Sounds crazy, right?  Ha! Well it may sound crazy but actually, that’s the method most people use consistently.  No financial adviser would tell you to handle your budget in this manner.  If you ask anyone, he or she would never admit to handling his or her funds this way.  You know how we do, we are trained to give the right answer and in doing so, it’s proof that we know how we handle things isn’t appropriately and yet we seem to do things differently less appropriate.  That would be okay if the expectation of results was minimal to none, but that’s never the case.

Managing money is very important.  It’s the lesson learned over through observation.  Most people never really think about, reflect or understand how they handle money or even pay attention to the fact that regardless of how well they are at doing it, there is a method to the madness of handling their finances. The method used may not be efficient and in too many cases, it’s not effective.  It may be verbal not written, it may reactive and not proactive.  It may have been actively learned or adopted while passively being observed but everyone has a method to how he or she handles or mishandles their finances.

It doesn’t matter how good or bad one feels he or she is with math, people manage to spend their money in their heads more often, than not.  From calculating their take home pay weekly or bi-weekly to calculating raises, income tax returns, anticipating any money coming in and likewise anticipating the way that money will be distributed; all done mentally.  In other words, without a pen or pad, without a system money is bought in and distributed without a real plan.  Handling money in this fashion, makes it easier to overspend and under plan.  Money spent in one’s head is spent several times over.  Think about it, you’ve done it before.  Planned to do so much with the money that you really end up doing too much over planning with your funds.

An effective budget or distribution of funds requires a written budget.  A system of distributing money that ensures all bills will be paid, money saved (truly saved), money placed aside for entertainment, money set aside for vacations, shopping and any other things one desires to accomplish.  An effective budget must be written, set and reviewed.  It should be set and written before the anticipated funds hit your hands and/or bank account.  Once the funds are available the budget must be reviewed.  The budget should be reviewed to access the things set and written, allow for changes due to bills that have recently come up or due dates updated.  Budgets are not set and never reviewed or altered.  To make sure that money is accounted for and that the goals of your budget are always met, a budget must be reviewed as often as money enters the home or business.  Whether one is paid weekly, bi-weekly, semi-monthly or monthly; the budget and bank accounts should be reviewed 1) to update the balances, 2) to see if the things that were planned to be paid, were actually paid and 3) to set actions for the future.

Simply put, a budget requires planning ahead, reviewing to determine if actual plans=budgeted plans.  If not, the budget must be adjusted, written of course.  One should also review and explore the reasons why the budgeted action didn’t become the actual results.  Was there an unexpected expense or a forgotten expense?  Was there a family emergency?  Were funds spent in another area like entertainment or shopping?  Was there a sale or a piece of furniture purchased that couldn’t or didn’t wait?  Without exploring the differences in the budgeted and actual, one will never understand, learn or have the ability, to change and improved the way the budgeted is handled therefore improve your money future.  An effective budget must include the whys and where’s.  Why did you stray from the budget?  Where was the money spent?

Life happens fast and because it does move fast, often people feel that they don’t have time to write a budget, review it or plan.  However, time is money and time not spent on budgeting will be wasted or spent in other areas and places.  You cannot even begin to imagine the money misappropriated because it was added and subtracted in the one’s mind.  The first line of this paragraph says it all, life moves fast and to handle it, your mind must move fast and make quick decisions as well.  Knowing that, how can you trust the same mind to handle your finances!?!  Are you getting the picture now?

Money spent in one’s head is money thrown away, lost and gone forever.  Move your budgeting into a system and watch your dollars grow.

#moneymatters #moneytalk #money #moneymindset

Kimberly Davis, Queen “B” of doing Business Better

http://www.accountingservicesrus.org