Do you know your BP? I’m not talking about your blood pressure. Don’t get me wrong, those numbers are important. However, the BP I’ll be referring to in this article is just as critical, just as life or death. For our purposes, in this case, BP stands for Budget and Plan. The things you want to achieve are your Plan, and what you’ll need, or need to forego, to get what you want is your Budget. Truth is, you can have almost anything we want in life and you don’t have to be born with a silver spoon to get it, but what you do need is discipline and a “Sow and Reap” mindset. That 5,000 square foot home, freedom from credit card debt, higher education without the looming loans, or that annual “Girls’ Trip” are all very attainable. We are only limited by our ability to budget and plan.
There are many types of budgets, budgeting tools, and software you can use to set and track goals and create a budget. The point of this article is to offer a few tips and tricks for those of us who may be a little stuck and a little frustrated because we are not seeing the progress we desire.
First there’s the Plan. Think of your plan as a goal or collection of goals. “Without setting goals or objectives, life becomes a series of chaotic happenings you don’t control”. We all want to be in control of our finances and our well-being. So back to the plan. Your plan can be a singular goal and or a primary goal with secondary goals that feed up into, and support, the larger goal. For example, your primary goal might be Buy a House in Arden Park and the secondary goals are, Obtain 780 credit score, Make annual income of at least $250,000.00 and, Complete Masters degree in Engineering. When it comes to goals there needs to be a method to the madness, a way to quantify and track progress, in order to increase the likelihood or achieving them. One popular goal setting tool is SMART goals. According to an article on YourCoach.be, “SMART goal setting brings structure and trackability into your goals and objectives. Instead of vague resolutions,”. SMART is an acronym describing what goals should be; Specific, Measurable, Attainable, Relevant, and Timely. In a nutshell, when creating your plan use these 5 steps, 1) make sure to get very specific and detailed about what your hope to achieve, 2) define the steps you will take to get there, 3)revisit steps 1 and 2 often and make note of the work you have done, 4)Ask yourself has your goal remained the same or has it changed, and 5)Assess how close you are to the finish line. Another suggestion is, make sure that your plan is something you designed for yourself. Forget about The Jones. You are much more likely to stay committed to the Plan if it promises to bring you fulfillment and fits your personal definition of success. There is no one size fits all. Okay, so let’s move on. Now, with the Plan in place we can move on to the Budget.
The budget is The How and we’re talking in terms of dollars. How much $$$ do you need to fund your Plan. There are many types of budgets, ways to create a budget, and tools to track how well you are sticking to the budget. Treat creating a budget like an experiment, lets observe our behavior then design processes and controls to direct our behaviors to get the desired outcome. First, continue business as usual. Tracking how you spend every dime for 30 days. Yes, “there’s an app for that”, lol. There are apps available that will help you track your spending. Apps like Budget & Expense Daily Tracker or My Weekly Budget-MyWB help users to track and categorize their spending so that you know where your money is going. The best part is many of them are free. Once you know how you spend your money the fun can begin. Prioritize the categories in order of importance, according to you. Note there are two basic ways to “stack” money, keep your expenses the same and earn more, or earn the same and spend less. Get creative about the controls you put in place to save money to fund your plan . Refer back to the plan. Instead of letting your money limit what you can do, implement a “Sow and Reap” mindset. With your goals identified, assign them a number in terms dollars, we’ll call this The Number, and work your way down. Writing these things down will make it easier try track. Consider using Excel. This will help to keep track of the math and maintaining an electronic copy will allow for future use or you can share with friends. Starting with “The Number” divide by the duration you set for the subject goal. For example, Goal: Save 10,000 for a down payment on a house in 1 year. Divide $10,000 by 12, that will tell you how much you need to save every month for 1 year in order to stick to The Plan. The Measure: Save $833 per month. The approach you take to “stacking” will determine how you attain the goal in other words you will either earn more or spend less. Add the monthly measure and your monthly spending. Take the sum and subtract it from your monthly income. If that number is positive, this is great! If the difference is negative, you have some decisions to make. You will either need to earn more or spend less. Get a second job or side hustle or go back to your spending tracker and see if there are expenses you can cut starting with those in the category(s) which you identified as low priority, depending on your chosen approach. This example is just one budget. You will need to be mindful of the “Big Picture” and prioritize. Put your goals in the proper sequence so that your efforts are working in favor of your Plan.
Knowing your BP will help you become more aware of your finances, aid you in building confidence because you’re able to see results, increase your feeling of fulfillment, assist you with creating good spending habits, and ultimately help you to design the life and legacy that suites you and your family.