Today I am going to talk about the importance of budgeting in relation to goal setting. For years and years I have set goals but I never used to fully fund the goals.



Before I had a home loan it was pretty easy actually, I would make a list with my family of all the things we wanted the following month. The purchases were prioritized and purchased as funds became available each week. Once I had a home loan, which obviously was one of the goals on our list, I found that our finances were a lot tighter than what they were before and it became a lot harder to set aside funds for the other things our family wanted to have and do.

So what tended to happen was the money was consumed immediately and for longer term goals there was no funding whatsoever. One of my goals was to go motor-racing, and there always seemed to be something more important to do than to put aside money for a go-kart, for example.

It took me years and years to get around to actually buy a go-kart; we would buy this or that or there was something else which needed doing. To actually have a lump sum available, $4000 or $5000 to buy a go-kart never seemed to happen. I think I ended up getting it from a tax refund.

However, what we do now is set aside some money on a regular basis for our longer term goals. Even if this does not fully fund your goal, let's say you wanted to buy a go-kart for $5,000, maybe you put aside $100 a week and in a year, you've got your $5,000; maybe you can't afford $100 a week, maybe you can only afford $50 a week, then at the end of the year you've got $2,500, and then you go and finance the balance of $2,500 some other way.

Without putting aside funds, things go from bad to worse and your goal will never happen. Let's say your objective is to get to the national championship of your sport and that every week without balancing your budget you find that you run out of money. Most people will start doing overtime for example, to make more money. If you start doing more overtime, then you might have less time to put towards your sport or your hobby. So instead of training five nights a week on your sport or talent, all of a sudden or it could be practicing a musical instrument or that, you find that you start cutting your time down and spending less and less time on your goals and more and more time on trying to make ends meet.

Wouldn't it be better to have a balanced budget in the first place, to make sure that you have got enough money coming in to cover your expenses, and sure you might have a national trip coming up and say I need $6,000 to go on an overseas trip to go to the international championships and maybe you debt finance a part of it. Still, we are talking about planning and spending as opposed to spending and planning.

Since we've started having a balanced budget, I have found is that it is a lot easier to hit those goals that we've been aiming for, and still have enough for all those things like Christmas and holidays and replacing cars and all that sort of thing.

In fact, my wife told me the other day that she's made $500 of interest on the money she's spent this year. It goes to show that once you get your budget balanced, that money can start working in your favor instead of against you. Now that's not an overnight thing and I don't promote the idea of just going to try and pay off your credit card all in one hit, or pay off all of your debts in one go.

It is more important to get the habit right than to get the actual debt paid off because it really takes some discipline and practice to establish the habit and you really need to set aside the funds that you need so that when your bills come in, you can afford to pay for them.

Once I set up my automatic payments for my big goal, I also set up high yield interest earning accounts and set aside funds for other known events such as holidays and gifts, car registration and repairs and I set up automatic payments for those things that my family uses weekly such as utilities. My wife and I have separate card accounts for day to day things and I know that I can spend all of the money in the card account without blowing the budget and my big goal.

Disclaimer: This document is educational and should not be considered advice. If you are in financial difficulty please get professional advice.