Budgeting in our generation has become a word synonymous with depravity, restriction, maybe even impossible. It isn’t any of those things and let me tell you why. Budgeting is having a plan. A budget with your finances is planning where your money is going to go. I will show you the start of how to set up a monthly budget. If you have a regular income it is easy to set a budget. If you have an irregular budget I will explain below. The hardest part is following the plan. Just like with anything it takes practice. You are going to mess up, you are going to have to start over, you are going to make mistakes both on paper and in life. Budget is NOT a 4 letter word, change your mind about what it can do for you.
Anxiety of the Unknown
Making a plan and sticking to it creates freedom in ways you don’t understand until you experience it. We have all been at the store and swiped our credit or debit card and wondered if we will see those 2 little words “payment accepted.” In those few seconds, our hearts are at the bottom of our stomach and we go through different scenarios if we just spent more than we had available. Do we have to use another card? Put something back? Did the mortgage payment come out of my account yet, putting my account overdrawn? I knew I shouldn’t have picked up that extra thing at the impulse buys right next to the register. Why would we want to live like this?
Having a plan is the solution. Imagine opening an envelope before you go into the store with cash for how much you have to spend on this trip, and having a list on which you know the meals you will be preparing this week and the ingredients to make those meals. Imagine getting up to the register with the food you know will feed your family for the whole week and handing the cashier cash that was specifically earmarked for feeding your family. Tell me how free-ing that is. You can feed your family and the rest of the bills have already been paid with money set for those bills.
Why wouldn’t you want to live like this? Budgeting is not a 4 letter word. It is a word that frees you. You don’t have to call it a budget. You can call it anything you want. I like “plan” myself. Probably because I know I am no good at being consistent, but a plan I can stick to if I write it down.
Write it down! I just use a notebook and a pencil (so I can erase hehe). Before you get paid write your plan for the money you make. If you have an irregular income write down the next x amount of dollars. I have always made an irregular income and budgeting (planning) is difficult when you don’t know how much you are dealing with. My plan was broken down into priorities and looked something like this:
Food 100 per week (YES, FOOD FIRST!)
Rent 500 per week
Utilities 50 per week
Gas for the car 40 per week
Anything else would be saved in an envelope until I had enough to pay that bill so if I made $690 that week only those things would be paid. If I made $691, I would put the $1 in an envelope and label it the next thing I wanted to purchase or a bill I had to pay. I should be able to make more than $690 every week but if I made $689, something was being shorted and I would have to make up for it the next time I made more than my minimum. It may sound confusing but everything was written down every single week so I knew exactly where I would need to put every dollar.
This is obviously very simplified but you should understand the concept.
Envelopes are your Friend
I would often get paid daily, like when I was serving tables so I would put my whole income in an envelope as soon as I walked in the door. I wouldn’t touch it until Monday (when my week ended). I would then count it up and write down where everything was going.
Writing down every dollar every time you get paid takes discipline, like with everything, it takes practice. It gets easier. Once you get a handle on where you spend every month you can start categorizing rolling funds. For example: I have a “kids” fund that is everything kids from back to school items to monthly gymnastics lessons to summer season passes. It is all guilt-free money. I know I have that specifically for kids so when I spend $500 on tickets to something for the summer, I know I didn’t just spend my rent, my doctor visits, or my car insurance.
This is probably the single best thing to understand about having a “plan” for your money. You forget that mother’s day is this weekend, you miscalculated how much you needed for food because you ran out of 10 different condiments this week (isn’t that the way it goes?!?) It’s OK! You can’t add magic money to your budget, however, so what do you do? Take that money from a different category. You need an extra $30 for something, it has to come from somewhere. Decisions and sacrifices have to be made for that week. Maybe the kids get pb&j sandwiches 5 times this week, or maybe your “Christmas” fund isn’t as bulky as you hoped for.
Sit down with your budget and fix it on paper before you spend the money!
In the beginning, especially it is so important for you to understand sacrifices have to be made to fit your income inside your spending. You will get used to certain cuts. Somethings I thought of as a sacrifice at first ended up being blessings and a way of life. I did a lot of research and I still do when I buy something. I feel like I am a master at “bang for your buck” now. I know what I should spend money on because it will last and what I should buy the “cheap” version of because it works just fine (sometimes better).
I hope you trust me now when I say Budgeting is not a 4-letter word, it is a word that you now understand to be synonymous with freedom, plan, and gives you hope for your future.
Plan is a better word
Spending < Income
Practice makes nearly Perfect
Peace and Balance,