James d. Gwartney

ELEMENT 4.3
Use budgeting to help you spend your money effectively and save regularly.

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penny. We recommend that saving and investment be specific, planned, items in your budget,
not just the leftover balance (if there is any).
The second action is documentation of actual spending and making needed budget
adjustments. Keeping track of all spending and placing it into the categories of your budget
provides valuable information about your habits and the progress made toward achievement of
your financial goals. Tracking your spending will also help you develop a better, more precise
budget in the future. For example, if you fail to include a spending item or two in your initial
budget, when that actual spending is observed, you can then make sure to include it in your
new budget next time. Suppose you budget €50 for restaurant meals for the month but then
realize that you actually spent €80. You will know to change your planned spending
somewhere else to account for this difference. The documentation of your actual spending
provides you with a feedback mechanism that will help you make adjustments to your budget
and spending in the future.
Budgeting your income and monitoring your behavior will help you evaluate your
spending and direct it toward the categories that will provide you with the most overall value.
Four simple steps will get you on the path to financial stability: Begin immediately, set goals,
get tools, and design a budget to meet your goals.
Step 1. Start now and increase the likelihood of success! Don’t fool yourself into
thinking that budgeting is only for people with jobs, or high salaries, or that you’ll start “later.”
Children receiving allowance, students receiving support from their parents, and people
without direct incomes should still budget and develop goals. Budgeting will not be easier
when you are older or when you are earning more money. In fact, it will probably be more
complex. It is easy to procrastinate. People who budget, spend their money wisely, and save
for the future generally started early when their incomes were relatively low.
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A free
budgeting app (there are many good ones online) can be useful here.