WHEN YOU THINK BUDGETS DON'T WORK, DO THIS
30 May 2022
Feeling pressured financially and budgeting has never been your thing?
Or maybe you have tried to budget before, and it never really worked out for you.
Whatever the reason you don’t have a budget (or plan as I like to call it), there is no better time than now to put one together and take back control of your finances and at the same time lowering your stress levels.
Here’s my 1 2 3 for getting started and staying in control.
- Avoid going back over previous bank statements to determine your future budget
It’s easy to look at everything we are spending our money on justify every expense. And if the numbers don’t quite add up, we do a little juggling. A little off this, go without that, cancel this, and presto, we did it. The budget now balances.
If it was that easy, we would have done it already right.
Creating a budget based off past experiences will let people down more than it helps them because it is often those experiences and behaviours that has prevented them from saving money and kept them stranded living pay day to pay day.
Instead create a plan of what you consider your expenses will be going forward and then frequently monitor your actual expenses to see how they align with your plan.
You will be quite surprised how different your actual expenses are, and you will start to notice the areas where your perceived expectation of expenses is higher than what you need.
This then allows you to take the difference and start to re-allocate that towards saving regularly. Even if the amount is minimal, your subconscious behaviour then starts to change as you recognise that your ability to save consistently is possible and some of your expenses aren’t actually as bad as you thought.
You also get the added benefit from now becoming actively involved in your finances and once you start recognising the areas that you spend money where you see no value, you can remove them from your plan further strengthening your savings capacity or giving you room to re-allocate money to other expenses or areas where you see a greater value for your money to be used.
- Balance your plan
You will notice in my first point I never discussed income. And there’s a really good reason for that.
We are all capable of maths right. With budgets we often start by identifying how much money we have then begin the process of deducting all our expenses.
And because maths is simple, once you get to zero, no money left, we validate for ourselves that we are out of money and therefore if we need something outside of our budget we will need to borrow or use credit.
Even worse we accept that saving money isn’t possible so we rarely look for opportunities to do so.
By starting with your expenses first, you remove the visible aspect of an ever depleting pool of money.
Instead you create a comprehensive list of expenses that you consider necessary and that you will need to manage and maintain.
Only then should your income be added to the equation. Once added you will identify one of two things.
- You have a surplus in which case you can now start a dedicated savings plan.
- You have a deficit.
Now you are perfectly positioned to start placing value to your expenses and start trimming or removing expenses that are in reality your ‘nice to haves’ or ‘luxuries’
You can always tell what someone values most by looking at their bank statements. Why do you think banks scrutinise your expenses like they do?
Step two is about becoming intentional with your money and making the hard but necessary decisions.
- Incorporate savings into your plan
Okay so now I hear the screaming, “Save, you have to be joking, how am I meant to do that?”
If you read on and don’t throw the idea in the ‘too hard’ basket I will explain.
Because in all my years of coaching people I am yet to come across anyone who can’t.
I’ve coached everyone from single parents on minimal incomes to couples on six figure incomes and I can tell you they were all capable of saving.
The key is to know what that looks like for you and not attempt to save what you see others doing or think you must save.
It starts from acknowledging that everyone has a ‘Minimum Savings Capacity’ and once you acknowledge that and apply it to your own circumstances you too will start seeing savings accumulate.
I’m not going to explain the formula, I’m going to keep it really simple. Here’s a calculator to work it out for yourself.
Once you have worked it out, add it to your plan and then repeat step two and make the adjustments needed to keep your plan balanced with savings now forming part of your plan.
If you have read this far and are thinking, it makes sense but it all feels to hard or impossible to do why not make use of my customised personal budgeting planner that will break it down for you in bite sized steps.
For less than a cup of coffee a week, you could be turning your finances around and leaving the stress of rising interest rates and escalating food costs behind.
Nothing to lose and everything to gain, because you know what they say
If you keep doing the same thing and expect a different result, you are ******