Balancing Your Personal Budget

Balancing your budget simply means that you spend less than your income. Overspending has to be dealt with like alcoholism or drug addiction, on a daily basis. The difference is that if you fall off of the wagon you have to start over at day 1 with alcoholism or drug addiction. With budgeting, you can make up for it by spending less or making more the next day.

Most budgeting is done within a monthly framework because that is how you usually pay for the biggest items in your budget such as lodging and transportation. Also, your income is often dealt with on a monthly basis. It is the total amount of money you have come into your house in a month from all sources. Your expenses are everything that you pay out. That includes your lodging, car including repairs, gas, utilities, phone, food, entertainment, vacations, debt servicing and taxes.

If you are just a beginner at budgeting, the best way to form good habits is to just deal in cash. If you do use a credit card, take the balance to 0 as in fully paid out at least once every month. The interesting thing about this habit is that once it is formed, it is hard to break. You will like not worrying about your credit card debt. You will find that it frees up your money and your energy to do much more positive things with your cash flow.

To budget properly, you must be completely honest about your income and your spending. For partnerships, this is not just important for your budget but for the long term viability of your relationship. Errors of omission do occur but uncontrolled and irresponsible spending are problems that make competent budgeting impossible. If you want financial security, you must solve any personal problems that get in the way of prudent and reliable earning and spending. This starts with knowing yourself and then knowing who your partner is in personal and business relationships. If there is an unforeseen problem that comes up, discuss it and solve it. If it continues seek counseling from any and all possible sources.

If the problem is you, solve the problem or risk the consequences. You are destined to fail and you will be pursued relentlessly by those who want you to act responsibly. You will probably lose your credit rating, lose any assets that you have and probably lose relationships with those who are close to you.

If the problem is not you but others, distance yourself from these people. If it is a partner you have to look at ending the relationship. They will take you down. Their problems of collectors and being rejected for the good things in life will be your problems. Do it sooner rather than later. These behaviours do not change unless the person is willing to exert a very strong will over themselves. To change is their responsibility, so do not make it yours. Save your self.

Once you know honestly what you make and what you spend, figure out if you are overspending or saving. If you are saving, this is great. Keep it up and don’t stop. If you are spending more than you make, you need to do one of two things. You can make more money. That may mean that you need a promotion, or you need to take on a part time job or your partner needs to increase their income contribution if that has more potential. However, most people find that if they increase their income, they will also start to spend more as well. One perspective on this approach of making more money is that you don’t have as much time to spend if you are working more time to make money. So you solve the problem two ways.

The most dependable strategy is to focus on the spending side of the budget. Big corporations do it all the time. They do it because it works. So you can do it on a personal level. First figure out how much you are over budget. Then identify items that you can spend less on each month. Look for things that don’t give you much enjoyment for the amount you spend. People are often surprised at what they spend their money on when they actually think about it. Stop spending on extravagances. You can enjoy luxuries when you have your money working for you in a few years. Stop spending on bad habits such as smoking. Get your debt under control so that you are only servicing good debt that pays for itself. If you are grossly overspending, you will be amazed that you can cut 50% from your spending budget and not really miss it.

Once you get the hang of it, you find that there were a lot of things that you had labeled as needs but they really were just wants. You see the positive side of saving as you watch your nest egg grow. Then you put the money to work and see it multiply and help you build your financial security. You feel better because you are calmer and more confident. You think more clearly and make better decisions.

It all starts with spending less than you make.

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