Planning is not second nature for all of us, and neither is making a budget, basically a plan for your money. They are really disciplines or habits that must be developed through practice. Habits and disciplines can’t become ingrained without regular repetition.
The main reason budgets fail is we think we only need to do them once. (Click to Tweet!)
Put Your Money to Work For You
Think of your money as an employee at a company. What happens to employees who show up late all the time or constantly make excuses for why they can’t come to work? They usually lose their jobs.
Now think of a budget as a work schedule and job description – it is what tells your employee (your money) when to be at work and what to do.
I realize this is not a perfect analogy, but it is one that most of us can relate to. When I worked for the government I had to be at work by 8:10 am Monday through Friday. In order to do that, I had to be up by 6:40 am. I do not naturally get up at 6:40 am. Therefore I had to discipline myself through repetition to get up on time in order to get to work on time.
Without a set schedule, I didn’t have a reason to create the discipline. Without adhering to my schedule, I probably would not have been as effective an employee, and, let’s face it, would eventually have been fired.
It’s the same with money. Without a schedule and job description, your money doesn’t know when to come and go, and definitely doesn’t know why. (Click to Tweet!)
Try writing down every purchase you make in the next week in a small notebook. You will probably be amazed at what you discover about your spending habits. You are most likely spending more money than you thought. You have an employee without a schedule, who doesn’t know what their job is, so they are just running amok wreaking havoc in your life.
Use a budget to give your money (your employee) a schedule so it actually shows up to work for you, and a job description, so it knows what it is expected to do when it shows up.
Doing a Budget every month is key, and as with all habits, it becomes easier the more you do it.
Resources for Creating & Maintaining Budgets
The Truth About Budgeting, article on daveramsey.com
EveryDollar from Ramsey Solutions
Basic: Budget and manual expense entry (Free) / Plus: Link financial institutions to pull in expenses automatically ($99/yr)
everydollar.com
This is the online budget tool created by Ramsey Solutions, and requires an annual fee for automated features provided for free by other services like Mint.com, but before you dismiss it because of the cost, realize that this online tool is not going to bombard you with ads for credit cards, mortgage rates, car loans, bigger better deals, etc. It also follows the concepts outlined in Dave Ramsey’s Financial Peace University course, so you know exactly what you are getting. (And while they do take Visa and MasterCard DEBIT cards, they do not take CREDIT cards of any brand).
Mint.com from Intuit (think Quicken, Quickbooks and QuickenLoans)
Free, but comes with targeted ads for financial products and services
mint.com
If you can ignore the targeted ads it pushes to you, Mint can be a very useful tool for budgeting and tracking expenses, and includes numerous charts and features to help you analyze your spending. It also has a fairly smart algorithm for categorizing your expenditures, making it a little easier to see where you are spending your money. It can tend to have issues staying connected to your accounts, so it requires a minor amount of maintenance and patience in that respect.
Budget forms from Ramsey Solutions
Downloadable Forms with Instructions
For those of you who aren’t as willing to budget online, Ramsey Solutions provides some great forms with step by step instructions to get you started doing your budget the old fashioned way. On paper.