Some people don’t really care for the word “budget”, and I am one of those people. For some, budget has the connotation of denial. I get the impression that I can’t spend money on something because I can’t afford it. It may be perfectly true that I can’t afford it, but I really don’t like to be told what to do. I would bet there are many people like that in the world since I know there are many people in debt and living paycheck to paycheck.
If I am going to become financially free, though, I am going to have to get over my aversion to the word “budget”. Maybe I could call it a spending plan or a cash management system or Fred for that matter. Regardless of the terminology, I am going to have to have some idea of where my money is coming from and where it is being spent in order to make sure that I have some left over at the end of the month. Ultimately, I will need to pay off some debt in order to lower my monthly payments to improve my monthly cash flow.
I will also have to look at discretionary spending and discover where I can save money. I will have to spend less money on food, clothing, gasoline, utilities, insurance, entertainment, and a host of other items in order to improve cash flow as a first step toward financial freedom and being able to be in a position to live off of passive income. All of this requires some sort of plan, ahem “budget”.
The upcoming Memorial Day weekend will provide the perfect opportunity to look back at the first five months of the year and review spending. I can look at all of the fixed bills such as the mortgage and student loan payments. I can also review spending for gasoline and groceries. It will be difficult to see what cash was spent on, but I will be able to track the amount that was spent. Using this information, I will craft a spending plan for the rest of the year and work to trim any unnecessary expenses.
So who is with me? Are you motivated to become financially free? Do you have a spending plan? Are you willing to put one in place?