Yes, we have Four Rules. And there are lots of step-by-steps throughout our software, but at a high-level, it is even more simple than all that. When we say “you need a budget,” what are we really saying?
We are saying you need to ask and answer, four different questions, that directly affect one another, but ultimately boils down to one thing:
What Do You Want? > What Do You Have? > What Will You Do? > What Did You Do? = What Do You Want?
What You Want
This is the fun part. Step back, and take money out of the equation really, what do you actually want? You could say a private jet, that’s nice, but realistically, what do you want? You just work that through.
I want to pay my bills on time. Maybe I want to get out of debt or take a vacation. That’s just the first question—budgeting is all about what you want.
It’s not about restriction or cutting way, way back. It’s about getting crystal clear about what you want and ensuring that your money follows suit.
What You Have
In order to get what you want, you have to assess what you have, and how you will get from point A to point B.
A lot of people, when they first set out to make a budget, they say what will I have, what would I have, what could I have, and they budget off of that. But you aren’t dealing in real money and it leads to all kinds of confusion and disappointment and poor decisions.
Do not project massive earnings, huge raises, or a doubling of your income. Just see how much you have in your checking account and go from there.
What Will You Do
When you’re making a budget, after you have determined what you want, and what you have, you must decide what you want that money to do.
Then when you have more, you just go back to the same thing again, what do I want that money that I have right now to do? Go back to what you want.
Based on your priorities and what you have—what will you do? You’ll see all sorts of priorities just naturally work themselves up. You have to pay the electricity bill, and put gas in the car. You could probably survive on what’s left in the fridge. But you also want to set aside a little bit for that vacation. Always going back to what you want.
You are building a plan that is moving you closer to what you want.
What Did You Do
Finally, you always need to be looking back and evaluating—comparing your plan to your reality. This isn’t about guilt or regret. It’s about progress and improvement.
The root word of budget is “budge” which means to move. It’s flexible. Did spending money on X not turn out to be as satisfying as you thought? Maybe you’ll do it differently next time. Did your priorities change? Was there an expense you didn’t account for?
The longer that you budget, and assess and question and adjust, the better you become at knowing what really makes you happy and making the best decisions to help you get you there.
Stay In The Game, Get What You Want
Stop telling yourself that a budget is this mean, scary, evil, hard thing it’s not.
Decide what you want, assess what you have, make a plan about what you will do, and then review what you’ve done and make adjustments. And then do it all over again.
But whatever you do, stay in the game, by establishing with clarity what you really want and using your budget as a tool to facilitate and enable those things. It will help you reach your goals and that’s all I have to say about that.