Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment. Command them to do good, to be rich in good deeds, and to be generous and willing to share. (1 Tim. 6:17-18)

Thursday, January 20, 2011

Budget Course Corrections

Let's Review

In my last post on 5 Steps to a Successful Monthly Budget Plan, I gave you a detailed breakdown of the 5 steps that I go through each month as I work out my budget plan. These five steps include the following:
  1. Create - you need to create a specific spending plan before the beginning of each new month.
  2. Implement - you need to determine how your spending is going to flow, whether it be checks, electronic transfers, debit card, or cash. For the cash envelope system, you will need to determine how much cash you need to fund your specific budget categories and in what denominations you need that cash. Then, you need to make a bank run and get your money.
  3. Review - you should check on your budget progress at least one time per month (most likely mid-month) to see if you're on track with your plan.
  4. Fix - you may need to re-adjust budget numbers and cash flow spending as needed when overspending takes place or unexpected expenses occur.
  5. Implement - after you have fixed any budget problems during the month, you will need to re-implement your cash flow plan and make adjustments to your cash envelope system.
Stuff Happens

Since I have been doing a successful monthly budget for a number of years, most of the time it runs on autopilot. I rarely think about it or look at it, except during my mid-month review. Occasionally, though, stuff happens that can throw your budget off. You may accidently overspend in a certain category. You may receive an unexpected expense that you have not planned for. Murphy's Law states that "Anything that can go wrong, will go wrong." Things will happen in your cash flow plan that will cause you anxiety and frustration. Your job will be to work through and around the problems. In this post, I would like to focus on Steps 4 and 5 of a Successful Budget Plan - fixing the problems that come up in your monthly plan.

Adjusting On the Fly

So when "stuff happens" in your budget, what should you do? Should you just wring your hands and give up on trying to make your budget work? No way! Anything that's worth doing well is going to have its own unique set of difficulties and challenges. I think the better question to ask yourself is "do I have the strength of character to work out these problems as they come up?"

Since I get paid bi-weekly, I feel blessed that this affords me an opportunity to make corrections to my budget "on the fly" as problems arise. The following is a list of five steps that I take to fix the problems that come up each month in my cash flow plan.

5 Steps You Can Take To Make Budget Course Corrections:
  1. Pray. If you have gone through Financial Peace University, you're familiar with the Dave Ramsey line that "prayer really works." Financial challenges will arise that we try really hard to fix on our own. I believe God honors that, and He wants us to be hard-working, diligent managers of His wealth. But, He also desires a deeper relationship with us. He wants us to go to the next level in our faith and reliance on Him through times of difficulty. Before working the problem, why not start with the source of everything in the universe? Go before the Lord in prayer and ask Him to help you by supplying you with the wisdom and resources necessary to get through your financial difficulty.
  2. Hold the Line On Spending. I don't think anyone enjoys self-discipline or restraint, but if you want your budget to be balanced for the remainder of the month, then you will need to "tighten down the screws" of the discretionary spending categories of your plan. If I enter the first or second week of a month and realize I'm having some budget problems, then I will purposely restrain my cash spending. I will do my best to have cash left over in my envelope system by mid-month or month end so that I don't need to get as much cash the next time I go to the bank. I sometimes even go to the extreme step of pulling out some of the cash in my envelopes and setting it aside until the next pay period so that I'm not tempted to spend it. Who says that just because you have the cash, that means you need to go out and spend it?
  3. Review the Monthly Budget. As spending problems come up during the month, I will pull up my budget spreadsheet on my computer and scrutinize all the categories, especially areas of discretionary spending.
  4. Re-adjust Numbers. In order to balance my budget, I will re-adjust any discretionary spending categories that I can. If I can push any spending into the next month, I will, and then worry about how to make that work out in the next month's budget plan.
  5. Look for Additional Resources. Look for opportunities to increase your cash flow for the month, whether it may be selling some stuff around the house, overtime, working a part-time job, or picking up some side work in your field of expertise.
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