There was a time when I believed personal budgets were only for those who had no money. A “bad” word at best. And, certainly something that I would never subject myself to!
In reality, a budget is a very necessary thing for everyone to use. That is if you ever want to have true financial peace!
It doesn’t matter how much money you make. You’ll always find something to spend it on. And, it’s become clear that regardless of how much your income goes up it will never be enough without a budget.
This is because, generally speaking, as income increases so do expenses. It’s just a natural phenomenon that you can’t fight. That is without a budget, of course.
Sure, with growing income you’ll likely have more toys, nicer things, and enjoy better services, but financial peace you won’t have. In fact, you may find the stress that comes with “having it all” is unbearable. This is where a sound budget can save the day.
WHAT IS A PERSONAL BUDGET?
A personal budget is nothing more than a cash flow plan. Money comes in, money goes out. Having a clear plan and some general guidelines on where your money goes after you’ve earned it is the key. I’d argue that over our lifetimes more money is lost right here than in the stock market, to taxes, or anywhere else. Let me say that again in another way- YOU LOSE MORE MONEY DUE TO A LACK OF FOLLOWING A SIMPLE CASH FLOW PLAN THAN YOU DO ANYWHERE ELSE! The good thing is this is one area you actually have control over!
When investing, it’s easy to feel as if we’re not in total control because of the unpredictability of the markets. You have to rely on fund managers, economists and financial analysts to manage your investments. The fact is there are a lot of things you don’t have complete control over. Your cash flow, however, you do have control over. So, don’t mess it up.
It’s our natural inefficiencies with managing money on a daily basis that creates problems. Or, maybe just limits our true financial potential. It’s not that you don’t care. It’s that you’ve never been taught. You’ve relied on conventional wisdom carried down from generation to generation to guide you in decision making. It looks right, feels right, and that’s what everyone else does so that’s what I’ll do.
The fact is a very high percentage of financial decisions we make are based completely on emotion. The problem is emotion tends to get in the way of logic. Logic comes from math and math doesn’t lie.
In Part 2 and 3 of this series I’ll break down several guidelines and principles of how to successfully manage your cash flow in a way that promotes financial safety and building wealth.
Until then……..
