A family member of mine is in a position where she has to restart her life at an older age. It hasn’t been a fun process thus far but it’s a necessary evil. She’s never been the breadwinner of the family and has never budgeted.
This is where I come in.
I’ve walked her through a proposed budget and the numbers multiple times. I’m confident she’s going to be ok. The biggest issue at this stage is unlearning all the old habits she has.
You see in her previous life she didn’t ever budget because she didn’t have to. She was able to lead the life she’s wanted without ever really thinking about it. She wasn’t living some extravagant lifestyle but she didn’t ever second guess a purchase.
Quick trip to target? Done.
Clothes for the grandkids? Done.
Life was easy.
Unfortunately, that has changed.
The concept of thinking through the actual cost of things just isn’t a habit and man is that a hard one to learn. Not only does it mean you have to think through each expense, but it also means you can’t buy everything you want.
While there are so many great pieces of financial advice out there, I firmly believe one stands above the rest when it comes to getting your finances on track.
The key to getting your finances on track
This key is knowing how much money you spend each month.
It’s just that one single number. The first place that most people went to when they read that is budgeting. I don’t think budgeting is the answer for some. I mean you could literally pull out your bank or credit card statements and have your monthly spend quickly.
Of course, if you look at the number and choke on your food, then maybe its time to think about budgeting.
The budgeting scale
In some cases, budgeting is certainly necessary. In others, it isn’t. I believe it’s a sliding scale.
For instance, if you are naturally frugal it’s unlikely you’ll need to budget. If you have a high income it’s unlikely you need to budget.
Its a sliding scale. On one end you have someone that doesn’t need to budget at all. As you work to the other side of the scale you have things like:
- Knowing how much you spend each month
- The anti budget
- Putting together a budget each month
- Tracking your expenses for general information
- Watching every penny close
Everyone will fall at different parts of the spectrum. For instance, in my household are spending tends to go through the roof if I don’t track it. Therefore, I track every expense. If we overrun our budget (most months) it’s not a huge deal. However, knowing where we are spending our money helps me to keep our spending in a manageable range.
The entire goal of personal finance is to move from the “watching every penny close” to “you don’t need to budget at all”.
Where to start on your budgeting journey
If you haven’t changed any of your personal finance habits for years then you probably don’t’ need any drastic changes. However, I do think it’d be wise to choose a point on the scale and start.
If you are truly looking to start moving your finances in a positive direction I’d start with putting a plan together for your spending (otherwise known as a budget) and then see how close your spending is to that number at the end of the month.
It’s that simple. Overall it will probably take 30 minutes to do and may just be the kick in the pants you need to take positive steps on your personal finance journey.