One of the most common excuses I hear from people who have failed to take preparedness seriously is often one of financial burden. When asking people why they don’t prepare, I often hear the excuse, “I don’t have money to waste on preparedness; I’m barely scraping by as it is.”
Ironically, these same people usually have more than enough money for their $5 lattes before work, fast-food lunches, and takeout dinners on the way home.
You can immediately see what’s going on, but therein lies the problem; most people don’t take the time to really look at what they’re actually spending. As simple as it sounds, to get ahold of your financial future, the first thing you have to do is sit down and set a written budget. For a lot of people making a budget ranks right up there with death, taxes, and public speaking. They seem to think that by establishing a budget, they’re somehow going to have to suffer through life without ever having any kind of fun. Others avoid it because they know what they’re going to find, and the thought of having to take responsibility scares the hell out of them.
The only way you’re going to get ahead and secure your future, is to start telling your money what to do. Establishing a written budget ensures that every dollar you make works for you, not against you.
The act of establishing a budget doesn’t have to be some complex accounting spreadsheet that only your CPA can understand. In fact, your budget should really only have of two basic parts:
It’s really that simple.
The first thing most people find when they start budgeting is the numbers sometimes don’t add up. On paper it may seem like you actually have a surplus of money. If that happens, you probably weren’t being honest with what you’re actually spending, and you may have to dig out last month’s receipts or review your past bank statements. But don’t worry; this is where you can start to change your life and secure your financial future.
Once you sit down and actually start accounting for where your dollars are going, you should be able to start cutting back on your monthly expenses. I’m not saying you have to completely stop spending, but you need to have a dollar amount set in your budget for every type of expense. These questions can help you find places to make cuts in your expenses.
Cash-only payments have two benefits:
Study after study has shown that people spend far more money when they’re able to purchase something electronically—with a credit or debit card. Retailers and bankers know this; that’s why today, even debit cards are starting to offer perks and reward points. They’re all banking on the hope that you won’t realize what you’re really spending.
This is a great way to visualize the money you have available in each of your budget categories and can be particularly helpful for those having trouble sticking to a written budget.
Assign an envelope to each category in your monthly budget—food, utilities, rent, preparedness, etc. At the beginning of every month, place the amount of cash designated to the category in its envelope. Use the envelope to pay for these items throughout the month. When an envelope runs out of cash, you’re done spending in that category for the month. The simple act of dividing your money into these envelopes has a powerful psychological effect and can help you stop overspending on certain parts of your budget—especially on things like fast food and entertainment.