Friday, September 11, 2009

Budget 101 - Yep It's That Time of Year Again (First in a Series)

Fall's here, footballs are flying, leaves soon will be, so it's time to start thinking about the Holidays and the New Year beyond.  It may come as surprise to you but 2009 is almost over and Christmas falls in December this year.

The Holiday Season (From Halloween through New Year), does amazing damage to the American pocket book.  We all know about Christmas and Thanksgiving, but it's quite impressive how much Halloween costs.  Besides mountains of candy, we spend a fortune on costumes and decorations.  Many communities are as extravagant in their Halloween decorations as they are with Christmas.  We are Americans.  We love lights.  We love opulance, we love gaudiness (Think Time Square or The Vegas Strip).  And apparently we love debt.

Well, it's time to kiss the whole debt thing goodbye.  Kick it out of the house and let it join the circus or something.  But we are through with it.  Right?  Right?......................

Ok, if you're still here, let's go over the basics of how we can accomplish all of our financial goals.  First, we have to have goals.  Let me suggest a few:  1.  Live on less than we earn, 2. Get out of debt, 3. Build a nest egg for the future, 4, Give to worthy causes, 5. Stop having to WORRY about money.

Those will do.  You might add some of your own related to vacations, education, buying a house, etc.  But the 5 above pretty much cover the core.

In this series, We're going to focus on #1, Live on less than we earn.  We'll touch on the other goals, but we won't stay long.  If you want a step by step plan on all 5 goals, you should check out IOU NO MORE.

I don't know many people who get excited about budgeting; at least not not at first.  But once we learn to do it right, budgeting is a lot of fun.  Ok, a little fun.  But, I guarantee you  that it's not a drudgery.

Think of it as "Fantasy Spending".  We all love to spend.  Back when I was a phone rep in a Call Center, as a part of our offer, we entered prospects and customers into a sweepstakes with a grand prize of $1,000,000.  We would ask people, "What would you do with ONE MILLION DOLLARS?"  I loved listening to the far away sound in their voices and customers spent that money in their imaginations. 

Think of a budget the same way.  It's spending the money on paper, before we spend it at the store.  Nerdy, detail oriented types love this part.  I've seen some people's budgets that rival a major coporation in their granularity. I don't recommend that.  Use something simple, but practical.  We've already done the outline work for you and if you like, you can get a basic budget plan for free right HERE.  Just tell us you want the free Basic Spending Plan and email it right out to you.

It's important to do a WRITTEN budget.  Doing it in your head just doesn't work.  As we say in the south, "That dog don't hunt."  Writing it down will help you focus and it will assist you in making sure you cover all areas.  If you are married, you should do this with your spouse.  It's ok if one of you does the heavy lifting.  But make sure you are both in agreement on the numbers and priorities.  Marriage is not about dominance or dictatorship, it's about teamwork and mutual submission.  You remember the ceremony right?  All that 'putting the other person first' stuff.  Well, budgeting TOGETHER is one way of actually doing what we promised.

Use a pencil rather than a pen.  I know, now I sound like the nerdy, detail oriented type (which everyone who knows me knows I'm not).  But I am practical.  There will be a great deal of erasing.  Pencils have erasers.  They are designed for work that has to be done over.  Ink pens..... not so much.  They are all about permenance.   Hey, what happened to my spell check.  It's missing..... bummer.  Ok, back to the subject.

You'll need a calculator and a copy of at least your most recent bank statement.  Good news, both are probably availble on the computer you're using to read this article.  You'll find the calculator under the 'accessories' tab in your start menu (if you are using a PC.  If you have a MAC, I have no idea.  I'm not cook enough for a MAC.  You'll have to find it yourself).  For the bank statements, go to your bank's website and log into 'online banking'.  If you haven't yet set up an online banking account, now is the time to do it.  If you already have one, you'll know that it's a great place to keep track of your spending patterns.  I check mine every day.  It's a safety thing.

Ok, you have a pencil, a budget form, some historical information and a calculator.  We're ready to begin.  In our next installment, we'll do just that.  We will look not only and the categories, but which order in which to budget them.  The order is mission critical.  But that will have to wait till next time.  I have to take a shower and go to work.