Over the last few years people have found the need to start managing their money better. They are becoming faced with the reality that, after the economic crisis, they now have to look at where they’re spending their money and making choices on how to cut back. For a long time money has proven to be the hardest thing to manage. A budget is a plan that limits and restricts your spending and is meant to be a guide for controlling your spending habits. Most financial gurus rely on budgeting as the starting point for managing your money.

Although many people opt for budgeting as the main method of managing their money, quite frankly, they just don’t work. It does not matter if the budget has been made by a professional or by yourself, whether it’s for a week or a month, or how big or small it is. Budgets don’t work because people know what they should do to, but they often just don’t do it. Here are three reasons why.

The first reason that budgeting does not work is that it is designed to be restrictive and depriving. The point is to control your spending so that you can meet your longer term goals. But how motivating is it to always cut back on things you want? It’s not very motivating at all. Budgets do not focus on what makes you thrive, they focus on what you need to cut back on. When was the last time you got excited about limiting how much you should spend on eating out, or cutting out the family entertainment? Constantly cutting back can easily build into a feeling of deprivation which will quickly kill any motivation. Imagine instead a plan that allowed you more free time to spend with your family, or more time for the things you love to do. Doesn’t this sound more interesting?

The second reason budgets don’t work is that they focus on only one side of the equation. In order to be a good money manager, you must manage your cash flow…and that consists of two components; your expenses and your income. To build wealth, you must start by managing your cash flow which means making sure that you have positive cash flow on a regular basis (meaning you have more coming in than going out). When you have excess, you can then decide whether to put that excess in savings or whether to pay off debt. The best and most stable way to continue having more coming in than going out, is to increase your income while keeping your expenses low. You can only cut back so far in your spending, but the amount of income you bring in can be unlimited. If you don’t focus on bringing in more money, then you’ll never see your cash flow increase and your wealth grow.

The third problem with budgets is that they take way from short term gratification without a suitable replacement. When temptation arises for something outside of the budget, it’s very difficult to say ‘no’. However, when there’s a highly valued long-term goal that you’re working toward, it’s much easier to say ‘no’ to that short term temptation. Inevitably, the sense of accomplishment and completion of achieving a long-term goal is much more satisfying than the quick pleasure you get from fulfilling that short-term desire.

So if you want to be a good money manager, then you must start with managing your cash flow. If you focus on keeping a budget, your chances of success will be much lower than if you focus on bringing in more income, especially if that income is coming in because you’re working in a field that fulfills your natural skills, talents and passions.

Author's Bio: 

Angie M. Grainger, CPA/PFS, CFP(r), Certified Money Coach President at RETHINK Money Coaching, Inc. Helping people master their money so they use it to transition into thier NEW desired ideal life.

To learn more go to http://www.49secretsofmoney.com