Is this really a good idea?

Living for today is always a good thing. If we cannot live for the time that we are actually living and instead live in another moment, whether it is the future or the past, then we are not truly living. However, only living for the present moment is not a good thing either. It has been stated (I forget where) that most people truly do not think beyond two or three days in the future. And this is also why people don’t truly make long term goals, for the most part. And perhaps it’s also why budget planning is not a big part of what we learn growing up.

It is important that we learn to handle our money. If we spent everything as we got it, truly only living for the moment, then there would never be anything available for the longer term expenses, even including housing, insurance, and groceries. Never mind what such a thing would do to emergency planning and retirement. While 75% of Americans surveyed stated that they have saved for retirement, only 13% are very confident that they will actually have enough to retire comfortably. And only 44% have actually done any kind of retirement needs calculation.

Perhaps it’s a good idea to actually make some plans for the future. Without planning and knowing how one is going to handle crisis, retirement, and upcoming large expenses, then there is no way that one can know exactly how much is required for these expenses. Sitting down and doing some kind of estimate, even a rough one, would make planning a lot easier. Realistic returns need to be taken into account on all savings, as well. This can give a sense of hope and security. And it might surprise people how little they actually need to retire. I’ve figured mine out. And in today’s dollars, assuming that I have no consumer debt, and that my kids are grown up, I can survive on less than $500,000 dollars in savings. In fact, that may even be high, especially if my taxes are low, or if I decide that I want to work part time. Actually, I know that I will do some income producing activity. It’s just the way I am and I will do it to keep myself occupied and happy, doing writing, consulting, teaching, or artwork of some form.

Planning for the future also allows one to live a better life today. With solid future plans, written goals and knowing how to accomplish them, one then has more security in the present. It’s easier to plan for the day when one knows exactly how much money is available for the present, allowing for all other plans. This makes living for today all that much better!

It’s really tough if you don’t make allowance for unexpected expenses. Part of your monthly budget should include putting a little aside each month, not just for retirement savings, but also for emergencies. This is one of the most often neglected categories of budgeting. The woman I was speaking with today did have a good idea, though. What she does for her fun money budget is take what’s left after the rest of her budget and divide it by the number of days in the month. Then she knows how much she is allowed for each day. This is actually a very good way to manage this category of money. This woman also knows, as she plainly stated, if she goes over in any one day she has to take it out of the next day or out of another category. And she knows that can hurt, so she tries very hard not to do it.

There are many strategies that we can use to keep within a specific category. The worst one that people tend to go over on a regular basis is the entertainment budget. Whether you manage it on a weekly basis or a daily or monthly basis, you must constantly be aware of where you stand and how much money you have in your budget. It’s even better if you can manage it well enough to stay below your budget and then have a little extra to add to savings or even just to put into a special “fund” to use for a big entertainment expense. Assuming, of course, that you are not stressed into paying off credit cards or other debt.

One strategy I used to try (before debt) was to set a specific entertainment budget at all times. I would then strive to save 50% of my monthly entertainment budget and put it into a fund for bigger toys (so to speak). This is how I managed to afford a few things that I otherwise wouldn’t have at that time. It really motivated me to know that there was a special reward at the end of the line, as long as I was able to restrain myself. It really meant NO buying lunch at work, no quick snacks from the corner store, and I basically cut my alcohol budget to zero. But it was always worth it in the end!

What strategies do you do to keep within your budget? And what motivates you?

What it is, is the person doing the budget each month is working on a cash only budget (no credit cards), and is not permitted to use the debit card from the bank. This is done purely to learn budgeting and is an exercise that may or may not be followed long term. At the beginning of each period, which is usually a pay period (when pay cheques are given), all the income is taken and put into different envelopes. Each envelope is labeled according to what the money is for, such as rent, groceries, cable, transportation, etc. Due dates of bills are also written on the envelopes.

The person managing the budget must be aware of how much is in each envelope and track the contents properly. Each envelope is then used only for what it is labeled to be used for. Of course, using these in conjunction with a calendar is a good idea, that way bills aren’t missed. And most bills are then paid either at the counter of the billing company or in person at the bank. It’s kind of a basic system for those who have never managed to understand budgeting or used for people who need a system that has restraint built right into it.

Keep in mind that this system does not allow you to use any credit cards whatsoever! You are restricted to the cash in each envelope. I kind of thing this is a good idea for those learning, and I will definitely use it for my kids when they are old enough to understand. What do you think?