Revamping Your View on Budgeting: A Money Management System for Financial Success
Budgeting conjures images of someone who is frugal or clips coupons. Some people are reluctant to adopt a budgeting practice because they think it might restrict their ability to be generous or spontaneous. But, what if we think of budgeting as a money management system instead? A management system is simply a process or procedure that organizations use to ensure it completes what it needs to reach its objectives. That sounds better, doesn’t it? We can create a money management system that allows us to reach our goals.
Creating the System
Get clear on your expenses: The process starts by getting clear on what money you spend and where you spend it. There are so many things that demand our resources. From owning and maintaining a home and cars, to clothing, food, and activities for our kids – we need money to participate in life. It feels like there is always something we must pay for. Over the years, I’ve learned that we often forget to account for the more minor items or the distant expenses and then we’re left with an unrealistic idea of our available resources. These are things like Ziploc bags, fuel for our cars, birthday gifts or events, or maybe even a trip somewhere. Without realistically capturing these things that do occur, we are left believing we have more money available than we do, and when we run out, that’s when we feel stress and anxiety.
So, how do we go about figuring out all these costs? Look through your past spending. One of the most incredible things about money management in our time is that we have a record of everything we spend money on. Look back at your debit and credit card statements, your Venmo/PayPal/Zelle account, and your check register. See what you’ve purchased over the past three months and categorize your expenses. For example, in your car category, how much did you spend on gas? When will you need an oil change again? When will you need new tires? We can easily anticipate the related recurring costs which will inform how much money that category demands.
Put the process in place: Once you have captured all your expenses, you want to write them in a place that is visible and that you can reference. When an expense comes up, you can check in with your system and determine if you had already captured it and planned for it. If you have, great! You’ve got the resources ready and available. If not, you can revisit the system and add this expense to it.
Adapt the system: Determining your expenses is an ongoing process – as our life changes or as we enter new seasons, we adapt our system to work for us. Our system is intended to be in place so that we can reach our objectives – that might be saving for retirement, planning annual vacations, or simply feeling financially safe.
A money management system is an essential tool for reaching your goals – regardless of how much money you earn. Building one helps manage your expenses, plan for the future, feel financially secure, and take control of your finances.