Better late than never is a phrase I use a bit too often in life and last week I finally took the time to sit down and fill in my own budget of the year. Yes, I know, it’s 4,5 months late to start. The point is that even if it’s a bit late to start you will still get several great benefits from filling in the previous months and it’s not very time consuming either, it took me less than 1 hour. With your budget in place you can then start to control your personal finances for the upcoming months.
First of all, your budget doesn’t have to start from January, it can start any month of the year and it’s up to you how you prefer to do it. What’s important is to start with your budget and for each month that pass you can influence your finances more and you will also get out more value from your budget.
Filling in your budget is just the manual part and nothing will happen unless you do something with the numbers afterwards. That is also the exciting part! I’ve always liked numbers, one thing that fascinates me about them is all the stories they can tell without words. Your budget will tell you stories about your life, what you like and what you do. If you don’t like the stories that are being told you then have the possibility to take charge of the writing of your story.
If you are not sure about where to start with your budget, read more about how to start budgeting here and get free budget print outs here. As you keep up with your budgeting you will gain three main benefits:
Detect Bad Habits
Your budget shows exactly everything you spend money on, whether it’s good or bad, and this is what you can take into your advantage. Already after the first month you will see in which category the money starts to pile up the most. For each month that pass you will then see what your habits are, good and bad. What we are interested in to improve our personal finances is to identify our bad habits.
Bad financial habits are easier to create now than ever when we use our bank card to pay instead of with cash. You don’t touch your money, you don’t see the money decrease in your wallet, it’s just a card transferring invisible numbers. Therefore your coffee expenses might not seem like it’s that much but once you see the actual numbers in your budget the total amount might come as a shock. With your budget everything becomes transparent and your habits are not just habits anymore, there’s a price on them. Is the habit you have worth the price you’re paying for it?
Identify Your Values
Actions speak louder than words, and meanwhile we might think that we value certain things in life it is not always what is reflected in our actions. Where we put our money is essentially what we value. It is not only about the price we pay but also the time we have invested to earn that money and now choose to spend on this particular thing. When I filled in my budget I noticed that I apparently value food a lot. The total amount I spend on food is not above average, but I have no idea how I manage to go to the super market that many times per month. I have a passion for food, but not to the extent that I have to go to the super market all the time. It’s simply not completely aligned with my values and I will therefore change this habit.
The first two steps are in order to gain awareness of your current situation and now it is time to take control over our situation. We have identified our bad habits through our budget, which area we spend more money than we should or that we think is reasonable. The next step is to make a strategy of how we can change this habit, what alternatives are there?
You have also cross checked if your values are aligned with what you spend your money on. Just like the previous step it’s about creating a strategy of how to decrease our expenditures in areas we value less and. These are important changes for you and your finances because it will lead to you spending more of your money on things that gives you real value instead of just wasting money. This can open up more opportunities that before was limited by your finances.
A budget is not only fun but it can also change your life.