“We must consult our means rather than our wishes.“
George Washington
Budgeting is a must have tool in the wealth creation journey, which serves as a navigator that ensures at all times you are true to your mission. As with all tools, it has to be used effectively otherwise you will end up frustrated with the results you get. Tools are only as good as their proper utilization. Let’s interrogate some of the things that make us not achieve the kind of results we desire when using a budget, shall we?
1. When you budget but don’t know all your expenses
You are excited about making a budget that will help you leapfrog your financial life. And so you sit down, review your monthly income and list down your monthly expenses, savings and investments, and then boom, you have a budget. Only in your budget you forgot about some of the expenses you make quarterly or annually. So, while you follow your monthly expense budget, when it comes to making payment of those one-off amounts such as insurance premiums, they simply throw you off balance.
My take is start by listing down all your expenses. Then you can categorize them into monthly, periodic or annual expense. This will help with having a clear view of all possible expenses and therefore you can make a comprehensive expense list.
2. When you budget to spend all that you get.
Budgeting is a good starting point. However, it is not very useful if we are consistently only making a listing of income and then listing expenses that fully match the income. As you start off your reality could be that your income matches your expenses. But if you don’t do anything about it, then there is a chance you will get discouraged and you might abandon this noble journey altogether.
Once you discover your expenses are the same as income, it is your opportunity to look at your expenses critically to see what you can start cutting down on. Start with the easiest as you contemplate the tougher expenses such as rent, school fees etc. The aim being to live within your means while saving and investing for your future.
3. When you are burdened with debt… living above your means
Sometimes we are caught up in a debt trap. No matter what kind of budgeting we attempt we are overwhelmed by what we owe. Debt can be emotionally draining especially when you can’t seem to pay it down fast enough, for instance debts to shylocks, high interest credit cards. Sometimes debt is long term and doesn’t seem to have an end to it, such as mortgages, and other long term loans.
One quick response is just to give up and deciding to default because if you bury your head deep enough , maybe the problem will resolve itself. I know you know that this is not true. If you are in such a situation, imagine there is hope, but you’ve got to have the right mindset and be willing to do the work.
4. When you give to others when you really shouldn’t
I have talked about black tax previously and given that we are social beings then we need to help when we can. If you are anything like me, there are periods where issues crop up like an avalanche, and the temptation is to give until you have nothing left. The trouble with that strategy is that you end up giving up something that you intended to do or worse still you borrow to make ends meet.
Believe me, I get it you don’t want to let anyone down, however in doing so most of the time you let yourself down. The best thing would be to have limits, work with the budget that you have. Also, on the months you don’t contribute anything you can keep that balance for the months that you have overruns.
It also helps to discuss with those who depend on you, your limits. So that you manage expectations.
5. When you care too much about what people think about you
Peer pressure is an interesting phenomenon. Even though sometimes it can lead to positive results, sometimes we lead ourselves down paths that are not helpful. You probably want to upgrade to one-up your friends, not knowing how they afford their lifestyle. Contentment goes a long way, and so does working day by day to achieve your goes. The power of Focus cannot be underestimated. Singular dedication towards the achievement of a specific goal. Mute the noises, avoid bad influence and the nay sayers. Determine to be your own cheerleader. Sometimes it’s important that you just show people the results rather than allow them to be part of your process.
6. When you are not consistent in following the plan
I call this the shiny object syndrome. You are always starting on something but never quite conclude it, since you are always ready to jump to the next new thing. What that does is to set you up for failure, since you can’t quite follow through to achieve your goals. Again, this derails you from your plans and you start to feel like you are not an achiever. The key to resolving this is to stick with your plans until you finish them. Unless a plan is not serving you, kindly stick with it.
What this will accomplish is to help you see yourself complete something; it gives you such a high. It also helps you create a habit of a finisher. And this is an important discipline to have in wealth creation journey since most often the people who win are the most consistent.
Consistency pays.
Winning at budgeting is a function of good habits, consistency.
Budgeting is a key pillar in the wealth creation journey. Creating a budget is key however purposeful execution certainly takes the cake. My admonition is, make the budget but determine within yourself that you will stick with it. Obviously if a budget line item does not serve you its important that you get rid of it quickly. Also if there are well considered opportunities, be flexible to adjust the budget and take advantage of the opportunity.
As always I’m excited for your progress and wins!