Three Secrets of Successful Budgeting


Financial budgets are a lot like training wheels: they help you get moving and offer you confidence as you learn how to balance.

I wish I could come up with a better word than “budget” for managing money. While I’ve made peace with the word, for me it still conjures up synonyms like whip, drudgery and cruel master. Personally, I prefer the more elegant term Spending Plan, but for now, because budget is so universally understood, let’s just go with it, all preconceived notions aside.

While there are many ways to budget, none are perfect. A budget is a tool you develop to fit your lifestyle. There is no single, guaranteed budget method, form or spreadsheet.

No budget is fail proof. Even a template or financial software that fits your temperament and lifestyle is not guaranteed to change your life in the same way a power tool sitting on the garage shelf is not going to put together that new wall unit for you, while you kick back and watch TV. You have to do the work.

Budgets are extraordinarily useful, a lot like training wheels. They can help you get going and give you confidence as you learn to balance. There may come a time that you’ll become an expert “cyclist” and outgrow your need for the training wheels. Or you may want to leave them on for confidence and security should you hit a bump in the road. 

NO ONE-SIZE-FITS-ALL. There is probably as many ways to budget and different kinds of templates, forms and budgeting software out there as there are financial temperaments. And rarely do those kinds of fill-in-the-blank templates work because all of those categories, percentages and pre-loaded numbers reflect someone else’s situation, income and lifestyle. That makes them doomed to fail in most situations.

The only way a budget is ever going to work for you is if it reflects you. The categories and the numbers in those categories have to match how you actually live your life.

BUDGET OF CHOICE. Of course, I am referring to my choice, but I’m confident this simple three-step budget can work for anyone in just about any situation.

  1. Create categories.Start with the obvious ones like Housing, Food and Gasoline. Expand your categories to reflect your life.
  2. Give every dollar job to do.Look at your paycheck or other source of income. Your job is to manage that money—every single dollar. The way you do that is by giving every dollar a job to do. You do that by pre-spending your entire paycheck on paper before you ever spend any of it. Think of yourself as the boss and those dollars are your employees. A good manager knows where the money is supposed to go and then follows through to make sure every dollar of it went where it was supposed to. That’s a budget.
  3. Every month starts over at $0.Call it a zero-balance budget. What it means is that since every dollar has a job to do, at the end of the month every dollar should have done its job and have been spent, saved or otherwise set aside by moving it out of the checking account. Theoretically, that brings your household bank account to $0. And if for some reason you didn’t budget exactly right and the account has some money left in it, decide ahead of time where to move it so that the balance does return to $0.

A budget where you 1) create your own categories 2) “pre-spend” every dollar by assigning it a job to do then supervising with a careful eye to make sure they do as told, and  3) starts over at $0 every month, is a budget that will push you to develop new habits and routines.

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