Budgeting – First things first!
Everyone knows they should budget. It is on that eternal list of New Year’s resolutions and things we are going to change about ourselves. I’m going to get organized, exercise, eat healthy and stick to a budget. And, like most New Year’s resolutions the budget lasts anywhere from “never got started” to about 3 weeks. And just like any good resolution, we need to approach budgeting differently if we really want to do it and make it work.
I find that whenever I am working in a budgeting process, the temptation is to jump in and just go straight to creating the end budget. I want to spend X number of dollars and these are the categories I will spend it in. However, this approach sets you up for failure. If you really want to start a budget and you want it to work, you need to leave nothing to chance and approach your budget correctly from the start.
Let’s start with WHY. Why are we budgeting? Simon Sinek in his book, Start with Why: How Great Leaders Inspire Everyone to Take Action, says “All organizations start with WHY, but only the great ones keep their WHY clear year after year…Very few people or companies can clearly articulate WHY they do WHAT they do. By WHY I mean your purpose, cause or belief.” If we don’t know WHY we are budgeting we will quickly lose our focus and it will be easy to walk away from the budgeting process. Take the time right now to be honest with yourself, why do you want to budget? Are you doing this for you, for someone else, what will you get out of the process, and what goals are you trying to accomplish with your budget? Begin with the end in mind. Take an hour or two to draw out and map where you want to be along the road of your budgeting journey.
Once you know why you are going to budget, you need to know where you are starting. This step is where I have observed that most budgets get off track before they even start. You need to know exactly where you already are today. Start by making a list of all of your current expenses and tracking every single penny you spend. Be honest with yourself and track this information in painstaking detail for one full month. While you are doing this, become a silent observer of yourself. Pay attention to your spending habits; do you spend more when you are hungry, with friends, or around ornery children? Do you use spending to help you deal with your emotions or do you feel differently when you use cash vs a card or check? You may be surprised by what you learn about yourself and your spending habits during the process.
This step is usually the hardest part of budgeting, but it is vital that you do it. It is hard for two reasons; first, now that you know your why, you want to jump in and get started. Secondly, it is hard to be accountable and honest with yourself this way. I cannot stress enough how vitally important this step is in the budgeting process; I have never seen a successful budget that did not begin with this step. If you truly want to be successful in your endeavor to budget, you owe it to yourself to take the time to this right.
Because I believe so strongly in these two first steps, we are going to end this month’s post at this step. Take this month to first establish your why, and second to begin tracking your spending. If you don’t know where to begin, here are a few suggestions.
Most importantly – do it! Ask yourself why, then pick a tool and start tracking your spending. Once you are doing this, you will be on the road to starting a successful budget! Take the time this month to get started and then check back next month for the next steps in your personal budgeting process.