The problem is you can always spend money faster than you can earn it. We see many people with high incomes but they also have high expenses and the money flows in and then just flows right back out.

Regardless of how much your income may grow it will never be enough if you do not have a budget. A budget is a spending plan and a savings plan that has been prioritized and established with some structure to help manage your money.

The word “budget” is generally a word people don’t like but a budget properly used is what will bring you real financial peace!

A classic and timeless book on personal finance is The Richest Man in Babylon by George S. Clason. In the book he makes the following statement:

“That what each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary.”

A budget is the tool that makes it easy for you to “protest to the contrary”! If you have no budget your money will always find a way to leave you and your situation will only grow worse over time. But with a budget and a good plan your situation will grow better and financial peace can be realized.

Have you ever really examined the differences between your needs vs. your wants? Take a piece of paper and draw a line down the middle. At the top of the left side write “NEEDS”. At the top of the other column write “ WANTS”. And proceed to list the items that cost you money each month in the appropriate column. As you do this it is important that you understand that NEEDS SUSTAIN LIFE and WANTS SUSTAIN LIFESTYLE.

If done honestly you will discover that you have many WANTS that you have always considered NEEDS. Many of the things we now consider NEEDS in our culture were not even considerations just a few generations ago. Many of the things we feel we can’t live without would have been considered a luxury by our parents or grandparents not to mention our great grandparents.

We all like nice things and enjoy the many conveniences provided by a prosperous lifestyle. But the problem starts when we try to live a lifestyle that we cannot afford or a lifestyle that we can no longer afford to maintain.

A friend shared a story with me about a man by the name of Molina that he became acquainted with during his missionary service in Tucuman Argentina. Molina was gainfully employed as a sugar cane worker. He was happily married and he and his wife had three children. Molina owned his own two room mud brick house. The house had dirt floors and they had a little barbeque type of grill for a stove.

A luxury item for Molina was shoes. Almost everywhere he went, he went barefooted. Not because he didn’t have shoes because he did. Each week as he walked to church (he had no car) you would see him with his shoes hanging over his shoulder with the shoe laces tied together. Once he approached the church he would stop and put on his shoes before he went in. After the church services he would leave the building and take off his shoes and walk home. He did this because he knew that the more he wore the shoes the sooner they would ware out and he would have to replace them. He couldn’t afford to buy new shoes frequently and so he took great care of the ones he had. This level of frugality is rarely if ever seen in this country.

If you were to take the average American and put them in a similar situation as Molina, most would consider it an almost unbearable lifestyle to adjust to. But the amazing part of this story is that Molina was and is a very happy and hard working man. His basic needs that sustain life are met. He does not have many luxuries but he does have what really matters.

It would be an extremely difficult experience for the average American to trade lifestyles with him because we have such high expectations of what a “normal” lifestyle should be like. We tend to feel cheated or left out if we have less than others. Of course we all want a comfortable lifestyle but there is no comfort in living a lifestyle that we can’t afford.

I think you get the point I’m trying to make here. It is difficult to lower your standard of living when you have become very accustomed to living a certain way. But if you are living pay check to pay check and unable to save for the future you will never obtain financial peace of mind unless you make some adjustments.

It is not easy to give up some of our costly comforts to reduce expenses, but a better way to think of it is you are “giving up” the stress and gaining financial peace which is a better type of comfort. The goal should be to live below your means because only then are you able to adequately save/invest and build toward a more prosperous and secure future.

So where do you start? Begin by making a complete list of all of your expenses and then analyze each one and ask yourself if this can be reduced or eliminated. You will most likely need a strong dose of humility. Your family and friends will support you when you can show them that you have a specific goal and a specific plan of action that you are determined to achieve. You will not have all the answers, it is a process. It takes some time and a lot of creativity but it can be done.

Any budget is better than no budget but most family budgets severely lack some critically important elements. Most every budget we have seen comes with generic categories that don’t have much meaning. Such as, Transportation, Household, Personal, etc. These types of categories don’t really serve a useful purpose.

We recommend four specific spending categories. All of your family spending will fall under one of these categories below (Top Priorities, Debt Payments, Monthly Bills, On-The-Go). You can then add as many sub-categories or envelopes as needed under each of these main categories.

The reason we recommend these four specific categories is because the money/payments need to be managed differently in each one. Below is an explanation to help you understand this better.

Recommended Budget Categories:

Top Priorities: Most budgets lack prioritization! What good is a budget to you if you don’t use it to prioritize? Your top priorities come off the top, the first spending you do after you receive your income. Your top priorities should include “paying yourself first” or in other words “savings”. It would also include charitable donations that you make on a regular basis.

We will be talking a lot more on the subject of saving/investing money but for now your most important savings goal should be to establish an emergency fund of at least 3 months of income. This savings transaction should be setup to be automatic. For example, automatic payroll withholdings or automated bank transfers.

Debts Payments: Do not mix non-debt bills with your debt accounts. A debt is something with a balance that you are making regular payments on but it can and will be completely paid off and gone from your life at some point. Not to be confused or mixed with monthly bills or other monthly expenses. You should include all of your debt in this category regardless of the type of debt. For example, your mortgage, auto loans, student loans, credit cards, medical bills and any other debt that has a balance that can be completely paid off and gone.

Your debts should be treated differently than other monthly spending because with debt you are losing more money than you may realize to interest payments. And it also prevents you from adequately saving and building up a cash reserve. The longer you carry the debt the more it costs you. Saving you interest and time is what we specialize in at MoneyPark.

Most people have 30 years or more of debt payments hanging over their heads which will cost them literally a fortune in interest payments over their life time. With our strategies and service we help our clients to be completely debt free in about 9 to12 years depending upon their specific situation. We recommend that you receive our Free Analysis Report so you can better evaluate and explore your options.

Monthly Bills: This category is for all routine non-debt monthly bills like: Insurance payments, rent payments, dues, subscriptions, cell phone bills, electric bills, gas bills, etc. These types of bills are usually paid once a month where you pay them online or mail in a check. The money is managed uniquely because they are routine, and monthly. They are expenses and not “debts” If you end one of the services such as your phone service the recurring expense goes away. The amount you will need to plan for in this category is very predictable and easy to budget.

On-The-Go:
This category is for all spending you will do when you are out of
the house and on-the-go. For example, buying Groceries, Clothing, Hair Cuts, Dining out, etc.

For greater ease and control with this category you may want to try using On-the-Go Cash Envelopes. Old fashion spending envelopes are very effective. Once you have your monthly spending plan (budget) determined you take regular envelopes and label each one, “Groceries”, “Entertainment”, “Misc” etc. Then you put the cash in each envelope. When the cash is gone it is gone. You can also write notes on the outside of the envelope if needed and also use them to hold receipts at the time of purchase so you can keep good records.

As you consider improving the way you budget your money please don’t feel overwhelmed. It is a process and it will get easier over time. But great things can be accomplished with a little planning and strategy. You can achieve financial peace! You can put a stop to paying interest throughout your life! You can start earning interest and watch your nest egg grow!

You must have specific goals and a plan of action. Zig Ziglar said: “If you aim at nothing, you will hit it every time”