The word budget is a four-letter word to many, but effective budgeting is a misunderstood and under-appreciated financial planning tool. A budget is a tool to create financial discipline (where there is often none) and to advance your priority goals in life forward. A budget can help you visualize and understand the concept of matching the timing and amount of your cash flows. The typical budget will fail, however, if prepared outside the context of your overall wealth plan that makes the budget real. When your budget inevitably gets tight, where’s the will to abide by it when there is no greater purpose that you are working to achieve?
Even well-intentioned people spend blithely only to look back and get frustrated each month to realize their spending limits were compromised. One of the benefits of an effective budget is that it can shine a spotlight on future cash flow problems and identify opportunities to make better use of your income.
To create a better budgeting experience, Mvelopes® developed a web-based electronic envelope budgeting system that takes a forward-looking approach to personal budgeting. If used correctly, this budgeting tool will show how much money you have left in the month to spend on golf, farm toys, and grandchildren – before you spend it! Another effective technique is “artificial” budgeting – payroll reductions for retirement savings and bank account drafts for other investment savings goals - and then spend down the remaining cash with a clear conscious.
Our experience has proven that good financial discipline is the single biggest difference in financial success or failure. If you design a realistic financial budget around their prioritized goals developed in your Wealthcare plan - and then follow it –you will gain control your cash flow instead of it controlling you.
