#MAKEBUDGETSCOOL

#MAKEBUDGETSCOOL

Let me get up on my soapbox for a moment and talk about why budgets are so great. I often hear people say 'they don't like budgets' or they 'don't believe in budgets' or they don't want to 'live on a budget' and it goes on and on. Everyday people and financial professionals alike. I'm here to say we need to STOP giving budgets a bad rep. We need to make budgets cool! Ok, maybe that's a stretch but imagine how much more excited we'd been to budget if society said it was cool...like snowboarding, pilates or playing the guitar.

I'm an accountant, and to me, a budget is a place where you record money coming in and money going out so you can see what to expect from money today and going forward. A budget is a plan for your money. That's it. Everything else is the story we have about budgets, just like we have money stories and attribute meaning to money. We do this to the concept of budgets/budgeting as well.

A budget is a tool, it is uniquely designed to help you see your money. Similar to how a hammer is a tool. It too is uniquely designed, it's purpose is to enable you to use your physical force, in partnership with a well-structured handle/surface combination, to impact another material item to insert it into or remove it from a surface (i.e. hit nail into wall). Nobody hates a hammer, nobody 'doesn't believe in the hammer,' or feels they are 'above' a hammer. You could use a textbook to whack a nail into the wall or code a robot that will come in to ninja kick it in, or...you could just grab a hammer, a tool that's been working for generations before you and will continue to serve a valuable purpose for generations to come. So off you go to hammer that nail into that wall to hang your family photo, that you can look at and appreciate in the years to come. Job well done.

You can call the 'budget' something else, like you could call the hammer and force-enacting device, OR, you could save yourself from having to explain yourself and just call it a budget. The one exception I'll offer is if you want to call it a cash flow plan. I'd be cool with that. Because at the end of the day, that is the purpose of the exercise of working with your budget. To see, understand, and plan the cash flowing into and out of your life.

Hammer a nail. Budget your cash.

I love budgets, partly because I love spreadsheets but more so because I like the outcomes of budgeting - the calm, confidence, and control I get from having my budget up to date and guiding me. I like being able to make informed decisions about my money. I think it's pretty darn cool to have a budget, to be able to feel this way - it's like money Yoga. So, let's work together and #makebudgetscool, let's all just get on board and shed the resistance, shame, annoyance, pride - whatever it is, and just put our money moves down on the page and call it what it is - it's a budget, friends.

Oh would you like some tips on building a budget now that you're on board? Yah, you do...

Step one: find a lovely cozy place, put on some nice music, grab a cup of tea, coffee, beer, wine - you do you, open up a spreadsheet, notebook, app, your choice.

Step two: create 3-6 columns with Months as the heading so you can build your budget out for the next 3-6 months (or going back 3 and forward 3). I do mine for 12 months at a time, but you can build towards that.

Step three: start listing the following:

• Income (from all sources)

• Savings

• Investments

• Expenses

  • Fixed expenses (they don't change month to month)

  • Variable living expenses (they change slightly each month i.e. groceries, pet care, gas, transportation if variable)

  • Discretionary (optional/wants-based purchases for yourself, your family, your home) - keep this bucket high level - you shouldn't have a budget for clothes, books, restaurants, coffee etc. - you can tally those up if you're looking back on where you spent money but going forward, who cares? give yourself a bucket of money for each week/month and stop spending when it's gone.

• Ad hoc expenses - things that come up throughout the year like auto maintenance (oil changes etc.), kids' summer camps, kids' activities, trips, property taxes etc.

Step four: do the math

1. For each month: Income - Expenses (including ad hoc) = Net Cash

2. Calculate cash flow: write down your current cash balance and then add the net cash for each of the upcoming months (one month at a time).

   
   

   Example:

Cash	January	February	March
Opening Cash	$500	$550	$700
Net Cash	$50	$150	-$200
Closing Cash	$550	$700	$500

You now have a cash forecast, and you can see where your cash is headed.

1. If it's going to become negative and stay that way, you need to make some adjustments to prevent taking on debt

2. If it's positive, consider what 'buffer' of cash you'd like to keep in the account so you break the paycheque-to-paycheque cycle. Beyond the buffer, save or invest the extra.

Step five: Come back and review your budget every week to two weeks. See how things are going. Adjust where things have gone off track. Do a little bit each time - you don't have to do a ton each week. Just check in for a couple of minutes and then add more time and energy as your confidence and interest grow.

That my friends, is a budget. If you build one and it's magnificent and you want to call it by a different name, then that is your prerogative, and you've earned the right. However, I hope you'll join me in seeing that the word budget is simple and does the trick. The budget is the tool; YOU bring the meaning.

#MAKEBUDGETSCOOL