How to Start a Budget that Really Works
Does the word budget make you cringe? When you hear it, do you feel a sense of restriction and constraint?
Rest assured that having a budget does not mean you can’t spend money ever again. In fact, having a budget really means that you’ll give yourself the freedom to spend money you know you have all while knowing that you actually have the money to spend!
It’s actually quite freeing!
But only if you know what you’re doing.
The trick is that you need to know how to start a budget that really works.
Consider Your Family
Before setting up your budget, it’s important you consider the needs of your entire family. Think ahead to the whole year. What things will your family need?
- Do you have an annual vacation your family takes?
- Do your kids play sports?
- Are there any family traditions that you need to budget for? (A special Christmas dinner, Easter breakfast, etc.)
- Do you have special celebrations for birthdays?
- Will your kids need new clothes for school?
Really take time to consider this portion of setting up your budget. The more things you can add into your budget and account for, the better and more smoothly your budget will run.
Don’t be Afraid to Tweak It
As you set up your budget, inevitably, you will miss something. That’s why you must give yourself permission to tweak and change it until you get it right.
And that’s not a bad thing. It’s good to always be working to improve it.
Later we’ll get into how to start a budget that really works. You’ll have the tools you need to set up the best budget for you!
See it as a Positive!
You must see budgeting as a positive thing or you won’t wanna do it. Sort of like dieting – if all you see is restrictions, you’ll never eat right. But if you see that at the end of your time dieting, you’ll be healthy and trim, then you’ll be more motivated to do it.
Your budget is the same way. You cannot think about it being a bad thing – a restriction of some sort.
You must start to see a budget as the way to financial freedom. It’s amazing once you get started!
Record Your Total Income for the Month
First things first. In order to start a budget that really works, you need to start by recording your total income for the month.
Figure in and record any source of income you receive.
This is the very first step in knowing exactly what you have to work with.
List All of Your Expenses
Logically, you need to know what you need to spend your money on. Your list of expenses should include:
- Emergency Fund (Click here to find out how start an emergency fund with no money)
- Utilities (Heat, water, electric)
- Garbage Disposal
- Vehicle Expense Fund
- Clothing Budget
- Dining Out
- Household Expenses
- Gym Membership
- Life Insurance
- Auto Insurance
- Any Debt
These are not listed in any particular order and you may have other expenses you would like to add or take away from this list. Hopefully this will get you started in recording your monthly expenses.
Subtract Your Expenses from Your Earnings
If you aren’t used to living within a budget, this may very well be the most important step. You must deduct your expenses from your earnings.
Do not just spend money off the top of your monthly income. It has to have a specific and designated place.
Assign Every Dollar a Value
Having said that, it’s so important that you know where every dollar of your money is being spent. When you’re not using a budget, it’s easy to get haphazard and spend your money without really being mindful of where it’s being spent.
This is really dangerous.
Because dollars add up and if you’re not aware of what you’re spending money on, you can easily spend more than you even have.
If you take the time to properly set up your budget, then you will already know where the money is going.
Be Intentional and Track It!
They say it takes about three months to settle into a budget. That means you’ll be tweaking and changing things around as you see how your budget is actually going to work.
The best way to do this is by tracking everything you spend and making sure you’re very faithful in doing so.
It’s really important that you find a system that works for you. My husband and I recently started using the Every Dollar App by Dave Ramsey.
It’s amazing to see how your money is being spent and I’m here to tell you that it’s oftentimes in ways you wouldn’t think.
Before tracking our expenditures, I would often ask my husband where all the money went. I had no idea (he did) because I wasn’t tracking it.
Once I could see where the money was going, I was much more intentional about spending wisely.
That’s one of the biggest reasons that tracking your money is so important. It will help you become much more aware and as a result, you will control your money instead of it controlling you.
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What about you? Do you know how to start a budget that actually works? What tips would you add to this list?