Regardless of what the economy is doing, being in a financial mess is never an easy situation to endure. Having bills and expenses pile up can be daunting and makes maintaining a clear mind almost impossible. No one is 100% rational under huge amounts of stress. However, that situation can be easily fixed in one simple step. Budgeting.
Making a monthly budget was something my husband and I had never done before, and he loathed the idea of even attempting one. “I can keep track of everything in my head; there’s no need to waste time with a budget every month,” he would say. But as soon as we finished our first few budgets, both of us wished we had started sooner! Why? Because you’re able to see exactly how to fix your financial headaches and how to achieve your goals with your money. A budget gives your money a plan and purpose to follow, instead of wondering where it all went at the end of the month.
Budgeting can take a few months to get the hang of, but once you do, you will be unstoppable. We make a new budget on the 1st of every month and have been doing this consistently over the last eight years. Its been the catalyst for all of our financial success – paying off $120,000 in debt in three years, saving over $60,000 in cash, buying a house, investing, and giving.
So, how do you make a budget?
A budget can be written by hand, on an excel spreadsheet, or through an app like EveryDollar or Mint. A budget is simply your monthly income minus your monthly expenses. It doesn’t take long and you can make it fun with highlighters, colored pens, doodles, etc. I’m more artsy and enjoy this approach 😉
Below is an example of a budget widely used and one we use every month. It’s a zero based budget where every dollar from your monthly income is utilized, so if you make $3,520 per month, all $3,520 is given a purpose leaving nothing unaccounted for. The budget also lists expenses in order from most important to least important. For example, food and water are more important than a haircut or gym membership. Likewise, it’s more important to pay your bills after your basic needs are met before saving, investing, and giving.
|Gasoline for Cars||150||1975|
(small buffer for unforeseen expenses to help you when starting to budget)
|Other Bills |
(listed from smallest to largest in total debt owed)
*As mentioned before, start saving only after all of your basic needs are met first. After saving a small emergency fund (usually $1,500 will cover most unexpected emergencies) you can start paying off your debt (if you have any). Once you’re debt free besides your home, you can start investing, giving, and start paying down your mortgage faster.
Once your basic needs are taken care of financially you start to feel a sense of stability that is very powerful in helping you move ahead. Add to that a small emergency fund and you begin to have motivation to start paying off your debt. You start to see the light at the end of the tunnel and you’re on your way to financial independence and freedom.
Hope this helps spur some ideas for a budget that’s right for you to start your financial freedom journey. 🙂