Let me be honest from the start the word budget is not a word that is liked. Whenever I bring up budgeting around friends and family I can immediately feel the shift in the atmosphere. No one likes to talk about their money, let alone have someone or something tell them what to do with the money that they worked so hard to obtain. Let’s get real here budgets get a bad rap. They’re really nothing but rules that you’ve come up with concerning your money. They’re like traffic laws or the safety guidelines that we follow at work. They are something put in place to help keep order and to keep people safe. This time, the order and safety are applying to you and your finances. I get it, budgets can be intimidating they can be so intimidating that we brush them off and simply don’t want to be bothered. However, if you’ve been doing things your way and you can’t figure how to get your finances in order or how to get out of debt maybe it’s time to switch things up a bit and try something new.
It always baffles me when I hear people say “I can’t live on a budget, that’s too restrictive.”. You mean to tell me that you can go to work and abide by the rules that they place on you, obey traffic laws, and maybe even follow the ten commandments but you can’t follow rules and regulations that you put on your own money? It’s time to change that way of thinking. Budgets reflect your current financial situation. If you have a mountain of debt that you’re trying to pay off or get control of then, of course, your budget is going to be restrictive because it will reflect what you can afford!
Why Do You Need a Budget?
If at any point you’ve looked at your account and wondered where did all the money go? You need a budget. If you’ve overdrawn your account more times than you can count, you need a budget. If your the type of person to swipe your debit card and hope that the transaction goes through, my friend you need a budget.
Before I started Broke on Purpose my husband and I lived on a faux budget. We knew how much money we had coming in and we kinda sorta kept track with what we had going out. I would do a budget on an excel spreadsheet and update it whenever I felt the need. This was our system. To us it worked, that is until I sat down and pulled up all our accounts to find out that we were over $100K in debt. Talk about a wake up call! By creating a budget, we were able to tell our money where we wanted it to go before it decided to do its own thing. We’ve been living on a budget for ten months and without it we would have never been able to pay off almost $30,000 in debt.
The other great thing about having a budget is that allows you plan and prepare for the next big thing. For everything we do in life you will always need a plan. Whether or not your plan is to save money or to take a trip around the world living life on a budget can help you get there. Think of the budget as your plan to achieving your goals. If you want to have money for gifts during the holidays add that category to your budget. By telling your money that you want $50 to go into a savings account every month, you will have saved $600 by December!
How do I set up a Monthly Budget?
Setting up a monthly budget doesn’t have to be hard. By following these painless guidelines it can be a rather simple experience.
- Make note of how much money coming in. This would be how much money you have after taxes, retirement, health insurance etc. have been taken out of your check. If you work a side job where you are paid in cash, count that in too. Your income is basically going to be all the money you have coming in that you use to spend every month.
- Create your budget based on necessities first. When putting together your budget you want to think about the things that are most important to your overall survival. These things could be Tithes, Rent/Mortgage, groceries (not including dining out), utilities, car payment, childcare etc.
- Now that you have your necessities out of the way start adding in other items based on how much money you have left. Add in money to go to savings, your credit card, car, and student loan payments if you have them. Then start adding in items you consider entertainment. Continue this process until you’ve used up all of your income. This is your starter budget.
What do I do if I don’t have enough money to cover my expenses?
If you find that you don’t have enough money to cover your expenses it may be time to really rethink your spending habits. Without a budget, we have a tendency to overspend thus causing us to use other things like credit cards or payday loans to fill in the gaps where our paychecks fall short. Unless checked this will create a never-ending cycle of debt. Add items to your budget based on how much you really need them. Maybe you can cut your cable and keep the Netflix subscription, or maybe you can only afford to go to your stylist 2x’s out of the month instead of three. If cutting back still doesn’t fill the deficit then consider a part-time job to help supplement your income. While no one wants to work two jobs remember it will only be a temporary thing until you pay down some of your debt and no longer need it.
What do I do if I have Money Left Over?
If you have money left over after you’ve completed your budget congratulations! Now, think back to your overall plans. Is it to pay down debt or maybe save money? If you’re looking to pay down debt I would add that money as an additional payment on one of your bills. The reason why my husband and I were able to pay off over $29,000 in debt is because we did just that. Utilizing the debt snowball method we added anything extra to our debt payment thus allowing us to pay off all of our credit cards and even our car 5 years early! If you’re looking more towards saving money for a trip or a maybe to purchase something special put the money in your savings account until your ready. You can also look into high yield savings accounts or money market accounts that give you a small return on the amount of money you have saved.
What If I get off Track from My Budget?
The beauty of the budget is that it’s not concrete. Based on the different situations that may come about in life your budget can change from month to month. The goal is to try your best to stick to the plan for your money that you’ve laid out. If you’ve never lived on a budget before it may take you a couple of tries before you actually get it right. This is to be expected as when we make a budget for the first time we often forget to include a payment that’s due down the line or we underestimate payments. Don’t get discouraged if things don’t work out for you that first month. It takes time to pick up new techniques, but if you stick with it you’ll become a master at budgeting thus leading you to be a master of your money.
To help you get started on creating your budget, I’m giving you access to one of the printables found exclusively with the Broke on Purpose Ebook. Download your copy now and work on setting up your budget for the month of February. Download your copy here!