Guest post by Bryant Armstrong, CPA, Squire & Company, PC.
Planning and Budgeting: 5 Simple Steps to Saving
Most of us are familiar with the saying, “If you fail to plan, you plan to fail.” It may sound a bit cliché, but it’s true! Having the necessary discipline to plan, specifically for financial expenditures, seems particularly challenging to most people. It’s difficult to voluntarily impose boundaries and restrictions on our spending. Spending money on things we want is fun and few of us have the ability to save without establishing financial goals. But without planning, we will reach the end of the month, having spent all that we earned and wonder where it went.
Here are five suggestions that may help you plan and set budgeting goals:
1. Create a budget –Budgeting can seem like a daunting task, especially if you feel you aren’t successful unless you measure everything. Start by identifying the items where you spend the most money (e.g., your mortgage or car payment) or those areas that have the least visibility, such as travel and entertainment. You will get the most reward for your efforts by focusing in these areas and gain valuable insight into where you are spending the majority of your money.
2. Start with a plan – Set goals regarding how much you want to save and for what reasons. If you have no goal to achieve and no discipline to follow through, your likelihood for success will diminish.
3. Provide incentive – Set intermediate goals and reward yourself when you achieve success. If you are budgeting for your company, include your employees in the rewards. After all, planning and budgeting often requires a change in behavior. The change will occur more rapidly if success is rewarded.
4. Write it down – The likelihood of achieving your goals decreases if they are not written down. A wise man once said, “The shortest pencil is greater than the longest memory.” There are many ways to document your plan. Most accounting packages include the ability to budget and to get reports comparing your budget against actual results. There are also online solutions or spreadsheet templates available that help you document your goals.
5. Just do it – Don’t worry about perfection or if your first attempts fall short of the results you want. The key is to start and to be diligent. Making the effort to plan and budget will help you achieve the financial results you want and will become easier with time.
This article should not be construed as legal or tax advice from Bank of American Fork. Please seek legal and tax advice from qualified legal and tax professionals.