23 Sep Budgeting 101: Everything you need to know to get started
Budgeting has quite the rap (1). In fact, many of us will admit to fiercely avoid budgeting at all costs. But that’s just the problem — avoiding budgeting is more costly than you think! Budgeting isn’t meant to restrict you indefinitely. It’s also not meant to burst all your bubbles and make you miserable. Just the opposite, learning how to budget can help propel you towards the things that really matter: reaching your financial and life goals, big and small. Of course, this takes time and discipline.
- It cuts down on stress
- It helps you establish your priorities
- It helps you tell your money where to go (ultimately, you’re in control)
- It helps point out unnecessary spending — and then nip it in the bud
- It helps you reach the goals that really matter
If you haven’t consistently budgeted in the past, or have had out-of-control spending, you may find the process rather unpleasant at the start. You aren’t alone! Just remember: you’re building an awesome habit and discipline.
And if you’ve always imagined budgeting to be super complicated, you’re in luck! You don’t need to be an accountant or financial guru to create a budget. Budgeting can be as simple or as in-depth as you desire. A good place to start is using a notebook, whiteboard or a simple spreadsheet program or budgeting app. For all intensive purposes, we’re going to keep it simple here and review the basic principles.
How to get started:
- Write it down, all of it.
- What’s your total income?
- List all of your expenses (weekly, monthly, quarterly, etc.) — remember that things like food, shelter, gas, insurance, etc. come first — so if the difference is coming up red (i.e., what you’ve got leftover), you need to remove things like Netflix and cable, or anything else that isn’t a priority.
- Subtract expenses from income.
- What’s left?
- Next, write down your debt, if any.
- Write down your goals for savings.
- Make an emergency fund.
- Have fun by planning for a ‘fun’ fund, or an ‘entertainment’ category (even if they’re really small).
- Get inspired and write down the big, outrageous long-term goals and dreams you have!
- Set a monthly time to review and revise the budget — if you’re married, do this with your spouse.
- Stick to it!
Review the numbers regularly (if you’re married, do this with your spouse), and identify areas that need to get revisited. For example, spending on restaurant meals and take-out can be cut in order to save for a first home, retirement fund or other goal that really matters to you and your family.
Getting good at budgeting can and will take time. Inevitably, there will be hits and misses. Use your mistakes to your advantage. After all, where appropriate, mistakes can help you re-calculate your expenses (for e.g., did you set a grocery budget that was way too small and unrealistic?).
In other instances, mistakes can help you figure out underlying habits that need to be addressed. Maybe you’re an emotional shopper, and have the habit of convincing yourself you need something when you’re stressed out or overwhelmed. Acknowledge this and then seek the accountability or help you need. Checking in with your spouse or a friend can be a simple way of bringing this issue into the light, and having someone who helps remind you of the long-term benefits of saying ‘no’ to impulse shopping! If you learn how to manage your emotions before you get the urge to make an out-of-budget purchase, you’re winning in the long-term: you’re getting emotionally healthier, and you’re learning the art and discipline of sticking to your budget.
Would you like some help getting started with the process? We’d love to help! Give us a call at the office (519) 787-2324 and we’ll set up an appointment to help you get started.
Are you ready to use a budgeting tool? Awesome. Check out these budgeting apps and programs: