Thursday Time Machine: The power of the budget.

I recently watched a video titled Dear 16-year-old Me, which made me realize that there is a great deal of advice that I wish I could go back in time and tell a 16 year old Jake. In light of that I have decided to devote Thursdays on my blog to the advice that I would give the younger version of me.

This week's piece of advice: The power of the budget.

One of the things I wish I had learned how to do better when I was younger was how to manage money.

The financial situation in my family growing up always seemed to be feast or famine. I did not learn how to set aside the extra in the good times to carry me through the bad times.

It was not until Heather and I started discussing financial matters prior to getting married that I realized how unhealthy my attitude was toward money. And the interesting thing was that I knew all the right things to do with money.

I knew that money was nothing more than a tool to be used. I knew that saving was important. I could spout off all the good advice I had ever heard in regard to money, I had loads of great advice from my grandfather on how to handle money, but my own financial habits were horrible.

So, what have I learned since I was 16?

Budgets are your friend.

I always hated the idea of writing a budget and sticking to it.

It felt restrictive. It felt silly. I thought I didn't need a budget because I was smart enough to keep all my finances straight in my head.

What I know know is that learning to set aside money for coming expenses means I don't get caught off guard as much. I know that having a budget does not make me weak or stupid, it makes me disciplined.

I also have come to realize that by laying out what I expect to spend in the coming month I can easily tell when other parts of my life are out of balance or when I am being cheated.

When I get a bill that is significantly higher than I budgeted for I want to know why. I call to find out if there was a mistake made in the billing or if there was some part of the expense I had not accounted for. And when I see that I am spending more money at the convenience store on the way to work I know I need to slow down and spend more time with my family.

When you have extra, save it instead of spend it.

I love the Bible story of Joseph.

God gave this man the wisdom to save an entire region from famine by storing up grain in the time of excess.

The hope for my life is to be trusted with such a responsibility some day; but how can I be trusted to with such an enormous responsibility when I spend every extra dollar I get?

Grandpa was right about saving vs. borrowing, so listen to him.

My grandpa always told me it was better to save up the money to make a purchase than to borrow the money to make a purchase.

I do realize that it is not always feasible to save up for a purchase, but living in a "credit card" society has made me much more likely to go out and borrow the money to buy something I want (notice, want not need).

What I have learned is that banks make money of the interest they charge for lending money. If I want to make my money work for me instead of my work going to pay the bank I need to become the bank.

If I loan my money to the bank (deposit into an interest earning account) then I make the bank work for me. Plus, there is something to be said for enjoying a new gadget or shiny new car (or at least new to me) knowing that it is paid off.