It’s now the middle of January and the New Year is well under way. Now is the time when people are starting to implement their resolutions, but remember that it is never a bad time to make positive changes in your life. At this point, you’re probably expecting me to preach about the importance of setting a budget and sticking to it…
A budget sounds like a great idea, but it’s a lot of work. Tracking every dollar that you spend can be tedious. It’s the sort of thing that most people have trouble sticking with.
Don’t set yourself up for disappointment with unrealistic goals. If you are not going to stick to a detailed budget, don’t bother. I’m not advocating sticking your head in the sand. I’m simply advocating taking a more practical approach.
I think that it’s more important to consider the purpose of a budget. The concept is to provide yourself with information so that you can make decisions on how best to allocate your money.
Most of your regular monthly expenses (rent, utilities, groceries, insurance, etc.) are pretty consistent from month to month. Look back over the last few months to determine how much it costs you each month for these necessities. Now consider how much your pay cheques are in a month. How you use your money above the cost of necessities falls into three categories:
• Discretionary expenditure
• Savings
• Debt repayment
I don’t want to oversimplify, but the rest is really up to you. Nobody can tell you your priorities. You set your own priorities and how you allocate your money will follow.
Here’s a suggestion. I like to set aside money in a savings account for unplanned emergency expenses. Based on my income and necessities, I decided on an amount and transfer money from my main account to this savings account with every pay cheque. Set up the transfer with online banking and it’s virtually no work at all.
If you want to save for a specific expenditure – vacation, home improvements, whatever – set up another account. Schedule an online transfer from every pay cheque so that you save up the money over time.
Everything is golden as long as you’re paying your bills and saving toward your goals. What can foul this up is unexpected reductions of income, significant unplanned expenses or pre-existing debt loads that are beyond repayment. That’s a discussion for another day.
Looking for more information on (not)budgeting? Check out what Doug Hoyes has to say.
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