Oh the budget. It’s a dreaded “B” word for so many of us.
But today, lay aside any preconceived notions you might have about budgeting.
If you thought you were going to be limited by your budget, you were wrong. If you thought that a budget was a killjoy, derived as an ancient torture device, again, dead wrong. Finally, if you were misinformed that budgets were limits placed upon your ability to enjoy life, wrong-o.
Budgets are your sturdiest weapon in the pursuit of paying off debt. In fact, I’m such a firm believer in this fact that I devoted an entire chapter in my book, “Slaying the Debt Dragon,” to budgeting. While I can’t sum it all up in one article, I do want to give you some of the tidbits that I picked up during our journey to knock out $127,000.
Change your lens
If you believe any of the mistruths about budgeting listed in the first paragraph, then you’ll have little success in this area of money management. You see, you need to begin by changing how you see the very process of building a budget. Can I tell you what helps me? It’s a simple word swap. Instead of “budget,” I say “forecast.” Because after all, that’s what the exercise truly is – forecasting what money will come and go during a set period of time. Don’t over-complicate things or layer on extra meaning by using a word with which you have negative feelings associated.
Say it with me, “FORECAST.” Ahhhhh doesn’t that sound much better?
Honestly, you could call your budget Bob or Judy or Buddy. It doesn’t matter the word choice, but begin the process by changing your lens.
The absolute best budget to build is the zero-based budget. While not a new concept, it can revolutionize your finances. In fact, my mind is blown that such a simple concept can completely transform the way you manage money.
The aim is to give every dollar a marching order — assigning it to expenses, debt repayment, or savings, so that at the end of the month you carry a zero balance in your checking account.
I’m fond of saying, “If you leave any extra cash in your checking account at all, it will grow legs and walk to Target.”
Want to spare your pennies? Send them away. If you remove all of the money — even if you’re sending it to an envelope or a savings account, you’ll be less likely to overspend.
Now, I know the control freaks in the house are stressing out right now because what would happen if you were overdrawn? Well A) Pay attention so that you don’t do that, and B) It’s OK to leave a cushion of $50-100 in there. Just don’t be surprised when you spend it and you have no idea where it went.
Do it at the right time
If you’ve never budgeted before, you should begin with at least an entire month at a time. I’m most comfortable forecasting (see what I did there?) about six months out. This helps me keep an eye out for expenses that aren’t paid on a monthly basis and seasonal activities like birthdays, back to school, and holidays. In the past, I’d rock a one-month budget only to come up short when it was time to pay quarterly insurance or celebrate life.
Budgeting is so fluid. Your expenses will change and so will your life needs. So setting something in stone isn’t the best idea. However, you can’t simply go with the flow either. Have a working framework that you can hold with an open hand, making changes when necessary is your best bet.
Use the right tools
This answer is as varied as the stars. As for me, I’m a Quicken sort of girl because I am attached to the hip with my laptop and love being able to look at graphs and charts of our spending. As I mentioned, I set up our income and expenses for about six months at a time and then reconcile things on a daily basis.
If you’ve never ever set up a budget before or prefer a pencil and paper over technology, you should check out the free printable budget form that I created on queenoffree.net. This will simply help you think through every category of spending possible. If you love your smartphone, consider downloading a budgeting app. Some of my favorites include mint.com, You Need a Budget, Good Budget, and Level Money.
A word to the wise: if a budgeting method has not worked for you in the past, it won’t work now. Don’t return to an ineffective system. Instead, investigate budgeting tools that best fit your unique gifts and inclinations.
You can love your budget. Your budget can be your best friend. Best of all, budgets breathe life into your money and help you manage all you’ve been given.