The important key to effective budgeting

Victorino — Sun, 09 May 2010 13:21:21 +0000

Budgeting is like enacting our spending, earning and saving today what we will do in the future. In other words, it is a process of bringing in a piece of paper or spreadsheet the lists of our planned revenues and expenses. The objective is to minimize expenditures, maximize earning, and fuel our savings. Budget may also come in the forms of imposed rules and policies. That is why many people sometimes view it as something that hinder their financial freedom. But this misconception is not practically right. Financial freedom doesn’t mean you are free to spend it all, buy all what you want, and get all what you want. This freedom means the capability to harmonize every financial element around us such as revenues, expenses and savings.

There are many important things to consider if we want our budget to go into success. These include making them specific, quantifiable, realistic and documented. We should specify our budget and make details so that we can have a clear picture of what we will follow. Measurability is also important in any financial plan, especially that we are dealing with money. Quantifying our budget is also vital in estimating future financial figures. We must also see to it that our budget is realistic and achievable. A conservative approach is more likely to succeed than a frustrating idealistic budget. Moreover, budgets must also be supported by documentations which are very useful in tracking and monitoring them. Tracking our earning, spending and saving behaviors will give us an idea on our weak points and strong points when it comes to our personal financial matters. With this, we can always find ways to strengthen our weakness and preserve our strengths. However, all of these things may not be enough for our budget to be taken efficiently. We should also realize one thing, and that is what I will discuss in the following paragraphs.

The important key to an effective budgeting lies on the value and importance we give to it. We may have a specific, measurable, attainable and trackable budget but it may not just be enough to help us reach our financial objectives. It is important to ask ourselves the following questions. Why are we making a budget? What is its great importance to our lives? These questions should be answered by our selves. We need to have a sense of direction. Budgets are tools that we can use to make our finances stable. But still we need to know its essence and values. Many people failed their financial plans because they don’t value them. Several financial gurus will teach you how to manage your personal finances. But without the sense of purpose you may only falter at the end. Our own budget should have a great impact in our lives.

In every plan we build, we need to assure that it is important to us. In every budget we create, we should see to it that it is relevant to our lives. As for me, I am budgeting because I want to save money for the establishment of my own corporation. I want to have a company that will employ people and give them jobs. I also want to offer quality products and services that will give my clients and customers satisfaction. This is why budgeting is so important to my life. Now, you can also try to meditate and know the roots why are you making a budget. Even a child can give great importance to his own budget to save a few bucks from his school allowance to buy a nice toy. Therefore, ask yourself once more, why I am budgeting? We all know that systems and tools facilitate our goals (financial goals), but our values are the ones who will give those goals the sense of direction and the sense of destination.

Personal Finance tips #1: Stick to Your Financial Plan

Victorino — Mon, 15 Mar 2010 10:36:03 +0000

Every person wants to have a financially stable life. Whether it involves millions of dollars or just a thousand enough to run a simple life, they want to make sure that financial troubles are far away from their lives. One effective solution to avoid financial disasters is to have a personal financial plan. This plan involves assessment of personal financial situation (evaluation of personal financial statements like balance sheet and income statement), setting goals (short term goals and long term goals), creating the plan (formulation of procedures on how to accomplish one’s goals), execution of the plan, and monitoring and reassessment to make sure that the plan is effectively and efficiently heading to its accomplishment.

A financial plan, if properly executed, can help anyone attain short-term and long-term successes. On the contrary, not following it will bring any person into financial tragedies. Creating a simple plan may become simple. However, adhering it may become a different story. That’s why, it is very important to stick to your personal finance plan. But how can we assure ourselves to commit to our plans? The answer lies on one’s self-control and his ability to avoid any distractions in achieving a particular goal. Distractions can be positive or negative distractions. Between the two, positive distractions are the harder to avoid. Why? It’s because they are more attractive than the negative ones. In other words, they are more deceiving than the negative distractions. Logically, when it comes to avoiding things, the more harmful things (negative) are, the easier to avoid. On the other hand, the more enticing things (positive) are, the more difficult they are to evade.

Sometimes, people don’t realize that many pleasing things are already pulling them away from their original plans. Let us consider a person who aims to buy a brand new laptop with complete accessories worth $1,000 from his savings after 3 months. Let us also think that the equipment will be used for his online business. After two months, the person has already saved $700. His goal to purchase the gadget is already near at hand. However, just after a few days, when he was walking at the shopping mall, he saw a beautiful LCD color TV that catches his attention. There was a promotion sale and the price of the TV was netted at $600, sliced by a 20% cash discount. Because of this attractive opportunity, the person could not control his self and bought the home appliance the very next day. After three months, he only saved $450 out of his $1,000 goal. He has purchased a TV but failed to buy the laptop he needs to run his online business that will give him online income opportunities.

The example above can happen to anyone of us. To avoid it, we need to stick to our game plan to win our goals. We need to have a strong self control and resistance to any distractions that will ruin our plans – whether they are negative or positive distractions. Finally, we should always remember that like in boxing, if you will not focus to your game plan – you can be knocked out.

Money Release: Making, Saving, Investing and Debt Management » Financial Planning

The important key to effective budgeting

Personal Finance tips #1: Stick to Your Financial Plan