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I never liked the word “budget”. It has attained all the unpleasantness of the word “diet”.People feel a budget is a spending diet full of unnatural sacrifice and unhappiness.

I prefer to look at it differently.

Have you ever noticed small children when they finally have money that they believe is actually theirs?

You can walk through a store and they want you to buy this…they want you to buy that for them. Want. Want. Want….

However,  if you tell them they can buy it themselves with their own money many of those children will hesitate, make a value determination and very often decide they would rather keep their money than give it up for something that means less to them.

They LOVE having the money. There is more pleasure in having the money than giving it up for something less valuable and pleasurable. If you can maintain this attitude toward your money into adulthood you will be happy and successful.

Somewhere in life some of us lose the pleasure of having money. Some of us develop the unfortunate superstition that cash in the bank is worthless until we give it up for something from a store.

Remember - the rich are rich because they save money and invested in things that increase in value. The poor are poor because they spend all their money on things that decrease in value.

How to take control of your money:The first thing we need to do is add up our monthly income from all sources. How much money do you actually have coming in every month? Do you know that amount? Great. Let’s call this amount “A”.

Next, we need to determine our fixed regular expenses every month. Things that stay the same each month. These are rent or mortgage, insurance, car payments, cell phone, gym membership, Netflix, cable tv, bank fees. Find all of it. Check bank statements and credit card bills to find everything that you make a regular payment to every month. Does the payment match your needs? Are you paying for 120 tv channels when you only watch 10? Are you paying for a bunch of data for your phone that you never use? I was. If you do as well, change your plan. Do not pay for something you don’t use. If you do not go to the gym anymore, stop the payment.

Add all of this up and call it “B”. Do the math “A” – “B” = “C”

Now let’s look at your regular but varied expenses. These are expenses you may pay most months, but they can vary from month to month. These are groceries, gasoline, clothing, household bills, haircuts, eating out etc.

Do you know how much you typically spend on groceries per month? How much you spend on gasoline every month?  Successful people know these amounts. Set monthly targets. Keep track

One of the greatest bank account killers is eating out. I prefer your grocery bill is a bit higher than to see money wasted on eating out too often. Eating out is a treat. A joy. Not something you do because you cannot be bothered to cook. Plan your meals. Make what you enjoy eating. Be sure eating at home is fun and varied.

Add up your estimate of your regular but varied expenses and call it “D”.

Do the math “C” – “D” = “E”

What is the value of “E”?

Is it a positive or negative value?

It had better be a positive value because we have not even gotten to irregular expenses. Many people can have a positive value of “E” but it is a small number. They have run out of money.

I call this treading water. You can just keep your head above the water, but you aren’t going anywhere. If you have debt as well then, your feet can’t touch the bottom. You are vulnerable.

Irregular expenses are the financial waves that hit us when we least expect them. Car repairs. Home repairs. Job loss. Relationship breakups. If we are treading water over our heads when those waves hit it is more serious. Some waves are difficult, unfortunate but manageable. You swallow some water, choke a bit but you can get back to treading water. But then there is a large wave. When it hits us, we are underwater. Due to debt we cannot touch the bottom. We are in real financial trouble. We are drowning.

We need to make a plan and goals to get our feet back on the ground and a positive direction to move toward.

Visit our blog next month for the continuation.