“Budgeting is fun!”
Said no one ever…oh wait; that’s actually what renowned Personal Financial Management Guru Bob Lotich says. The first time I read that I laughed myself silly and with good reason. However, the more I read his thoughts the more I understood what he was talking about.
You know that feeling you get when you spend money that you don’t have, to do something that is probably not that important, like buying yourself a new pair of stilettos.
That feeling that lets you know that in a couple of days or weeks you’re going to regret spending your money like that? It will probably come to you when you don’t have cash for fuel a couple of days to payday. Or when you have to borrow money for lunch or fare, or both to take you through the last stretch of the month. That’s when you remember the money you spent on those stilettos and how absolutely unnecessary it was.
Guilt, that’s what that feeling is called and budgeting is how you get rid of that feeling. It’s liberating to know that you are buying a new pair of shoes or a new dress or going out for a drink when you know that you set aside some money specifically for that purpose.
Either you do, or you don’t
Generally, when it comes to budgeting people fall into three broad categories. You either don’t do it at all and you spend as need or want arises. Or, you budget only for the fixed major expenses like mortgage, rent, school fees etc. Or you’ve got budgeting OCD as far as your money is concerned and you have to know exactly how every shilling you have is going to be spent.
I fall in the second category as most people, where any other expense that is not considered major falls under the ‘’miscellaneous’’ box. I have come to learn that my miscellaneous box is where my money disappears to. It’s the hole in my pockets so to speak, every small expenditure planned or unplanned falls here.
Most financial management experts will tell you the first rule of budgeting is to know where your money is going. Now, this is a tedious process and can be far from fun. It’s going to need some discipline, but you can do it.
Know where your money is going
If you have never sat down to look at what your spending looks like on paper you will be shocked at what you discover.
Start by using one or two months —possibly even three for good measure, take note of every shilling spent.
Not only the big stuff but the little stuff as well, every time you buy airtime, every time you buy a bottle of soda for yourself or someone else or any time you have to get something for your children, whether you knew about it in advance or didn’t. This is the cash that slips through the cracks and easily goes without notice.
At weekly intervals sit down to put it all together and see what your spending looks like. This is the first step of budgeting. Once you have this on paper, cluster the expenditure into the major categories: household expenditure, bills, entertainment etc.
This process is important because once you have this picture in your mind, you will know where you’re overspending or you’re likely to overspend. Then, you’ll start making decisions on what needs to be cut off so that what goes out is equal to or less than what comes in.
Knowing how much you spend on an item on a weekly or monthly basis will also help you know when you can take advantage of some great offers when you shop in bulk. Are you ready to give this a go? Have a look at these exciting downloadable budget spreadsheets to get you started. Thank me later.