Budgeting is a process that helps us in planning our cash flow. It helps us direct our money to things that are important. You may be new to budgeting or have tried it before and know all too well how it will end.
How to Make Budgeting Count?
As is usually the case, end of the month approaches and we find ourselves scrambling to scrounge enough to pay off the bills. We may end up wishing we hadn’t spent all that money on things that we didn’t need and promise ourselves to never let it happen again. In the heat of the moment, we build a budget that forces us to live on scraps and give up all that we hold dear. In this moment of despair, extreme budgeting seems to be the answer to all that has gone wrong during the month.
We may be able to stick to this extreme financial diet regiment for a while but soon find ourselves falling back to our old habits. The reason this happens is because we have essentially built a punishment budget. This is not a healthy budget that will put us on the path to developing healthy financial habits. What we need is to develop a budget that helps us break out of spending habits that put us in difficult financial situations.
So how do we do that? First, gather all your financial information, which means your income and expenditure. Find out how much income is coming in and the money going
The next step is to set our priorities, determine what is important and look at options to reduce your monthly expenditure. This does not mean going to extremes and stopping all expenditure, this is not a sustainable path. Going down the path of extreme budgeting will not end well. This is the reason why many people struggle with the idea of budgeting because they are using it as a tool that is limiting their ability to lead the life they want instead of helping them achieve it.
The third step is to decide on how to move forward. Budgeting is not just about crunching numbers in a spreadsheet and cutting expenses. Proper analysis of your financial data can provide a wealth of information. Build a budget and learn from it. Regularly review your budget on a weekly or monthly basis. Budgets are most useful when they help direct your finances to areas that need attention, it is a reallocation of your finances so that you are using it in the most efficient way possible.
The goal should be to develop a sustainable financial plan that is not just looking at one month at a time. A sustainable financial plan must be for the longer term. Most people budget for the month ahead, cutting every expenditure and putting themselves through misery only to fall back into old habits before any substantial gains.
When we plan for the longer term we ensure that we are not just reacting to some financial hardship, however, we can use it as a stimulus to get started.