226-378-7748 joe@budgetboss.ca

Monday, March 12, 2018

What Kind of Budgeter are You?

I have run into a lot of different spending styles over my first few years as a financial advisor. There are as many different types of budgets are there are people out there. To be totally honest, the majority of people I meet have no real system. One thing that set me straight with my spending habits was having a written budget. It can be as simple as writing things on a napkin. Often times you will see me scribbling numbers on a small slip of paper. Someone will walk by and ask me, “what are you doing?” It’s me crunching some numbers for the month’s expenses. As I have mentioned many times, how you spend your money will determine your success with it in life. As my main man, Dave Ramsey has said, you must have a written budget if you want to be wealthy. This clarity is what allows you to become a boss with your money. Today I am going to describe a few types of budgeters there are and then tell you how I organize my money in order to be financially fit. Let’s see where you fall in terms of how you budget.

 

The Kramer

Financial Advisor

The fact that this type of budgeter exists really blows my mind. The Kramer is the person who has literally no system at all. This person makes money somehow but never really knows how much. The equation of work to money is lost on this kind of person. What that means is that they don’t fully realize that their lack of time spent at work, (ie. Sick days, vacations, hangovers, straight up being lazy), translates into not having much money. Their theory is that no matter what happens, it’ll all work out. The bills somehow get paid, food gets eaten and the world keeps on spinning. Kramer always seems to get by, but never really gets ahead. Of course, this sort of system, or lack thereof, usually depends on the kindness of strangers. Some key characteristics of the Kramer Budgeter are:

-Laziness

-Forgetfulness

-Impulsiveness

-Carefree

Just a heads up, eventually this form of living catches up with you. The only way it will not is if you are so oblivious to your surroundings that you never realize you have not progressed in life. Either way, those around you will finally catch on and you may find yourself surrounded only by other Kramers or no one at all.

12 Signs You Are Dating a Deadbeat – Budget Boss

 

The George

Financial Advisor

This type of budgeter is a step above of the Kramer, but not by much. George is fairly intelligent and understands that you can’t be completely oblivious to the world around you. At the same time, not a lot of future thought occurs with George. He always pays his bills and takes care of business, but at the same time is never ready for life’s curveballs. Money is put away to get through the week and the month, but beyond that, we are out of luck. Then what happens is a massive setback when life gets in the way. Unlike Kramer, George worries about his finances. Sadly just like Kramer, George doesn’t really do anything to make them better. Work is not taken seriously and the future is always too far away. Some key characteristics of George are:

-Lack of Punctuality

-Forgetful

-Procrastinator

-Laziness

-Worrier

-Slick Talker

George would almost be better off as a Kramer because at least then he wouldn’t worry much about his lack of forward progress. While Kramer doesn’t look past tomorrow, George doesn’t look past the end of the month. Both types of thinking are very harmful.

How to Stop Living From Paycheck to Paycheck – The Balance

 

The Jerry

Financial Advisor

Jerry is much better with his money. He prepares for the present, but also for the future. While it may seem that Jerry is a lavish spender, it is only because he directs his money properly so as to live the life he wants. Jerry dedicates a portion of his pay to the immediate needs of his household. This includes housing, transportation, food, and utilities. Jerry also puts a little bit of money away for a rainy day. When life gets in the way, Jerry simply writes a cheque and covers the expense. He then uses his next pay, or pays, to replenish the rainy-day fund. More importantly, Jerry puts money away for long-term growth. This is money he won’t touch ever, well at least until retirement. This system allows Jerry to handle all three of his cash flow needs: the short-term (monthly), the intermediate-term (monthly to annually), and the long-term (lifetime). Some key characteristics of a Jerry are:

-Thoughtful

-Frugal

-Hard-working

-Ambitious

-Fearful yet confident

-Skeptical

-Determined

Jerry will always do well because he has put himself in a position to do well. He worries about the future but acts on it to make it better. He is aware of the importance of positive cash flow and makes sure he has directed his money in the proper places, so he can stay in the black. Jerry also understands that to live the life he wants, he must work hard and work often.

