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  • Writer's pictureMarshall Reissman

Budgeting 1.0

Failing to Plan = Planning to Fail

So many folks are unaware of how much they spend and what they spend their money on. Unfortunately, there is a very low savings rate among Americans. A large percentage of families are completely unable to pay cash for any emergencies, even a simple auto repair.

A simple formula for financial success is to spend less than is earned and save and invest. So many folks live paycheck to paycheck out of unavoidable necessity. However, many people act as though they are determined to spend every dollar they make and then some. Oftentimes such folks are in a jet stream, spending whatever they make without a second thought. Then they feel victimized if they have accumulated no savings.

To Budget or Not to Budget? That is the Question.

Going through financial life without a budget is like taking a trip without a map. Like a map, a budget can be simple or complicated. Many years ago I was driving through West Texas. There were no towns, or even structures, for as far as the eye could see. I saw a sign that said “200 miles to next gas station.” Imagine the predicament of those who had insufficiently planned to have enough gas to get to the next gas station. Budgeting is like that. Budgeting will allow for preparation to successfully get from financial point A to financial point B.

There is no right or wrong budgeting tool. You just have to find a format that works for you and stick to it. If this task seems daunting to you, try committing to one month of recording your purchases (yes, even that morning coffee!) in a pocket notepad. The key is consistency. One does not have to compulsively keep track of every penny at all times. However, by tracking expenses on a daily basis, one will have a clear picture at the end of the month of what has been made, what has gone out, and in what categories.

Think of the budget as a financial roadmap. Just as a roadmap must correctly illustrate the path to the intended destination, a budget has to be accurate to be effective.

All too often, people are in denial about their true spending habits. They do not admit to themselves or others that they have what I refer to as “leaks in the bucket.” These may be 2 embarrassing habits such as gambling losses, partying expenses, or the daily Frappuccinos and fast food that can really add up over time. These items must be listed.

So, just be honest with yourself. Where is the money going? If there is a short fall, where can adjustments be made? Strive for a surplus: first, get out of debt, and second, save and invest.

Virtually everyone wants financial security. Some people want it more than others. How badly do you want it and what are you willing to do to get it? Are you willing to keep a budget as a primary tool to attain financial success?

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