Simply, a budget is a personal lifestyle Global Positioning System (GPS)--a tool to guide decisions to move living standard from point 'A' to 'B' wisely. As with a GPS, we start where we are and then travel to defined destinations. If we do not use correct starting and ending points, we will be lost.
The budget begins with the current financial condition and 'maps' how' to reach specific goals in a defined future period. The charted course is filled with huge challenges because seldom do we have enough funds to do all 'needed' priorities.
Budgeting is about choosing; it's deciding between competing priorities. Choosing what to do and what to defer is a continuing irritant. Today, the United States must decide between lowering its debt, maintaining its military capability, and sustaining entitlement programs, among other things. It can't do all, although politicians tell us that's possible.
Households face difficult selections, too. In my experience, these three are the biggest dilemmas to overcome as many folks prepare household budgets; each affects lifestyles.
- Accumulating a reasonable deposit to buy a home
- Saving systematically to buy the next car for cash
- Setting aside time regularly to apply a pre-spending decision procedure, and monitoring performance against budget
The first dilemma for many households is how to live within fixed incomes, pay rent, and simultaneously accumulate a reasonable, 20-25% deposit, to buy a home. The temptation to buy a home with a lower down payment is great; particularly because the rent might be below current mortgage rates.
We need discipline to overcome this. The householder must sacrifice the short-term for the longer term. To save a 20-25% down payment, he or she must sacrifice grown-up toys, eating out, buying gifts, cable TV, among other items. However, these sacrifices will contribute significantly to eliminate debt, stop interest payments, lower monetary stress, and a more stable financial position.
Saving Systematically To Buy The Next Car For Cash
The second dilemma to overcome while budgeting deals with a car. How do we stop making car payments as we provide for daily needs? We must recognize that where we live and where we work can affect our transport needs materially. We can carpool, live close to work, or live where we have access to good public transit. Besides, we should distinguish between weekdays and weekends. We could rely on carpooling or public transport during the week, and on a rented vehicle some weekends.
During this period, we need to identify a monthly sustainable car payment to pay to us. When the time is right and funds are available, we buy the car; however, we would continue paying us, so we buy the next car for cash.
Setting Aside Time Regularly To Apply A Pre-Spending Decision Procedure
The third dilemma deals specifically with key behaviors that affect spending directly. First, despite many daily priorities we need to invest time to use a formal pre-spending decision procedure consistently; it's behavior which drives spending. Second, though it will add to things to do, we must monitor actual against budgeted spending, regularly.
Surely, the constant cry will be, "I don't have time." Nevertheless, as we know, we have 24 hours daily; therefore, the issue is, how badly do we want to be free from continuing financial stress and become debt free?
As with most goals, overcoming these dilemmas needs discipline. The journey might be long but the benefits are great: debt freedom, financial stress freedom, and healthy family relationships. Are you ready to overcome these dilemmas and start budgeting?
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