Budgeting can be such a scary term for many people. In actuality, once you implement a budget it can be quite freeing. We all have a certain amount of income coming into our homes and a certain number of expenditures that causes that income to go out. In the quest of gaining or remaining financially healthy, we need to keep focused on not only seeking to increase the household income but also to establish a continued growth in our personal net worth. The best place to start, like any solid corporation we either work for or invest in does, is controlling costs and expenditures. Remember we cannot grow in a personal or professional manner until we create a stable financial environment.
I, from a personal standpoint, use a generic budgeting template that comes with my Microsoft Excel platform. Others prefer to use software like QuickBooks or mobile applications like Mint or NerdWallet. For me, the most basic building blocks work best. I tweak the template so that it aligns with how cash and expenses flow in and out of my house. No matter how precise I try to be on a monthly basis, the amounts tend to fluctuate a bit, and the perfect savings balance seems to always be elusive. I guess that is why now, eight years later, I look at this as more of a game rather than a chore, a challenge instead of a barrier. It is an exercise and a habit that most individuals can benefit from. No matter what your income is, having a true understanding of how your personal financial machine works, is liberating.
What is the expectation? The objective of household budgeting is to make a prudent investor comfortable and confident in their future investment decisions. It creates clarity on wants and needs for a lifestyle and develops making decisions on unwanted and unnecessary expenses. Taking it a step further, every January 1st I do a simple audit of products and services my family may or may not need in the upcoming year. Sometimes my family collectively decides what package of cable or streaming services we actually use, how many Apple music subscriptions should we truly have and I contact the electric and energy companies to establish a monthly budget billing plan that will help me avoid monthly spikes and create a fixed line item in our newly implemented budget. Don’t knock it until you try it.
Look for my blog next month: The True Cost of Everything
-Ted de Groot, Spurstone Partner