Budgeting is Freedom
Before the end of the semester, I attended a seminar about managing personal finances.
One of the speakers was Brandon K. Moore, a certified public accountant, financial advisor and ASU alumnus. He said something that almost blew my mind: Some people think that budgeting can be restrictive, but in reality it actually gives you freedom.
After you have paid for all the things you need to pay and you have saved some, then you can truly do whatever you want with the money or time left.
I had never really thought about saving money from this perspective, but after reading the tips he gave about budgeting, you will probably understand what I am talking about.
Here are Moore’s 5 steps to effective budgeting:
1. You need a reason to budget.
Your reason must be very clear in your mind because without motivation, discipline is impossible.
2. Set a goal, and don’t make it too ambitious.
Your goal must be measurable, specific, attainable and it must have a term. For example, don’t set a goal of saving half your paycheck if the other half of your paycheck is gone just by paying your rent.
3. Understand where you are spending your money.
To track your expenses, technology-enthusiasts can chose from a lot of apps and software, but an old-fashioned notebook and a pencil will work just fine.
4. Develop a priority list.
Now that you know where you are spending your money, decide what is important to you. Paying rent or buying that party dress on sale at Forever 21? Buying books or the new “Call of Duty” game?
5. Budget rewards as well.
Don’t forget to build rewards into the budget for meeting the goals you had set. Rewards don’t need to be expensive — they can be cheap entertainment, going places or doing things. Remember, a budget without rewards has a short life. You are more likely to give up if you don’t have any incentives to keep going.
I also had time for this short Q&A with Moore, so here are his answers to my financial questions.
Can you tell me about some mistakes you made when you were still not an expert in budgeting, and what did you learn from them?
Taking on too much credit card debt and rationalizing the purchases. I learned that credit cards are an evil task master. I now only buy things with cash or my American Express, which is paid in full each month.
What is the biggest achievement you made thanks to good budgeting?
I don’t know if you can applaud budgeting as much as a disciplined financial lifestyle. There were times it would have been easier to use credit, but because it went against my desire to avoid all consumer debt, I stuck it out and found creative ways to satisfy whatever need I had.
If you could give advice to yourself as a college student, what would it be?
Be patient, read and ask questions. Patience is important in business.
Most young people want to be successful immediately. They want to live at their parents’ status now, but even after getting their first real job, they won’t make enough to have the three-bedroom house.
If you aren’t strong in finances, read. Educate yourself. Find a mentor who has been there and ask them questions so you can avoid the pitfalls they have already overcome.