A budget is different things to different people. And to those same people, it can be a different things at different times. It’s how it works.
The different views are determined by the conscious and quashed needs of the individual, or the agreed needs of the couple or the family, at the point in time in their lives when they ask whether they have enough money, and will they have enough.
Young & Carefree
For the young and “carefree”, the budgeting “decision” can be whether they have enough to go out tonight, and just burn it, and still get through to the next payday. They might kind of know there’s not enough, but go anyway, knowing that they’re young enough to waste some some money and that there’s still time for the money to “grow back”.
Further along life’s timeline, the thinking moves to whether they can pay off a car loan, overseas trip, wedding, buy a house, holidays, school fees, commit more to superannuation, buy an investment property, retirement, travel or bequests.
The acknowledgement of the need for financial security is the big driver of the decision to move from maybe being sort of being aware of the need for a budget, to the conscious commitment to put one together and stick to it, month after month, year after year. To write it down, or at least commit it to a file, so it won’t just mentally self-adjust to accommodate reality.
The Budgeting Decision
Once the decision is made, the first goal of a budget is to find out how much is left after paying for the all the needs. You should include saving a percentage of your income as a need. If there is not enough to cover the needs, you have to either reduce the needs or increase your income.
When income, net income, exceeds the cost of needs, opportunity is created, and you start having a choice about what to do with your money. You open up a world of decision opportunities.
You Might Be Surprised
Going through the step-by-step process of a good budget will help you prioritise your spending as you realise that the things you thought were “too big” and unachievable can come into reach if you just stop doing a few of the not so important things. You’ll realise that you can start investing if you just stop spending. Put another way, if you stop wasting, you can move closer to what you want.
A Good On-Line Budget Template
David Koch, at www.moneymakeover.com.au ,will tell you that you need to get a good budget template from on-line. You need a budget template that will prompt you and remind you of the numerous little expenses that you just don’t notice; that dripping tap that empties the whole tank.
Earmark’s budget packages will help you think about the detail to build the big picture.
Earmark’s “Everything” lets you choose the starting point to build to your budget. You can start at income, and then see how much you have to spend and invest, or you can start at expenses, and work out how much you need to earn, and then want to earn.
No matter where you start, Earmark helps you build a picture that lets you first see and then develop the relationship between your income and your expenses and your investments, to eliminate waste and to help you stay ahead of the game.