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A budget is essential to financial freedom. Money has a funny way of disappearing if you do not spend it intentionally and assign it a specific purpose. Before you do anything else for your financial goals, you must create a budget. This will provide a set of guidelines for your spending and saving. I’m a traditional first born, so rule-following is my jive. As Monica from Friends says, “Rules control the fun.” And all the Type A people said, “Amen!” You may not choose to accept this school of thought for every area of life, but it certainly applies to your money. A working budget is non-negotiable. You have to make a plan before you can commit to stick to it. Click here to get my free budget forms, made especially for you!
How to Get Started
The hardest part about this process for me is actually creating the budget. I have to go back to the drawing board every time we have a life change. I’ve been at this for a while so the budget creating process has gotten much easier (until we added a baby to the mix and then I had to start from scratch in those new categories). If you are relatively new to budgeting, you may have no idea what is reasonable to allot to various categories. Some expenses are constant and predictable (payments, rent/mortgage, utilities, water/sewer, insurance, daycare, phone, tithe, internet, etc). Others may vary greatly from month to month (miscellaneous expenses, restaurants, vacations, gifts, groceries). You could go back through your bank statements and categorize each expense and calculate your average expenses on those items OR you could make your life much easier for yourself and allow a website to do this for you.
I use mint.com for my budgeting. This website is a free budgeting resource that will allow you to link all of your accounts and cards in one location. It will also categorize your expenses into various categories to give you an idea of how much you are spending. This is important because you need to know where you are starting before you can create your goal budget. You will likely be shocked by how much you are spending on nonessentials. As you notice these trends in your spending, you can begin tweaking your allotments for each category and you can reassign this previously wasted money to other categories. I check my account frequently to ensure that we are staying within our budget for the month and we adjust our spending as necessary to stay on track. For example, if I realize our grocery expenses are reaching the top of the budget, we eat from the pantry and the freezer and put off grocery shopping for a few extra days. If we have had a little too much entertainment fun this month, I will wait until next month to make any extra miscellaneous purchases.
The Envelope System
Online budgeting works for us, but you may need a little more structure. If you need a visual, palpable budget, then you should use the envelope system and stop using debit cards. Dave Ramsey (see my link to Our Story to read more about what we have learned from his Financial Peace program) explains this system on his website. Basically, you cash out your paycheck and put it in various envelopes designated for your spending categories. When the money is gone, you’re done. This ensures that you do not overspend because unless you can find some spare change in your couch or a parking lot, there is no money left. You can make your own or purchase an envelope system like the one below to get started*:
When making your budget, make sure that EVERY SINGLE DOLLAR has a place to go. All surplus needs to be dedicated to saving, investments, or knocking back debt. Free-floating money will almost always be wasted and that is such a dangerous habit. It is only possible to reach your financial goals when you control exactly how your money is spent. Remember Monica’s advice, “Rules control the fun.” You can do this! Don’t forget to click the link to get your free Budget printables and tips to get started! Feel free to comment below or contact me directly with any questions.
What are your best budgeting tricks?
Disclaimer: I am not in any way affiliated with mint.com. I cannot guarantee that your information will be completely secure on this website and I will not be liable for any losses that may incur if you use this website. New York Times wrote an article a few years ago about the security of mint.com. You can read that here.