Spring is almost here. What are your “plans”? Spring Break getaway? Vacation? What will you be doing in preparation for the warmer weather and longer days that are coming soon? Regardless of what is in store for your near future, a “plan” for your finances should be included.
In everyday life, having a “plan” can refer to anything, especially when it comes to this time of year. Vacations, family reunions, parties, and graduations are among the most popular things we all look forward to once Spring comes, and they all involve some level of “planning”. But, what is commonly disregarded is one’s finances. As you read this, please take a moment to reflect on the following thought: you are hosting a dinner party/gathering for family and/or friends. What is the “plan”? First, you have to arrange a date for the event and then a place (if not at your residence). How many can you accommodate at the location? What will you have for food, drinks, games for children (if young ones will be attending), and how much of each? What is the best time to have the event? Are you setting up accommodations for anyone that will be coming from out of town? By the time the planning is all done, how many hours or days did you take to “plan” this event?
Before I elaborate any further, I would like to draw special attention to a couple of items: 1) the word plan is in quotes above and 2) there is a difference between a plan and a goal. The goal of you hosting your loved ones is to provide enough resources to ensure all have a great time and create memories with those special people that are a part of your life. The plan was how you made all of the arrangements.
In your financial world, your goal may be to retire comfortably, or to save enough for your children to attend college, or for you to graduate with your degree, or any other life goal you wish to achieve. And since money affects every aspect of your lives, having a plan for your finances is essential for achieving your goals, or reaching your destination.
What do I mean by a “plan”? This is simply a budget.
I will breakdown a budget in more detail in the next couple of posts, but here are some overall highlights of a budget:
- A budget puts your monthly net income (aka take-home pay) front and center. This is the amount you have to give, save, and spend every month. Your income is the starting point. If you don’t know what is available, how can you create a plan.
- You have control. The decision for giving, saving, and spending is yours and yours alone. If you are married, then it is between you and your spouse–together–making the decisions. So many people think a budget is restrictive. This is not so. Once you know the amount available, the decisions are intentional. This is where your goal(s) come in play. Your budget should reflect your goals, both short-term and long-term.
- Because the decisions relating to the budget are yours alone, that means you can make adjustments, if necessary. For example, maybe you planned on putting $200 in your savings account for the month, but then you realized you forgot to account for the child’s team photo that is coming up. Well, you can make the change to the budget and add the photos and lessen the amount that is to go to the savings account.
- You can pick your budget period to align with your family’s income. The most common budget is done on a monthly basis. But, what if you and your spouse get paid on the same day, or Thursday and Friday of the same week. In that case it might be advantageous to have your budget period be bi-weekly or weekly depending on your pay schedule. If one of you are paid monthly and the other weekly, then you can adjust the budget accordingly. Your budget allows you to be flexible.
Hosting a one night gathering with family or friends may be one of the simplest events when compared to out-of-town travel or long-term vacations. I asked you to reflect on how many hours or days such a gathering may have taken to “plan”. As a guess, I would say a total of four to five hours over a week, depending on the number of people attending, of course. Once you get the hang of preparing your budget, it will only take about 30 minutes and for some months, even less. The first 2 or 3 months preparing a budget will be the most time consuming if you have never prepared one before. But once you get the hang of it, it will take hardly no time at all.
Thirty minutes per month for a whole year is 6 hours total … FOR THE YEAR.
Don’t you think this is time well spent to get you to your financial destinations?
Thank you again for reading!
