Focus On Finances: Keeping It Simple

Posted on November 12, 2008
Filed Under Spending, budget, plan |

Yesterday a reader commented on my post 10 Steps to Budgeting with Irregular Income and it reminded me of the most important step to begin a budget or spending plan. Denise from Plain Ol’ Food says

We use the envelope system for both personal and business expenses and as cash comes in some is put in the bank and some is put in the envelopes. A priority is getting cash in the envelope for each bill. Checks are deposited in the bank and as a bill comes due, the money for that bill is put in the bank and the bill is paid. It’s a simplistic way to do things but it works for us. For over a year, the bills have been paid on time and we have money saved. Pretty neat, huh?

Her point is that for someone who is beginning to budget, a simple system may be the best. Frankly, I think she is right. When I initially started focusing on my finances and developing a budget, I also used the envelope system. I didn’t use it for bills but I switched from using my debit or check card to using envelopes. When I spent something out of the envelope, the receipt went in.

This simple method really helped me to determine where my money was going and helped me to focus on changing my spending habits. I firmly believe however that how you budget or which spending plan that you use really doesn’t matter. The key to budgeting is just to focus on your finances.

What do you accomplish when you start to focus on your money? You become more aware of how much money you are spending. You start to realize how much those little things like a soda and a snack on the way to work add up. You realize that a large percentage of your money gets frittered away two or three dollars at a time whether it’s at a convenience store or in the gas tank from those little extra trips.

Once you know where your money is going, it becomes much easier to divert those dollars into savings or debt repayment. If you stop at the 7-11 every morning on your way to work and spend $2.50, that adds up to $40 per month. For me, that would be the minimum payment on my credit card plus a little extra. If I add that to the payment I already send them, I could pay my credit card off in half the time or I could add it to my emergency fund.

It’s those little snowflakes of savings that come from simply focusing on your finances. It’s not complicated. You don’t need spreadsheets or programs or folders. You simply need to focus in some way on where your money really goes. Once you have begun, the rest gets easy. The scary part? For me the scary part is really knowing what I spend my money on, not planning where I want to spend it.

So if you are new to financial planning, keep it simple. Keep your focus on your finances for a day, a week, or a month and the rest will come easily. Be warned though, budgeting can become addictive.

If you enjoyed this article, you may want to subscribe to my feed by RSS or get updates in email.

Comments

2 Responses to “Focus On Finances: Keeping It Simple”

San Francisco Certified Financial Planner (1 comments.) on November 12th, 2008 4:03 pm

Love the above article. Let those little ’snowflakes’ of savings add up! I always like to show my clients how small savings can add up to big money over time:
Save $1 per day = $30 per month = $365 per year
Save $50 week = $200 per month = $2,400 per year
Denise (18 comments.) on November 12th, 2008 8:39 pm

Great entry! I agree that when you really focus on where your money goes, your eyes are opened. Keeping track of every penny we spent for 30 days was one of the smartest things we ever did. It was very disturbing but it led to rapid changes in our spending habits which in turn led to rapid increases in savings..and that’s a very good thing, indeed. Simple is good, I say, and for some of us it really is the best way. The more complicated something is the less likely I am to stick with it so a simple method of budgeting works beautifully for me. And its been relatively painless.

Leave a Reply