Develop a budget
Adjust your attitude
If there is one reason why most attempts to budget fail, it is the “you must cut expenses ’til it hurts” mentality. When establishing a budget, it’s easy to look only superficially at expenses and start slashing.
Imagine a lumberjack marching into the woods and chopping down the biggest tree. Sure, that big tree was easy to spot, but was it the best choice? It’s possible that smaller, less obvious trees may be better wood — and certainly easier to drag out of the woods.
For most households, the biggest or most obvious expenses are: mortgage or rent payments, utilities, food, transportation, clothing and entertainment. If you follow that “cut ‘til it hurts” mentality, you could:
- Move to a less expensive neighborhood or apartment.
- Reduce home heating by keeping the thermostat at 62 degrees and wearing lots of sweaters.
- Cut air conditioning expenses by cooling to only 80 degrees (removing the above-referenced sweaters!).
- Walk or ride a bike to work.
- Avoid clothing purchases (except for sweaters).
- Eliminate entertainment expenses.
Adhering to such a budget would certainly amount to enormous savings but what would it do to your quality of life? You need a budget that will help you guide your spending so that you can enjoy your life. (Can you believe your eyes? The words “budget” and “enjoy” in the same sentence?!)
It really is too bad that there are so many negative perceptions of budgeting. For most of us, a well-thought-out household budget is the single most powerful means of improving our standard of living. And believe it or not, unless you are in dire financial trouble, there is no reason for budgeting to be a painful experience. On the contrary, budgeting will improve your financial condition and may help you eliminate the possibility of financial difficulties in the future.
A good budget helps you:
- understand how your money is being spent
- increase your savings
- prevent or reduce impulse spending
- protect against the financial effects of unemployment, accidents, sickness, aging and death
