| Budgeting and accounting are both very boring | | | | I know that this is very boring. And I personally |
| subjects when it comes to exercising them in real | | | | find this exercise very boring myself. I suggest |
| life to plan your finances. But budgeting and | | | | you find some alternative methods of budgeting |
| accounting for the domestic consumption is | | | | your expenses like "Pay Yourself First" method or |
| directly related to achieving your financial goals. | | | | "Budgeting on Excel spread sheet or *UPDATE* - |
| Tabulating and charting your monthly and annual | | | | Quicken |
| expenses in each and every category helps to | | | | But in any case, budget your finances. |
| control your expenses. This also reduces the | | | | How Much Money Do You Spend? |
| probability of allocating too many dollars to those | | | | Do You know How Much you and your family |
| products and services that are not really | | | | spend each year on Food, Clothing and Housing? |
| important. | | | | Most of the people in this world will answer this |
| If you want to become financially free and | | | | question with a -"No". But most of the millionaires |
| wealthy then you must budget your expenses | | | | and wealthy people will answer the above |
| like governments and business all around the | | | | question with a - "Yes". Remember that I am not |
| world. You must keep track of each and every | | | | talking about Mortgage payments or car loan |
| dollar you earn. | | | | payments you make every month. |
| If you can manage to reduce unnecessary | | | | Most High income and low net worth (Upper |
| expenses then you can divert that money | | | | Middle Class) people will say that they remember |
| towards buying some appreciating assets (Stocks, | | | | each and every important transaction that they |
| bonds, gold, mutual funds, real estate, online | | | | make every month, so why worry about small |
| properties, etc) which appreciate in its price over | | | | expenses such as food, clothes, and mobile bills? |
| time and make you rich and financially free. | | | | And these people will also argue that "I am saving |
| Budgeting and accounting are the subjects that | | | | on taxes by taking higher mortgage loan so I |
| are not taught well in our schools and colleges. | | | | don't need to budget because after all I am |
| And that's why most of the people struggle | | | | saving on taxes at the end of the year." |
| financially. Both of these skills are important skills | | | | Well, these are just excuses. Did you know that |
| to achieve your financial goals. | | | | according to the survey on Millionaire households in |
| People who are wealthy today are typically doing | | | | USA, almost two-thirds of households know |
| both of these exercises for their Business and | | | | exactly where each dollar that they earn goes |
| home every month, for years and till this day to | | | | every month? |
| maintain their wealthy state. And they teach their | | | | I want to stress the importance of budgeting. It is |
| children these 2 basic subjects of money | | | | a very important exercise. Most of the people |
| management as well. You should begin to practice | | | | really don't know what they really spend their |
| these habits early; it does get easier each time | | | | money on every month. |
| because you'll begin to notice your expenses. | | | | This is very bad in the long run. If you want to be |
| And that's why their children are more financially | | | | rich, financially free, and wealthy, then you have |
| independent than the children of high income but | | | | to plan your every expense. You should take |
| low net worth group of people (Upper Middle | | | | note where that dollar of yours goes every time. |
| Class). | | | | Budgeting: The Long term benefits |
| What are your Financial Goals? | | | | Long term Benefits of Budgeting |
| If you ask a typical upper middle class person (I | | | | When it comes to budgeting, all the financial |
| am talking about High Income, low net worth | | | | planners and advisors will tell you How important |
| group of people) about their financial goals, most | | | | budgeting is and why everyone should do it. Now, |
| of the people will tell you the following. | | | | all of us know that budgeting is a very important |
| - Minimize the Tax burden by taking large | | | | financial exercise but how many of us seriously |
| mortgage loans | | | | do budget? |
| This is the prime financial goal of people living in | | | | Not even 1% of people get involved with |
| USA and worldwide. They think that taking larger | | | | budgeting. In fact, let me tell you my own |
| mortgage loans is a smart idea. Because it will | | | | example. I myself, run a personal finance blog and |
| reduce your tax liabilities and thus, you will save | | | | advising people to budget their own finances. But |
| on the tax. | | | | Honestly speaking, I personally hate this exercise. |
| One of my friends has recently taken a large | | | | Because it's so boring and nothing is glamorous in |
| mortgage loan to save on taxes. But according to | | | | it. |
| me, if he would just budget his household's | | | | So What I do is, I create the environment of |
| monthly finances then he will easily save more | | | | economic scarcity for me. I use "Pay Yourself |
| money rather than saving on taxes every year. | | | | First" Formula. It means that every month I |
| Most of the people focus on larger things. But | | | | invest 10-15% of my Income for long term |
| they don't focus on the smaller expenses. If you | | | | investing. And I live with the rest of the money. |
| deduct few of your small expenses every year | | | | I advise you to find some less boring ways to |
| then you will save much more money than your | | | | budget your finance like "Pay Yourself First". |
| interest payment on your home mortgage (Only | | | | Spread sheets, Quicken, or something else. |
| Interest payments on mortgage loans are Tax | | | | Because there are long term advantages of |
| free). | | | | budgeting and it's much easier to budget if you |
| What I advise people do every month, is to sit | | | | visualize the long-term benefits of this work. |
| down with your spouse or family and write down | | | | There are long term benefits of Budgeting. So |
| each and every category's expenses on a paper. | | | | You have to find alternate ways to budget your |
| Make category for each and every expense and | | | | finances if you find it boring. If you have other |
| write down expected spending in front of each | | | | methods to budget finances, then please share |
| category and compare that with actual expenses. | | | | them with the readers. |