Budget Challenges

Maintaining a spending plan comes with its challenges. If it didn’t require attention to detail, discipline or consistency everyone would be doing it. Many people are not because they don’t want to face the challenges and the sacrifice that come along with that aggravating money system called a budget. Below are a few budget challenges many will have to face and overcome to make the spending plan work.

ATM or cash withdrawals. It’s so easy to take $80 out of the ATM on a friday night and have no clue where it went when saturday morning rolls around. The problem with cash withdrawals are they don’t get recorded in the spending plan, the money is spent without any accountability. I am sure the cash I withdraw has a purpose before I take the money out of the bank, so when the money is in my hands I already know what amount goes to what category.

Variable Expenses. All expenses don’t occur on a monthly basis such as auto maintenance, home repairs or taxes.  To budget for these expenses, set aside a specific amount monthly so when that item needs to be paid you don’t have to bust your budget or incur debt. Estimate the annual variable expense, divide the amount by twelve determining what must be saved monthly. Include these amounts in your spending plan like a regular monthly payment.

Sometimes if we are on a tight budget we tend to avoid saving for the annual variable expenses because “we can’t afford it.” However, even if you can’t set aside the full amount, set aside something because something is always better than nothing. Variable expenses also include birthdays, christmas or vacations.

Impulse Buying. Impulse items are purchased unnecessarily and without thinking, just acting off impulse. Buying off impulse is the main cause for overspending and additional debt. We do rationalize impulse purchases by saying “its a good investment,” “I just couldn’t resist it,” or “it was on sale.” Cash usually isn’t available so many impulse purchases are made with easy credit financing or credit cards.

Anything you want to buy should be viewed with your budget in mind before you buy it. This takes discipline but it can be done with determination and practice. An “Impulse List” may help; this works by making a list  of anything you want to buy on impulse. Once the item is on the list, price the item at different stores and wait thirty days. After thirty days if you still feel you need or “got to have” the item then buy it, if you have the cash for it.

Gifts. I don’t think you have to buy a birthday or christmas gift for every friend, co-worker or family member to express your love and gratitude for them. Unfortunately, many people bust their budget with this philosophy. Plan ahead for gifts, shop wisely, set a gift budget and stick with it, don’t buy any gifts on credit and remember you can give a gift that costs nothing. Be creative.

Attitude. It is a budget so yes there will be challenges but don’t give up. A challenge is only an opportunity to move to the next level. Be patient. It will be discouraging at times but be encouraged because it will all come together if you stay consistent. When you begin your spending plan, start with a positive attitude because if you start thinking you will fail, most likely, you will fail.

Budget Talk

I had to realize that to obtain financial freedom I would have to live within my means and I couldn’t spend more than I make. Society, the actions of some friends and family and advertisers pressures us to live beyond our means or use borrowed money for normal living expenses. This is a bad idea because to consistently spend more than is earned is creating a miserable financial future. It can also make the status of your present financial situation difficult. If you spend less than you earn, you begin to walk the important steps toward financial stability.

A budget or spending plan takes discipline but needs and wants can be incorporated into your budget.

Needs. Needs are necessary purchases required for basic living expenses such as food, clothing, shelter, insurance and transportation. While we easily mistakes needs for wants, we have to learn how to discern true needs and admit wants. We still have the responsibility to budget our needs wisely. If I need a winter coat, I have to make a wise decision about the style and price of the coat. The coat must fit my budget.

Wants. It’s not wrong to have wants but the problem is we want too much, we want it too soon and we’re unhappy when we can’t have what we want. There is nothing wrong with wants but they should not take priority over needs. Be sure to treat yourself to wants but only if your budget allows it. You should save for wants, easy credit should not provide for your wants.

Dividing up the income

The first portion of our income belongs to God. We return a tenth of our income, the tithe, telling him we recognize that He owns everything we have. He is the owner and we are managers of what he has allotted us.

The second portion belongs to the government known as taxes.

The third portion which comes after tithe and taxes is the Net Spendable Income. This is the portion of the income from which we set aside a portion for savings and meet our expenses such as food, the mortgage or rent, transportation, etc.

This leaves us with the surplus portion. This is the portion we use to aggressively pay off debt. Once we achieve debt freedom we use this portion to do and buy more of the things we want. Our goal should be to maximize our surplus portion so we can give more to meet the needs of others, invest long term to build wealth, retire comfortably and fund as much of our kids college fund as possible. Even though this portion is surplus it should still be controlled with a spending plan.

The debt-free Christmas

Thanksgiving eve and it’s not the turkey on most people’s minds. It’s shopping, spending, buying gifts for friends and loved ones. It’s a wonderful thing if you are smart about it but it can haunt you for months, maybe years, if you dig a hole of debt to get those things. Just wanted to share a few ideas of how you can have a debt-free christmas and not get slapped in the face with big payments in January and the rest of 2009.

