After talking with a lot of people, I have found that most families think they are budgeting. It turns out, they’re not actually budgeting. They‘re just paying the bills. What’s the difference?
Paying the Bills
Tell me if this sounds familiar. You get out a notebook and start writing down all your bills:
• Cell phone
• Credit card
• Student loan
• Car loan
• …and so on
Next to that list, you write down how much you owe on each bill. And after paying online or getting a check in the mail, you mark off each item to remind yourself that the bill is paid.
Although this is a very responsible way to keep on top of your bills, it’s not actually budgeting.
What’s the Difference?
Is paying bills a part of budgeting? Absolutely!
But in our everyday life, we spend a lot of money that doesn’t get billed in the mail. Groceries, fuel, movie tickets, and fast food are great examples. Are you keeping track of all of these items?
What Budgeting Looks Like
Zero-based budgeting means knowing how much income you will have coming in for the month and assigning every dollar a mission. Creating this plan helps to make sure your family is not overspending, and if you’re lucky enough to have extra money, you can put it to work by paying off extra debt or saving for something special.
When you budget, you create a plan for your money. This is how you start taking control of your finances.
If you read this blog and have realized you actually just pay the bills rather than budgeting, it’s time to learn how. Be sure to contact me for coaching sessions or check out my events page for upcoming workshops.