One of the most common advice that was dished out to folks having money problems is to have a budget. For me, I felt that you do not always need a budget if you get competent with money, but if you aren’t, you got to understand about the budget to sort yourself out.
Going through the motion of creating and maintaining a budget trains the money discipline that have been missing in your life.
The best form of budgeting is not some form of super sophisticated smartphone app that do everything for you. No. It is the kind of budgeting that you have to do majority of the work yourself. Just like studying, writing down things create some reactions that make remembering and understanding better.
Using a Spreadsheet and carrying out Zero Based Budgeting is what I recommend for most people.
If you are going through the budgeting experience, you probably sometimes beating yourself, self depreciating that you shouldn’t have bought so much on this, you can’t help but to spend on that TaoBao buying spree that you have not used for a year.
By compartmentalizing money the way you do in Zero-based budgeting, you can also isolate your mistakes.
A simplified way to compartmentalizing your money can be splitting what you take home into two amounts: Your Wealth and your Expenses.
There is a reason we label them that way, because you want to be wealthy and the way to be wealthy is to cut your expenses to an optimum level.
Have a third compartment, and that is the expenses that you spend that you conclude at the end or start of the month during budgeting that it is a mistake.
So suppose you add them up and they come up to -$420.
If you keep making more mistakes, this amount will balloon to -$1000 and even more eventually.
Compartmentalizing this way tries to make you face up to the music, that you STILL have a control problem there and that is why the amount is ballooning.
If this amount is negative, it means you owe someone for spending it first. This person can be a credit card company, the sensible self or your future self.
When you get a windfall, say during bonus time, or an SG50 bonus, or 4D windfall, you know that you cannot enjoy that windfall and have to pay down your mistakes.
If this works, overtime, you will have less mistakes.
You have less mistakes because you will think whether you need that thing, whether it fits your value system, else you don’t buy.
The Mistakes Jar is one indicator of your budgeting performance.
Does this work?
I don’t have a mistake jar, but there are many jars that tell me I am not doing things well such as why my medical account is always negative. I need to do better there.
Recall that my formula to success in most things are:
- Motivation / Determination / Decisions
- Systems / Processes / Habits
In many cases, the motivations to improve aren’t very big. Things have not gotten out of hand unless the person is deep into debt. Hence we have budgeting which is the end result of 2 and 4. It will only work if you build into the system of an external auditor or mentor, to ensure to call you out that you are not improving.
How about you? What are your budgeting problems most of the time? What threw you off the budgeting train?
To get started with dividend investing, start by bookmarking my Dividend Stock Tracker which shows the prevailing yields of blue chip dividend stocks, utilities, REITs updated nightly.
Make use of the free Stock Portfolio Tracker to track your dividend stock by transactions to show your total returns.
For my best articles on investing, growing money check out the resources section.
Subscribe to Investment Moats to Level Up Your Wealth Management Today
Join our mailing list to receive the latest news and updates from Kyith.