Three Reasons Your Budget Will Never Work

Photo courtesy Steve Rhodes

Recently I’ve seen several blogs and other forums where people have stated that they’ve tried to budget, but it just didn’t work for them. Here are three reasons that their budgets failed to work.

Reason 1: It’s not going to work if you don’t give it time.

When you’re new to budgeting, your first crack at it just isn’t going to work. You probably aren’t really sure how much you need to spend in each category since you’ve never really tracked it. That shouldn’t stop you from trying. Establish a starting point and make adjustments as you go along. There’s nothing wrong with that. You’re just refining it to make it fit your situation. If you need an extra $20 a week to make the grocery budget work, then add it. You just need to find an area or areas where you can cut back in order to find that $20.  Give your budget at least three months to really start working. Don’t give up on it.

Reason 2: You don’t really understand it.

I read someone’s blog where they said they had tried a bunch of different systems but they just didn’t work. The one in particular that struck me was that they said they tried paying off their debt like Dave Ramsey said, but all they ended up doing was depleting their savings. I happen to know a lot about Dave Ramsey’s system since my wife and I went through Financial Peace University. In addition, I was trained in his Financial Counseling program. I can assure you that if you spent all your savings getting out of debt, then you weren’t really following his system. Savings is a HUGE part of his methodology.

You can’t just take a piece or part of a system and expect it to work. You have to fully understand the whole system and try that first. Maybe there are areas you can deviate from once you become familiar with the system, but don’t try and short cut it and then say the system doesn’t work.

Reason 3: You don’t create a realistic budget for your situation.

Trying to be over agressive about your budget is not going to work either. Don’t try cutting out everything at once and expect the whole family to jump on board. Use a principle of moderation. You’re more likely to get support from everyone if you take it in steps and slowly cut back as you have success with your budet. Also don’t expect that something that works for one family is going to work for yours. Maybe one family doesn’t mind eating beans and rice for every meal in order to get out of debt. That doesn’t mean that’s going to work for your family. Maybe your family prefers to travel less and cut the gas budget back rather that skimping on the grocery budget.

In order to have success in the budgeting process, you need to be patient and realistic. You also need to make sure you fully understand the process. There are many books and websites that have a ton of information about budgeting and saving money. Make yourself knowledgeable on the subject so that you can have success. There are also many people out there that are very familiar with the subject and can provide you with help that is specific to your situation if you’re still having trouble getting there. Don’t give up. It can and will work if you stick to it.

Put Some Passion In Your Money and Your Marriage

photo by Mike Lawrey

I’ve been reading Top Performance by Zig Ziglar and Jim Savage. It’s an awesome book for leaders. There is a lot of advice on how to be a great leader and how to inspire the people that work for you to do great things.

Something that really caught my eye toward the end of the book was in regards to balancing work and family life. They used a study that was done by a German Insurance Company to show that in reality a good home life is good for your career. This study showed that if a man kissed his wife goodbye daily, he was more successful. And by a kiss, they mean a real, passionate kiss, not a quick peck on the cheek. The study found that these men not only lived almost 6 years longer, they also made 20 to 30 percent more money as those who just walked out the door in the morning!

So if you want to increase your income, tomorrow don’t let your spouse get out the door without a kiss, and make it one to remember!

Keeping Up With the Joneses

Porsche by Alex-s

This morning on ABC’s Good Morning America, they caught up with a group of people that had been on the show last January. They were all deeply in debt and struggling. They received some advice and help from Dave Ramsey at that time to get a Total Money Makeover. In this follow up segment, they review how far they’ve come since their last visit.

What was striking to me was not so much how far in debt they were. What struck me is that the group represented a cross-section of America with salaries ranging anywhere from $15,000 per year to $150,000 per year. You see, it really doesn’t matter how much money you make per year. If you make more money, it just allows you to get into debt that much quicker and that much further. The “keeping up with the Joneses” mentality is a real condition. No matter how much money a person makes, they tend to aspire to the next level up, when in reality, they can’t afford it.

In Thomas Stanley’s book The Millionaire Next Door he relates that most people living in million dollar home are not actually worth a million dollars! In fact he found that there were three times as many millionaires in $300,000 or less homes as there were in $1 million dollar homes! Our society is so focused on image that they don’t really realize that in reality the truly rich Joneses are living in a nice modest ranch style home and driving a Ford F-150! No really! Just read Dr. Stanley’s book!

The real key to being rich is not looking like you are. It’s really quite simple. You’ve got to live on less money than you make. The more frugal you are, the more money you will save, and the richer you will become. Wouldn’t the freedom of not being broke be so much more fulfilling than driving that fancy car or living in that fancy house?

Creative Financing for Dummies

Don't try this at home!!!

Dyan and I were doing some book shopping at our favorite bookstore (Goodwill) and ran across this title, Creative Home Financing. Wow. An entire book for that? I can sum it up in three words DON’T DO IT! Okay, so maybe I cheated a bit with the contraction. I’ll go ahead and allow four words.

THIS is what got so many people in trouble in the first place! Loans for 100% of the value. Home equity lines of credit for 110% of value. And then the market crashed and suddenly you’re so far underwater on your mortgage that you have to be a certified diver to go down that far.

There are some people out there that are so intense when it comes to their finances that they have managed to buy a nice home with 100% down! They eat beans and rice, live above their parent’s garage, and never go out to see a movie. I’m not suggesting you do that, but if you are going to get a home loan, you MUST have 20% down. If you don’t, you’re going to be paying for PMI Insurance (I know that’s redundant people). You will just be throwing that money down the drain when it could be going to pay down your principle instead. Also make sure you get a 15 yr loan so that you don’t end up paying interest forever. And with just a little creativity on your part, you can get it paid off in even less than 15 years. Something as simple as paying your mortgage every two weeks can have a HUGE impact on the amount of interest you pay and thus shortening the length of the loan.

If you want to get creative with your homes financing, try finding creative ways to get your 20%+ down payment even quicker. I’m sure you can come up with some great ways without moving in with the in-laws.