With rising inflation and the recession among us, many may be feeling financial strain. Creating a budget can seem overwhelming with all the many expenses we face but it really comes down to three simple tips. By implementing these tips, you can alleviate the stress that may come with financial management:
HAVE A BUDGET
There, that was easy, wasn’t it? 50% of the country has no budget. 50% of the country is struggling financially. Coincidence? Not likely. If you don’t have a budget, you are not in control of your life, your money is. That may sound harsh, but it is true. Without a budget, when you want to spend any money of significance, what do you do? You turn to your money and essentially ask it for permission and say "can I spend you." The second you do that you lose control. By having a budget you reverse that relationship. Instead of asking your money for permission to spend it, with a budget, you tell your money what it is going to do for you. A budget puts you in control!
Don’t like the word budget? Does it sound "nasty" and "negative" to you? You may be right. I was never a fan of that term myself. That is why I don’t have a budget. I have a SPENDING PLAN. Think about it. Doesn’t that sound so much better? So empowering? I mean really, what is a budget? It is something that shows how you are spending your money now, and helps you save your money so that you can spend it in the future! So I really don’t have a budget, I have a Spending Plan and it makes me feel in control of my finances.
UNDERSTAND WANTS VS NEEDS
Something you need is something that is required for survival - food, clothes, shelter and transportation. Something you want is a "step up" over needs. I need runners. I want Nike. I need a place to live. I want a 5,000 sq ft mansion. There is a dividing line between Want and Needs, that line is called "the things I can afford." Most of us are lucky and the things you need and the things you can afford go hand-in-hand. If we are really lucky, the things I want and the things I can afford also go hand-in-hand. Where we get into trouble is where the things we want fall onto the wrong side of the things we can afford. What do many of us do then? We go, "well I want it, but I can’t afford it, so I will put it on credit." I have some news for you, if you can’t afford it now, you can’t afford it 30 days later when the bill arrives! This is how many of us get into trouble. Understand Wants vs Needs.
TRACK YOUR EXPENSES
Think of it this way. Your spending plan (budget) essentially says "Gee, this is how I wish I were spending my money." This is no more than a wish list. Tracking says this is how I am really spending my money. It is very important to track your expenses and to have the reality of your tracking "talk" to the wishing part of your spending plan. Combined, you have a spending plan (budget). If you don’t see the reality of tracking your expenses, then all you are left with is the wish list and wishing doesn’t pay the bills!
And yes, you must track everything! "Oh, come on" you think, "Do I really have to track everything, I mean what is a cup of coffee here, a muffin there?" Well, if you lose track of just $5 a day - a coffee here, a muffin there, you will lose $1,825 a year! I don’t know about you, but I can’t afford to lose almost $2000 a year just because I couldn’t be bothered to track my expenses! So have a real spending plan, because at the end of the day, a wish list just won’t cut it.
If you are experiencing any financial challenges, know that you are not alone. Our experts can support you manage your mental and emotional health as you deal with stressors. Reach out whenever you need a hand by visiting our Virtual Therapy Clinic or your workplace support page.