The “B”-Word…. Budget!
Congratulation, you have tracked your spending and know where your money goes. And you have given thought to the difference between needs and wants. Now you can check those boxes off your financial wellness checklist.
Budgeting has gotten some bad PR in the past, making us think of it as a daunting, tedious, and unpleasant experience. Here is what I used to think a budget was:
Something I had to be good at math and/or spreadsheets to do
Going to make life only basic and “no fun anymore”
That we would not be able to buy things we wanted any more
For people that actually had extra money and didn't live paycheck-to-paycheck
A budget is really just a spending plan. That’s it! You have complete control over a budget. It is your budget. All a budget is, is a tool to help you manage your monthly expenses, prepare for unexpected life events, and to be able to afford big ticket items without having to use a credit card. All the while moving you closer to your financial goals.
Ready to get started? Ha, it’s really not hard, you got this! It just takes a few easy steps.
Here we go:
Step one (the easiest):
Write down your monthly income. Here you will include your take-home pay and any other income you have on a consistent basis. If your paychecks vary from check to check, you might consider using your lowest paycheck.
Think about your why. And set some financial goals. Do you want to pay off debt? Do you want to save for something?
Break your goals into short-term and long-term. Short-term goals are financial achievements you want to reach in the next 1 to 3 years. Long-term goals are achievements you want to reach in the next 3 to 10 years and even in a lifetime.
Don't have a concrete goal yet? That's ok too, taking control of your financial wellness is a great goal to start with, and when you think of other goals you can write them down.
Pick your tool of choice. How do you want to track your budget? Choose what works best for you. There are free apps you can use, your bank may have a budgeting tool, or you may be like me and need to see it on a sheet of paper. ( I am geeky enough that I set up a spreadsheet so each month I just have to adjust the numbers and it does the math for me, insert blushing-shrug emoji here). Print out a sheet and fill it in each month. Or if you like to doodle, then draw up your own creation and color it in, make it fun. Choose what works best for you. I started out with a printable from Pinterest and over time moved on to the spreadsheet.
Now you have your income, your goals, and your tool of choice. You are almost there!
Look back at the expense tracking you did and enter your mandatory expenses aka your needs. Remember these are rent, food, utilities, etc.
A budget is only beneficial if it is accurate so look over this information and make sure you did not forget anything.
Now, subtract these expenses from your income in step 1.
Here you will repeat step 4, only with your other expenses that you wrote down from tracking aka wants.
Now subtract these expenses from your income as well.
Let’s stop there, stand up, and stretch, you don't want to pull a hammy, 😀.
PHEW! How are you doing? Tell me in the comments below how you feel after doing these steps.
Next blog post, we will talk about evaluating your results from steps 1-5. Till then….