1. What is the first thing you will have to do before you can be successful with a budget?
ANSWER: CHANGE THE WAY YOU THINK. The best way to think of this is to image yourself as business, ie, ME, Inc. Here are three scenarios: (1). Your office chair breaks, so you drive to Office Max or Office Supply and buy a chair. You then assemble the chair and take your boss the bill. (2). Your office chair breaks. You go to your boss and tell him; and then ask him, if you can purchase a new chair. He inspects your broken chair and agrees. He then checks his budget and determines that he has money, $300 max., in his budget to purchase you a new chair. He then gives you a charge code. You go to the Purchasing Dept. and tell them that you need a new office chair and have a $300 limit. Purchasing gives you a catalogue with office chairs in it, and you select an appropriate chair. They give you a purchase order to fill out INCLUDING THE CHARGE CODE GIVEN YOU BY YOUR BOSS. The Purchasing Dept., orders your chair. The chair is delivered to warehouse loading dock. It is then assembled and delivered to your office. (3). Your office chair breaks. You go to your boss and tell him; and then ask him, if you can purchase a new chair. He inspects your broken chair and agrees. He then checks his budget, and determines that he does not have any charge code for office chairs or he finds that the office furniture charge code has a zero balance, but he says he shall plan on having the money in his next budget. Meanwhile you get your chair repaired or you scrounge for another chair.
People that do not budget use option (1). When a cost needs to be made they decide to spend the money with no real understanding of their finances. THIS ALMOST ALWAYS CAUSES FINANCIAL PROBLEMS.
A true budgeter uses options (2) or (3). Rather than a charge code, personal budgets have categories. You must ask two questions on all expenditures, just as any business does. They are (1) Which category (charge code) is the money in, and (2) How much money is the in the category for the intended expenditure. If you have planned well, you can make the expenditure. If not, the expenditure will have to be delayed or not done at all. THIS ALMOST NEVER CAUSES FINANCIAL PROBLEMS.