Whenever I am coaching a group of individuals on getting out of debt, I ask the question each week: So, how are your budgets going? What follows is a long awkward silence finally ended by someone saying, “hmm, pretty good.” It’s the same response I give to my wife when she asks me how my doctor’s physical went. Simply put, most people are not budgeting and they are paying for it each month.
We make budgets out to be an electronic (or paper) bully that restricts our ability to have any fun. Budgets do not have to be a swear word in our lives. Our small children should not need to put on their ‘ear muffs’ when their parents talk about their budget. Below are the classic excuses I often hear and what we can do to avoid them.
Don’t Have the Time
“I am too busy to sit down and do it.” I do not doubt that for a second. Most people work 40-50 or more hours a week. We work really hard day after day, week after week and year after year, and most of us have no savings to show for it.
Here is an experiment – what is the average annual salary you have been earning since college (or high school)? Take that number, and multiply it by how many years you have been out of college (or high school). It’s probably a pretty hefty number, right? Now, how much do you have in savings? Seems pretty puny compared to how much you’ve earned, right? This exercise typically puts into perspective your need to budget.
Another question I like to ask these folks who don’t budget is: “How often do you talk about money with your spouse?” Every time I hear in responses, “All of the time, or every day.” My wife and I have been on a budget since 2002. Before and during the initial stages of our first budget, we talked about it every day. Today, we talk about money matters once a week on average. Rarely do we have spirited fellowship (read: fight) about money. It would be never if our cars didn’t break down, which somehow brings out the worst in both of us. Taking the time, up front, to put this action plan in place, pays off in the future.
Writing your initial budget with your spouse may take an hour or two. Singles, do the same. Guys, you may have to skip the first half of the football game, unless you are a Detroit Lions fan (in that case, skip the second half.) It may be painful at first, but your financial situation will not improve until this is addressed.
It’s too Complicated
I actually do have compassion on this comment. I have seen some budgeting tools that are so complex and thorough you could make it your full time job keeping it up to date. “How much should I budget each month for shampoo, shaving cream, razors, soap, and tooth paste?” Unless you think you have a spending problem on Crest or Colgate, you can group these together. For simplicity sake, I group everything that I buy at the grocery store, including personal care products, under the grocery expense category.
It Never Works Out Correctly
I never verbally say this, but, how does NOT writing a budget work out?
If you are expecting your first budget to work out perfectly, you will be in for an unpleasant surprise. It will always be a work-in-progress and will never be perfect, but that is not a good enough excuse to stop doing it. Just last month, I received our two annual car registration renewal forms in the mail. After budgeting for seven years, this still took me by surprise. Total bill: $117.70. I forgot to put this in this year’s budget. It will be there next year.
Ideally, budgeting helps avoid these annual ‘unexpected’ events. Why is Christmas financially unexpected every year? Life gives us enough unexpected events, so let’s not let annual events surprise us if we can help it.
Be Reasonable
When you write out your first budget, do you really think that you’ll stay within the $10.00 per month that is allocated to gifts and the $5.00 put towards clothes? I did, and had to adjust quite a lot higher.
Writing an unreasonable budget will only lead to discouragement. It’s okay to be ambitious with your budget, as long as you remain flexible if you don’t hit your targets each month. We missed our ‘ideal’ budget target last year by nearly 40% (partly due to our new addition to the family).
Afraid of What You Might See
Some people believe their situation to be so bad that they just don’t want to see it on paper. Sadly, their situation won’t change until something is written out. I have yet to see anyone get out of debt by accident. Once a budget is written out, the response from those who were afraid of what they see is almost always not as bad as they thought. In fact, once they see their plan written out, they are filled with a new found hope that getting out of their predicament is possible.
What’s the Score?
How do you know if you are winning or losing when no one is keeping score? Budgeting and the tracking of expenses will give you an instant response on how well you are playing each month. The longer you track your expenses during this process, the more accurate your budget will become. The key is you now know where your money is going. Knowing your financial score puts you in the game to start winning in your finances.
