Budgeting Basics In Times Of Recession

How do you overcome the overwhelming desire to spend money or the immense urge to splurge? The answer is BUDGET.

Many people know what budgeting means but putting it into practice is a completely different ball game. Nobody wants to live within a budget and often maintaining a budget can leave you feeling restricted due to the amount of record keeping required. But budgeting can be a way to help you achieve your financial goals and dreams. It’s essential that you have a positive attitude towards budgeting otherwise you will fail miserably. The worst thing you can do when deciding to maintain a budget is give up. Always remember that a budget is there to assist you in achieving your goals. Budgeting can be used as a guidance tool and can help you move forward financially.

I don’t mind living within a budget because it shows me where I spend my money and ultimately it means that I can afford to buy the things I really want and most importantly I don’t owe a single cent to the banks. The other thing is that I don’t fill up my cupboards with unwanted purchases only things that I really need.

The main and most important step when budgeting is that you stick to it. It’s useless putting pen to paper and working out how much your expenses are for the month if after 1 or 2 months you go back to your old ways. Sticking to your budget will help to save and manage your earnings. Here are a few other simple steps to budget:

• Allot a spending allowance.
  
• Keep a logbook of your spending. (Seeing how quickly money is spent will come as a shock)
  
• Write down every cent you spend for a month. (This will show you where you are breaking your budget)
  
• Maintain a budget planner
  
• Involve the whole family
  
• Be realistic. (Don’t set unrealistic targets)
  
• Stay positive and don’t look at budgeting as penny pinching.
  
• Bring a bottle of water with you to work. Not buying a $3 coffee every day, will save you $1068 per year.
  
• Try to use your savings and not your credit card where possible. (Use the credit cards for emergencies only)
  
• Keep away from sales that only make you buy things that you don’t need.
  

If you are finding it difficult to maintain a budget perhaps adopt an alternative approach. Start off by calling it something else like a “spending plan” or “my personal goals and aspirations”. Look at the budget plan as something you want to achieve for your future because your future is definitely worth investing in. Knowing what you spend your money on is essential because it is what helps you achieve your goals and helps you save for things that are important to you for example a holiday, education, a new car or new home.

There are many reasons to budget:

• A budget leads you in the direction you want to head financially.
  
• A budget can create extra money for you.
  
• A budget helps your family discuss common goals openly.
  
• A budget allows you to have control over where your money is spent.
  
• A budget will show whether you are living beyond your means.
  
• A budget avoids unwanted purchases.
  
• A budget assists with unexpected bills.
  
• A budget identifies areas where you are overspending.
  
• A budget can help you stay out of debt.
  
• A budget allows you to have financial control.

Of course when you budget you want to be realistic as well. You still need to find time to enjoy your earnings, after all that is why we all work. The last thing you want is to become totally obsessed with saving and budgeting that it begins to obtain or assume control and affect or change your lifestyle. Also if you are in a relationship you don’t want to exercise power or authority over the family money because this will lead to anger and resentment.

I know of many families that started out with no money at all but through hard work and perseverance managed to achieve all their financial goals. They travelled, raised a family, bought a home, a car and have enough investments and savings to live comfortably in their senior or retirement years. Budgeting is a great tool to help you achieve your financial goals but once you have done this it’s important that you don’t fall into the trap of living like a miser for the rest of your days. The last thing you want to be is somebody who hoards money, hates spending money and as a result, through rich lives as though he or she were poor again.

At work, I came across many examples where budgeting had a negative impact on people. Once people had achieved their financial goals they could no longer stop their frugal and thrifty habits.

I remember serving this older derelict looking gentleman at work. He was a retired teacher who came into work to rollover his substantially large investment. He proceeded to tell me how proud he was of his financial achievements and that he did not want to dissipate his earnings like his relatives. He said that he lived a very simple life, owned a few properties, lived in a small flat, never ate out at restaurants and the only clothes he owned were those on his back. He explained how he used to walk to work everyday and how he saved each dollar as though it were his last. He told me about how poor and deprived his childhood was and how through budgeting he managed to come a long way.

