budget Archives - Page 2 of 2 - GoldenRules Financial Strategies

Tips to help you Reduce Financial Stress

According to Peter Drucker, a management consultant, author, educator, and the described founder of modern management, “Doing the right thing is more important than doing things right.” Doing the right thing is effectiveness; doing things right is efficiency.

Sometimes stress is caused by expectations not met. We think things should go one way with our finances and they go the other. When this happens, when financial reality does not line up with our expectations, we sometimes become disappointed, and stress results. Use the following tips to help you avoid money stress and lower financial stressors.

Plan to Spend your Money

Using time to think and plan is using time wisely. In fact, if you fail to take time for planning, you are, in effect, planning to fail.

As I have written before, managing money is a job, and it takes time, so plan accordingly.

Set Financial Goals

Financial goals should provide direction to your life and determine how you spend your time and money. When setting goals, decide what you want, where you want to be, and what you want your money to do. Further, when you set goals, set goals that are SMART (specific, measurable, achievable, realistic, and have a time constraint.)

The best goals are those that cause you to “stretch” as you do your best to reach them.

Prioritize

Use the “80-20 Rule” originated by Italian economist Vilfredo Pareto. The 80-20 rule says that “80 percent of the reward comes from 20 percent of the effort.” The key to prioritizing is to identify the valuable 20 percent.

Once identified, prioritize your time to work on those items with the greatest reward. If you value managing money better, prioritize the time it takes to manage it better.

Be Flexible

According to Peter Drucker, a management consultant, author, educator, and the described founder of modern management, “Doing the right thing is more important than doing things right.” Doing the right thing is effectiveness; doing things right is efficiency.

Be flexible when working your money, focus first on the urgent, effective task, then concentrate on the important, efficient task.

The tips above can help you eliminate or reduce money stress in your life. Be careful with stress it can cause mental, emotional, and physical health issues. How do you reduce financial stress? I would love to hear from you.

Plan to Spend Your Money

All the things we do with money can fit into these three categories. So, it is okay to spend your hard-earned, worked for, money; all I am saying is to plan to spend your money.

One of the reasons why we fail at managing our money is because quite often we do not plan to spend money. Now, to that you may say, it’s my money, and I will do what I want with it. I worked hard for it and it’s okay to spend it. And you are right; it is okay to spend your hard-earned money. But before you spend that money, read the rest of this.

If you really think about it, money is only good for three things, and we have all done them.

Money is good for: spending, saving, and giving, that’s it. All the things we do with money can fit into these three categories. So, it is okay to spend your hard-earned, worked for, money; all I am saying is to plan to spend your money.

So, what happens if you do not plan to spend your money? You spend money at places and on things that you did not plan to spend money on. It’s that simple. Have you ever gone into a store and spent more money than you planned to spend?

That’s it, it happens every day.

When we do not plan to spend our money, we allow others to take control and spend our money. You are not managing your money effectively because you are not planning to spend it.

When you go to the grocery or the pharmacy and you get to the checkout, do you plan to buy that magazine or that candy bar? We are visual beings and if we see something we like most of the time we will buy it.

You may think that that is not a lot, but if you do this every day, that is buy something that you did not plan to, it adds up. Let’s say that in an average month, you spend $5 a week on magazines and candy bars at the checkout. It does not seem like much but over time it grows.

Five dollars a week works out to be $20 a month and, in a year, you spent $240 on candy bars and magazines or whatever.

So what happens if you plan to spend your money? When you plan to spend your money, you have a spending plan or budget, and you know where you are spending your money. You know how much money you are spending, and you are not haphazardly spending money on things and in places you did not plan on.

When you plan to spend your money, through your spending plan, you are telling your money where to go and what to do. You have complete control of your finances.

We have already established that it is okay to spend your money, so it is okay to spend $20 on magazines and candy bars. I just want you to plan to spend that $20 on magazines and candy bars.

It is important that you plan to spend your money. When you do not, you give control of spending your money to others. When you plan to spend your money, you take control of your financial situation. The choice is yours – choose to plan to spend.

A Way to a Better Spending Plan or Budget

If you are not maintaining a spending plan or budget to plan your household spending, you are not alone. Many individuals and families are not, and many who think they are, are not.

According to a 2019 report from the Certified Financial Planner Board of Standards, nearly 60% of people say that they don’t track spending, and another 40% have never had a spending plan or budget. Among those who reported having a budget, 43% describe their budget as a tracking tool rather than a way to plan, in advance, where their money will go.

Why We Fail

Creating a spending plan and its process involves more than recording receipts and tracking spending. In our I want it now culture, we do everything we can to get what we want immediately and sometimes we leave very important steps out.

We put the cart before the horse and wonder why it’s not working.

A spending plan or budget is an estimate of how you will spend money during a given period. The more accurate we make this estimate, the better we are: 1. Able to stick to it and 2. The more successful we are at it.

Instead, do this

So instead of continuing to do that and expect a different result, try this. Begin your spending plan process by tracking your spending for 3 months, 90 days.

