Budget

Part 1

Photo by Sharon McCutcheon on Unsplash

Budgeting allows you to take control of your finances. You work too hard for your money to not manage it. Budgeting is simply implementing a plan for your money.

A budget is a powerful tool to assist you in reaching your financial goals, whether that be an emergency fund, a down-payment for a home, education, retirement, or anything else that is important for you. Without having a budget, most people will spend more money than they earn and will always be enslaved by debt.

A personalized budget allows you to make and manage your personal finances like a business. Your spending will become disciplined instead of pure chaos with no idea where or how much of your income is being spent. Always keep in mind that:

Income – Expenses = Profit or Loss

To be successful in creating a budget, it is critical that you include your spouse. Budgeting is a family affair and your chances of success without involving your spouse is nearly zero. It’s also important to have a discussion with your children so they will understand the reasoning behind the money decisions you will be making.

There are several budgeting strategies that you can use that will assist you in reaching your financial goal(s). They range from super simple to very complex. Of course, the more more complex models will require more of your time in bookkeeping and analysis. Some printable worksheets of several budgeting strategies are available online so you can select the strategy best suits your personality, the time you are willing to commit to bookkeeping duties or the amount of detail you want or need in order to fine tune your personalized budget.

I believe in KISS: Keep it simple and short. This simplicity encourages dedicated use and monitoring of your plan (budget) versus abandonment due to the time required in bookkeeping and analysis of more complex tools.

Summary

It is imperative that you track your income and expenses. Otherwise, there is no reason to have a budget because you’ll end up spending more than will be permitted to meet your financial goal(s). There are only three options when your expenses exceed your income and have you mentally and emotional starved of any peace of mind because you are unable to meet your financial obligations:

  • Increase your income,
  • Decrease your spending or
  • Finance your money shortage through additional debt … which should never be considered.

I will present a simple, easy-to-use budgeting strategy in Part 2 of this series that requires minimal effort and time, yet effective.

Published by W. M. Brown

I am a retired U.S. expat living in Ecuador. I was a business owner for 32 years before retiring in 2012.

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