Figure out a Budget
Financial freedom starts with creating an every dollar budget at the beginning of each month and following it with diligence. When we are intentional with our money we will see a change immediately. The best way to start seeing a change in your finances is to create a budget and stick to it. This will likely feel restricting at first, but within a few months you should feel a sense of freedom because of your planning. A budget is simply a focused monthly plan for your money. This allows you to be more intentional with every dollar that you have each.
Why do I need a Budget?
Some of you may be asking yourself why you need to do a budget. You are probably thinking that you get along just fine without one. Let me ask you this, do you ever wish you had more money for certain things? I am going to assume your answer was yes. When we don’t live on a budget we naturally spend more money. A budget helps us create an intentional focus with money so that we can direct every dollar to where we want it to go.
When we get on a budget we become more aware of how much money we have and where it is going. It allows us to spend wisely as well as save and give generously. A budget does not have to be restricting unless you need it to be in order to achieve a goal.
How do I Create a Budget?
The process of creating a budget can be fairly simple or it can be extremely complex. If you are just starting to budget I recommend going on the simple side, because it will be easier and will create less stress. Everydollar.com is a free budgeting resource created by Ramsey Solutions and it allows you to create an every dollar specific budget online as well as on your tablet or smartphone for free.
There are tons of forms, programs and apps available for free as well as paid versions, but let’s not get ahead of ourselves. The first thing to do in order to create a budget is look at last month’s spending. Get your bank statements and receipts and figure out exactly where your money went last month. Also find out how much money you made for the month. While you are doing this gather together all of your bills. If you have debt gather together how much you owe in total as well as what your minimum monthly payments are so that you can be sure to list them out.
Once you have gathered your information you can start putting it down on paper. Start with your income. At the top of the page list how much money you made last month. Below your income you can start out by listing the things you know you have due each month such as bills, mortgage/rent, and debts. It is also helpful to create some different categories to organize your budget such as: Giving, Saving, Housing, Transportation, Food, Lifestyle, Insurance & Taxes, and Debts. With your statements and receipts from the last month you can start putting dollar amounts underneath each category. With all of your prior months expenses annotated you can add them up for each category to help determine how much you will need to allocate in each category for the upcoming month.
Below is an example of a basic handwritten budget. At the top you will notice the income and I have included some main headings and listed the bills and minimum payments under each. For lifestyle you will notice that I have listed cash for both him and her as well as some for kids. This is an extremely tight budget that this family is living on, but it is still important to have a little bit of spending money. Without some spending money a budget will be extremely difficult to stick to. In this sample the couple is paying their bills and their minimum monthly payments on all of their debts while saving up some money to get to their $1,000 beginner emergency fund which is the first thing to do after getting on a budget.
Budgeting is fairly simple to do and it does not have to be complicated. If you desire to have a more complicated plan that’s fine, but start simple first. When you first start this process it is going to take some time before you are able to stick to the budget completely. Each month is different and your budget will change slightly. As you continue creating your plan each month you will notice that it will become easier and less daunting. You should start seeing some extra money each month to put toward your emergency fund, debt, savings, spending, etc.
With all of that said you will need a reason to do a budget. If you do not know why you are figuring out a budget then you will not do it. If the reason is not good enough you will not do it. It’s easy to to spend your money, pay your bills, and hope that you didn’t overspend or overdraft your account. The wise thing to do is to create a plan based upon your goals and dreams for the future. When your “why” is big enough you will find the desire and energy to start budgeting. With your why in place it is time to raise a beginner emergency fund of $1,000.
Congratulations in your quest to start budgeting and beginning down the path of financial freedom! If you would like help or have any questions along the way please feel free to contact me by calling 573-208-4266. One-on-one coaching is available in person, over the phone, and via video chat. Don’t let another day go by without a plan for your finances.
Thank you for your time and have a blessed day!