February

Here’s the second in a series of monthly posts focusing on meeting small, manageable financial objectives in order to create a path to overall financial success. You can find January’s post here.

Budgeting is everyone’s least favorite financial planning topic (except actual financial planners - we love them, but tend to call them something else so clients don't walk out of our offices). It conjures visions of deprivation, a second job’s worth of listmaking and tracking, and a general overall lack of fun.

Another reason no one likes budgets is that they’re hard to stick to. But I think that’s because when most of us make a budget, it’s based on what we want our finances to look like, not on reality. Then when we try to live that way, reality bites back, and it’s easy to feel like a failure.

Instead, for this month’s objective, we’re going to go about it a little differently. Before you can make a real budget (or spending plan, or cash flow projection), you need to know what the actual expenses are. And in order to do that, you need to be able to gather all your expenses, without missing anything. So this month’s challenge isn’t to create your budget - that will come later. For now, just commit to one spending method for as many expenses as possible, whether that’s cash, a credit card, or a debit card. Use one thing for everything, so you don’t have to look in so many places to figure out where the money is all going. I have some opinions about which method is best for most people, but for now don’t worry about making drastic changes - the whole point of this is to meet achievable objectives, right? - just pick the one that’s easiest now, and commit to using only that for a few months.

And here’s what will genuinely be the hard part: don’t change your behavior otherwise. Spend and save and earn as you normally do. In three months you will use the information gleaned to create an attainable budget based on actual numbers. Understanding your spending habits is the key to success.

While the spending information is building itself up, take some time to think about what you’re really trying to achieve. Make a list of the ultimate objectives of the exercise: more savings? More organization? A better sense of control over where your money is, and where it’s going? Or something else? When it’s time to create the budget, we will use both of these important pieces of information - the expense data and your objectives - to craft a plan that is rooted in reality but also shaped to get those objectives met.