Foundations of Finance

It’s easy to SAY you want to have a strong financial portfolio, but where do you begin? Financial success lies in the simplicity of money management. Smart spending, wise investments, saving for the future, not building up unnecessary debt. Unfortunately, too many people start out with a crumbly foundation. We need to remember the basics. Today’s focus? Plan a budget and stick to it!

The one financial advice that was pounded into me as a child and through my college years was to stick to a budget. My parents had four children when my father graduated from law school. During those school days my mother worked as a nurse and supported my dad. Four kids and law school on a nurses salary seems a little overwhelming-especially since she didn’t work full time; she had a family to take care of! I asked her once how she did it. Her answer? They stuck to a budget.

My parents had five white envelopes. On the front of each envelope was a category: Rent (or mortgage payment); Insurance; Utilities/other bills; Entertainment; Miscellaneous. After getting a pay check they would get the exact amount of cash needed to fill each envelope with the appropriate amount. They never went over their allotted budget and were able to make it through school with very little debt.

When I started college I followed a very similar process. Granted, there are better ways to manage a budget these days than to put cash into an envelope, but the same idea still applies. I used my banks online program to create max amounts I could withdraw for certain purposes. I kept track of those max amounts and wouldn’t withdraw more than my budget allowed. The program would allow me to see what I’d spent on a particular category so far that month.

Sticking to a budget definitely requires discipline, but is well worth it. Look over your previous months spendings, see where you could cut back and give yourself guidelines. If you happen to go over on your budget one month (try REALLY hard not to!) then you can adjust the next months to balance it out. Remember-just because you have a budget doesn’t mean you can’t do “fun” things. That’s why you have an entertainment “envelope”. How do you begin to start that amazing financial future of yours? Plan out a budget and stick to it!