Capacity is one of the three C’s I have the privilege of talking about with marketplace executives, entrepreneurs, and other leaders looking to move their lives into the realm of significance vs. success. In order to make a significant impact on this world, we need to create excess capacity in several areas of our lives to free up the time, money, and spiritual overflow that will allow us to make the impact we feel called to make, and creating financial capacity is one of the biggies. No matter what you do for a living or how much money you make, if you spend more than you earn you will always be broke. Even some of the highest earners realize that they are living paycheck to paycheck or, even more commonly, that they don’t know where all the money goes every month. Whether you are fresh out of college or halfway through your career, creating a realistic budget is an essential first step toward creating financial capacity. Here are some tips to help you do that.
Ask yourself “How much is enough?”
At the end of the day, each of us has to answer this question or we’ll be forever chasing a nebulous goal. To make it easier, these components of the “how much is enough” formula may be useful to think through:
1. Is there a limit to what I’ll spend on myself?
2. If so, what is the limit?
3. How will I give generously?
4. How will I bring my family along on the journey?
Keep a Spending Diary
If you have never created a budget before, it all can seem pretty overwhelming. Fortunately, you don’t have to go from zero to full budget in one day. Starting slowly and taking it one step at a time is the best way to get your spending under control and find money you didn’t know you had. You can start with something as simple as a small notebook and a pen or If you prefer, you can use a smartphone app to track your spending. Just write down each purchase you make for a week or two, no matter how small. This daily spending diary will help you see exactly where your money has been going, and it can serve as the basis of your future family budget.
Go Through Your Checkbook and Bank Statements
Once you have a handle on your incidental purchases, you can start working on those large recurring expenses. Start by going through your checkbook and bank statements and recording the amount of your utility bills, rent or mortgage, taxes, and other payments for the past couple months. This will give you a good idea of the average of those expenses and help you build your budget going forward.
Find an Appropriate Budget Template
After you have the numbers you need, you can start to actually build your family budget. The first step is to find a budget template that includes all the categories you need. There are literally hundreds of these templates on the Internet, so finding the right one may not be as difficult as you think. Look for a budget template that does the calculations for you; it will make math errors less likely and give you one less thing to worry about. Also look for a template that makes it easy to add and remove various categories. Once you have everything in place you can simply plug in the numbers you found earlier and get going.
Once you have all the numbers laid out in front of you, it will be much easier to see where your money has been going and how you can economize in the months and years to come. Whether it is changing to a less costly cable package, cutting back on restaurant expenses and doing more cooking, reducing the cost of your cell phone plan, or even moving to another residence, there are things you can do to save money and start building capacity for your journey to significance and generosity.