Budgets are a lot of things to different people. Some say they are the key to finances, others say they don’t need them. People even say they are sexy. I think they are all right about what a budget is. I know personally I have used a budget and it set my financial journey in the right direction.
Something as simple as a budget is a very powerful tool if used properly. Sometimes we must go back to the basics with finances. Americans in general are not great savers. New data from a recent study by U.S. Bank states that only 41% have a budget set in place. While to some this is surprising to others It all makes sense. The average savings rate in 2019 was 7.6%. Yikes and I am curious could some people increase that if they just tracked their income and expenses via a budget? I would like to be optimistic and think there are people out there who could greatly benefit from utilizing a budget to optimize their finances. If you have debt check out my Debt 101 Blueprint for a step-by-step guide that will help you get rid of all that consumer debt.
When we talk about budgets there are a few ways we can tackle it.
- Pen and Paper
- Excel Sheet
- Online Budget Tools
The first and most basic way is simply using a pen and paper. This while works for some I think is a huge waste of time and paper. It is very time consuming to write down everything that would make up a budget. I value my time and yours so to me this is the worse choice of the three options.
The second way is using some form of an excel program on your computer. This in fact is not a bad way to do it. It is actually what I started with it is faster than the pen and paper method yet it’s not the fastest method to use. The link below is a FREE Budget Template for you to use.
The newest way and most streamlined in my opinion is that of online budget tools. This would be my preferred method of choice as it’s fast can be taken on the GO due to downloading an app. For this, I would pick Personal Capital I love the user-friendly interface and all the sleek graphs.
Method To The Madness
With creating a budget, we simply are creating a category for each thing in our lives and assessing how much to spend in that category. We also can track all of our monthly income. This tool will give us a snapshot of how our spending and income look over a long period. While this may seem like a waste of time for the right person this is a Game Changer.
Once we start a budget we are giving every dollar of ours a job. From this, we can accurately track at the end of the month how much we spent in each category. Now you will see where all that money is going. Some categories like eating out will probably surprise you. Other categories you might have already known. Now comes the fun part. We can now honestly look at the big picture and see all the money that comes into our lives and all that leaves our lives. At this point, we could assess each category and see where we can make cuts. Do you really need to spend $200 a month on eating out? Could you instead spend $100 and save the other $100?
Remember in this stage it is very easy to get discouraged due to all the bad spending and realizing you save very little money if any at all. I encourage you to remember this “No Shame No Blame”. You are taking the first step to fixing your financial situation and achieving the life you want. Once this step is tackled you will more than likely be saving more money and cutting back that spending. I like to reevaluate my budget to see if there is any unnecessarily spending once a month.
This is an incredible leap in the right financial direction. Small steps add up over time to huge improvements. This is what life optimization is all about. Little improvements 1% at a time. Which can be hard at first especially if we are expecting big leaps in change.
How has a budget helped you in your journey?
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