How to Practice Good Budgeting Habits: Part 1 

Some subjects seem easy to discuss openly, but shouldn’t be, such as talking about one’s sex life. Conversely, when it comes to speaking up about one’s ability to practice good budgeting habits, why does it seem such a taboo topic? Finding ways to better manage your money is the key to financial freedom.

According to a recent study by the University of Kentucky, people who win only $10,000 are just as likely to file for bankruptcy in five years as those who win $150,000*. Statistics say that a whopping 44% of winners spend their entire earnings within the first 5 years**. As the saying goes, if you can’t learn to manage a little money, you won’t be able to manage a lot. The first in a 2-part series (see Part 2 here), here are some tips to get you started practicing good budgeting habits to ensure a prosperous future for you and your loved ones.

Find a Role Model

Finding a mentor will help you get ahead in any endeavor. If you have an example to follow, it makes finding your way a whole lot easier. Not all of us, and in fact very few of us, grew up with this mindset.

But, finding a role model is important. You need to find an example that you can model yourself after, and be mentored by. A role model doesn't have to be someone we know down the street or we're related to. A good financial role model could be Robert Kiyosaki, author of Rich Dad, Poor Dad. If his message doesn’t inspire you, finding a mentor can be one good Google search away.

Change Your Outlook

Here's the question I ask everybody: What did your grandparents do? 50 years ago, if you didn't have the money, you didn't buy it. And if you really wanted it and wanted to live "dangerously," you used a program called layaway. You set it aside at the store and made payments until you could buy it, but you locked it in at that price or you locked in that year's model. That's the reality. If you couldn't afford it and it didn't fit in your budget, you did without.

Cultivate Discipline

Put another way, “If you're hard on yourself, life will be easy on you.  If you're easy on yourself, life will be hard on you.” Developing self-discipline and deferring gratification will bring you the prize. When you’re trying to lose weight, you have to practice discipline. Similarly, when you’re trying to save money, you have to practice financial discipline. The reality is most Americans don't have money saved up for retirement, a symptom of not practicing deferred gratification. Another symptom is when people do not practice good budgeting habits (more in Part 2). There's nothing wrong with eating your desserts first now and then when enjoying life and kicking off your shoes, but if you consistently eat dessert before your main course, you're probably going to develop some weight issues and adult diabetes.

Read on to Part 2 of this blog post next week to find out how setting goals, developing a system and living below your means are key in being financially successful.

Kemp & Associates is an independent retirement services firm.  Since 1992 we have specialized in helping our clients prepare for retirement, assisting them through the retirement process and into their post-retirement years.  We believe in providing personal, professional, and prudent financial planning to each client. Feel free to contact us for more information or to inquire about our services.


* "The Ticket to Easy Street? The Financial Consequences of Winning the Lottery." The University of Kentucky, May 2010; http://www.uky.edu/~swhank2/research/lottery_bankruptcy.pdf

** “Lottery Winner Statistics.” Statistic Brain, February 2012; http://www.statisticbrain.com/lottery-winner-statistics/  

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