Keeping Your Head: Home Budget Psychology

Making a home budget and sticking to it can be a "head trip." While other articles on this site focus more on the nuts and bolts of managing your money, this article will focus on the psychological factors you should be aware of that tend to play heavily into personal finance management.

A Better Reason

Most people think of a home budget as a way to help make ends meet. And while that may be true, it's not enough of an incentive for most people to take the time and effort to create one and, more, to stick to it month in and month out. There are greater incentives to managing your money with a home budget, the greatest one being, in a word - wealth.

Designing a home budget that balances income and expenses is a nice (and necessary) first step. But it's not the final step in personal finance management. Far from it! Because once you're clear on how much money is coming in and where it's all going, you can start to find ways to create a surplus.

A balanced home budget without a line item or two for savings will have you living hand-to-mouth for the rest of your lives. Having a surplus of money - even a little - at the end of each month is the only sure-fire way to create wealth (at least, the only way that's actually within your power).

How do you design a surplus into your home budget? Simple:

Make more. Spend Less. Save More.

Any of these by itself will make a noticeable difference. Do all three together and you've built your home budget into a foolproof wealth producing machine.

For help with this, home budget software tools like Budget Forecaster for Windows, Expense Tracker for Windows, Budget Forecaster for Excel, and Expense Tracker for Excel lets you try out different scenarios so you can see how making certain adjustments can affect your overall savings over time.

Keep Your Head

Personal finance management is a tricky business. It's hard to keep your cool and remain clearheaded and objective when managing your money as it's so easy for emotions to come spilling into the mix. Thinking about working more and/or spending less is enough to keep anyone up at night.

That's precisely why home budget software like Budget Forecaster and Expense Tracker are such valuable tools. Because even when your emotions seem to be taking over, your home budget software will be there painting an unemotional picture based on the facts and just the facts.

And speaking of tricky business, remember...

It's Your Business

That is to say, your home budget is your own personal business - nobody else's. Don't make your personal finance management anybody else's business. And don't let anybody else make the way you spend (and save) your money their business.  Even if you choose to work with a financial planner, in the end, your money is your business and responsibility. 

When the proverbial "they" said, "Politics and religion make strange bedfellows," they forgot about personal finance management. Everybody is into managing their money differently, and what works for them may not work for you. The last thing you need is somebody (other than your partner and a financial manager, maybe) giving you their opinions on what you should do with your money - especially if their advice is inappropriate for your circumstances and could wind up being detrimental to your home budget.

Well-intentioned peer pressure can still be ill-founded. Don't let somebody else's confident coaxing push you into hasty and unwise decisions - whether it's keeping a piece of property you were planning on selling (or vice-versa), treating yourself to a second honeymoon, or upgrading/downgrading your car - that could have detrimental effects on your personal finance management.

Opinions are like noses - everybody has one and they love to stick it where it doesn't belong, most often in your private business. Keep your home budget your private business, and then try your best to keep other people's noses out of it.

Using home budget software, like Budget Forecaster for Windows, Expense Tracker for Windows, Budget Forecaster for Excel, and Expense Tracker for Excel, helps you greatly in keeping emotions out of the equation.

It's Their Business Too

"They" being your family. When it comes to your spouse and your children (those old enough to understand, that is), full disclosure of your home budget is highly recommended.

That's not say you necessarily need to share all the intimate details of your income and expenses with your kids, but making them aware of what a home budget is, that your family has one, and that it affects all of you, is important. Your children should know that you have devised a plan for managing your money with certain family goals in mind (like yearly vacations together, you and your spouse's retirement, college educations for the kids, etc.) and with requirements on every family member to help make it work.

Sacrifices are easier for family members to make when they know that it is all part of a cohesive and carefully thought out personal finance management plan designed to keep all of you healthy, safe, and happy. Include your family in managing your money. Have them participate in implementing, adhering to, and adjusting your home budget as necessary. Your home life will be happier for it.

Kenneth C. Kelly is the President of Strativia, a financial management software development and services company specializing in applications for personal and business use.  Strativia is the developer of Budget Forecaster, a sophisticated home budget and personal finance management software package.  Website: www.strativia.com. Contact: info@strativia.com.

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