It keeps me out of debt, having fun, and feeling rich.
A budget is the best place to start when it comes to getting good with your money. That’s how I started my wealth-building journey.
Many do not like the idea of budgeting, but when you hear their alternative it sounds very much like a budget to me. I have heard people say that budgets are tedious and micromanagers of one’s life.
Sometimes you just need to change the wording like Ramit Sethi. He calls budgeting Conscious Spending. That is my favorite alternative term. Instead of spending on the fly, you are being intentional. You know what brings you joy, how much you earn, and you are aware of your priorities.
If you don’t care about being flashy then your transportation, home, clothing categories will be lower than other categories that you love like traveling, entertainment, giving, etc… I know that home costs can’t be lower than clothing, but you know what I mean. Living in a small home in a decent neighborhood is good enough for you.
Starting a budget is very time-consuming if you have never done one. However, after two to three months you get into a good rhythm and it’s a smooth process after that. The hardest part is staying consistent with your tracking and creating a new budget every month.
What is a budget?
A budget is a plan that tracks money coming in and out for a set period of time. There are a variety of budgets. I use the zero-based budget. I have tried the 50–30–20 budget method and I prefer the zero-based budget.
You can make a budget for a week, a month, a year. It depends on your preference. A monthly budget is what works for my household because of how we get paid and the size of our family. With a family of five things are constantly changing. I want to set us up for success. A year is too long.
Included in your budget are items that are essential, non-essential, and savings accounts. Debt is also included.
Every month or whichever route you decide to go you will designate a certain amount of money to spend for each specific category. This amount is based on the expected income for the month.
If you choose to follow the zero-based budget method then you need to know your specific income and your budget should not go over that amount.
Here is an example of what a zero-based budget looks like.
Photo Source: www.easybudgetblog.com
Having a budget is worth it because it helps ensure that you spend according to your values.
Before I started budgeting I had no idea where my money was going. I felt like I wasn’t doing anything fun because I never felt like I had money. I will never forget the first time I did my budget I felt like I got a raise. There was suddenly money for all of the things that I wanted to do.
That being said, budgeting has given me a sense of:
Before I started budgeting I felt that my money controlled me and not vice versa. I am in control now.
How to start working on your winning budget
Track your spending for 1–2 months
- Write down everything you spend money on
- This is done before you create your budget to give you perspective
- It helps set you up for success by inserting realistic numbers into your categories
Write down what you value
- I.E traveling, eating out, fashion, security… it doesn’t matter what they are as long as they represent your household
Choose a budgeting method
- Google “household budget method” to learn about the different types of budgets
- Choose the one that resonates with you. You can always switch if it’s not working out
- Zero-Based Budget is great for beginners
Identify your categories
- Now that you know what you spend on, write down your categories. I like to be specific so instead of housing, I write mortgage, repairs, maintenance, and organization, etc…
- I also like to organize my budget into three sections: essential, non-essential, and saving/debt-payoff/investing
Track your spending for accountability purposes
- Download an app for your phone. I use an app called “Spending Tracker”. It has been extremely easy so I don’t see a need to switch. I use it solely to quickly note my expenses when I am out. The categories I have on the app are the same ones that I use on my e-budget in Google Sheets.
- I use Google Sheets to track my spending on “paper”. It is also user-friendly. I am not well versed in excel, but I watched a quick YouTube tutorial and I was able to go from there.
- I track spending from my app to google sheets weekly to ensure that I am on track to stay on budget. This takes me about 15 minutes a week. Clients that I have coached agree that going over a week to track expenses is a bad idea. You lose track.
- If you are going over in a certain area cut back on another to not end up in the red.
Start new budget one week before the new month
- On Google Sheets, I have different sheets with different months. It makes it easy to start a new budget on the same document. There are sheets for January — December. I start a new document in the new year.
- It’s okay for budgets to change from month to month; there are different events that are taking place. Holidays, summer camps, birthday months, tax months, will throw some off.
If you have been feeling out of control or in touch with your finances a budget is a great place to start. As you begin your budgeting journey, keep in mind that you have to trust the process. Persistence, focus, and patience are keys to creating a winning budget and sticking to it.
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