By Daniel Rodriguez | Dr. Budgets
When it comes to budgeting, I don’t do budgets in the traditional sense. What I mean by that is that I don’t do budgets that feel like “I’m on a budget.” Budgets seem to have a bad reputation, and the way many people budget, rightfully so. January is the wonderful time of New Year’s Resolutions, and many people resolve to finally get their finances in order. They set out to pay off their debt, save some money, and put themselves in a position where money isn’t a source of stress and anxiety for them anymore. To do so they put themselves on a budget (what I like to call a “crash budget”), which ends up feeling very restrictive because they decide to not spend money in the areas that are important to them. They literally take the “fun” out of their budget. This is a recipe for failure, which is why I don’t do budgets.
The alternative to this is to create a healthy spending plan, which is different because you start with your goals and then set realistic parameters about where to spend your money. This allows you to balance out progress toward achieving your financial goals and spending money on what you enjoy. Instead of “being on a budget,” you use a spending plan that guides you and motivates you to gradually modify your behavior to the point where you are spending less than your income. That sounds simple, right? It is definitely simple, but not easy to implement, which is how I have been able to build a business around this concept. The amazing thing is, though, once you consistently spend less than you earn, magical things happen… debt starts to disappear, checking and savings account balances begin to increase, and the stress and anxiety you feel about money start to melt away!
The way most people budget usually doesn’t work for a sustainable period of time. A healthy spending plan when constructed properly and applied consistently over the years can create lasting healthy spending habits, which then naturally leads to the achievement of your financial goals.
John Maxwell said it best: “A budget is telling your money where to go instead of wondering where it went.” When you create a healthy spending plan (the budget I believe John Maxwell is referring to in his quote), then you are in control of your financial destiny. You consciously decide where your money will be spent rather than wondering what happened to all the money you earned over the years.
So that is why I don’t do budgets. Instead, I create healthy spending plans. This, in turn, allows me to transform my clients’ lives. If you know anybody who has a financial New Year’s Resolution, please have them contact us so they can finally achieve their goals this year. Happy New Year!
- Published in Spending Plan
By Daniel Rodriguez | Dr. Budgets
“Budgets are awesome!” says pretty much no one…ever! Except maybe a particular doctor with “Budgets” in their name. For many people, the word “budget” is often associated with negative images, so let’s use a different term: “spending plan.” A spending plan details how your money will be spent over a particular period of time. A spending plan not only helps you plan for your upcoming expenses, it also brings an acute awareness to where your money is going so you can consciously choose where you want your money to go.
Many people treat a budget like a crash diet – they cut out so many expenses that they financially starve themselves. Unfortunately, like crash diets, “crash budgets” don’t work for very long. They may see amazing short-term results for a few weeks, or even a few months, but then they spend in excess the following months, putting on the “financial weight” again and reversing the progress they made at the beginning.
If one of your resolutions for 2014 is to have a spending plan and to stick with it, try taking a different approach in the New Year. Instead of a “crash budget,” consider creating a healthy spending plan for yourself in 2014. A healthy spending plan does not mean you have to stop spending money on your daily latte, eating out with friends, shopping, or fun. With a healthy spending plan you are allowed to spend money on what is important to you. And with our coaching program, you don’t have to do it by yourself. We will be by your side; step by step, milestone by milestone, and we can adjust whatever needs adjusting. To develop a healthy spending plan you want to follow these 5 Steps:
Step 1: Set Financial Goals
Only pick the 1-2 goals that are most important to you.
Step 2: Identify Current Spending
Simply seeing where your money disappears can give you that “aha” moment.
Step 3: Evaluate Current Spending
You decide what is important to you and what is not, so you can redirect funds to your goals in Step 1.
Step 4: Create Your Spending Plan
You develop a spending plan that helps you reach your goals.
Step 5: Monitor Your Spending
Steps 1-4 are useless if you don’t monitor your spending to stay on track.
When you construct a budget this way, you end up with a healthy spending plan where you see results happen over time, and unlike a “crash budget,” you are much more likely to see permanent change. Having a healthy spending plan also influences every part of your life: you feel less anxious because your debt balance is going down, you feel more secure because your checking and savings account balances are going up, and arguments with your spouse or partner are reduced because you are both on the same page financially. You are finally saving enough to buy a home, you can take that trip without going deeper into debt, and you have more motivation for every aspect of your life.
A crash diet never works – neither with food nor with money. So set out to build your healthy spending plan for 2014. If you begin with your end goal in mind and have someone hold you accountable to that goal, you will see, like many of our clients, a success cycle that then builds confidence and motivation in you, which will propel you to achieve your goals faster and faster every month.
May the New Year bring you awareness in your spending so you can consciously move in the direction of your financial goals! And then, maybe, you too will say, “Budgets are awesome!” Have a healthy and happy 2014!!!
- Published in Spending Plan