Money is a funny thing, if you don’t decide beforehand where you want it to go, it will still go. An old friend mine use to say, “money is like gas it expands to fill the space”. If it’s a small space it fits that, if it’s a large space it fits that.

During his life where he lost income, it always seemed to work and at times when income increased it always got spent.

Over the years because of a unique position I was in, I had the opportunity to look at a lot of people’s finances and one thing I realized is that it doesn’t seem to matter how much money you make. I would see the family making $20-30,000/yr doing just fine and then the family making $200-300,000/yr getting behind each month OR the reverse, with the family making $20-30,000/yr getting behind each month and then the family making $200-300,000/yr doing just fine, along with every income level in between.

So what matters is not how much you make, but how you manage the money you do have.

“If you fail to plan, you plan to fail”. A budget is basically a plan for your money, so let’s see how to plan.

What you need is a list of what you’re currently spending and then right next to it, a list of what your budget goals are or the budget you want. It’s called an “actual” and “planned” budget format.

Some points to remember:

Your income should equal your expenses. If not, the extra will disappear or “expand to fill its space”. Your goal is to live under your means, so any extra should go to debt first and then savings.

A “spending cash” item is essential. For example, say you only have an extra $5 every month, but you don’t budget it and so when you’re out you stop and buy something to eat and then your spouse does the same and now you’re over the budget.

Sound familiar? Now, if you knew you only had $5 most people have a tendency to only spend $5 or darn close. Personally, there’s been times in my life when the budget only allowed $5 and so my wife got $2.50 and I got the other half. She would go garage selling with her half, so she could get her shopping fix and I would buy off the dollar menu. But there’s also been times when the budget allowed for hundreds of dollars for spending cash.

The point is that most will blow money anyways, so as not be surprised at the end of the month, know what you’re going to spend beforehand.

Budget for a specific period of time (such as weekly or monthly) according to your pay schedule. If income and expenses vary from week to week or month to month, prepare a new budget each and every pay period, until you can become stable.

Finally “If you fail to plan, you plan to fail”.