3 (More) Reasons Why Budgeting Does Not Work

It doesn't matter how much money you have, without a good cash-flow plan, it will not help you achieve the goals in life that make you happy. Thus it is important that you are able to manage your finances in ways that support your wealth building and the lifestyle you desire. To get started, most advisors recommend that you create a budget.

Budgeting refers to a method which sets limits on the amount of money that you are going to spend over a certain period of time. Dave Ramsey describes it as, 'budgeting is telling your money where to go instead of wondering where it went'. Budgeting is a great idea, however, although it is a one that most advisors will tell you to adopt, it often does not work, and here's three reasons why it doesn't.

First of all, budgets only focus on your expenses. It does not attempt to hold you accountable to your income, only to your spending. This happens to be the biggest downfall of budgets, because you can only cut back so far before you must start focusing on bringing in more income. In order to build wealth, you must master your cash flow. Your cash flow is the difference between what you bring in, and what you spend. If you spend less then you bring in, you can begin to build wealth with the excess.

The second reason budgets don't work is that when they are made, people tend to set unrealistic targets. It's much easier to estimate your future expenses by guessing, than it is by looking at what you actually spent over the last six months and projecting that forward. If the future looks bleak, it's easy to fudge with the numbers to make them work instead of facing the reality. So now you may have a budget that works on paper, but when you actually try to use it, there's probably a slim chance that you'll actually stick to it and make the cut-backs you proposed in your budget.

The third reason people often fail with budgeting, it makes it makes them feel guilty. It's like going on a diet, then sneaking that delicious desert. Once you've broken your promise to yourself, you have to live with the guilt of not following through. So, the next day, when you want that desert again, it's a lot easier to take it. And eventually, you stop dieting because you get tired of not being able to follow through, and the guilt is too heavy to carry.

Budgeting is a method of managing money that has been given more credit than it deserves. It's a good start, but only if you're willing to focus on increasing your earnings, set realistic targets, and stay committed to your success.

Angie M. Grainger, CPA/PFS, CFP(r), Certified Money Coach
President at RETHINK Money Coaching, Inc. Helping people master their money so they use it to transition into their NEW desired ideal life.

Visit my site http://www.49secretsofmoney.com/ and To learn more go to http://www.49secrets.com/.

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Three Reasons Why Budgeting Does Not Work

Over the last few years people have found the need to start managing their money better. They are becoming faced with the reality that, after the economic crisis, they now have to look at where they're spending their money and making choices on how to cut back. For a long time money has proven to be the hardest thing to manage. A budget is a plan that limits and restricts your spending and is meant to be a guide for controlling your spending habits. Most financial gurus rely on budgeting as the starting point for managing your money.

Although many people opt for budgeting as the main method of managing their money, quite frankly, they just don't work. It does not matter if the budget has been made by a professional or by yourself, whether it's for a week or a month, or how big or small it is. Budgets don't work because people know what they should do to, but they often just don't do it. Here are three reasons why.

The first reason that budgeting does not work is that it is designed to be restrictive and depriving. The point is to control your spending so that you can meet your longer term goals. But how motivating is it to always cut back on things you want? It's not very motivating at all. Budgets do not focus on what makes you thrive, they focus on what you need to cut back on. When was the last time you got excited about limiting how much you should spend on eating out, or cutting out the family entertainment? Constantly cutting back can easily build into a feeling of deprivation which will quickly kill any motivation. Imagine instead a plan that allowed you more free time to spend with your family, or more time for the things you love to do. Doesn't this sound more interesting?

The second reason budgets don't work is that they focus on only one side of the equation. In order to be a good money manager, you must manage your cash flow...and that consists of two components; your expenses and your income. To build wealth, you must start by managing your cash flow which means making sure that you have positive cash flow on a regular basis (meaning you have more coming in than going out). When you have excess, you can then decide whether to put that excess in savings or whether to pay off debt. The best and most stable way to continue having more coming in than going out, is to increase your income while keeping your expenses low. You can only cut back so far in your spending, but the amount of income you bring in can be unlimited. If you don't focus on bringing in more money, then you'll never see your cash flow increase and your wealth grow.

The third problem with budgets is that they take way from short term gratification without a suitable replacement. When temptation arises for something outside of the budget, it's very difficult to say 'no'. However, when there's a highly valued long-term goal that you're working toward, it's much easier to say 'no' to that short term temptation. Inevitably, the sense of accomplishment and completion of achieving a long-term goal is much more satisfying than the quick pleasure you get from fulfilling that short-term desire.

So if you want to be a good money manager, then you must start with managing your cash flow. If you focus on keeping a budget, your chances of success will be much lower than if you focus on bringing in more income, especially if that income is coming in because you're working in a field that fulfills your natural skills, talents and passions.

Angie M. Grainger, CPA/PFS, CFP(r), Certified Money Coach
President at RETHINK Money Coaching, Inc. Helping people master their money so they use it to transition into thier NEW desired ideal life.

To learn more go to http://www.49secretsofmoney.com/

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3 Reasons You Should Sit Down to Budget With Your Spouse

They say that money problems are the leading cause of divorce these days. While many couples argue about money, money itself may not be the issue. Everything in your life affects your finances. Some personal finance coaches encourage couples to sit down once a week (later on, maybe more or little less often depending on your own situation) with their spouse and discuss the budget.

What benefits does this offer?

1. Both spouses (and the kids if they are invited) know exactly what the financial situation is for the family and can make decisions accordingly. It is getting close to the end of the month and the dining out budget has already been met, so the family opts to stay in and eat at home this Friday night. Or the kids can see that if they save up for that video game themselves instead of begging Mom and Dad for it, the family will be able to stay on track planning a fun vacation.

2. Arguments can be avoided! If John knows that there is not enough money in the budget to cover a week-long camping trip, maybe he can work out a weekend instead. At the same time, Jane knows that John has been working hard and deserves a vacation, so she can help spot areas where they can cut back and open up a little room in the budget to make that trip happen. Sitting down together to work on the budget reminds you that you are a team. You care about each other's needs and desires, and you work together to figure out how to make them happen. Besides avoiding arguments, you are actually building a stronger, more loving relationship.

3. You will reach financial goals sooner. If you hadn't really considered financial goals before, this weekly meeting is a good place to talk about them. Want to save up for retirement or the kids' college? Want to plan a family vacation? Each week, you can discuss your goals and see the progress you are making towards them. If a large bill comes up (suppose Mikey needs braces), then you can work together to adjust the budget. This is much better than one spouse simply cutting up the other's credit card to cover the new expense, leaving that other spouse feeling undervalued and not respected. I've heard of this happening, and trust me, it's better to talk about it and work together as the team you are!

iMoneyCoach is a financial life coaching company that exists with the goal of helping people reach financial freedom and a life the LOVE! At iMoneyCoach we not only teach the fundamentals of successful money management, but we also look at how life affects and is affected by finances. This is what sets us apart from other financial programs.

All successful athletes have coaches. A personal finance coach can take a look at your situation and see things from a different perspective or things you had not noticed before. We help you get out of debt, teach budgeting that fits your life, and show you how to set meaningful goals. At iMoneyCoach we want you to not only get out of debt but go on to enjoy financial success.

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