If you’re like many you hate the idea of a budget. I’ve heard many people find it to be constraining. However are you on track to reaching your long-term goals? Do you find yourself making resolutions that never seem to materialize? Then a budget may just be the right thing.
My budget lesson
A few years ago I found myself asking the question (where did my money go?) At the time I had a two-latte-a-day Starbucks habit. I decided to take them up on the idea of getting a Starbucks prepaid card. While I paid for this card with my credit card I knew that it would help me to think about how often I was refilling that card. If you’re like me you don’t go through the details of your credit card statement. If it seems to fit within your normal range, you just would pay the bill. I began to find out that I was refilling this prepaid card more often than I realized. When I asked myself “Why did I enjoy going to Starbucks?”; I found it was more for camaraderie and experience than it was for the coffee. There were three ways I could address that need:
- The first was to cut out Starbucks altogether,
- Switch to once a day
- Start getting a coffee instead of a latte.
I opted for switching to coffee and going from a Grande size to a Tall (small). Now that I am married with kids, most of my coffee is made at home.
What are you spending on?
Do you know where your money is going? Getting control of your spending involves understanding what you’re spending your money on. Like me, you may find that there are certain items that are more about lifestyle and relationships than they are about function. A budget can help you lay those things out and to prioritize them in your life. Is your coffee habit more important than funding your children’s education? Do you deserve the daily coffee run over the more expensive car and its monthly payment? These are but a couple of prioritization issues that I have encountered in counseling my clients. With goals that require savings and the compounding of investment returns for them to grow the longer these things go unfunded or underfunded will require more drastic cuts to spending. Oftentimes cuts in future spending won’t even get you far enough and then will require you to compromise on the goal itself such as a second home or retiring at a later date. My experience is that most people would rather not delay their retirement. In fact, many people would like to accelerate their retirement. A budget today can help you avert these compromises.
What should you do?
Do you feel that you fully understand this aspect of finance or you have never been taught and need help? If you feel you know what to do but aren’t doing it, I recommend an accountability partner. Many people find an accountability partner that helps them be accountable to do things they already know how to do. Oftentimes birds of a feather flock together. In that case your friends have behavior similar to yours they would not be the best accountability partner for sticking to a budget.
If you have never been taught, you likely need to work with a credentialed financial planner, such as a Chartered Retirement Planning Counselor or CERTIFIED FINANCIAL PLANNER™ professional. They should be able to educate you on budgeting and other elements of your financial foundation.
No matter what camp you are in, there are online tools that might be helpful. I provide my financial planning clients with a personal website that can assist them in their budgeting. I also provide them with ongoing financial and behavioral counseling, to help them tie their budget to their goals. A few have told me that this accountability and the review meetings that we have are what they find even more valuable than the website itself.
No matter if you decide to learn more about how we can help, we implore you to start budgeting now and find a personal trainer-like accountability partner today. If you’d like to learn more about the website you can go here or schedule a discovery call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.