What is Budgeting?
Budgeting is probably one of the hardest areas that we can be asked to look at! Simply because we do not like to look at the reality of our lifestyle costs, for the pure fear that reality will show that we are spending in excess of our income, and/or that we cannot afford to save any additional monies, unless our lifestyle changes.
The major reason for this is that we tend to want to enjoy our lives as much as we can, on a day to day basis, and we don’t seem to worry too much about the future, but deep down, we really do concern ourselves about the future and what it holds.
Furthermore, when it comes to budgeting, we have a mindset that we do not want to know what our day to day costs are. Although, in reality there are many tools out there that can assist us with this.
For example; if you have online banking, you will find that most banks will have an information area, which is really their budgeting area, that records all your expenditure, whether credit card or bank account expenses.
This, in itself, is a great guide, and is a true budget analysis tool. From there, it is important to ascertain whether you are spending in excess on items and services that there is probably no real need to, and from there ascertain how you could cut back if you are exceeding your income capabilities.
Similarly, you could sit down and complete a budget sheet, and adjust it this way or that, to see what outcomes could be obtained.
On our website we have a budget sheet that you can use. It is a simple spreadsheet that allows you to put in your figures and then see what the outcome is.
The next stage of budgeting is that, once you have worked out what you are spending and whether there is a capacity to save, you can see whether you can make adjustments to help meet your objectives.
I find that this is the most challenging part for all concerned, as decisions are usually made on a day to day basis, sometimes it is an emotional decision more than a practical decision, therefore, there is always an element of weakness in how we can rigidly stay within budget.
My view is that, if you can carry out your budget at a rate of 100%, that is excellent! However, for most people, if you can live within 85% – 90% of your budget, you are doing very well, and I feel that is a great starting point.
Why do I need this?
You need a budget to help you align your goals and objectives with your ability to meet them.
A budget can clearly help you identify whether you can meet your objective of, for example, saving for a deposit to purchase your first residential home, or saving to buy an investment property, or saving or investing to create wealth through equities and other investments, over a specified period of time.
Budgeting can also assist with your long term retirement planning through super. There are various avenues. Therefore, budgeting is a very powerful tool, if used correctly.
It helps you achieve your particular goals and objectives, and provides you with the confidence that you have created a path of achieving these goals, over a period of time.
What happens if I don’t have it?
If you don’t have a budget in place, and believe me, more than 70% don’t, it is more difficult to achieve your goals and objectives whether they be short , medium or long term goals.
Most people muddle their way through life, and may achieve these goals, in a roundabout way, but with no specific time lines or dates, and no particular control through careful management of the process of achieving these goals.
Therefore, what can happen is that you may eventually achieve your objectives, but it could take a lot longer, and it could be more costly, or, you may never achieve your objectives as you have not sat down and worked on an appropriate budget.
The real disadvantage is that you may not fulfil your life long dreams of achieving all your dreams.
What will the cost be to me?
The cost is in not budgeting as you may not fulfil your overall gaols and ambitions for your life. That can be an extremely high cost.
You need to assess whether it is a cost worth missing out on or not?
It is important to know that, any objective that is worthwhile will carry the cost of time, financial planning perseverance, patience, and a degree of self sacrifice.
If you are not prepared for this, then the cost is really enormous, as you may die wondering, what if I had of done this or that?
This is a real concern that needs to be addressed properly.
We at FOFM are very focused on ensuring that all our clients try to budget well.
To assist you, we recommend you “click” on our Budget Sheet button below and try to complete our budget sheet, which is a great stating point.
We also have some savings/investment strategies in place, that can help you achieve your goals in a methodical manner that will not be too taxing on your lifestyle. Call us to find out more.
The key point is that you need to start, and start TODAY, not tomorrow!