This doesn’t have to be a laborious and complicated task. Some banks and credit cards will produce expenses and other reports you can use for this process. You can also turn to smartphone apps that will do this. Once you see your spending history hopefully your spending habits will change also.

When I am coaching clients through the spending plan process, this is the first step in the process. Every dollar for 90 days is tracked and recorded.

Next, you can take the three months of expenses, average them together, per category i.e., food, gas, and then plan the next month’s spending. It’s not perfect and exact but remember a spending plan is an estimate. How can we make the estimate closer to actual.

You are going to have to plan for those occasional expenses, the sinking funds, like car insurance.

When I am working with clients and they tell me that they do not have any discretionary money to spend, or I am living on a fixed income, my first response do you know where you are spending all your income?

How can you not know where every dollar of your money is being spent but managing it effectively?

I am a spending plan and budget coach, and I can help you create and stick to a spending plan that works for you and your family. Like this post, share it with others, and contact me if I can help you.

Track Your Spending to Manage Money Better

I believe that if you do not, track your income and expenses, you are not successfully managing your money because you do not know where you are spending it; you do not know where it is going and therefore you cannot – effectively manage it.

Tracking your spending is a must if you want to do better with money.

Tracking your spending, on the surface, appears to be pretty straightforward and simple, but it can be a complex process and quite difficult.

It is the consistency that tracking your spending requires that is the hard part and makes it difficult and overwhelming.

To help fight this difficulty, you need to get into the habit of consistently recording your expenses. Use some type of log to record the expense.

Whatever you use as a log, a piece of paper, some type of register, or a spreadsheet, every time you receive money, you should record it in the log.

Whether it’s from a paycheck or gambling winnings, record it in the log. And every time you spend money, whether it is a bill or that cup of morning coffee, record it.

Track Your Spending Every time, every time, every time!

Tracking your spending helps to make your money and you’re spending more real. You will begin to see it come in and go out and see it as a tool to help you achieve your goals.

It will give you a sense of control.

Your awareness of your money and your behavior with money will sharpen, allowing you to make changes to improve your financial situation.

This is an important skill with money.

Here are a few tips to help you in tracking your spending:

Make it a routine. Once you get into the habit of tracking your spending, it will become easier. And always, do what works for you. No one system is perfect for everybody. The important thing is to track your spending. How you do this is up to you!

Be more careful with transactions that are easily forgotten. Some transactions, online transactions, transactions without a receipt, can be quickly forgotten. Take special steps to remember these.

Get a receipt for everything. There are not too many places where you can spend money and not get a receipt. If they do not give you one, ask for one. Additionally, make it a habit of putting all your receipts in one place so that you know where to find them and do not forget where you put them.

It is best to record your transactions daily. Although you can track expenses once a week, you may find this hard to do. By tracking expenses daily, you do not run into the problems that you would by tracking them weekly such as I can’t remember a transaction or can’t find a receipt, etc.

For some, recording expenses will make you more connected to what you spend.

It will make you think more about each purchase, and you will begin to see if your purchases line up with your values. This may help you to keep unnecessary spending under control.

Tracking your spending is a rewarding process.

It will paint a picture of your spending habits as they exist and not as you think they exist. You can then use this information to create a spending plan, or, at the least, to serve as a picture of where your money actually goes.

How do you track your spending? Share your thoughts and subscribe to the GoldenRules Blog and learn how to create a winning spending plan for you and your family.

Spending Plan Vs Budget: You Decide

I use the words spending plan because it creates a better feeling for the practice of you telling your money what to do and it not telling you what to do. If you have a confidence issue with money, using the word spending plan can help eliminate some of that fear.

I like to use the words spending plan when talking about money, financial management, and managing money better.

My reason for this is that the word budget has a negative effect on some of our brains and makes us think that we are limiting ourselves when we budget.

In using the words spending plan, I hope it gives a feeling of control as you plan to spend your money, and you are telling your money what to do.

Some do not care what you call it.

I use the words spending plan because it creates a better feeling for the practice of you telling your money what to do and it not telling you what to do. If you have a confidence issue with money, using the words spending plan can help eliminate some of that fear.

It’s your money, you earned it, and you are in control of it. It works for you and does what you want it to do. Tell your money what you want to do.

It is this train of thought that will calm the fear and help you thru the process of creating a spending plan that works and winning with money.

My definition of a spending plan is a plan for meeting expenses in a given period of time. The word budget is defined basically the same way.

So, does it really matter whether you use, the words spending plan or budget to describe how you manage your money?

If you have a bad history or negative history with managing money, using the words “spending plan” could help you think differently about managing your money.

Managing money is about managing behavior and if the words spending plan helps you manage your behavior better when it comes to managing your money, great.

What are some of the tips and tricks you use to help you manage your money? Subscribe to the GoldenRules Blog and learn how to create a winning spending plan for you and your family.

#GoldenRules #youneedaspendingplan #It’syourmoney