Budgeting Made Simple

I learned budgeting in my college days.  My dad required me to do a 6 month cash flow projection before I got my ‘student loan’.  I am sure I was the only student who had to do that.  After 20 plus years of working with people and their money, I think every college student should be required to create and live by their cash flow projections.

My years as a financial advisor, I have learned a few things that makes creating and keeping a budget easier.  I have found the biggest stumbling block in keeping a budget is the non-monthly expenses.  Things like Christmas and gifts, vacations, medical expenses, car repairs, clothing and home maintenance.  When you pay a monthly bill it is easier to keep on track with your spending plan.


So the key is to make a monthly bill for every item in your spending plan.  You set the money you have allocated for a vacation, car repair and other non-monthly expenses into a savings account.  I refer to this as a buffer account.  If you leave the money in your checking account you are likely to spend it on other things, and be short when you need it.

When you need to pay for a car repair, you transfer the monies from your buffer account into your checking account to pay the bill.  The same applies for all the non-monthly expenses.  You can keep track of your non-monthly expenses – accruing the monthly allocation and subtracting your expenditures, and keeping a balance in each expense category.

However, if you aren’t one for details, or you don’t have the time, you may want a simpler approach that you can maintain.  Success in a spending plan requires your being consistent.  An easier approach is to total the monthly allocation of your non-monthly expenses and transfer it into your buffer savings account.  Pay all your non-monthly expenses from the buffer account.

This approach allows you to have ‘fun’ on your spending plan and not feel guilty or get caught short some months in meeting your bills.




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