James d. Gwartney

Step 3. Get tools to assist with your budgeting. Don’t re-create the wheel by starting
with a blank piece of paper to develop a budget. With today’s websites, spreadsheets, and apps,
budgeting has never been easier. A plethora of resources exist at little or no money cost.
Literally, they are available at your fingertips. Conduct an Internet search for “budgeting
tools,” and find numerous high-quality and secure budgeting options. Choose one that helps
you become meticulous in logging your expenses and income, keeps your financial goals in
front of you, issues payment reminders, helps you control any impulses to spend outside your
budget, and links you to options on how to achieve those goals. Make a habit of using your
selected budgeting tool. Keeping track of your spending and income can be easy with the right
tools.
Step 4. Devise a plan of action: Create a personal budget with actual and proposed
items to achieve your goals. Although we constantly think about all the things we “need” to
buy, there are very few things most of us are required to have beyond adequate food, clean
water, basic shelter, and simple clothes. The best way to see where you can begin to achieve
your goals is by listing your “needs” and separating them from your “wants.” Reduce your
wants to make way for savings and investing, and for devising a plan within your budget to
meet your short-, medium-, and long-term goals. This places you in the driver’s seat of your
financial life.
An architect does not build a house without a blueprint. A surgeon does not effectively
remove a patient’s appendix without coordinating her plans with the other members of the
medical team. An athlete does not end up competing at the Olympics without committing to a
philosophy of success long before reaching the Olympics. Developing a detailed plan of
action, sticking to it, and updating it when necessary are essential if you are going to succeed
in all aspects of life, including your financial life.
Each budgetary item needs to be evaluated within the context of the others. Since you
have limited income, increased spending in one area translates into decreased spending in
another, unless new sources of income are identified. As stressed in Part 1, every choice has an
opportunity cost. Consider yours when making a spending decision. Examine the big picture
through your budgetary lens. Figure out your monthly basics—show how much you earn, pay
in taxes, save, invest, spend, and face in debt.

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Regardless of your occupation, income, or position in life, the two actions in the
budgeting process—the creation of your budget and tracking and adjusting your spending to
improve your welfare—will help you systematically examine and guide your spending to get
where you want to go. Make your plan crystal clear and become the CEO of you. Commit to
creating a budget that organizes your spending, controls your debt, provides emergency funds,
helps you meet various financial goals, and supplies funds for investing.
The next time you are thinking about all the things you “need,” recognize that you do
not really have to have many of them. Remember that spending today costs you in terms of
your future wealth. We aren’t suggesting that you live a life of deprivation so you can be rich
in the future. That makes no sense. But there are many creative ways to reduce spending and
increase saving. Budgeting and laying out a savings plan will produce immediate satisfaction,
help you gain a sense of financial control and security, and build wealth for the future.