More On Realistic Financial Planning

   Why do I list the written budget and expense management plan first? Well like Benjamin Franklin said "by failing to prepare, you are preparing to fail." Let me explain what I mean. A realistic written budget is just that. It is written. You are going to put the plan on paper or in a spreadsheet. It's also realistic. "Realistic" doesn’t mean what you think you can live with but rather living within your means. (I will talk later about how that is not going to permanently mean hardships). While you go through the process of creating your plan we will be careful to ensure that it is indeed realistic! These are listed first because this planning is the foundation on which the rest of your personal financial success will be built. This is the first step because it will tell you if your income is matching your expenses. If your income doesn’t match the expenses you are going to either 1) generate more income or 2) start reducing your expenses. Help for both of those are offered on this site.  

     Real Life Story: Many of us may have known a kid when we were in school that never had to study. He or she always did well on the tests and received high marks. They had lots of free time to do what they wanted, did little or no homework, and got lots of "A's" painted on their test papers. I was like many other kids who thought "hey, if she can do it so can I!". I skipped the homework. I didn't complete the study exercises listed in my books. I didn't ask the teacher questions during class. I didn't take notes. However, you guessed it, when the results of the tests came back it was very obvious this approach DID NOT work out for me! My lack of planning resulted in poor marks. More about realistic planning.

     Maybe my analogy is a stretch but I feel the same way about budgeting and expense planning. If you put your paycheck in your pocket and go out into the cold cruel retail world without having done your budgeting and without a realistic plan you are going to get beaten up pretty bad. So many things are stacked against us. Inflation, fees, lower quality of goods, breakdowns and unexpected expenses, for example. Sometimes people cut it so close that one small thing can become the tipping point that sends them into financial disaster. You have to be prepared for such circumstances.  

A budget is the cornerstone of financial planning

     Can you see why a budget is so important? It is a basic means of telling you where your money is coming from and where all the money is going. Even for those people who are rich, a budget is mandatory. It is so easy to lose your money without a written plan. When you are waiting in line at the grocery store next time read the headlines on the gossip papers. You will often find a story of a celebrity or athlete who has lost it all. I am going to bet they had lots of money but few written plans. I knew a guy whose "budget" was the ATM machine. He would go to the ATM and check his account balance. If there was money in it he could go spend. If there was no money in it there was no spending that day. He would make a withdrawal of $50.00 and the next day have no idea where his pocket cash went, but if the ATM told him he had more money he would take it. What a great way to go broke at record speed! His method is obviously not what we are talking about here. Following a written budget and plan will put your financial situation further ahead than any other action you take.