How to Budget Your Money Better And Change Your Life!
When you hear the word “budgeting,” do your eyes glaze over? Would you rather watch paint dry than have this conversation? Are you spacing out right now? Hang on, come back to me! I know, I know. Budgeting isn’t a sexy word. It’s not something most people LOVE to talk about, but they should! Why? Learning to budget your money better is the first step to getting the car you want, buying your dream house, or going on that vacation you can never seem to afford.
But that’s not all that budgeting can do for you. Take a second to think about the BIG picture, what you really want your life to look like. Budgeting is important because it helps you create the life you want to live. And THAT is sexy!
So let’s get started!
Budget Your Money Better — The Scary Part… Math!
Are you nervous? Don’t worry! We’ll only use quick and easy math today.
The first thing to do is to calculate your monthly income. But remember, this budget isn’t for the IRS, it’s just for you! So you don’t need to be painfully precise. Are you an employee that gets a regular paycheck with all the taxes taken out? Then figuring out your income is easy as pie! If your paycheck is the same almost every month, use that amount. If there’s a lot of variation, use your lowest-earning month or calculate the average. To calculate the average, add all your income together from the past 6 months. Then divide it by 6 and voila! That will be your monthly income for our purposes today. Need a visual?
Month1 + Month2 + Month3 +Month4 + Month5 + Month6 = 6 Months of Your Income
6 Months of Your Income / 6 = Your Average Monthly Income
Good job! See, you got this! Now, hold on to that monthly income figure. We’ll need it in a minute.
Suggestion: If you’re a freelancer or seasonal worker, use your lowest-earning month in the past year as your monthly budget for this step. It’ll give you a little wiggle room during the good months!
Where is All My Money Going?
THAT is a good question! Let’s figure it out together. You’ll want to make a list of all the bills that are non-negotiable. Here are some examples to get you started:
- Rent/Mortgage
- Utilities
- Car Payments
- Student Loans
- Insurance
- Groceries
- Childcare
- Gas/Transportation Costs
- Cell Phone Bill
- Emergency Fund
Once you’ve got a complete list of non-negotiable bills and necessities that you pay each month, add them all together. (“That’s where that money went!”) Next, subtract your non-negotiable bills and necessities from your monthly income. Need a little help? Here you go!
Bill1 + Bill2 + Bill3 + Bill4 (etc) = Your Non-Negotiable Bills and Necessities
Monthly Income — Non-Negotiable Bills and Necessities = Game-Changer
Got it? Good! The number that you’re looking at NOW is what it’s all about. We’ll call it the game-changer.
Budget Your Money Better — The FUN Part!
Most people don’t like budgeting because they don’t know what they’re saving for. Or they’re saving for something that’s expected of them instead of something they REALLY care about. Right now, you have the opportunity to stop and think about what YOU really care about. All budgeting is, is taking small steps towards making your goals into realities.
What Do YOU Want to do?
Alright, do you have a goal in mind? Good, now write it down. About how much do you need to save to reach it? Write that number down too. Now think about how much money you want to put aside each month to reach that goal and change your life for the better. Is it $100, $50, $20? We’ll call that your goal-smashing amount. Remember, the more you can set aside each month, the quicker you’ll get to where you want to be. But even a SMALL AMOUNT means taking steps towards achieving your goals! So don’t be discouraged if that number is a little smaller than you’d like it to be right now.
Suggestion: Create a new savings account (or rename your existing one) with the name of your goal. I.e. “One Week in the Bahamas Fund” or “Fund to Start My New Business,” or “Gucci Shoes Fund” or even “Fund to Purchase The Switch,” whatever you like! We don’t judge.
Here’s some more easy math for you! Subtract your goal-smashing amount from your game-changer figure. It should look something like this.
Game-Changer — Goal-Smasher = Treat Yourself
Yes, you read that right! You can (and SHOULD) treat yourself every month. Depending on your Treat Yourself amount, it can be as small as a cup of your favorite tea, as luxurious as a massage, or as big as a weekend away! How do we get started? Let’s start by creating a list of your reasonable wants. Write down a reasonable list of things you’d like to be able to do each month whether it involves relaxation, recreation, your hobbies, or something else. For each item, write down what you might spend on it each month. Here are some ideas of what could end up on your list.
- Eating out
- Going shopping
- Entertainment
- Gifts
- Coffee Shops
- Massage
- Fancy Loose Leaf Tea
Now that you have a list of your reasonable wants, add it all together. It should add up to less than your Treat Yourself amount. If you find that you’re spending too much, try making some adjustments. Cross out a few of the things that aren’t as important to you or reduce the amount you’re willing to spend on a few activities. What should the math look like?
Want1 + Want2 + Want3 (etc) = Less than your Treat Yourself amount
Budget Your Money Better — The Hard Part…
Whew! You got through all the math, now the hard part is over, right? Well, not exactly. The hardest part of money management isn’t creating a budget, it’s sticking to it. What can help?
- Make Sticking to Your Budget as Easy as Possible — Try automating all your necessary bills AND your goal-smasher savings amount. How can this help you? You won’t get money management fatigue, trying to remember how much goes where every single month. And when saving money is automatic, it’s harder to “miss” it once it’s gone.
- Be Reasonable — Occasionally, unexpected expenses come up. Be prepared by having an emergency fund so you don’t have to go into debt. And don’t be too hard on yourself if you can’t set aside as much for your goals that month as you wanted to.
- Focus on the Big Picture — If you find yourself tempted to do some over-budget spending, remember your BIG goal! Imagine how great you’ll feel when you reach it! This mental rehearsal will improve your chances of succeeding and even lower your stress.
- Adjust Your Budget When Necessary — Did you just have a baby? Get a new job? Buy a new home? Circumstances can change pretty quickly. The budget you created today will need to be adjusted to fit your life as it shifts and changes.
Is Budgeting For Me?
Yes! Budgeting is an amazing tool that you can use to better your life. Whether you feel like your income is large or small, creating a budget will move you towards your BIG goal. And if you budget with a purpose (YOUR purpose) it will make sticking to it that much easier. So what are you waiting for? Start making your dreams into realities!
Originally published at https://andreapruettwrites.com on July 21, 2020.
