Let’s face it, the reason most people don’t budget is that it is boring. I don’t like it—I never have.
I don’t have the attention span necessary to sit down, list, and look at every little expense that I might incur over the next month. The very idea of budgeting this way is discouraging.
For some reason Credit Counselors and other well-meaning financial advice-givers regularly offer up this simplistic approach as a starting point. It must be in a master manual in some financial library somewhere. I can guarantee that most of the people extending this advice don’t take it themselves—very few people do.
Cost of Living Magically Increases
When it comes to spending, human beings are an undisciplined species. No matter how smart we are, or how much money we earn, our cost of living always increases in direct proportion to the amount of money we earn. That is unless we protest otherwise. This is why the first and most important of the Six Proven Principles is—Save.
At least 10% of all you earn is yours to keep—and invest—for your future. This is non-negotiable and absolutely without exception. It doesn’t matter how much money you owe on your credit cards, or how far behind you are on your rent—or your car payment. When you embrace the Six Proven Principles you always pay yourself first—no matter what. If you don’t, you will spend the rest of your life at the back of the line, with your hand out, wondering what went wrong.
Some readers hearing this advice for the first time may feel it sounds unreasonable or unfair. How could I possibly begin to save money when I’m behind on my bills?
While it may seem counterintuitive, I can assure you that it is not unreasonable or unfair. It is where a well-ordered financial future begins. This first of The Six Proven Principles is the foundation that all other principles are built on. If you get this one right, budgeting, and everything else will fall in to place.
Budgeting Becomes Second Nature
Here is why. When you are in debt, or have no financial goal, plan, or structure in your life, a sense of aimless, hopelessness, settles in. Without a financial plan, purpose, or progress, most of us give up. Why not buy that new dress, or take that vacation? Why bother budgeting, or caring, I’m always broke anyway?
When you start saving 10% of all you earn, all that changes. As you watch your bank balance grow, week after week, your enthusiasm will grow with it. You are able to look to the future with confidence and optimism. Hope replaces hopelessness. You have purpose, direction, and a clear vision for your future. Living within your means, “budgeting”, is no longer a painful, tedious process. As your bank balance grows you become as excited about saving as you were about spending. Controlling your expenses and living a thrift-filled life becomes a joy-filled challenge. You have a plan, and you know it works.
What About My Debts
Embrace the idea of short-term sacrifice, for long-term gain. When you regain control of your financial life you will be motivated to do whatever you have to do to put your debts behind you. Look for creative ways to pay them off quicker. Here are some ideas:
- If you have one, sell your car and take the bus for a year.
- Move into a smaller apartment, or get a roommate(s), if you can.
- Stop eating in restaurants and going to Starbucks.
- Get a second job and dedicate all you earn, after saving 10%, to pay off your debts, once and for all.
I realize better than most that everyone’s circumstances are not the same. I’m not suggesting you must do any one of these specific things. These are examples of some of the types of dramatic action you may need to take to get your financial house in order.
When my wife and I embraced this new way of life, over thirty years ago, we had a brand-new Jeep that we had financed, 100%. We soon realized that the $450 monthly payment we were making made no financial sense. So, we swallowed hard and sold our new jeep for less than we owed on it. The bank financed our $4000 loss over the next two years. After that we drove inexpensive used cars that we paid cash for and smiled all the way to the bank.
We had a plan that would work—and that was exciting.
There Is No Magic Formula
When it comes to budgeting there is no magic formula or form to fill out. Each of us is unique and we will approach this common sense process in a way that works best for us.
Budgeting is important, but not where a better financial future begins.
Saving 10% of all you earn—no matter what—is.
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