Making your budget a success
The 3 most important questions to ask
When most people think of budgets, they tend to think of these 3 things, ‘Income’, ‘Expenses’ and ‘Savings’
- They ask themselves how much do they earn – this way they know how much money they have to work with.
- They ask themselves what are their expenses – knowing this allows them to see if they are earning enough money.
- They ask themselves – is there anything left to save for a rainy day or any goals they might have?And depending on the maths, they then make a decision to accept the budget or they acknowledge it doesn’t add up and then juggle things around the best they can to get through until next pay day.
Does this sound at all familiar?
While these 3 things are an important part of budgeting, in reality they are only numbers.
There are 3 more important factors to consider first that will give you a greater opportunity of success no matter what the numbers might end up looking like.
Below I cover these and a brief explanation why they are more important than the numbers themselves.
1. Why do you have a budget?
Here’s a few examples of why some people have a budget
- To make sure everything is paid on time?
- To make sure they are savings towards a certain goal?
- To make sure they are making extra payments on debts?
Whether you are new to budgeting or have budgeted diligently for ages, acknowledging why a budget is important to you is fundamental to your success.
This underpins your commitment and focus to an outcome that you are expecting or want from your budget.
Knowing why means when the money doesn’t add up at any time, you are more likely to find appropriate adjustments. (How do you get more money or perhaps reduce costs).
Not clearly knowing why they have a budget is one of the main reasons people give up before they begin to see any results.
It wasn’t that a budget didn’t work, it was simply a case of not clearly understanding what their expectation was in the first place.
2. How will you monitor spending? (Monitoring is different than planning) Will you:
- Check your transactions every day?
- Check them every time you get paid?
- Check them once a month?
Planning is done pre – event for example, making a list of what you will do with your money now that you have been paid.
Monitoring is looking at what your expenses actually were compared to the plan you had established earlier.
For example your budget allowed $100 for petrol until your next pay day but upon monitoring what actually happened, petrol only cost you $80.
Having a plan to monitor your expenses means you are actively participating in your finances.
When you notice an expense is less than planned for, you can now decide what that means to you.
Can you reduce any future amounts budgeted for this area freeing up money for something else?
If you have under budgeted you can ask yourself if this is an area that you can be more focused in. Perhaps reduce costs in with a little more effort.
Alternatively, the budget for this area may need to be increased and if so, what adjustments are you prepared to make elsewhere that will make up for this increase.
3. What are the consequences or benefits.
By understanding why you have a budget, and being confident in your process for monitoring your expenses you can now establish a greater understanding of the consequences and benefits.
This greater understanding motivates you to remain committed to your budget / plan.
Whether you are avoiding the consequences of getting off track or you are becoming more passionate about the goals you have set will depend on your personality type.
If you are motivated by wanting to avoid pain or disappointment then focus on the consequences,
If you are motivated by reward and pleasure, then focus on the benefits.
As I said earlier the numbers will take care of themselves so focus on gaining insight or answers to these 3 things first before you embark on creating your budget / plan.
Then you will enjoy a greater level of success.
So go ahead, ask yourself these 3 questions and once you have the answers you are ready to create a successful budget.
- Why do you want a budget?
- How will you monitor your spending?
- What are the consequences or benefits for you?
If this makes sense but you are having trouble getting started schedule a Free Discovery Call and I can get you heading in the right direction.