AT IHF we know that creating and sustaining a successful home budget is not easy. Having said that, we also know that if you are successful in creating and following a good budget, it can have huge implications in your everyday life. So what is the difference between being successful and continuing to worry about your finances? We have put together 5 areas that we feel will answer that question. If successful in these areas, you will have a budget that is clear, practical, and effective!
To be successful you must:
This age-old adage holds true in the case of home budgeting. When talking to people, this one one of the major reasons they failed to follow a budget. If the plan you have set out is too complicated and cumbersome to keep up to date, over time it will simply fade away. No one has time to spend hours a day on your budget; besides, who would want to? This is the big reason when someone purchases a large, complicated software program to do their budgeting with, it never works in the long run. It is just too time consuming!
A solid home budget should only have two things that the user needs to enter and manipulate: 1)Budget Numbers and 2)Transactional Data. In other words, what you want to spend, and what you actually did. If you keep maintainance down to this minimum, keeping your budget up to date will be quick and easy! Of course, you need to be able to see a lot of information between these two, but that should be something the tool provides, not you!
While talking to a many of our potential customers, we found one common theme in how they did their home budget. They would look at how much they made each month and then decide how much they could afford to spend that month. This is important, but this is only focusing on the short term. Let's get back to the basics and ask: Why do we have a budget? The answer: To save money for the long term! Why you may want to do this could vary. Maybe you are saving for retirement, paying off debt, getting ready for your kids college, or simply getting ready to go on vacation or put money down on a new car later in the year. The reasons may be different, but the goal is the same: To save money for the long term!
Now that we know why we have a budget and we have our personal goals defined, it is important to be able to see if we are on track to meeting those goals. However we do our budget, it needs to be able to cleary show us if we are still on target to meet those goals. If we do not have the end game in clear focus, what is the point? A good budget should help you realize your goals in the end. If we are just looking at the short term, only making sure we spend less than we make this month, we will never get to where we want to be because we do not have a clear path to get there.
Once we know what the goal is, we need to have a plan to get there. The fact is, there are an infinite number of ways to achieve that goal! We need to determine what is most important to us and what we can do without. This process should not be done blindly, though. We need to have a way to look at the many alternatives, the results of each alternative, and then make a choice on which one best suits our seeds.
Let's say we want to save $100 this month. We could do this by not eating out as much, by not spending as much on entertainment, by not buying all the clothes we had planned for, or by any combination of the former. A good budget should let you see what each of these options or combination of options would look like so you can make the choice most acceptable to you. This is a simple example, but the fact is, to save money you most likely have to make cuts somewhere. You need to be able to easily look at the alternatives that allow you to reach your goals, and have confidence in the decision.
Let's face it, you can have the best plan in the world but things are never going to go as planned! Unforseen circumstances always come up. Home maintenance, medical bills, or any number of other issues that you just can't see coming. Since we know these are a given, our budgeting process must allow us to compensate and adjust accordingly. The budgeting process needs to be a living process that is very fluid!
Remember, we must keep it simple, keep the future in focus, and consider the alternatives. Rolling with the punches needs to incorporate all of these concepts! If we have the future in focus and we know what our end goals are, then we can adjust our budget accordingly to make sure we still achieve them. But if it is not easy to do, as soon as one of these "punches" hits us, it can throw off the budgeting process and it is tough to get back on track. We need to be able to quickly adjust and move on knowing we are on the right path!
This is what it is all about! Almost all of the people we surveyed said that their home finances created stress in their life. The whole point of a good budget is to take away this stress! If we are successful in the first four areas, number 5 will come with no work at all!
Think about it. If you had a home finance method that was easy to use, always had your long term goals in focus and on track, and was flexible enough to anayze alternate ways to compensate for any "punches" that were thrown your way, what would you have to worry about? This is the confidence IHF allows you to create. Go through life financially stress free!