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Critical first step in getting your finances in order – Budgeting

One of the quickest ways to get a hold of your monthly finances is by creating a monthly budget, however a budget you can live with not one that’ll make it hard for you to achieve your goals and dreams. Over my career I’ve created hundreds of budgets, including different types of budgets that include zero based budgeting, incremental year over year budgeting, and a percentage-based budgeting method. Below are a few personal budgets that you can learn about.

  1. 50-30-20 Budget – the rule here is that 50% of your income goes to your expenses every month. After that 30% goes to savings, including retirement accounts and the remaining 20% goes toward spending as you like.
  2. Zero-based Budget – the goal is to get all your income to equal zero. The budget plan will break down everything you earn into a category, such as bills, credit cards, groceries, and savings. Allocate your money how you determine it to be spent but remember to spend all of your income.
  3. Goal-based Budget – base this budget on the clear goals you have for your money. As you reach your goals be ready to shift your income into different budget categories. For instance, say you reached goal A, now you want to reach goal b, which is adding more money to your 401k account.
  4. Spending Cap Budget – Place a maximum cap on what you should spend every month even if it’s less than you earn. Once you get to that cap, you can spend the remaining money on what you want to spend it on as long as you have met your spending cap amounts.
  5. Pay Yourself First Budget – This system prioritizes that you set aside money for savings first, be it in a savings or retirement type account. When you get paid immediately move money toward those savings goals. What you have left over will go toward all other expenses.

There are many more budgets, these are just a few for you to learn about.

Now, let’s talk about budgeting. Why do you want to budget?

  1. Budgets help you identify where you’re spending your money
  2. Identify where you are financially
  3. Identify where to curb your expenses
  4. Budgets help you ensure you’re not spending more money than you are making
  5. Budgets can help you identify places you’re wasting money on
  6. Budgets allow you to make informed choices
  7. Budgets allow you to identify how much money you can or can’t save
  8. Provides you with a method to determine how much you are spending on a frequent basis
  9. Allows you the opportunity to re-allocate where you spend your money
  10. Helps identify options or choices regarding where you are spending your money

These are just a few reasons why you want to prepare a budget for yourself.

I’ve created a budget planning spreadsheet that you can use to document all your sources of income and expenses. This will show you where you are spending your money on a monthly/annual basis by categories.

Use the link below for the Annual Budget Planner that you can use to plug in all your income and expenses, plus a couple of charts. You’ll be able to itemize your income and expenses by categories.

Annual Budget Planner

Budgeting Apps

Here are a few budgeting apps you can use to help you create and manage your budget. I’ll go into details about budgeting apps in another post.

  1. Mint – free budgeting app that allows you to connect all of your financial accounts in one digital space so you get a high-level overview of your financial health. The app also allows users to track spending and savings and set and track budget goals.
  2. PocketGuard – You can connect your bank accounts, credit cards, loans and investments and track bills. With that intel, the app shows how much you have left to spend after setting aside funds for necessities, bills and goals.
  3. YNAB – Users of the app are actively involved in setting goals, adding expenses and adjusting their budgets as needed. You start with default budget categories, but you also can create your own to fit your specific needs.
  4. Good Budget – Goodbudget is a budgeting app that relies on the traditional envelope system to help users budget their monthly expenses. This app is a great fit for consumers who want to organize their priorities and get ahead financially.
  5. Honeydue – Allows couples to see both partners’ bank accounts, credit cards, loans and investments (and each partner can select what to share with the other) so you can manage money together and see everything at one glance

This should be enough information to get you started on a solid plan of budgeting. Good luck and I look forward to hearing about your budgeting success stories.