Write down a plan. I stress the importance of having a household spending plan so I’m also stressing the importance of writing down a christmas spending plan. First, you have to know how much money you can spend without tapping your savings, your tithe or giving and missing any necessary payments. In other words your household budget should stay in tact. A good way to handle christmas is take a little out of each paycheck through the year but if you haven’t done that you are about 11 months behind. So, write a short list of everyone you would like to buy a gift then decide how much you can spend on each person based on your “extra money” leftover after everything else has been fulfilled. If you look at your list and your money and there is only enough for one person; you buy for that one person and don’t feel guilty about it.

Stick to the plan. It almost goes without saying but I’ll say it anyway, sticking to the plan is crucial. The spending plan won’t work if you don’t work it. If you have a list of five people you can buy gifts and $150 to spend, only spend that $150. Take the list of the items you want to buy in the stores with you. If needed, take an accountability partner to keep you from spending more than planned. Another way to stick to the plan and avoid spending more is…

Only use cash. There is an emtional connection you have with cash that outweighs your connection with a small plastic card. If you go to a restaurant and give the waiter $50 in cash for your meal, you will feel the pain of it leaving your hand a lot more than using your visa. Do not use credit cards of any type. You should be paying those off and not using them anyway but you don’t want to buy cousin tommy a sweater that he wears two times and you spend six months paying it off. It just doesn’t make sense. If you think you will spend more in the store you can always shop online. However, a plan is still needed and you must not go over your spending plan limit, it’s easy to get carried away online as well. So be disciplined so you don’t bust up your budget.

Remember the reason. I think in all the hustle and bustle of the shopping, decorating and everything that comes along with enjoying the season we forget the real meaning of it. The real meaning of christmas is not exchanging gifts but its the fact that God our Father LOVED us so much he sent his son, Jesus and this season celebrates his birth. Jesus is the reason for the season. So, NO you don’t have to buy a gift if you are struggling or in a financial squeeze and just can’t afford it this year. Buying gifts is a good way to express your love and gratitude to someone else but not at the expense of damaging the future of your finances.

Living on less

Living on less money than you make is an easy concept to grasp but for many people it’s hard to do. Most, naturally want to spend all the money they have in their possession. Think about it, when you were a kid and someone gave you five dollars, you didn’t automatically think “I should save a dollar, give a dollar and spend the rest.” Living on less than you make is like contentment, it’s a learned trait.  It’s not terribly difficult but it does take self-control and a willingness to mature.

This is why a personal spending plan is so important. When you learn to live on less you stay out of debt, you don’t spend unneccessary money and everything you do with your money is in connection with your long term goals. The house you want, the car you want, your child’s college fund and retirement are largely based on your acceptance to spend, save and give on the income that comes in each month.

Manage a spending plan. Whether your income is six figures or below the average household income, your money needs direction.

Don’t be complacent. Sometimes we don’t make enough money so do not accept the lie that you will never make more than you are making now. Pray for the faith, boldness and courage to get a plan together, work that plan and double your income in three to five years. Commit to the Lord whatever you do and your plans will succeed. (Proverbs 16:3)

Patience. When you start the process of adjusting your lifestyle such as selling the car to get rid of an ugly car note, moving down in living space or not using credit cards it will take a few months for it all to start working together. You may not see immediate results but stick to the plan and within a few months you’ll see the progress.

Get out of debt. Some of us make enough money, the problem is we have been living on more than we make for so long we haven’t seen the reward of our hard earned money.

Living on less than you make is one of the paths to achieving financial success. If you spend everything that comes in each month, you have nothing set aside for the unexpected. It doesn’t have to be something tragic or big, it could be a $200 car repair and because all money is spent it can cause a big financial mess for months to come. Don’t be normal, be strange; live on less.

Proverbs 21:20

Spend with a purpose

Many people get confused when you talk about a spending plan, better known as a budget. They think it resticts or limits them to the point they can’t spend but it’s called a spending plan so you can do just that, spend. The problem lies in the fact that you can’t spend or buy everything you want. I mean you can but if you ever want to achieve success in your finances, that wouldn’t be smart.

A plan that says I’m going to spend this much on this category and not one cent more. What should be the foundation of your spending plan?

1. Income. The reason many people are in debt today is because they spend more than they make. You can’t do this. If you make $10, you can’t spend $12. Easy credit is the easiest way to spend more than you make.
2. Write it down. You do this by prioritizing what is important. Obviously, food, shelter, utilities, transportation and insurance should be at the top of this list.
3. Discretionary income. This is the money left over after all the necessary expenses have been paid. This is the money that should go towards your set goals. Your first goal should be to get out of debt.
4. Fun Money. If you’re in debt, this category should be very limited but you should plan to have money for entertainment. This will keep you level headed while you’re paying off debt.
5. Stick with the plan. If you get off track, it’s okay. Just get up, dust yourself off, make the proper adjustments, get back on the track and keep it moving.

Credit card debt is on a steady rise and household savings is on a steady decline because people don’t have a plan. It’s just spend, spend, spend with no idea of how much they are really spending. This causes overspending which causes more debt. So don’t just stop spending but spend with a purpose now so you can have more of what you want later.

So, are you spending with a purpose?

Proverbs 21:20