The Myth of
the Household Budget
Household
financial advice starts with the budget.
Given the stunning amount of household debt that’s around today, we may
want to rethink that one. It’s like
using a diet to address the obesity issue.
Not only does it not work, but it suggests that the inability to follow
either the budget or the diet is the fault of the client and not the counselor.
There are a
few reasons that budgets don’t work:
They give the
householder permission to spend up to the budget limit each month, even if they
don’t need to
They can’t prepare you
for the catastrophes that sink most budgets – like the $3,000 transmission
repair
In a lot of cases you
simply can’t live within the limits the budget sets out
The savings portion
may be too small
In summary,
concept of a household budget is just too rigid to accommodate the average
family’s complicated life. Instead you
should worry about being further ahead at the end of every month (to adequately
prepare for that impending $3000 transmission repair). And that means every purchasing decision
should be reviewed with the monthly goal in mind.
Frugal
people think about every purchase, and because they do, they wind up purchasing
less. So at the store, they think about:
1) if they really need something and; 2) how little they can get away with
paying for it.
Frugal
people save, and they like to watch their savings grow. They sleep better at night knowing that when
the transmission fails that they can pay for it. More importantly, they know that each moth
their net worth increases. And that
increase in net worth is the goal, not staying within the budget.
The first phase of getting a person/family finances under control is writing?tracking where the money goes...Most people didn't have the foggy idea where all the money went....All they know is for some strange reason theyare "short" money....Thus after they see where the money goes a "budget" Thank U
ReplyDeleteHere is something i did in past years when living pay check to pay check......On payday wait 2 days till you "touch"(use to cash the check) then if you can do that add 2 more days till you "touch" the money....Soon you can be a couple pay checks ahead...Two days should hurt that much...It will get a lot of people out of that "panic" mode of having to spend the pay check....I used to do 3 days but maybe you can only do one..Either way this helps build frugal Thinking on which I think the point of this site is...
ReplyDeleteThanks for stopping by and taking the time to leave some comments Frank. And I agree about the waiting part.
ReplyDelete