Characteristics of a great budget!

Let's recap. What is a budget? A budget is how you get and stay wealthy. Okay, maybe that's an overstatement, but it's certainly the premier stepping stone to heading in that direction. A budget, simply put, is a written plan for your money, where you tell every cent you earn where to go, every month, prior to you getting paid. Granted, the necessities and expenses of life have already called shotgun on most of your paycheck, but nevertheless, it behooves you to intentionally walk the dollars to their destination, rather than you popping your head in the Checking account and asking the remainders you find there what happened to their comrades. So, what makes a great budget?

The most important characteristic of a great budget, is having one! In a survey done by the Financial company Intuit Inc, 65% of 1500 people surveyed didn't track their monthly expenses. Granted, that's a small sample, but I believe a larger one wouldn't skewer the results either way too much. In short, most people are simply not budgeting! So, whether it's pen and paper or an excel spreadsheet, start somewhere and just go from there.

Once written, a good budget is what the fine folks over at Ramsey solutions call a "Zero-based budget." This simply means that income minus expenses is equal to zero. For example, if you make $4000 a month, the top line, which is income, should say 4000. You'd then write out all your expenses line by line, e.g. groceries, gas, car insurance, etc, subtracting each of them from the 4000. At the end, the number should be zero. That means that you have intentionally accounted for every single dollar of your income. Intentionality is progress' best friend.

The budget may serve to reveal, among other things, three key things:

- Overspending: A comprehensive honestly written budget that has accounted for all your expenses will expose categories where you may be overspending. (You may find out you have 4 different entertainment subscriptions, and odds are, most offer the same content, who knew?!)

- Living beyond your means: The well written budget is akin to wearing a pair of pants and looking in the mirror objectively. The pants will quickly expose how your waistline is doing, after which you'll have some life choices you may need to adjust. In the same way, the budget will point out whether you're living beyond your means. It'll give you an opportunity to trim the expenses and get your finances in a healthier place.

- Income problem: If the sum of your expenses is greater than the sum of your income, the problem you need to solve is an income problem.

The budget is the colonoscopy of your personal financial world! Wow, now that was an uncalled for analogy! I am willing to bet though, that there are some who would rather endure the colonoscopy than sit down and write a budget. How did a colonoscopy end up in a finance related article and why am I still talking about it?! Point being; Lord help me, in the same way that a colonoscopy serves to examine the inner workings of your digestive system, a budget will tell you everything you need to know about the inner workings of your finances.

Secondly, a good budget prioritizes the basic needs of life first. These are Food, Shelter, Clothing, Transportation and Utilities. If your income only goes far enough to ensure that you are fed, have a place to lay your head, have clothes to wear, have a means of transport to and from work, have necessary utilities, e.g. water, electricity, etc, you'll live to fight another day. Odds are, most people who'll read this are not at that level, but nonetheless, these are the most important pieces of your budget that should absolutely be addressed first. If you're in debt, don't pay on that before you pay your rent and have food to eat. Priorities, priorities.

A good budget is clear, comprehensive, and uncomplicated. A seven year old should be able to decipher it. While you can get creative with it, e.g. categorizing, using different fonts and colors and making it look pretty and such, at the end of the day, it's lines on a page and addition and subtraction. Every dollar should have a name, and every expense should be accurate. While some expenses such as groceries are rarely static and will fluctuate, study your own trends and give a ball park estimate that's based on data, not guesswork.

Lastly, a good budget looks to limit the number of surprise expenses that may come along. If you get overdrawn on your account because you have automatic withdrawal on a certain bill or subscription, you can chalk that up to poor planning and an incomplete budget. When this does happen, add said expense to your budget and adjust it accordingly. Along the same lines, expenses that are annual or quarterly such as taxes and the like should still be called out in your budget. As the old adage goes, failure to plan is planning to fail. No one knows your life like you do, so forecast and account for the future to the best of your ability in your budget.

There you have it. While this isn't a comprehensive article on budgeting, these tips and characteristics executed definitely puts you ahead of the curve. Budgeting well takes time and consistency, but the initial bumps smooth out quickly and give a reward that's greater than the time invested.

Ultimately, budgeting is extremely godly, and is the most important cog in the wheel of stewardship. A good steward/manager plans adequately for the future. A bad manager does not. Everything we own was granted to us by God, and He's not impassively unaffected by our choices. He actively looks for us to be good managers of what He has given us. Poor management will mean less responsibility. No good CEO would hire or promote the person who shows ineptitude in their management ability. When done, budgeting is of great impact in your financial, spiritual, relational, and emotional life.

p.s. If you'd like help in budgeting, or in any other area of your financial journey, fill out the short form at the bottom of this page and schedule a session for us to chat! I'd love to talk with you!

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