Personal Finance: Budgeting – Part 5, Life and Accountability

by Jonyce Bullock, CPA

Budgeting is one of the top two most common New Year’s resolutions – and we all know that the majority of New Year’s resolutions fail.  Why?  LIFE!!  Life happens, we get busy, we have conflicts, we make mistakes, etc.  How can you help your budget resolution (New Year’s or otherwise) stick and work?  First, let’s review where you’ve already been?  You’ve identified your financial goals, tracked your spending, identified your needs and wants, determined what things you were willing to give up or change to meet your goals and you’ve started working on a debt elimination plan.  Give yourself a hand because that is a lot!  But what are you going to do to keep going, to make it work and not let life get in the way?!

Accountability

One of the most important steps to any successful financial plan is the accountability.  If you are not accountable for the goals you set, it will be easy to start to justify falling back into old spending habits, or to just stop all together.   The easiest and best way to hold yourself accountable is to find an accountability partner and share your goals, challenges and successes with this person.  Make sure it is someone who can be honest with you and is willing to help hold you accountable.  If you are married this might be your spouse – but depending on your personalities that may not work either.  Let me give you a personal example.  After graduation I needed to study for the CPA exam; I laid out a schedule of number of hours and questions per day and my husband agreed to help me achieve this goal.  However, pretty quickly I found that when I didn’t want to study I could easily talk him into watching a movie instead.  Finally, I ended up enlisting a co-worker as my accountability partner – every day she would ask me if I met my study goals and would push me to keep up with my personal commitment.  The same principle applies with finances, don’t be afraid to involve a trusted friend of family member to help hold you accountable to your plan.

Family Involvement

Involve your entire family in the process.  The phrase “you won’t buy-in if you don’t weigh-in” is particularly applicable when it comes to the budget.  If you sit down and set the goals and the spending limits and your family is not involved, they may feel it is being pushed on them.  If your family is involved in the process, they will feel ownership and be more willing to be accountable.  Even young children can be involved and learn a lot from the process.

Recognize that small changes add up

Small changes to your daily routine can add up when done consistently.  Spending 30 minutes at the beginning of the week can cut down on multiple grocery trips and eating out expenses, as can making sure not to grocery shop when you are hungry. Bringing a lunch to work, keeping a few cans of soda in your desk rather than running to the nearest soda shop, paying with cash rather than plastic leads to spending less overall.  There are dozens of other small and simple things you can do to make a difference.  If you are living by your spending plan you’ll be able to capture the cumulative benefit from these little changes and put those dollars to work for you.

Rewards

Make sure to reward yourself along the way.  Your budget is a tool to help you to financial success, not something to beat yourself up over and limit you.  Build rewards into your spending plan.  Allow for things that are important to you so you can stay excited and motivated to stick to your plan.

Emergencies

Don’t let an emergency derail you.  As soon as your spending can handle it, begin to save for an emergency fund.  If you get a bonus, raise, or tax refund set some of it aside and commit not to spend it except for a true emergency.  Decide in advance with your family and/or accountability partner what constitutes an emergency where that money can be spent.  Hopefully you’ve stopped spending on credit cards; however, you may have kept a card or two for emergencies.  Justifying the use of a credit card for an “emergency” is something that can easily derail the best spending plan.  I like to recommend putting your emergency credit card on ice – literally.  Take the card – wrap it up in multiple layers of saran wrap and then freeze it into a block of ice.  That way, if you truly do need it, you will have it, however, by the time you get done thawing out the card you will have had a chance to really analyze if you need the card.

Wrapping up

You don’t ever really wrap up your budget.  Financial planning and budgeting is a constant, continual event.  Every time you have a major life change you’ll need to evaluate, adjust and revise.  This could be to a raise, change in jobs, change in family members, illnesses, moves, etc.  The most important thing you can do is to continue to track your spending so you can recognize when changes are occurring and take the steps needed to adjust your budget.  If you make a mistake, recognize it and get back on track.  Don’t let overspending one month convince you to stop planning!

In the pamphlet “One for the Money,” Elder Marvin J. Ashton says: “Learning to live within our means should be a continuing process.  We need to work constantly toward keeping ourselves free of financial difficulties.  It is a happy day financially when time and interest are working for you and not against you.”

Keep working with your budget and you will be amazed at how it will work for you!

 

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