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Blog: Minimizing Financial Clutter
 Got a Budget? Get a Plan First!
If you are a regular reader of this blog, you may have noticed that I've been "missing in action" for the past few weeks. My youngest child just graduated from college and was commissioned as an Ensign in the United States Navy. Between the graduation festivities and work, I admit that I, the Financial Clutter Blogger, did not budget my time adequately to write my weekly blog.
Speaking of budgets, I've noticed lately that many of my clients don't have them either. They do not budget how they spend their time, and the result is too much stuff and paper clutter. And they don't budget for how they wish to spend their money. Their lack of a spending plan causes my clients all sorts of problems: bounced checks, unpaid bills, arguments between spouses, and having "more month than money",
Back in the Stone Ages, I learned in business school that "budgets fund programs". That means that you have to have a program – a plan, or a set of financial priorities – before you can create a budget. A budget literally "puts your money where your mouth is". You first decide on the things that are most important for you to purchase, and then you assign a dollar amount to each of your priorities.
Another concept I remember from b-school is "opportunity cost" - what you will forego when you choose one priority over the next best option. If you have only $5 in your pocket and must choose between buying a gallon of gas and a Starbucks latte, the option you don't choose is the opportunity cost.
I think I see a pattern emerging. We fool ourselves when we believe that when we fail to plan, there is no opportunity cost. But in fact, when we spend either our time or our money before we plan how to spend it, we always do give up the possibility of spending our time or money on something else. The fact that we don't make those choices intentionally doesn't mean that we haven't, in fact, made choices.
If you have no plan, no intentional program for how you spend your time and/or your money, the place to begin is to keep track of how you are actually spending them right now. It may be an eye-opener for you! Keep a journal for a week. Write down everything you do and how much time you spent on each activity. Similarly, keep a log book of every penny you spend for a week. At the end of the week, add up your "spending" by category: How much time did you spend working, watching TV, exercising, volunteering, etc.? How much money did you spend on groceries, dining out, gas, electricity, etc.?
Are you walking your talk? Do the ways you spend your time and money reflect the priorities you say you have? If not, then it's time to make a plan to align them.
posted on: 5/25/2008 11:30:00 AM by Katherine Trezise
category: Finances
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Minimizing Financial Clutter
by Katherine Trezise
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About Katherine:
Katherine Trezise is president of Absolutely Organized, based in Baltimore, MD. She is president-elect of the National Study Group on Chronic Disorganization. Katherine holds a masters degree in business administration, is a Certified Professional Organizer® and a Certified Professional Organizer in Chronic Disorganization®. Absolutely Organized specializes in helping people organize their homes, paperwork and financial records to make room in their lives for the things, people and activities that are most important to them.
Katherine's Website:
www.absolutely-organized.com
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