This man looked as though he hadn’t eaten in days because he was so skinny, he was unwashed, unshaven and his clothes had a very bad stench. He had all these investments and he still lived as though each dollar was his last. He still budgets til this day. Despite his difficultly and hardship throughout his life there must come a time when you need to let go and say “I have managed to achieve all my financial goal and now it is time to enjoy my life and the money I saved”. This man was in his 70’s and lived with his 45 year old son. He could travel a little, meet new people, refurbish his unit, improve his hygiene, he could spend his money to make his life much more comfortable, but he would much rather live an isolated life and see a large monetary balance on a statement than improve his standard of living. But who am I to say what he should do with his money? He was quite happy leading a modest, unpretentious life. He had everything he wanted and a refurbishment or make over wasn’t going to make him happy. He was happy with his routine and no matter what anybody said he believed they were envious of his financial achievements. This man expressed concern about his passing because he was worried about how his spendthrift family was going to waste the hard earned money he earned when he died. He did not want them to benefit from his “penny-wise” ways.

I think many people who experienced poverty or hardship in their childhood end up living similarly to this man. Because money was so hard to earn in the early days and things were scarce, people continue to carry this privation and misery though out their entire lives. But the aim is not to fall into this trap and to realise that it’s acceptable to lead a comfortable, clean life and it’s okay to pamper yourself and have nice things because you worked for it. The last thing you want is for someone else to benefit and enjoy your savings.

I came across another retired couple at work that took budgeting very seriously whilst raising a family. Budgeting helped the couple achieve all their financial ambitions. The wife stayed at home to raise the children and the husband was the sole breadwinner for the family for 55 years but because the husband had gone out to work he believed that deserved to manage the family finances. When it came to spending money, he did not allow his wife to have any financial independence because he exercised his power to keep it away from her. He did all the banking, paid all the bills and bought all the shopping. The wife believed that even though she did not work for an employer she still worked very hard to maintain the household and rear their 5 children.

One day the couple came into work because they needed a cheque issued to buy a car. The husband explained that he wanted to buy a car as a gift for his grandchild’s twenty-first birthday. When I asked the husband the name of the car dealership he said that he left the details in his vehicle, so he went out to get them. The wife stayed at the counter. She was quite upset because her husband had not consulted or involved her in the decision making for the gift. She had no say about how their earnings were spent. She believed that it was the parent’s responsibility and not the grandparent’s duty to buy a car for the child. She went on to say how obsessed her husband was with money and that she had no authority to make any financial decisions at all. She didn’t even have access to their joint bank account. She could not understand why he would deprive her of necessities and penny pinch and then just spend money frivolously on a car for a grandchild they hardly saw.

The husband came back with the car dealership details. He went on to say that he was a self-funded retiree and callously had no respect for a government that assisted those that squandered their money instead saving it. He said that he worked really hard to send his 5 children to private schools and buy investment properties. He felt bitter because he was left to live off his own investments whilst other families he knew (who weren’t as diligent and hard-working as he) were eligible for the government old age pension. He believed that he should not be penalized for having saved his money and deserved a pension just like his peers.

I felt sorry for this couple because here they were in their retirement years, both angry and resentful for different reasons and all over money. They could be saving their hostility and putting their efforts towards taking pleasure in the money they both worked so hard for over the years. They didn’t travel, go out to eat or have a chance to really enjoy what they worked so hard for over the 55 years. The wife was left feeling financially controlled and felt intense hostility towards her partner. She wanted to be appreciated, respected and she wanted to have the same value that her husband and children had. She did not want to see her son in-laws and daughter in-laws benefit from all her hard work and her unnecessary destitute life.

I could go on and give many other examples on how if taken too seriously budgeting can have a negative impact on your life but I think you get the picture. While it is important to know where your money is spent it is also imperative to remember that you worked hard for your savings and there is absolutely nothing wrong with allocating a portion of your earnings towards a little self-indulgence and the last thing you want is to live like someone from the stone ages.