Many people dread creating a budget, but I have nothing but good things to say about mines. In fact, budgeting has been my saving grace (no pun intended) and it’s one of the most important tools that I have used to manage my money throughout the years.
What is budgeting?
A budget is a powerful wealth building tool which helps you set intentions and create an action plan for your money. Simply put, a budget is a spending plan. It outlines how you will spend your money, save, pay off debt, invest or give.
Here’s another way to think of it, a budget is like Google Maps. Without Google Maps, would you know what train to take or which highway you should avoid because of traffic? Probably not, right? Well, a budget is really just a roadmap leading to your financial success. One more thing, creating a budget may be involved, but it should not be complicated or excruciatingly difficult.
How to stick to a budget?
I’ve found that I’m able to stick to a budget when it aligns with what I value and find important – not what society says I should do with my money, or what my family and friends think I should be doing.
My budget is about me and it’s designed for me.
It represents what I value and hold dear to my heart.
I stick to my budget because it focuses on two very important questions:
- What is important to me?
- What are my priorities?
For example, in my budget, I set money aside for travel (no surprise there) and extra mortgage payments.
Since I love to travel, I set aside money every pay period so that I have funds available to travel the world. And since I want to pay off my mortgage early, I also put money aside for extra mortgage payments. By looking at my budget you’ll be able to tell: 1) I prioritize travel and 2) I am striving for financial independence.
In summary, a budget outlines your priorities and by looking at what you spend your money on, you can tell what’s important to you.
Learn how to create a budget that helps you reach your financial goals sooner with my Back to Budgeting Basics course.
But aren’t budgets restrictive?
No, budgets don’t have to be restrictive.
Although I set boundaries for myself within my budget (so that I can work towards my goals), it’s important that my budget is realistic and builds in some fun every week.
Also, if there are any restrictions in your budget, you have to realize that you set them yourself. And most likely you’ve set them because whatever you’re working towards is worth prioritizing and making sacrifices for.
When you create a budget, know that you are in charge of the budget creation process and you decide where your money goes every month. You also decide what you’re willing to do to reach your financial goals. A lot of people forget that.
If you like Starbucks, budget for it. If you enjoy going to comedy shows, build that into your budget.
It’s your budget, own it.
Remember an unrealistic budget will not serve you.
In fact it may discourage you and you’re more likely to give up budgeting at that point because what’s the point, right?
What have I accomplished with a budget?
Now let’s talk about a real world example.
With a budget, I’ve been able to save for many trips around the world. Here are all the places I’ve traveled to so far!
How did I do it?
Well, I was very clear on what I wanted. Next, I created a plan (my budget) then I followed the course I laid out for myself.
Till this day, my budget is a simple Excel spreadsheet that I update once a week. There aren’t any pivot tables or any fancy formulas, just the basics to give me a snapshot of where I stand financially.
To make things easier, here’s the monthly bill tracker that I use to keep track of all of my monthly bills in one place. Use the code “TTCSAVINGS” to get 20% off.
Why is budgeting important?
Budgeting is important because it helps you organize your finances. With a budget you can track where your money is going and you can make more informed financial decisions based on these new insights. It can also prevent overspending and undersaving.
Things to Remember:
Remember, every month your budget will look different.
Well, we are dynamic. Our budgets should reflect that. Also, don’t be too hard on yourself if you fall short. What’s more important is that you figure out what happened and pick yourself back up. On the other hand, be sure to celebrate each and every money win along the way. Lastly, a budget works for you not against you. So set the tone with your budget and follow the beat of your own drum.
Next, read about my payday money routine and the important things I do every time I get paid.
Found this article helpful?
I detail all the steps to creating a budget in my course, Back to Budgeting Basics. Set your financial goals, track your expenses and live life on your own terms.