As you’ll know by now, the Smart Money Method™ (SMM) is built on 5 foundational pillars:
- Your money reality check,
- Smart budgeting and reviews,
- A money management system,
- Total debt elimination, and,
- Saving/Investing for future use.
Today, and in fact this month, I want to discuss one of these pillars: Budgeting.
Budgeting also has 5 main pillars, and these are vital if you’re going to create and maintain a functional and successful budget. These 5 pillars are:
- Know exactly what you’re earning, after-tax,
- Know where and how much you’re spending each month,
- Write these into a plan, being accurate but realistic,
- Track your spending each month against your written budget,
- Review and tweak your budget with your significant other each month.
It’s far too easy today to spend on unneeded or even frivolous things – a bit here, a bit there, and before we know it, we wonder why we have more month left than income left! And our debt levels climb.
Why Budget?
A budget, or money plan, can quickly reverse this for you if you apply yourself to it, track closely, and only spend what you purpose or choose to spend. And, as we factor in some saving as well, you’ll soon see your account balances climbing while your financial stress comes down.
However, budgeting sounds like a joy-killer. Remember though, it’s a process or a means to an end. You wouldn’t drive in an unfamiliar city without a roadmap or GPS, so that’s how you should think of your budget – it’s your money roadmap to financial independence and eventually true financial freedom.
Once you have control over your income and direct it purposefully where you want it to, including savings, and some ‘fun’ expenses too, you’ll soon see quite dramatic results we often see with our clients as we start with this essential financial skill. I caution against budgets that are too strict however, as these inevitably fail as life is meant to be enjoyed!
A budget helps us feel in control, instead of just wondering where our money went.
Who should budget?
Budgets are for anyone who is managing money coming in… and going out – that is all of us! We can all make smart choices about our money and can benefit from a budget. It’s not just for anyone having difficulties making ends meet.
Do you typically spend more or less than you earn each month?
If the answer is, you spend less than earn, that’s great! You can use a budget to fine tune your expenses to save even more and begin to power up your savings towards your goals.
If the answer is, you spend more than you earn, you’re in the right place… that can be fixed. You can use a budget to fine tune your expenses to see exactly why and then take steps to reduce your spending so that you spend less than you earn and then can begin saving for your goals too.
To my mind, budgeting is a necessary financial skill ALL of us should have, regardless of our current position in life, but few of us possess – let’s change that!
Now that we’ve discussed the WHY around budgets, in the next post we’ll discuss the HOW.
See you there!
