My fourth rule of budgeting: Budget for the future, not for the past!

by Nick on August 1, 2010

I already wrote a bit about this here, so I won’t get too much into it again.  But it basically boils down to this:  Don’t spend money on something in “month one” that you’ll see in the budget for months to come.

It happens all the time.  I’ve done it.  You want to go on vacation in September.  In July you buy the plane tickets for $1,000.00, figuring you can just put $100.00 per month in your budget for the next ten months.  Then in February, the vacation is long gone, you’re tired and you want to plan another vacation for June.  But you’re still paying for the first one!  Ouch.  So what do you do?  This one may require a little bit of catching up.  It may require skipping one vacation.  Or it could be accomplished with some aggressive budgeting and simple living for a bit.

If I had items like this in my budget I would treat them like credit card debt.  I would attack them with a vengeance.  Instead of budgeting the $100.00 per month for the ten months (i.e. paying the minimum on a credit card bill), I would get rid of it as fast as I could.  How?  By spending less for as many months as I could to “pay myself back” the $1,000.00.  Once I caught up I would then save up for my next vacation – as fast as I could.  I would set a target – say $1,000.00.  Once I saved the $1,000.00 I would plan a vacation and pay for it – right away.  Trust me, you enjoy a vacation much more when you don’t have months of payments (or budget entries) awaiting you when you get home.  (It’s like the January credit card bills that many people dread after a great Christmas!)

So stay ahead of your money!  Budget for things in the future.  And buy “stuff” once you have the money – not credit – to do so.  You’ll be happy you did. 

How do you work vacations and other big-ticket items into your budget?  Do you think you could never get or do anything if you tried this?  You’re wrong.  You’re probably just behind a bit.

So until next time – put the credit card away and slowly step away from the mall!

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