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Dreaming About Budgeting

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The Roots of the Financial Planning Tree

 

A few weeks ago I wrote about the 4 W’s of budgeting. That post was an overview of the WHY, WHAT, WHERE AND WHEN of budgeting. It was a quick look at the purposes for budgeting from the outside. It didn’t answer the question of HOW I do my business budget. It is important to understand the underlying reasons or there is no motivation to prepare or maintain a plan. So we will peel off another layer of the onion and get closer to the process of HOW.

This morning as I was reviewing my schedule and once again trying to figure out how best to spend time, I had a thought…time and money both need to be managed and spent well. Both of them have a major role in achieving our dreams and need to be budgeted.

We can’t see into the future so we can’t know in advance how much of either of these, (time or money) it will take. What we can do is use information from our past and plan for the future. The hard part is maintaining the present. We need to be aware of where we are and be intentional in our actions using what we know from the past and what we want for our future, otherwise we just wander through life.

Dreaming about the future –

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            If you haven’t determined where you want to go, how will you ever get there? Growing up watching my Dad farm, that was what I dreamed of doing. I started in that direction without much of a plan (okay none) and then something unexpected happened…my Dad died. If his death wasn’t enough, the waves that it created completely changed my future. Granted there is no amount of planning that could have prepared me for his death, but the right plan would have served as a life preserver until the waves subsided. Instead my ability to dream was drowned. I went through years with no clear destination or direction. Then several years later I had a dream resuscitating incident. I fell while working on a second floor. I was unconscious for three days. After regaining consciousness and while recovering, I realized that God wasn’t done with me yet and I still had things to do and dreams to achieve. I think that when I hit the ground the impact must have restarted my ‘dream heart’. The point of this is the underlying importance of dreams. Having a plan can serve as a life preserver.

 

863937109_6245bef2c4_oI have always been a planner by nature. For years there was no purpose behind the planning. Dreams are what give the planning a purpose. My dreams now are big, more like they used to be. Things like; being debt free, renovating our home, traveling, owning rental property, flying my own plane and owning a NASCAR team…to mention a few. Everyone’s dreams will be different, but this will be the motivation behind the plan.

Okay now we have a reason for making plans. How much money and time are needed to achieve your dreams? Break each one down, what is it going to cost to get out of debt or buy that NASCAR team?

If my debt is $100,000.00, how am I going to pay it off? How long is it going to take? How much do I currently earn?

I will peel another layer in a later blog and we continue to go deeper. Until then what are your dreams?

The 4 W’s of Budgeting

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The Place to Start When Considering a Budget

 

Recently I have been asked multiple times about how I do my business budgeting. This question has come up multiple times over the last several years. Based on the number of times, it must need some discussion.

Budgeting has rarely been a very popular subject. Most people view it as restrictive, confusing or just too much work. It’s even more complicated when you’re self-employed and don’t have a constant or regular income. Before you can budget effectively you need to answer some questions.

The first question to answer is WHY do you want to bother with a budget? This could be because it’s just one of the things that the business world talks about, so it must be the right thing to do. It could be because you are tired of not knowing where your money is going. It might be that you feel out of control. Whatever the reason, this needs to be the first question to answer, because it will affect how you answer the remaining questions.

The next question is WHAT difference is a budget going to make? Before budgeting I would deposit a check and Debby would pay bills. Later I would be surprised when there was less in the account than I expected. After writing the numbers down and doing the math I could see exactly where the money had gone. Before it was written down it would be abstract and estimated. It was amazing how much difference it made seeing it written down. If your happy with your current money situation and can account for where it all goes, then you don’t need to bother with a budget.

6736189489_451af024b0_oIf you don’t like where you currently are then it’s time to sharpen your pencil and get ready to answer the next questions. WHERE do you want to be? This will be different for everybody, but it needs to be answered. Do you want to have money put back for your retirement? Do you want to be out of debt so that you aren’t feeling the pressure that comes with owing money to someone? Maybe you are just tired of your life being out of control and living paycheck to paycheck. Whatever the answer to this question, once you’ve answered it, you then have a destination. If you don’t have a map how will you ever be able to get there?

Next is WHEN will I get there? Once you have determined why it makes a difference and where you want to go, it’s time to figure out how long it’s going to take. This comes down to doing some simple math. Depending on what your end target is, it may seem overwhelming. The thing to remember is that if you don’t start you sure won’t get there. This is why some way of tracking progress is helpful. It can give the process a sense of reality rather than just being a fantasy. Dave Ramsey refers to Aesop’s Fable, the “Tortoise and the Hare” in his Financial Peace University course. We live in a high speed want it now world. We need to remember that slow and steady wins the race and not be discouraged if in the beginning it looks overwhelming.

After years of working through these issues I have come up with a system that works for me. It is an accumulation of different thoughts, ideas and plans from a variety of different people and places. In a future post I will break down and share HOW I budget and track my finances. So until then, answer the questions above so you will be ready to move forward and get control of your money and your life.