A lot of people think budgets don't work. That's because: a) they hate the idea of counting every penny they spend b) they cheat on their budget or c) they have an endless supply of money. If you are like me (and most of us are ) the latter doesn't apply and the first two probably do. Generally, people do think budgeting is a four-letter word and it is something that is frowned upon, disregarded and a big nuisance. Well then, call it a spending plan. Now doesn't that sound better?
I personally think spending plan says it all, it is not how you are going to budget your money really. It is how you are going to spend it. And let's be honest, when we talk about spending our money, it puts a smile on our face.
At Credit Canada the unfortunate reality is that we see too many people who really don't want to think about their money, where it is going (or not going) and often have an aversion to even discuss money matters . Of course if we are honest, we know that just makes the situation worse. Debt increases, savings never happen and people are living paycheque to paycheque. This becomes a cycle and the next thing you know they are having a hard time making those bill payments.
This is where the spending plan comes in. It is important to figure out where your money is going so you can then decide if that is where you want it to go. Remember - you want to control your money, you don't want your money to control you. The best way to go about this is think about necessities first. For example, if you don't pay your rent or make your mortgage payment, soon you won't have a place to live; however, if you don't have that extra large mocha coffee everyday, it is not going to affect your life (except maybe jitters from not having that all too necessary caffeine hit). So realistically you want to write down all the necessities in your life like home costs, utilities, daycare, food, etc. and then find out what you have left for the desires such as entertainment, dinners out, etc. If you can figure out the amount you have left over and then only spend that amount you are now getting somewhere. I know this can be difficult; trust me I have been there, but it is really about a lifestyle change. Once you get into the habit of doing this it can actually work well. If you really do not know where your money is going, email or call us and get a free Monthly Budget Tracker. We will send it right to you so you can get started.
There is one thing to keep in mind throughout this process though, and that is savings. People are often one paycheque away from financial disaster - meaning if they lost their job today they would be in immediate financial difficulty. One way to deal with this is to put some money aside for a rainy day. Yes, it turns out grandma was right! I suggest ten percent of your net income if you can. If you cannot, put away whatever you can. Put it in to an account you do not touch. If you leave it in your chequing account you will spend it. Believe me I tried that many times many years ago, and it does not work! Let that money build. You will be surprised (and impressed with yourself) by how fast it does grow. At Credit Canada we have a wealth of information on budgeting, retirement savings and sticking to a plan. Check us out...
Next week, I am going to write about specific things that you can do to cut costs...for example, did you know that when you grocery shop, food at eye level is more expensive? Try looking up and down on the shelves for cheaper deals.
In the meantime, if you have any ideas or comments I would love to hear from you.