back to the basicsPeople sometimes think it takes exotic and complex approaches in order to excel and achieve. It has been my experience that a lot of people have this mindset when it comes to money and finances. The truth is that most people do not appreciate the power of the basics when it comes to money management. In many instances simple is better. This article is the first of a series entitled “Back to Basics” and focuses on the importance of a budget—yes I said the “B” word.

One of the most avoided basic principles of financial matters is living within one’s means. In theory it seems easy but in practice it is much more difficult. We need all the help we can get when it comes to keeping our spending in line with our earning. The single most effective tool in doing that is creating and living on a budget.

For most a budget causes one to cringe because he or she feels it is confining and limiting—it is an assault on one’s freedom to do what, when and how one wants. The budget has a bad “image” and its time to do some much needed re-branding and positive public relations. It’s high time to look at the concept of a budget in a different light. The truth is that a budget actually gives you more financial freedom (especially over time).

Planning is key if you want success in just about anything—failing to plan means planning to fail. A budget is nothing more than a deliberate approach to spending…put simply it’s a spending plan. It is a way to tell your money what to do with a specific purpose in mind. The simple fact is that if you do not tell your money what to do it will do whatever it wants—whether you like it or not! Money is like teenagers—left to its own devices there is no telling what will happen to it or where it will end up. How many of us have said, “I don’t know where my money went?”

A budget gives vision and purpose to every single dollar. If you are a parent you understand how important it is to give our children a sense of purpose and vision. The same is true with money. The importance of a budget cannot be overstated. Even so, many are in denial about their need for a budget—they blame it on the fact that they do not make enough or that they cannot get ahead because of their bills. The vast majority of people who do not live on a budget overspend and do not even realize it. The first step in leveraging the awesome power of a budget is recognition that you need one. Take this challenge.

Without changing your spending habits, record everything (I mean everything) you spend over the next two weeks. If you are like most people you will be shocked at how much you spend on “miscellaneous” items like vending machine food or cups of coffee from high-end stores. When faced with the reality, most people admit they would not have made a conscious decision to spend that amount—try it, you just may be surprised.

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