In this post, I’m going to say the B-word. And, it may offend some.
Budgeting. There, I said it and I apologize. For some reason it’s become a dirty word in the world of finance. The fact of the matter is making financially wise decisions begins with cash flow management. Most of us have tried to create and stick to a budget. And most of us have failed. Here are a few tips to taking control of your cash flow.
Be intentional. How were you taught to manage money? For many our first interaction was a small allowance from our parents or our first paycheck. We received money, we paid our expenses, and we made a decision whether to spend or save what was left over. This “left over” mentality is what plagues many. How can I possibly save when there is nothing left over at the end of the month. Being intentional starts with being specific in how you plan to spend your money each month and making sure you set aside money for the important things first (i.e. paying down debt or saving), not just if there is something “left over.”
Keep it simple. No computers. No exact numbers. No calculator. Grab a pencil and a piece of paper. When budgeting, our tendency is to get too deep into the numbers, pulling up bank statements for the last six months, and diving deep into how you spent money in the past. Although I think it’s important we understand how you’ve spent money in the past, it’s even more important we understand how you intend to spend money in the future. At the top of the piece of paper, write your monthly income. Below your monthly income, write your monthly savings or debt pay down goal. In the third line, write your monthly fixed expenses (housing, child care, utilities). Subtract lines two and three from line one. The remainder is what you have left to spend that month.
Create a system. Stick-to-it-ness starts with simplicity. The harder something is, the less likely we are to achieve it. Creating a system is a huge step toward simplicity. Consider setting up an automatic savings/debt payment to happen every time you’re paid. If money sits in your everyday spending account, there is a high likelihood you’re going to spend it on things you don’t intend. If it’s already in a savings account or been used to pay down debt, you’re less likely to use it on other, less important, things.
At NewLeaf Financial Guidance, our goal is to help our clients manage cash flow efficiently. We do this by implementing simple systems that help our clients spend intentionally.
Want to learn more about how we can help you master your finances? Schedule a meeting today!