The backbone to every successful financial plan, whether it is personal or business accounting, is a monthly budget. This monthly budget is the blue print to your financial success and prepares you on where your money is going and what to do with it in advance. Without a system of budgeting or a method of accounting or finances, you are living recklessly with your money.
Only 32% of families create and follow a set budget each month. There are many reasons why majority of households do not follow a budget. Let’s take a look at the reasons why:
- 1. Misconception of the word ‘budget’: Many people hear the word ‘budget’ and immediately feel a limitation being placed on them. However, if a budget is done the right way, the negative connotation attached to it might go away. A budget can be a liberating way of accounting and rather than employing a chartered accountant, you can become your own! You have control over your expenses and how you are making use of them each month. In the long run this may help you save money for things you actually want and need rather having no idea what you’re spending your money on.
- 2. People are afraid of what they’ll discover: Initially, budgeting can be a scary process because you don’t know what to expect in terms of what how much you spend per month and what exactly you’re spending it on. When you begin, you have to take the mindset of an accountant who focuses on numbers and uses this data to discover what you spend most of your money on and how to allocate funds accordingly each month.
- 3. History of budget abuse: Some people have tried to implement a budget into their day-to-day lives and have failed. Rather than use this as a tool to control how much they are spending per month, they are using it as another way to control how others in their household are budgeting.
- 4. Lack of knowledge on how to prepare one: When creating a budget, it may be daunting to begin with. You can find yourself unsure of how to track this information or how to handle irregular expenses. A suggestion our chartered accountants for you have is simply this; don’t try to figure it out before you begin. You must learn as you go and over time refine your way of logging the information and pre-planning the following months accordingly.
- 5. Laziness: Some individuals lack organization and find themselves losing track of their expenses each month. Budgeting is a process that benefits you in many ways and allows you to become your own accountant if done right. Just like the other many habits we discipline ourselves to follow and have become second nature, we have to train ourselves the same way when managing our expenses. This will not only save money but also your precious time and figuring out how to handle your expenses when there is a true financial crisis at hand.