Budget Is Not a Bad Word

Budget. It sounds so… restrictive. But the opposite is actually true; it is freeing! I get a little, okay a lot, excited about budgets. I get a rush when reviewing the excel spreadsheets that house my budget, spending, and my retirement plan. I started budgeting 15 years ago and can’t remember or imagine how I got along without one prior to that.

I like to control my money, so in order to do that I need to know where it is going. If you want to control your money instead of letting it control you, then you need to have a plan too. And that plan is called a budget.

So how to start? You can put it on paper, in a spreadsheet, or even track it on an app in your phone. It is easier than it’s ever been to budget. Different personalities can have different budgeting styles and that is totally fine. The point is to have one and stick to it.

My personality is very detail-oriented, which means I need to know where every cent is going. And I budget for everything specifically. The categories I budget for include: Home Improvement, Savings, Emergency Funds, Marriage, Groceries, Dining Out, Vacation, Car Maintenance, Charity, Insurance, Gasoline, Property Taxes, Internet, Utilities, Cell Phone, Mortgage, Personal Expenses, and a few other things. Budgeting this way helps me avoid any surprises. This type of budgeting is not for everyone, but that doesn’t mean there isn’t a budgeting style for you out there. There is a budget type for every personality. Below are two types. One of these two is sure to get you started on your way to financial happiness.

This is the type of budget I use. The way this budgeting type works is that you basically “spend” all your income before it reaches your bank account. You list out all your expenses and assign them a portion of your income so at the end, after you’ve assigned the dollar amounts by account, your leftover money equals zero. This method of budgeting helps make your money goals a reality.

For example:

Income: $3,000

• Housing: $1,300
• Groceries: $550
• Utilities: $150
• Health Insurance: $120
• Transportation: $150
• Internet: $75
• Cell Phone: $75
• Emergency Fund: $200
• Car Maintenance Fund: $25
• Property Taxes: $30
• Dining Out: $75
• Entertainment: $75
• Personal Expenses: $75
• Vacation: $100

Leftover Money: $0

With this method you divide your income as follows: 50% for Necessities, 20% for Wants, and 30% for Savings and Debt.

Necessities could include:

• Housing, Food, Transportation, Insurance, other necessities, Minimum Debt Payments

Wants:

• Travel, Entertainment, Dining Out

Savings and Debt:

• Grow Emergency Fund, Paying off Debt

I hope these two budget types will get you started on your own path to freedom from the frustration that comes from not knowing where your money goes. It will serve as a way to help you analyze what you are spending on that you may not even realize you’re spending on or even need.

If there was just one more thing I could say about budgets, that I think will make the difference between sticking to it or just abandoning it as another failed attempt, is to have a realistic budget. A mistake many of us make is that we make an idealistic budget, how we would like to be spending our money. This is only going to lead to disappointment and to the idea that budgets are restricting and a pain instead of the huge benefit that they are.

There is no point in under-budgeting only to overspend each month. The budget must be realistic for it to work. So I suggest you get real with yourself and budget those $300 a month for dining out. It can be sobering when you see realistic expenses on paper. It could be enough to help you consider cooking more at home (I use this example because this happened to me. I am turning into a fine cook :))

Before you go, a bonus:

A note about credit cards. Please do not include your credit limit as part of your income; it is not! And do not use credit cards unless you can pay off 100% of the balance each month. If used wisely, credit cards can earn you free money and help increase your credit score (I earned over $700 last year), but if you are not in the habit of paying off your balances, do not start now. Not until you’ve worked your budget successfully for at least a few months, if not a year.