BUDGETING: A little extra

Every Mickle

by Randy Rowe

Sunday, September 15, 2019

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Last week I covered 'budgeting' and gave simple tips on how best to budget.

This week I'll continue along that line and give six follow-up budgeting tips that may be necessary for anyone starting out. Hopefully they'll help you avoid common mistakes and pitfalls.

 

AVOID “MISC”

This is probably the most common budgeting error. People tend to budget along mentally ideal lines. They concentrate on the big things (which is good), but leave out the small things which do cost, and cost a lot when added up. They tend to just think, “oh let me just add an extra 5k in and call it 'miscellaneous' in case I've forgotten anything”. Don't do this!

Try your level best to include everything; think about your schedule for a week or two and see what you typically do and then list the cost associated with it.

Usually spend your Sunday's chilling with your friends at the barbershop? There's $700 there for the barber, and another $700 for the two beers you drank while there. List EVERYTHING!

 

EXTRA IS GREAT!

If you're one of the lucky few who have money left over after following step 1, then that's ok! Just don't feel pressured to add unnecessary things to the budget in order to clear it off. Send that surplus to the savings line. If you have a goal, then you're that much closer to achieving it; if you're saving for a rainy day, then your umbrella is going to be gold-tipped. Avoid thinking of this extra money as an excuse to party harder. trust me, spending your extra on entertainment feels good in the moment, but there will come a time when you will want (NEED!) that money, and it'll be better off in your bank account instead of a stripper's purse...

 

THE RACE IS NOT FOR THE SWIFT

It's clichéd, but clichés are clichés because they're true. If you have listed all your expenses and have a deficit (or a huge deficit) then fret not. Well, fret a little, but calm down quickly, because you've gotten the first step out of the way. Don't allow the negativity of seeing how little you have stop you from following up on your budget each month. Now that you know how big a mountain you have to climb, you can start planning ways to chip away at it. You have great resources (like this column) and the rest of your life to get it right. Don't get discouraged. The budget that brought the bad news, will also bring the good news when you turn your finances around. Trust me, I have been there. Few things are sweeter than seeing the deficit total go to zero, then become a surplus.

 

MEASURE TWICE, CUT ONCE

Your budget is based on a lot of estimation — that's how it works. Try to get that estimate as close to accurate as you can, then leave a little room. A good rule of thumb to follow is: overestimate your spend, underestimate your income. Follow this and you'll always have a nice little extra amount around. It may be just a few hundred dollars, maybe more, but more money in your bank account is always better than less, so feel free to round down your after tax salary, and round up the money spent on gas each week, or other repeat expenses like your electricity or cellphone bill. 100% accuracy is good, and very impressive if achieved, but a bit of rounding is more realistic.

 

DON'T SWEAT THE SMALL STUFF

You've done the budget, you tried to stick with it this month. it worked in some areas, you slipped in others — you're terrible, you feel like a failure, you'll never do this again! Cut those thoughts immediately. You're not likely to get it right immediately, few people do, very few. I don't know anyone who has actually gotten it right at the right time. Don't get too worked up if things didn't go as planned this month; just record what you spent on, compare it to the plan, and adjust. Your budget is infinitely adjustable — every month is another opportunity to get it right — and I can assure you, the more you review and adjust, the better you'll get at it. Stick to it for three months and you'll see measurable improvement...in cash, which is the best measurement standard I can think of right now.

 

SPLURGE!

I strongly recommend including a splurge amount in your budget if you can afford it. If you can't afford it, get your expenses down to the point where you can. Like entertainment, funds for a splurge is a set amount that's there just for you to have fun with, to treat yourself. You don't have to use it every month, and if you wish you can roll over the amount in the months when you don't use it all. That way, you can have a bigger splurge when you're ready (or you could send the money to your savings whenever you don't use it). Whatever you choose to do with it is fine, as long as you don't exceed the amount. Humans respond to rewards, even when it's rewards we give ourselves. keep a splurge line just to reward yourself for sticking to your budget — you'll find that you feel good. when you do. Enjoy the reward even if it's just something simple, like an evening at the movies or just something simple like a slice of cheesecake at the end of a rough day.

 

I hope these follow-up tips really help you. Budgeting is one of those little things that can make or break the best of us. No matter how good you may be at making money, whether it be from a job or investing, budgeting is the “secret” tool to keeping your money under control and reaching financial freedom (and staying there). See you next week.

 

Randy Rowe is a strategy consultant and lead writer at www.everymickle.com. He runs a monthly beginner workshop where he teaches regular people how to get started with investing. He is NOT an investment advisor. He is however, human, and knows how hard it is to stick to a budget, especially when you never seem to have enough money. He wants everyone to reach “enough money”…and then surpass it. His dream budget is always in surplus.

 


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