I don’t need a budget...
Stewardship Cents Newsletter Sept 2012(click here to subscribe)
Whether you make $50,000 a year or $5 Million… you need a budget. When I ask the question “what is your annual income?” most people know exactly how much is coming in. But the real question is “how much is going out?” Now let’s be honest, most of us neglect the answer to this question.
“The amount of money you have has got nothing to do with what you earn. People earning a million dollars a year can have no money and people earning $35,000 a year can be quite well off. It’s not what you earn, it’s what you spend.” - Paul Clitheroe "A budget tells us what we can't afford, but it doesn't keep us from buying it." - William Feather
Surprises and Opportunities
Often I hear startled comments after a budgets review such as, “I spend how much on coffee each year?!” “We only save $______ each month?!” “We pay how much interest?!” And good surprises too, “Wow I thought we gave more away… lets increase our charitable giving.” “We really can afford to do ____.” For some people, maybe the $4.50 workday coffee is okay because you have chosen that you can afford it and you enjoy your daily cup of joe (for those of you wondering…5 days a week x $4.50 x 49 weeks is over $1,100 a year). For others though, a revelation like this can change spending perspectives quickly. Money is a resource to enjoy but you have to know where it is going. The point is, as long as you stay in the “guardrails” that you set, you don’t have to worry and your stress levels drop. You can have confidence because you are now in control of your cash flow and spending choices. You can work towards reaching your goals, like reducing debt, paying cash for that next major purchase, setting money away for your kid’s college and most importantly saving for your retirement.
How to make a budget happen
The word budget often makes us think of restrictions. But in reality it provides us with freedom. You see, when you allocate your spending and saving, something brilliant happens… you get freedom. Let me explain. The budget you establish (step 1 create it) and then track each month (step 2 record it) gives you useful information that allows you to have exact knowledge of where the $ is going (step 3 analyze it). This knowledge then gives you the power to make intelligent and wise spending choices (step 4 choose it). Confidently choosing how to spend your money; this is where the freedom lies.
A solid budget is the foundation of all good financial planning!
Here are some great resources to help establish a budget, accurately track it and make wise spending choices:
- For those who like mobile/web access (also free): Mint.com
- For those who want software: Quicken books
- For those who prefer paper: Printable budget worksheet
To your financial freedom,
Luke Fields, CFP® Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members