Who, outside of MBA and CPA types, likes the word budget?
It sounds like being bogged down with a lot of papers and doing all sorts of math and trying to remember if you’re supposed to pay $5 on the 10th or $10 on the 5th.
Many of us say we’ve got it “all in our head.” According to productivity expert David Allen, storing un-acted on information in your head is the cause of our daily stress and strain. Wouldn’t you like to know how much money you’ve got and should have on any given day? If you don’t already have a budget, you’ll love my 5 Minute Budget. All it requires is a calendar, a pencil and five minutes!
The 5 Minute Budget
1. Figure out when you get paid for the next two months. I like two-month timelines for budgets because when you just do one month, there could be a lot of things due at the beginning of the following month that you didn’t even take into account.
2. Mark down the MINIMUM amount you’ll be paid and on what dates. Doing just the bare mimimum amount is our worst-case scenario for planning, because there’s nothing like counting on some money that doesn’t come through.
3. Check your current bank balance and your cash on hand (having access to your bank accounts online is a real time-saver here). You would mark that on today’s date.
4. There are 4 main areas that everyone, regardless of income, needs to have a grasp on. Shelter, utilities, food/toiletries, and transportation make income possible, so give them their due! Mark down the due dates and sums of your rent, electricity/gas, groceries, telephone, fuel and car insurance payments. That’s probably only three bills you have to put your hands on.
5. Based on your due dates and amounts, you should be able to answer the following key questions: How much money do I have? What HAS to be paid, and when? Will I have enough money for each item? Is there anything I should hold off on in order to meet obligations down the line? How much do I have left over after I’ve paid my essentials?
Although this is simple, the key is to create AWARENESS and a SYSTEM, the two main components of prosperous personal finance.
Things like due dates and amounts shouldn’t be kept in our heads. And it really doesn’t take sophisticated software or hours spent “budgeting” to answer these very basic questions. But once you establish this framework (how much by when), you can move on to planning for other obligations and expenditures.
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Well said Great information, keep up the great work!