Budgeting: A Pathway to Money Stability
Budgeting Tips for Households
Budgeting for households is held by most people as somewhere between a root canal and waking up to a flat tire. Budgeting is not held in high regard. You might even ask: Why should I budget? Is it really necessary? I don’t even have enough money to cover my expenses I have so why bother? I hate numbers and spreadsheets. I know what I want to spend my money on. Budgets are confining and restricting. These are real opinions and objections, some of which I have experienced myself. The cold, hard truth is, unless you have a room full of cash in which to swim, NOT BUDGETING is a combination of lack of monetary discipline or laziness. There…I said it. If you are still reading, pat your self on the back for having courage to face the stinky mess of living paycheck-to-paycheck and deciding to break that cycle. Living on a budget that gives names to all of your income BEFORE you spend it is a tremendous start to reaching your financial goals.
Here are a few guidelines:
- Plan your expenses before paying them. When using a budget to plan, create spending categories for your expenses. In our last article, I mentioned the 4 walls: Food, Clothing, Transportation, and Housing. Starting with those 4 categories is a great beginning. Another category may be “Medical Bills” or “School Expenses”. Give ALL income a name each month before you spend it. Keep creating categories and give it a dollar amount as you go through all expenses. When you run out of income, stop spending on paper.
- Each month is somewhat different in either income or expenses. If you use a digital file, save the budget from the previous month and rename it to the current month. Figure out what works best for you and your significant other. Don’t sweat it if you mess up or forget some bills. Give yourself AT LEAST 3 months of practice to get good at this.
- Except for emergencies, DO NOT spend more than you bring in each month in income. If you have an irregular income, use your lowest month of recorded income. If you exceed that income, pay some things that are of a lower priority.
- Prioritize the non-negotiable expenses and push other non-pressing bills lower down the list. Try to anticipate upcoming expenses that are irregular (i.e. homeowner dues, vehicle maintenance, inspections or registrations, birthday or holiday presents, taxes of all kinds, school expenses, etc.) Look for frivolous expenses that can be cut, at least temporarily. Entertainment, full-price movies, digital or online purchases, gym memberships, and that pesky Fruit of the Month club membership!
- Finally, all of these decisions should be made with an ACCOUNTABILITY PARTNER. Singles can consult with a close friend who understands the importance of financial focus and be a source of encouragement. Married couples should work each month together in compiling the monthly budget in a caring and cooperative way that helps the entire household benefit. Who knows, the entire process might bring the stress caused by money fighting down and actually bring couples closer together.
In the first article of 2018, we will discuss the role of credit cards in personal finance and examine a healthy and effective way to deal with recurring credit card debt. What financial goals do you have for 2018? Pay off a mortgage? Start a college savings plan? Retirement savings? Become more financial literate? Contact me today at Lighthouse Financial Coaching for a FREE introductory session so you can make 2018 the year you start winning with money. If you aim at nothing you will hit it EVERY TIME!
Certified Financial Coach