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The mistake of living without a budget
If you have no budget, which is in effect a short-term plan, you are in reality planning to live as a responder. We've all seen parodies of the person who "saves" thousands of dollars buying things on sale that are not needed. But impulsive or responsive spending is not a gender-specific problem. Women tend to buy responsively while shopping - clothes cosmetics, shoes. But men are equally "guilty" of being "responders". The problem is, men tend to go for the big ticket items - boats, cars, sporting equipment, investments, and second homes.
The whole idea of living on a budget is distasteful to almost all of us because we view it as constraining. Yet a budget can be one of the most financially freeing things you can have. A budget guides you and tells you when you are on course, just as a road map does when driving in an unfamiliar area. Not having the map creates fear, perhaps frustration, anxiety, and wrong turns. The same can be said about living without a budget.
A budget is one of the best tools to help you generate a positive cash flow - and a positive cash-flow margin is absolutely essential if you are to accomplish either long-term or short-term financial goals.
Without a cash-flow margin, you cannot save in order to meet long-term goals or accomplish any of the four other short-term goals - tax reduction, increased giving, debt reduction, and lifestyle support.
Today's Bottom Line
Debt reduction and lifestyle reduction both have an immediate dollar-for-dollar impact on the cash-flow margin, thereby giving the flexibility to accomplish many other goals, such as tax reduction, increased giving, and accumulation.
This article is adapted
from Master your money
