A Written Budget – A Basic But Essential Financial Tool

October 7, 2009 | Posted by Brad Chaffee

Do you currently have a written budget?  The truth is that most people probably do not.  In fact, just the word budget, is likely seen as a bad word in most cases.

I know for me and my wife, we avoided the thought of even trying—that is before we realized exactly what we were missing.

So what exactly are you missing if you do not have a written plan?  For starters you are missing the opportunity to tell your money what to do, instead of looking back and wondering where it went.  A monthly, or even weekly, cash flow plan allows you to track your spending, as well as make your money behave.

People often equate the term “budget” to negative feelings.  I prefer the term cash flow plan because it does not sound as controlling.  The point is not to be restrictive with your money—it is to be in control.  You can spend your money however you wish to, that is why they call it personal finance.  It’s merely a plan.

What if you were having your dream house built?  You would first need a plan—a blueprint if you will.  That blueprint will help you control cost, build efficiently, and ensure that it is done exactly the way you imagined it.  Having a written plan is no different.

A big reason people do not do a budget is because they have tried to do one in the past, but failed.  No plan is ever perfect, but there are some things to consider when formulating your written plan.

• you will not become a budgeting expert over night
• it will take you 3 to 4 months to get the hang of it
• it is a team effort between you and your spouse
• it is not to be used to control your spouse
• spend every dollar on paper, on purpose, before the month begins
• the best budgeting tool is a zero-based budget

Here are some additional tips and tricks to having a successful budget.

• always budget priorities first (the four walls—food, shelter, clothing, transportation)
• spend less than you make
• remember to think about any irregular expenses
• consider using the envelope system for items such as fuel, food, clothing, entertainment, etc.
• put your written plan on the fridge
• cut wasteful spending
• set aside a limited amount of money to blow
• stick to your plan
• find a way to stay accountable

It’s as simple as that.  If you want to become more self-reliant in your finances, doing a budget is the best place to start.  Your budget will allow you to accomplish so much more financially.  Good luck!

Brad Chaffee is the Enemy of Debt, and a regular contributor here at the Self Reliance Exchange. Brad has also become debt free by paying off $26,076.75 in just 20 months. Learn more about Brad by reading his bio. You may also contact him here.

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Categories: personal finance | Tags: budgeting, cash flow planning, self reliance | No Comments »