One of my favourite quotes is from a motivational speaker named Jim Rohn: “The problem with things that are easy to do, is that they are even easier not to do.”
Not only does this quote apply to my wife’s weekend chore list; it also applies to personal finances. For most people, a mere 10-minutes per month could be the solution to reducing the number one stress in our lives.
The problem with most ‘budgets’ is two-fold. First, they imply that we are sacrificing in order to make them work, when really a cash-flow plan (a friendly way to say budget) is about spending intentionally and not like a drunken sailor with the hopes that you don’t run out of cash before your next paycheque arrives.
The second problem is that worksheets associated with these plans are often way too cumbersome, often containing over 50 categories. Do I really need to decide what I spend each month on gifts, clothes, or at the corner store? No.
There are only two categories you need to look at when you are putting together a cash-flow plan. Recurring expenses, the ones that are pretty much the same each month such as: mortgage/rent, taxes, insurance, daycare, etc..; and Variable expenses which are not consistent: groceries, fun-money, gifts, clothes, etc…
So, here’s the secret – In order to have a successful cash-flow plan, you need to turn your variable expenses into fixed expenses. If you do this, you will know exactly what you have to spend each month.
For example, in my home, here is what we do; My wife and I have a set amount we take out each month for our fun money, and a different amount we take out in cash for groceries. Because we do this, we don’t have to track them.
The only items which require tracking (after we have established an annual budget for each category) are: our vacation spending, what we spend on the kids, and home improvements. It really only takes about 10-minutes each month to track these three categories, because everything else is on auto-pilot.
Jed Levene MBA(FS) 2013 is President, Rockwater Wealth Management Limited and Investment Representative of Quadrus Investment Services ltd. He is a Certified Financial Planner® and holds a certificate in Behavioural Finance from Duke University. His articles on financial planning appear regularly on Orillia Today, Simcoe.com, CEGE Connection is pleased to advise that Jed has graciously agreed to be a repeat contributor on CEGE Connection.