This is part 2 of the series ‘Budgets for Dummies.’ Part 1 can be found here.
Many people feel that budgets are restricting. The truth is that they are only restricting if you are predisposed to think that they are restricting. However, if you’re willing to put your rose colored glasses down, I can show you how budgets actually free you you spend your money. It leads to better money management and less financial stress.
So how does this actually work? How does a budget allow me to spend my money more freely? Think about this, how often have you wanted to go on vacation, but felt guilty about putting it on a credit card? Ever wanted to go to that exclusive restaurant, but felt like it was to much money? How about wanting a new car?
You see, all of these things can easily be done if you plan for them in your budget. Let’s say that you like to go on a big vacation every June and let’s say that it usually costs you around $2,400. In your budget you simply allow for $200 each month for a vacation. After 12 months you’ve got your $2,400 (basic math here….) You can now pay cash for your vacation instead of paying it off of your credit cards at 18% interest! The same principal applies to any big purchase.
For smaller items, such as the exclusive restaurant above, you simply budget for them. For instance, in my budget, I allow for $200 per month for dining out. At the beginning of the month that money is already marked for food and it won’t be spent on anything else. So I’m faced with a choice, I can go to McDonald’s and buy 200 McValue fries, or I can go to three or four nice restaurants with my wife. It doesn’t matter, and I don’t feel guilty for dropping $60 on dinner. John Maxwell says, “A budget is telling your money where to go instead of wondering where it went.†A budget is so freeing!
Next in the series is the real meat – how to create a real, livable budget that frees you from worry and financial stress.
What financial areas do you struggle with in your life?
This has been part of the Budgets for Dummies series. You can find the rest of this series here, here, here and here.
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