“You just need to learn how to budget…”, you have been told over and over. Well now I am telling you that you absolutely do not need to learn how to budget! You need to learn how to do more than budgeting. Google’s definition of a budget is “an estimate of income and expenditure for a set period of time.” This is actually not even the first step in managing your finances successfully. The problem with budgets is that we apply them to an unknown future and almost anyone that really needs a budget is going to run into financial complications in the future. If you had more money than you needed you wouldn’t be on this webpage but on one about how to maximize your investments or about which luxury car is the most sought after lol. So what do you need?
You need to Master your Finances.
Well wouldn’t getting really good at budgeting help me master my finances? The answer is it would if you knew exactly what you wanted in the future, had time to create and update a detailed finance projection regularly, could accurately predict house and vehicle repairs, didn’t have any dependents and followed it perfectly. Does that sound like your life? If not then you have come to a good place. Also, unlike budgeting, the skills to master your finances will be just as useful when you are a billionaire as when your are hundreds of thousands of dollars in debt. Also, you aren’t becoming a master of finances as much as mastering your finances. This is opposed to letting them master you. Everyone falls into one of the two categories, you either make your finances work for you or your dreams and desires fall victim to your poor financial situation.
One thing I would like to say before I continue is that some people are entirely unable to help themselves financially. A tragedy of our society is that many people are born into an environment that royally screws them over and robs them of opportunity. My heart breaks for those people. However, many many people think they are in that victim category when actually they have firmly driven themselves into their own hole in the ground.
What do I need to do?
Mastering your finances requires that you know what you want – not what you feel like on any given day – but what really causes you grief if going poorly or what really makes you passionate about life. The first step in managing your finances successfully has nothing to do with money but everything to do with priorities. You will never follow a finance plan that your heart isn’t behind fully. Life is hard and we are all looking for an escape which usually isn’t free. The first step is to learn what is most important to you. The second step is to make a list of priorities. This list consists of almost everything you want to spend money on practically. The tricky part is the list needs to be ordered.
Now the real work begins. If you know what you want, then you need to be able to accurately predict at least one months cash flow into the future. There are a few ways to do this that I am going to teach in my Finance course on Udemy. This is the part that is similar to a budget except you don’t waste your time trying to predict long term. The one catch is that in order to even accurately predict and prioritize spending over one month you still need to have budgets for specific yearly expenses. Setting up your cash flow prediction so that you can easily update/extend it into the future is one of the keys to mastering your finances. Your plan won’t succeed unless you can respond quickly to life’s changing demands. If updating a plan takes too much work in your mind then it will almost immediately become outdated. If even a part of a finance plan is outdated then you probably won’t follow any of it.
Spend Money In Order of Your Priorities
This is the biggest key of all. Spending your money based on what is important to you will free you up to live how you want, will motivate you to follow your plan and will increase your health by reducing your stress related to money. Heck it might even save your marriage since a significant percentage of divorces are related to finances.
Check back soon for a discount to my Udemy course I am making that will practically show you how to implement the above steps. By the way, going through these steps is hard but not as hard as realizing one day that you never achieved your dreams because you were mastered by your finances! Make it easier on yourself and invest your money and time letting me show you how I learned this the hard way so you don’t have to spend years with failed budgets.