The 90-Day Pre-Budget

dw_piggyJacquette M. Timmons is the author of "Financial Intimacy: How to Create a Healthy Relationship with Your Money and Your Mate," and founder/CEO of Sterling Investment Management, Inc., an investment education and financial coaching firm.

When budgets lie
I don't believe in traditional budgets, and here's why.

Whenever I teach a financial workshop, I ask participants, "Raise your hand if you know how much money you spent last year and on what items?” Very few people raise their hands. And that's precisely why budgets don't work.

Budgets aren’t about numbers—they are about patterns and choices. Few people are aware of their true spending patterns, thus their efforts to live by a budget often fail.

What most people really need: a pre-budget.

Before you build a budget

  1. Get to the truth about your money habits. Track your spending—with a notebook, spreadsheet or software—for 90 days, uncensored. Don't just focus on your bank and credit card statements: Analyze your cash spending, too.
  2. Ask yourself: “Does my spending reflect my priorities? Where do I want to make adjustments?”
  3. Use the pre-budgeting period to compare your financial ideals to the reality of how you handle money. How might you construct a budget based on your strengths as well as your weaknesses?

Maybe you're a great saver, but a frivolous or emotional spender. Maybe you're disciplined on weekends, when spending risks run high—but you're careless during the week.

Bottom line
The 90-day pre-budget system gives you a reality-based foundation for your financial plan—which is why it has a higher stick-to-it success rate. Tell us how you plan to rebuild your budget.

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