The Skills of Budgeting

        Most people think that the skills of budgeting are math skills. Math skills are not the primary skills of budgeting because if you can count to 10 and have a five-dollar calculator, you can add and subtract the numbers in your budget.

              As a financial consultant, I have found that there are two primary skills of budgeting. As with all skills, your skill level will build if you are willing to practice.   The first skill of budgeting is the skill of estimating and predicting . The language of this skill is: "What if..?"   "Then what..?"

              To practice the skill of estimating and predicting in your spending life sounds like: " What if we pay twenty-thousand dollars for the new car?  Then what will be the monthly car payment? Or "What if we spend five-hundred on this couch? Then how much will we have left for our vacation?

              Practicing the skill of estimating and predicting in your earning life sounds like: "What if I charge fifty-dollars an hour for my services? Then how much income will I earn?"

              Practicing this skill in your saving life sounds like: " What if I invest three-hundred dollars each month in that fund?   Then how much money will I have at age 65?

              What if is the skill of estimating what you will do–your actions with your money. Then what is the skill of predicting the consequences of these actions in your financial life.

              The second primary skill of budgeting is the skill of setting financial boundaries .   A boundary is a limit. It is a place where you stop yourself. A budget is simply a system of financial boundaries that you agree to keep. This agreement is with yourself and, if you are in a relationship, with your partner.

              The budgeting skill of estimating and predicting is the first skill. Then based upon this information you decide to set a financial limit and you decide to stay within that limit.

              Practicing the skill of setting financial boundaries sounds like, "We have saved three-thousand dollars. We have decided to spend no more than five-hundred on a couch so we will have twenty-five-hundred to spend on our vacation.   And this is how we will keep to these limits." Practicing this skill means staying within the limit that you set and meeting your budget.