Finances are terrifying and it makes sense why 78% of people live paycheck to paycheck. This is happening because of high debt to income ratios, low pay wages, and a lack of knowledge of budgeting. We are scared to ask questions when it comes to finances and it’s leading to even more debt and even more struggling. Begin budgeting and feel your financial freedom expand drastically. There isn’t one budget that is right for every single person so it may take some trial and error, but just taking mindful steps to build your bank account will result in less financial stress. Creating a budget doesn’t have to be a difficult task. Keep it simple and build as you go.

Why Budget?

Where your focus goes, your energy flows. When you spend time focusing on money, you become more mindful of your spending habits. You spend so much time working on your money, don’t you want to know where it’s going and being put to use? The first step to financial freedom is creating a budget. When you begin budgeting, you are ensuring that you will always have the money you need for things you wish to do and emergencies that pop up. It allows you to prioritize and creates more importance on the things you have and do. Budgeting holds you more accountable and shifts your mindset into thinking more long-term. This will secure your future and make working more enjoyable because you know that there is a finish line.

1. Set Your Financial Goals

Maybe your goal is to pay off debt, save up for something you’ve been wanting to have or do, create an emergency fund, or just to stop living paycheck to paycheck. Whatever it is, knowing what you are working towards will make the task of budgeting/saving more attainable. You will feel more motivated when you have a specific purpose to your budget and when you know that there is an end goal (even if it’s far away such as retirement).

Setting financial goals for yourself will keep you on track. Write them down and remind yourself each time you have the urge to buy. Is it something you need? Is it worth the money? How will it benefit you now and in the future? Keep your goals in plain sight as a constant reminder but also have it accessible at all times (on your phone, in your planner, etc.) so when you are faced with the challenge of spending, you can reset and refocus. Below I have a free financial goal sheet that you can keep on your phone or print and fill out.

2. Track Your Income

Write it down, use an app, put it in a spreadsheet. Just find what works for you to stay on top of the money you are bringing in. Be sure to include all incomes that play a role in your spending habits, such as spouses, parents, or government assistance.

It is important to separate the type of money you are receiving based on fixed (consistent) and variable (inconsistent) income. Variable income should not play a role in budgeting and should be looked at as extra side money. Try to only plan your budget around fixed income. Always be mindful of how you get paid. If you work hourly, the amount you get paid may look a little different each month. Try to take the average income over the last few (3) months to calculate how much you have.

3. Track Your Expenses

Note what you are spending and when it is being spent. With so many things being electronic nowadays, it’s easy to not even be aware of what is being taken out of your account and when it’s being deducted. Having an idea of this can help better prepare you for upcoming weeks and reduce the guessing game of how much money you should have.

There are many ways to track expenses and spending. This can be tricky because we often forget to include the small here-and-there transactions that are a dollar or two but those little things add up. Unlike income, both fixed and variable expenses should be included here. Think of fixed expenses as recurring expenses of the same amount and variable expenses as expenses that are inconsistent in the amount/price.

4. Assess

Look at your overall spending habits and where you can cut things out. Begin to prioritize. Make lists of things that you absolutely need, what you want, and how much you would like to be saving/putting towards your goal(s). Begin to minimize spending habits that aren’t necessary. Create mini-goals that help you avoid spending.

5. Find a Breakdown That Works for You

When you begin budgeting, you will realize that there isn’t one model or system that fits everyone’s lifestyles. It’s easy to Google or Pinterest budgeting plans but it’s not until you dive into it that you’ll be able to figure out what actually works for you. I know, this is supposed to be a “Beginners Guide to Budgeting” but there are so many different plans that could work for you. I couldn’t (with a good heart) sit here and tell you that you have to follow one structure and you have to stick to that 100% or else it won’t work.

Use your assessment to begin budgeting accordingly. You can use many forms of budgeting including but not limited to the use of apps, spreadsheets, pencil and paper, cash-only spending, etc.

There are so many ways to budget. Here are a few ways to get you started:

– 50/30/20: 50% of income goes to needs, 30% to wants, and 20% to savings
– 50/50: Deduct you’re needed expenses (housing, groceries, gas, bills, etc) from your fixed income and then put 50% of the remaining into savings and 50% into a fun fund or spending account
– Cash Envelope System: Putting allowed amount for each category (food, gas, entertainment, etc) in individual envelopes and only paying cash from that. Replenish monthly, when the money runs out, that’s it for the month (Dave Ramsey approach)
– Set Savings: Commit a specific amount (based on your needs and assessment of spending) to go towards your financial goal(s) each month

Tips:

– Be realistic. Creating unrealistic goals when you begin budgeting can make everything feel impossible and it will make it more likely that you will not follow through
– Be prepared to adapt. Budgeting can be difficult because it means decision making. When you commit to a budget, be ready to adapt to the changes. Some days will be easy, some will be rough, all days will be worth it
– Adjust as needed. Budgeting is a vicious cycle to trial and error. If you see/feel that something isn’t working for you and your lifestyle, try something new. It’s okay to play around until you find the right system
– Stick with it. Budgeting doesn’t always feel like it’s paying off immediately, but it definitely does in the long run. Keep thinking about that vacation, retirement, emergency fund, how it will feel when you don’t have to stress about living paycheck to paycheck, or that fancy item you’ve wanted for years. Don’t give up on yourself, it’ll pay off in the long run.

I use the Clarity Money app (not an affiliate, just genuinely like the app) to help me keep track of…everything. It helps track income, spending, debt, recurrent payments, where and how to invest, and does monthly breakdowns based on your accounts. There are many convenient websites and apps (that are free) that help with budgeting plans. Don’t be afraid to search around and see what you like and don’t like in a plan.