting up your budget, consider professional help. Independent Financial advisors may help you get on the right track for you. Typically, most people don’t because they feel “they can’t afford” an advisor. Many good ones, especially ones without a client minimum, will be willing to help you work towards the right track. If you need help, or would like to see some good tools (budgeting, cash flow, etc) you can google it or contact me and I’ll share with you some tools that I suggest and use with my clients.