Budgeting - Personal Spending and Money Management a Key to Weathering the Storm Part 1 - FV

Money management, finance, and budgets can no longer be regarded as concepts and applications used predominately by businesses. Plant shutdowns and job layoffs have caught many people off guard. Our economy and the economic forecast are causing individuals to become more spending conscious.

It has been said “If you are not planning, you are planning to fail.” There is much truth and reality to that adage, given the economic climate. Planning and budgeting are all about being prepared; you might say it is all about opening your eyes to the true long-term costs of decisions and direction. Far too often our thoughts, actions, and decisions are based on what we are currently feeling. We must change our mindset, and become more prudent, thinking and acting with long-term objectives in mind.

Your dreams and aspirations are the basis for your goals and long-term objectives. With regards to dreams and aspirations, I am not necessarily talking about something grandiose or extravagant. Your dreams might include paying down debt using accelerated payments, or being able to own your own home. Today, it might include ensuring you have a financial buffer to get you through the tough times. It all comes down to writing out your goals and then developing a plan that will reach those goals.

A budget is defined as: a plan to show how much money a person or organization will earn and how much they will need or be able to spend; a sum of money allocated for a particular purpose. Taking the time to develop a detailed budget will open your eyes to the true potential of your earnings. Without budgets, money has a tendency to flow right through you pockets. I have often referred to your hidden potential money as “black hole” money; you never see or realize its potential.

Creating a detailed budget does not mean creating a budget that will overly constrain you; it only means providing the proper detail to fully present an accurate picture. It is up to you to determine how much spending cash is available or affordable based on your budgetary goals and constraints. The whole idea is to provide visibility as only then can you make informed decisions.

It will probable take around an hour or two to compile (gather) all your budgetary information. I would suggest you take the time to enter that information (income and debt sources) into a spreadsheet, word processor, and text file. This way you will always have the data and you can easily import it into most budgeting software. I would suggest that you capture the following information at a minimum: description, income or debt, amount, and pay date.

Although it is possible to build a budget using spreadsheets, I don’t suggest it. First you will need a fair amount of knowledge to create the spreadsheet formulas that are required to link all the worksheets; linked worksheets are required to provide the visibility to see the whole picture. Additionally, the insertion of a single income or debt source would have to be replicated on all the worksheets, which means you must ensure all the links are still operating as expected. Spreadsheets don’t provide you with the ability to easily make changes and see how those changes affect the overall budget. For that reason alone I suggest that you research and purchase a budgeting software package that will meet your needs.

In Part 2 of this article, I will discuss how to take full advantage of budgets so you can steer and adjust your course through these economic storms.

Please note that all businesses large and small create and follow budget to achieve an expected outcome. There is nothing hindering you from doing the same and achieving your goals, receiving the expected outcome.