Budgeting

Most people find they go through a teething period when setting up their budgets. How to deal with? Don't stress! It's quite normal.

Budgets may well blowout in the early stages. It's important to recognize this as a sign we've not quite got things right yet and to make appropriate adjustments.

Ask yourself some questions:

• Was it just a one-off situation? E.g. car broke down, unexpected tax bill arrived.
• That's reasonably easy to handle - we'll discuss below.
• If not a single event, what caused the budget blowout?
• Have you left something out of your budget? Did you forget an expense?
• Can you cut or reduce any other expenses? Remember to shop around for cheaper phone and internet plans, consolidate expenses, cook up in bulk and freeze ahead etc. There are plenty of budgets how-to tricks for reducing expenses.
• If there is a serious problem and your budget simply cannot balance, you may have to ask some tough questions. Do you really need that gym membership? Jogging is free!
• Is it budget-leak? That's where all the little cash spending items adds up and you just keep running over.

If so, then:

• You may to get a bit tougher with yourself. Use the Cash is King method and never EVER cheat! Learn to spend less. You're doing this for YOU - nobody else, remember? New spending habits will take a while to adjust to.

Or:

• Your discretionary spending budget may be too tight - maybe give yourself a bit more 'wiggle room'. Remember - a budget that constantly leaks will eventually BLOW!

Savings are mandatory in any budget. Cutting your savings out completely is NEVER an option.

We are aiming for 10% savings (i.e. saving 10% of your after tax income) but even if we start off at 1%, that will do initially. There have to be SOME savings. These are what it's all about, remember?

These savings are intended to grow so you can then invest them. You want to send your money to go out to work for you. You can start small but you have to start somewhere.

Without Saving for Wealth Creation, you're not Budgeting to create Financial Freedom, you're merely surviving.

You may find that initially when you're still heavily focused on debt reduction, you simply can't save 10%. That's ok. Work out what you can save in the meantime (a minimum of 1%, ok?).

Once you're done with debt reduction, you'll have a lot more money available to put towards savings.

Let's go back to the first option above for a moment.

Say your budget blew out due to a one-off emergency expense.

A lot of people talk about budgets how-to but when they refer to savings, they actually mean an Emergency Fund. Savings however are solely for Wealth Creation! At least they are in my book.

It is very important to have an Emergency Fund, though. A separate bank account which you can trickle feed and build up over time usually works well.

In the early stages, there simply may not be enough money here yet to cover the emergency expense. In that case, you will simply have to hang in there and get through this period by being creative. You may have to cut back your discretionary spending, skip this month's extra debt reduction or even (god-forbid!) cut your savings amount down to a mere 1%.

Hang in there! As time passes, you'll build up enough money in your emergency fund to handle most situations without missing a step.

Whatever the reason, if budget blowout occurs don't let it worry you too much. It's a chance to learn, to tweak and fine-tune things. There are plenty of great budgets how-to techniques you can apply.

So keep up the good work!

Wishing you much Prosperity,

Miriam