The feeling of being out of control is familiar to me because that’s how I used to feel about our finances a few years back. Even though we had a great income, I could not figure out how to maximize it for our household.
Basically money came in and went out and I could not tell you where all of it went. Sure, we took care of the major things like mortgage payments, food, utilities, etc.
But there was also a lot of waste. Things had to change because I was tired of being out of control and we had nothing to show for all the money we made and all of our efforts to earn it.
Over the next few weeks here on the blog, I will be spending sometime going back to basics for winning with your money.
And today, we will start with how to regain control of your money with a budget.
We discovered the budget is the best tool to regain control of your money. I know that to some of you that it is an offensive word, a reminder of a strait jacket or something that limits your fun.
Or you might think: “I have tried that and it did not work for me”. Or you might think: “it is too hard to do it”.
But I will promise you this: the key to regaining control over your money, the key to maximizing the efficiency of your income is a working budget.
It was this way for my wife and me so I know it can work for you as well. You can do this!
What is a Written Budget?
Basically a written budget:
- Gives you a blueprint to help you manage and control your finances.
- Provides you with a way to objectively and comprehensively discuss money matters with your spouse (or accountability partner if you are single).
- Will help you live on less than you make.
The budget is the plan for your money.
How to Establish a Budget?
- Keep it simple (you don’t need an Excel spreadsheet with 17 tabs!). A yellow note pad will suffice if you just do it.
- Prepare it every month before the month begins. Every month is slightly different.
- Lay out all of your monthly income.
- Lay out all of your monthly expenses.
- Spend every single dollar “on paper” and “on purpose”. In other words, allocate every single dollar to a spending category.
- This is what is called a “zero-based” budget.
Income – Expenses = Zero
- Do it every month. Plan it and live it. Keep up with your spending.
- Work with your spouse (if single, find an accountability partner).
- Use your budget to gain insight into your spending patterns.
- Prioritize giving.
- Focus on needs, not wants.
- Adjust as necessary. It will take you about 90 days to get things under control with your budget. But you will do it!
- Stay with it!!!!
“A budget is people telling their money what to do, instead of wondering where it went”.
John Maxwell, Author & Motivational Expert
Question: What’s keeping you from living on a budget?
This post is also available in: Spanish