The word alone just freaks people out when they hear it. Right? I mean, whenever I think of budgeting, at least in my past life when I thought of budgeting, I thought of constraint, no fun, following the rules, and being told what I could spend my money on. It didn’t feel very freeing at all.
But I want you to think of budgeting in a totally new way, because that’s not what a budget is at all.
Budgeting is a way for YOU to tell your money where it needs to go.
You’re the one who gets to decide what happens to that money, not your budget. I mean, who’s the one who’s creating the budget? Right – you are! You are the one who gets to decide how much you spend on the things that you’re purchasing in your life. they’re spending your money on. And the goals that you want to achieve.
Now granted, we may want to have more money in our budget, more income, to achieve those goals but that’s a different topic for a different day. But what I’m saying is that when you have a plan for your money and you can tell your money how it’s going to be spent, you have ultimate control and freedom in moving your direct the direction of your life forward.
And that’s pretty powerful. There’re not many things in this life we can control. So being able to control where that money goes is awesome. It’s amazing. It’s a pretty cool responsibility, and also a pretty great freedom.
So, when you think of the word budget, don’t think of it as constraint but think of it as “I get to be in charge!”
Pretty cool, huh?
I’m sure you’re wondering, well, this is great, I’m sure I need a budget. I need to make sure I know where my spending is going because at the end of the month, I have no idea what I’ve spent my money on. I have no idea what’s happened throughout the month and then somehow, I’m come up short. How can that be happening?
So why do we start to budget? Budgeting can seem very overwhelming. Budgeting can feel like it’s way more complicated. And it’s too much math, and it’s something that I won’t be able to master I’m not organized.
But I’m here to tell you that budgeting is not that difficult. And even if you can’t math, you can always grab a calculator to do that for you.
Budgeting, in its purest form, is the ability to tell your money, where to go, so that you can achieve the goals that you’ve set for your life.
How powerful is that??
That can always be a tough thing when you’re starting anything new, right? I mean, think about when you’ve learned to walk (Well, maybe you don’t remember that.) But when you learned to ride a bike. When you learned to drive a car. When you learned a language. When you to learn skills for a new job. You didn’t have all the answers at once, right? You had to go through steps so that you understand how to perform the job or skill. And that’s the same for budgeting as well.
To get you started with budgeting, I want you to give you some first easy steps to get you grounded and get you started on that path so that you can create this amazing life that you are meant to live.
So here are what I would consider the starting steps for creating a budget.
Number one, first, girl, we need to change your mindset around what a budget is, and what money is all about.
Don’t think of a budget as being evil. It’s not in and of itself evil. It is literally just a plan to tell your money and how you’re going to spend it.
I think what happens is we get so blocked with having these negative connotations about what a budget is and what it represents that we can’t see past it and we can’t use it as this awesome tool to help us with our life goals.
Instead, start thinking of your budget as a way to be in control and have the freedom to do with your money how you please. Because if you can’t get past that mindset, you’re never going to create a budget, and you’re never going to create this plan, and you’re never going to carry out the plan. And then you’re going to end up right back at the same place you always were. And never fulfill the awesome dreams you think about in the middle of the day.
So, change that mindset.
Think of your budget as a plan, rather than what you’re being told to do.
Number two: start with just observing your spending.
I like to tell people that when they’re starting budgeting to not try to create the plan first before you actually know where you’re starting from. You need to understand what your spending habits are and what your day to day life looks like.
What I ask my clients to do is to track their spending for at least 30 days. This will give you an understanding of what you’re spending your money on over the course of an entire month and will include most all of the expenses you would want to capture in a budget, like rent/mortgage payment, utilities, groceries and so on.
And you will get a better handle on your spending habits by doing this tracking exercise first. Because we can’t adjust or correct spending habits or create a true plan, unless we know where we’re starting from.
Take 30 days to just track your spending day by day. I think the easiest way you can do it is to keep a little notebook with you and just jot down every day when you spend money. When you pay a bill. When you buy a snack at the grocery store. When you go out with friends for happy hour.
I highly recommend physically writing down your purchases. Writing it down makes you become more aware of what you’re spending your money on. And it’s only for 30 days! But if you really balk at the idea of pen and paper and don’t want to write it down, then take a look at your bank statement for a month to see exactly what you’re spending your money on. If you are spending any cash, though, it would be helpful to write down those cash expenses, so that you can see what you’re spending on in cash.
So that’s step number two – track your expenses for a month.
Step number three is to categorize your spending. now we can actually start thinking about the different categories that you put all of your different spending so now that you’ve taken a look at what you’ve been spending. Now you can kind of group and categorize those items into different buckets. You may want to include any grocery store purchases in the same bucket as if you go out to dinner with friends or family.
Start categorizing your spending that you’ve been tracking for the last 30 days, add up the numbers and see realistically what you are spending in those categories.
Number four. Compare your spending for the 30 days against the income that you have coming in. If you have income coming in at $3,000 a month and your spending was actually $3500 a month, we have a shortfall of $500.
So, where are you getting that $500 from? Are you charging your spending on a credit card? Are you over drafting your checking account? I’ve been guilty of this more than once.
What’s going on with your spending that’s causing you to fall short?
This is where the rubber hits the road to get you started on that budgeting journey, because now you can see, holy cow, this is what I’ve been spending on food. Or maybe you finally realize that the apartment that you’re living in is way beyond your means. Or you find out that you are spending a lot more on your cell phone bill than you thought.
So, this is the time to kind of do a little feedback analysis from your spending versus what’s coming in your bank account as income.
Step five is actually creating the plan for your money each month. Now that you have a handle on what you are actually spending and where you can cut back, you can create a plan of action for the following month. Assigning every dollar of your income to your spending – whether that’s household expenses or savings – gives you the power to make decisions about how you want your life to look like and not wondering if you will ever reach your financial goals.
Don’t worry about being perfect when you create that first budget. If you talk to anybody who’s ever started a budget, they will probably tell you it takes a good three to four months to get a handle on the whole process, so don’t expect to conquer all kinds of budgeting nirvana in one month. Understand that budgeting is a continuous process and like most learned skills, you will become much better at it over time.
The key to budgeting is to think of it as a way to tell your money where it’s going and how you want to direct your spending. Budgeting is such a powerful tool to allow you take control of your finances, and ultimately, your life’s goals. Taking action with your money will not only allow you to focus your income on the things that are most important to you, but it will also prevent you from spending money on the things that don’t hold much value for you.
Your goals and dreams are worth making them a reality so take the time to create an action plan to make all that amazing awesomeness come true!