Budgeting and Setting Goals
- Short term goals – those things you wish to do in one year, like a vacation or reducing debt, for example.
- Intermediate term goals – those things you wish to do in one to five years, like starting a family, or paying off all debts.
- Long term goals – those things that are at least five years in the future, like starting your own business, or buying a home.
- Life goals – those things which don’t have a timeframe because they will never be fully achieved. These goals need not be attainable through money.
When you are in debt, a budget is a great plan to help you get out of it. It isn’t rocket science but most people fail at this task because they simply don’t stick to it. Building and sticking to a budget is like sticking to a diet and exercise plan. Most people have good intentions by starting but then they eventually go back to their old habits and stop all together.
If you are in debt $10,000 and you create a budget that allows you to save $250 per month then in 40 months (or 3.33) years, you will pay off the $10,000 debt. If you think 40 months is too long, then you can look at your budget to determine if there are any additional costs you can cut or reduce. You may realize that if you cut your cable TV off, it will save you $100 per month. Adding the $100 to the $250, you will be able to save $350 per month and now it will take 28.6 months (or 2.4 years) to pay off the $10,000 debt. If you are still not happy, you can cut other expenses or try to increase your income by finding another job, getting a part-time job or starting a side business.
The hardest part of a successful budget is “SUSTAINING” it. You have to stick to it month-after-month and eventually you will hit your goals.
- Living on a budget will allow you to:
- Save money, especially for setbacks, such as losing your job.
- Live at or below your means so you can save money.
- Allow you to eventually buy big ticket items without using credit or taking out loans.
- Measure your performance. If you are not meeting your goals, your budget will make it evident.
Below is more information regarding building a budget: