How to Practice Good Budgeting Habits: Part 2 

Previously, in Part 1 of this blog post, we wrote about finding a role model, changing your outlook, and cultivating discipline to practice good budgeting habits. Read on to find out how setting goals, developing a system and living below your means are key in being financially successful.

Plan your Spending and Know Where Your Money Goes

Once you have cultivated discipline, the next step is to set some goals and prioritize the things you want. This is an opportunity to start setting aside money for things you may not need yet, but will need in the future. For example, you may start budgeting for long term care after retirement. If you plan ahead and keep track of your spending, patterns start to emerge that tell you where problems areas exist.

Develop a System

There are primarily two ways to practice good budgeting habits. One is with a paper envelope system. Traditionally, you budget with envelopes by putting a set amount inside a pouch designated for each budget item. The other is digitally using software programs and apps. You Need a Budget (YNAB) is probably the best budgeting software we’ve seen. It has features that allow you to track and set aside dollars. It even has an ebook on budgeting you can download. You can also use Mvelopes software or Mint.com, both of which are free.

Live Below Your Means

In my 23 years of looking at people "financially make it" and really seeing what their lifestyle is, what their income is, and what their assets are, the people that are successful live well below their means, and you would never know it. Dr. Thomas Stanley, author of “The Millionaire Next Door” uses a phrase I like – big hat, but no cattle. There are a lot of Texas ranchers that were all about the show with a big hat but no cattle.  In his book, Dr. Stanley discusses over 20 years of research as a teacher at Atlanta’s Georgia Tech.  He profiled the well-to-do and how they live, and what he found was that successful people didn't live in a fancy house. They lived in a very modest house and lived below their means.

To make a paradigm shift in your financial situation, changing your outlook, cultivating discipline, developing a system, finding a mentor, and beginning to practice good budgeting habits are required. Having money will not solve all of life’s problems, but being financially secure can give your family and loved ones peace of mind and help them reach their true potential.

Kemp & Associates is an independent retirement services firm.  Since 1992 we have specialized in helping our clients prepare for retirement, assisting them through the retirement process and into their post-retirement years.  We believe in providing personal, professional, and prudent financial planning to each client. Feel free to contact us for more information or to inquire about our services.

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