Here’s the thing about budgeting. It’s actually not that hard. Here’s the other thing about budgeting – you absolutely need to do it if you want to Get Lean in 2019 (or any other year for that matter).
What freaks people out about budgeting, isn’t the tedious nature of it, the spreadsheets and tables. It’s the inherent truth that we know we probably won’t stick to it.
Maybe for a month or so, but maybe not much more than that. We usually set budgets as a reaction: an unexpected financial hit, leaves you scratching your head wondering how you will find the money to cover it. Or out of sheer frustration at never having enough for the things you want, so you map out an extensive plan (this usually happens in January) to make this “the one we stick to” – only to let it fall (usually by March).
That’s the truth for many of us – DLS included. We have been there, lived through the frustrations and disappointment of it. We are by no means experts, but we have decided to look at budgeting in a more realistic, and simple sense.
When helping our clients with budgets, the very first thing we do is analyse their actual living expenses. This is usually entirely different from what they think they spend – a few hundred on this, a few hundred on that. We almost always underestimate what we spend in certain areas, and overestimate what we think we can save (savings being the entire point of budgeting).
Guesswork sets you up for budget-failure. You have to dive deep into your expenses, find patterns, look for trends – actual hard data on what you spend. And not just each week or month, but over 6-12 months. We understand that dragging yourself through 12 months of bank statements (if you can get them) sounds pretty droll.
Thankfully, it’s 2019 and FinTech allows us to use special software to sift through a year’s worth of statements, establish categories, find trends and identify habits.
Why is this important? Firstly, it makes analysing spending easier, faster and less stressful. That’s a big Tick. Secondly, it shows real spending – no guesstimates, no forgotten expenses. It’s all there in digital black and white. Sometimes it is confronting – we once had a client figure out that he spent just over $1000 on Uber and UberEats every month. His guess was a few hundred, at most. Subscriptions are another big area to analyse – it’s so easy to sign up for things (especially free trials) and then forget that you are being charged every month.
Look, let’s strip this back to what it really is: Money Out V Money In. If you earn $5000 per month, and you spend $5000 each month, then it’s pretty apparent you are not saving any money. Sure, you might put some away when you can, but to save for that house or car or simply for “just in case” (very, very important), then winging it each month will not work.
Worse, if you have no idea where that $5000 goes – truly goes – then you are not in control of your finances. And that is what Getting Lean in 2019 is all about: helping people control their finances.
So back to the budget. With our analysis techniques, our clients can understand precisely what they spend each month. Next step is to figure out what are fixed expenses (must be paid), and what are discretionary expenses (stuff you can live without if you have to).
Smart budgeting is not about only eating rice and tuna (not that there is anything wrong with that), never going out with friends or family, or ever socialising again. That’s unrealistic. And, it sounds like absolute torture.
Can you save thriftily, as well as meet all of your commitments, and feel like you live a normal life.
Remember, it’s about changing behaviour (setting healthy boundaries on the fun stuff), setting realistic goals and asking yourself the hard questions (Do I need this? If so, is this the most cost-effective version?). Then setting an automated process to take care of all of the “musts”. This ensures that things are paid on time, never missed and you don’t have to do anything other than set up the process.
When your budget is realistic, sustainable and covers all of the necessities, as well as things you enjoy, you are in control of your finances. It sets you up to save real money, not just wing it.