So Let's Talk About Budgets, Spending Plans and Getting Your Money Under Control
A traditional individual or family budget is one of the most self-defeating tools you can use when you find yourself over your head or you want to get control over your money. There really is a better way.
Budgeting seems like one of those common sense things to do to deal with financial problems. But the reality is that if you sat down right now and made a budget it would truly be a page of lies, a wish-list on how you would like to spend your money. It would be based more on fantasy rather than reality. While fanaticizing can be good, it's not when it comes to managing your money.
A wish-list budget is just like a fad diet. It might work for a little bit but in the long run the progress will vanish.
Budgets are also setup to fail. The majority of people that rush to make budgets give-up very shortly. The reason is obvious. If you make a budget based on wishes and then you can't stick with it, you feel like a failure and give up. "See I told you this wouldn't work", the spouse usually says.
Let's examine what the goal is when you start thinking about budgets. Typically the goal is financial control. And this is exactly why some spouses or partners may not willingly participate, they don't want to be accountable.
So let's say you were given the task of damming up a river to make a manmade lake of a certain size. Would you just jump in and build the dam, I hope not. Your first step would be to carefully evaluate the situation, take measurements, record observations, make plans and then implement the plan. Same is true for controlling your finances.
In all actuality we can't make good decisions about where our money goes unless we have good data to make those judgments with. There are four major ways to gather this data.
- Mvelopes Personal
 - Nice to use once you are up and running with good data.
- Ultimate Spending Plan - The only way to get started building a spending plan that fits you.
- Little Pieces of Paper - Not a serious approach. Often gets lost, almost never gets completed. Self-defeating.
- PC Software - Quicken or MS Money - Better to use for bill paying than money tracking. Not a huge fan of for budgeting. You have to remember to enter the data all month and then it spits out a steilized report. Not the best approach but if you insist on using a computer program to track expenses. Try one of these to manage your money.
- Access Your PC Software Remotely
 - A really nice service that allows you to access your home PC when you are away from home. If you decide to use PC based software, use this service to get to your program so you can enter data as you gather it before you forget it.
There is a really good way to use one or more of these tools, keep reading, I'll tell you what I think.
Budgets have to fit you and your life.
A budget that does not fit you life isn't worth following. When people first make a budget they typically cut out everything fun in their lives thinking that it is optional. It's not. Ultimately we want our financial life to be in control, in balance, easy to manage and giving us clarity about where we stand.
Our species is primally drawn to pleasure over pain. It is just a fact that we are hedonistic beings that would rather have fun and enjoy ourselves. And having fun is OK, in balance.
When your financial life tips out of control and does not fit your lifestyle, that is when self-iniated financial problems begin to creep in. I'm not saying live everyday like it is your last, but that would be a heck of a lot of fun if we could. No, what I'm saying is that it is OK to go out to eat, maybe just not everyday. Remember that age old word, moderation?
So here is my preferred method of getting your finances under control.
Steve's 3 Steps to Gain Control Over Your Money
- The very first thing we need to do is track the cash. Of all the available products to do this that I prefer and have witnessed people doing better at is the Ultimate Spending Plan book. This book is a month at a glance specially designed spending plan book. The pages have days across the top and categories down the side. It is so simple to use and best yet, because it is so simple, it gets used.
I'm all about making life easier and when you start by using the Ultimate Spending Plan book you don't need to worry about installing software or learning a new program. The day you get the book in the mail you can start using it.
If you make this process easy to slip into a resistent spouse or partner is more likely to participate.
In the tracking cash phase I just want you to track where your money is going. Don't make any drastic changes to your spending. Just do this for 30 days. Once you gather good data, you can make betters choices about where we want to make changes.
You will probably notice that during this phase your spending will be naturally reduced by 10%-20%. This is because you are tracking the cash. When you track the cash you heighten your awareness about where you are spending money and that will cause you to make choices about where you let your money go. A very nice side effect of this initial process.
- Once you have gathered at least a months worth of data then you can sit down with the results and using the data about the way you really live you can make good adult decisions about where your money is going and what changes you are will to make. Remember, it is all about balance. If you have been eating out everyday maybe you'll decide to change that to three times a week. Big changes are made best by small adjustments to many things. I've also put together a reducing your monthly expenses guide for you to use as well.
So what is the right amount to spend in each category? Who cares. (Shocking to hear that from a money coach isn't it.) The problem with those avererage or suggested spending charts is that nobody is average. The ultimate goal is that your spending is less than your income. How you choose to divide that up should be completely up to you. If you want to spend more eating out because you have a low mortage, go for it.
By using the Ultimate Spending Plan book you be able to develop a spending plan that fits your life and you'll have an awareness about what you need to allocate to your categories so you can live your life. A spending plan is much different than a budget. A spending plan is an intentional plan based on good data and reaility about how you intend to spend your money. It is a living document. It can stretch and breathe with your authentic life.
- Here is where I think that some type of computer program can really come in handy. A Mvelopes Personal web tool allows you to access and enter your data from almost anywhere. This Mvelopes Personal program (Take a tour of Mvelopes Personal
 ) lets you define the category amounts that you discovered by tracking your cash. You can then pay bills and see how you are doing against your target. If you find that you went over this month in one category and under in another maybe that just means that you need to adjust your category targets. It certainly doesn't mean that you are stupid and you failed.
So there you go. Once you get to this stage it is just rinse, lather and repeat. You know what I mean, just keep it up and things will be under much better control. If you follow my plan you'll develop financial awareness, make good descions, get on a spending plan that fits you and easily track how things are going so you can reduce debt and/or build wealth. Afterall, that is the ultimate goal.
Footnote: If you follow all of this advice and you still can't get things under control I would urge you to strongly consider working with a dedicated personal finance manager at ManageMyBills.com to give you the financial discipline you want and need.
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