Just for fun I am doing a mini series on the 10 common reasons why people get it wrong when it comes to Cash Flow Management.
I have taken some content from my ‘Simple Wealth Steps‘ course and broken it down into short ‘thought provokers’.
We’ve had the first two already. That was “Having No Targets” and “Wrong Starting Point”.
Today we are up to number three. I think everyone will identify with this one!
3. Lack of Information
Not much was ever taught at school about budgeting so most of us have had to make up our own systems and methods. The most common budget format that people use is an income vs expense ‘bean balance’ type budget.
You probably know this one. The total of all your incomes is calculated and then an attempt is made to average all your expenses down to match the cycle of the income (e.g. weekly). This allows a comparison of income and expenses per cycle to reveal whether there is more income or more expenses.
At best this information will tell you whether it is possible to make ends meet, but it does not tell you HOW TO MAKE ENDS MEET. You soon find out that knowing something is possible does not mean it is easy to achieve and this method fails almost every time because there is not enough useful information.
Yes you may prove paying your bills is possible, but that’s next to useless if you don’t know how to pay them!
Most people try the ‘bean balance budget’ format a few times, have no success, and then conclude that they are no good at budgeting.
From that point on it becomes a self-fulfilling prophesy. They say they are no good and therefore they are not. It’s all downhill from there!
It is when you realise that you need to know HOW to make the balanced numbers work that you have a chance to take control.
I’ll give you an example.
Compare a document that says.
Your car’s is capable of going 100 KPH and it is 100Km between town A and town B so you can easily be in town B in an hour.
With a document that says…
To get to town B by 4pm, start at the post office at 3pm and drive 100m towards the town hall where you need to turn right into 2nd Street and travel on for 2.6km till you come to the 4 lane highway. Turn left onto the highway and stay on that road for 50km. When you see the black stump on the right you have exactly 20km to go to the exit to….. and so on!
A road map with checkpoints vs a statement of the possible end result!
I gave number 3 the title “Lack of Information” but for a lot of people it is more like “No Information” or “Wrong Information”.
You get bombarded with bills and payments and all sorts of expenses that seem to suck up your money leaving you with nothing left over for the things you really wanted to do. And it happens week in week out till it wears you down to the point where you really start to feel stressed and unmotivated.
If there is one thing that my Simply Budgets software customers tell me over and over and over again is that it takes all the stress out of their finances. The information it generates is like having your own personal money “road map” to follow with regular check points that allow you to know you are OK or ahead of target or falling behind and needing to catch up.
If you feel like number 3 is causing you grief, have a look at the info at https://simplybudgets.com.au/simplybudgets
If you already have this covered give yourself a big tick for number 3!