That 4-Letter Word: Budget!

You would almost think the word budget is a four-letter word! When I say the word budget, what comes up for you? For me, I would rather run naked through a desert full of cactus in the middle of July then to write out a budget.

But as I have learned more about finances, spending, and the flow of money, I have also learned that when we follow a budget, we have the ability to actually know where our money is going and where we can cut funds from flowing too. Households that follow a written budget save 14% more on average! Take that in for a moment, what would change in your life if you received a 14% raise this year? Friends, if you earn $50,000 a year, that is $7000 saved from tracking your spending!

It's funny, I didn't know where my money was going, I just knew I was always short money before my next paycheck. And I knew something had to change. Does it ever feel like every time you try to get ahead, another bill comes up? Yeah, me too.

Following a budget allows you to track what is actually happening. If you are in sales, it's like tracking where your leads are coming from and your conversion rate.  You can then Focus on what is working and alter what isn't. I am including in this post a simple budget. And I want to challenge you to take this on. Try it out. Start with your take-home dollars, and really spend some time thinking about your expenses.  It helped me to review three months’ worth of bank transaction history. It's amazing what you will uncover.

Creating and following a budget will do a few things for you:

First, you see where you stand in a month’s snapshot. Warning:  It might hurt.

Second, it exposes where your funds are flowing to. You can’t manage what you don’t measure. It's really important to see it in black and white.

And third, you can now figure out what adjustments you can make.

I want you to see that there's a possibility to cut some expenses so you can pay yourself first. What does that mean? I have my direct deposit setup or 20% of my take-home pay goes into an online savings account. I don't even see it. What goes into my main checking account for my household expenses is what I have to live off of and work with until my next paycheck. I figure it out and I make it work. If you could learn to live off of 80% of your take-home income, and make that 20% work for you - put it into Investments, fund a college fund for your children, have a large cash savings, max out your retirement accounts... you see what I'm getting at.

20% savings will change your life. But you have to see what you have to work with. Could you imagine S&P 500 companies trying to get through a day without having a written plan and measuring their results? Try it out and see how it can change your life. It doesn't have to be painful, but it will feel uncomfortable at first. Just go with it. Because ignoring your finances is easy, but easy is not always right. And it will catch up with you and be an even BIGGER problem down the road. Try it out, and see if it can provide a blueprint in which you can start making subtle changes.