What Kind Of Spender Are You? – Canadian Budget Binder

 

Which am I?

Financial Advisor

I would say I am closest to the Jerry type of budgeter. I definitely have a couple George characteristics, but I am nowhere near a Kramer. My budgeting system is multi-layered just like Jerry’s. Every week and month I have obligations that must be covered, just like anyone else. I direct cash on a weekly/monthly basis to cover these expenses. One of these expenses is long-term savings. Every two weeks money automatically comes out of my chequing account and is directed to my investment account. It is on me to make sure the money is in there so as not to go in the negative. At the end of the month, one of my important tasks is to monitor the month’s cash flow. This is my emergency fund/slush fund monitoring. A happy month for me is when I can add more to the emergency fund. I love transferring a little at the end of each month into that account. A bad month, which I absolutely hate, is when I cannot add any money to this account. In those months, something came up like an unexpected expense. My monthly budget is rounded up, so I can add to the emergency fund at the end of every month unless something random comes up. It also could be that I just spent too much on fun that month, maybe a few nights out instead of my usual zero. Some key parts of a system like this include:

1) Manageable fixed monthly expenses

You must make more than your fixed bills cost, and not just more, a lot more. I would recommend double, but at a minimum, your fixed expenses should be no more than two-thirds your take-home pay.

2) Consciousness of variable spending

You don’t have to be a hermit, but you definitely can’t be doing something that costs money every night. In fact, in all reality, you shouldn’t do things that cost money more than 1-2 nights a week. I have a rule when it comes to this: If you work the next day, stay home that night. It’s pretty simple.

3) A large buffer

You must put a lot of distance between what anything in your life may cost, and what you have available in case of emergency. For instance, there is no real expense I could face any given month that would cost me more than a few thousand dollars. Therefore, I have an emergency fund/slush fund that has that covered with ease. I continually add to this buffer because I know as I get older, the expenses will get larger and larger.

4) Work a lot

No one likes working a lot, but you cannot get ahead unless you work like crazy. We all know how underpaid we are and how sad the state of our economy is. Not working is not the solution. If it takes working 7 days a week, do it. Everything is getting more and more expensive every year. If you do not make more and more money every year, you will fall behind, dramatically. An added bonus is that you cannot spend money while you are at work, well not a lot at least. So, the more you work, the less you spend.

5) Set goals

You must set goals in terms of savings. Mine are multi-layered. I have emergency fund goals, short-term spending goals and of course retirement goals. This allows you to track your progress and see where you stack up. If you do not set goals, you will have nothing to hold yourself accountable for. That puts you in the Kramer/George realm where everything always seems out of reach. Even small goals keep you in check.

I talk about budgeting a lot because it is the most important thing you can do with your money. It is not about denying yourself fun or excitement, although for some of you it should be. It is about prioritizing your money and putting it in the places that will make your life better. These places include paying the bills, saving for a rainy day and saving for the future. Once you get that down, it definitely should include things like vacations, entertainment, and even a few luxuries. Set up that base and you can then focus on the fun stuff.

“The key is not to prioritize what’s on your schedule, but to schedule your priorities. – Stephen Covey

Financial Advisor

[contact-form to=”joe@budgetboss.ca” subject=”Blog Response”][contact-field label=”Name” type=”name” required=”1″][contact-field label=”Email” type=”email” required=”1″][contact-field label=”Do you have a question about Budgets?” type=”textarea”][/contact-form]

Email – joe@budgetboss.ca 

Follow Budget Boss on – Facebook LinkedIn Twitter Instagram Pinterest Quora

Comments

comments

Contact Us.

Please enter your details below and we will be in touch.

12 + 1 =

BUDGET BOSS

CONTENT

CONTACT

(226) 378-7748

joe@budgetboss.ca

201 King Street

London, ON

N6A 1C9

Copyright © 2018 Budget Boss

Powered by SixFive.

Pin It on Pinterest

Share This