Where's My Dollar: Budgeting Basics!
"Oh no, you can't find your dollar. What should we do?" Let's talk about budgeting! Sometimes it can feel like we are paid today and it's all gone tomorrow. Luckily, the money isn't walking out of our account, rather, we may be lacking the necessary tools to track our spending.
What is a Budget?
Your budget is a financial plan for a defined period of time. A plan is important because it's the foundation to help you plan objectives and achieve your goals. A Gallup poll found only about 1/3 of Americans (32%) maintain a household budget which means the remaining individuals are "shooting in the dark" with their money. Budgets are not meant to be restrictive. Having an established budget helps us make informed decisions and minimize the feeling of living paycheck to paycheck.
Building and maintaining a budget is financial fitness. Just like working out, the sooner you get started, the easier it gets and if you hit a bump in the road (it happens) the recovery can be quicker.
How To Start Budgeting?
It's simple! Here are easy 4 steps to building a basic budget:
List Out Your Expenses
An expenditure is anything that causes money to leave your pocket. These outflows can occur regularly or irregularly. When building your budget, we want to capture as many expected expenses as possible. Examples of expenses are rent, savings, subscriptions, vacation, eating out, etc. Consider this step as an opportunity for personal reflection. Ask yourself, where am I spending my money?
Estimate Your Income
Income is money coming into your pockets. Most of us only have one income which is called earned income. Earned income is the money we get for doing something (i.e. job/career). However, if you have multiple streams of income, be sure to know the sum before subtracting your expenses.
Set Financial Goals
Setting goals gives you a focus and helps you to organize your time and resources so that you can make the most of every opportunity. Goals can range from any amount of time and usually are categorized as immediate, short-, medium-, and long-term. Once you set your goals, stick to them, and confidently say NO to anything that may distract you from your financial goals.
Track Your Progress
Tracking your progress helps you identify potential obstacles and strategies for how to overcome them. Having a tracker will keep you accountable and remind you to celebrate the small wins. Personally, I strive to update my tracker at least every two weeks and this cadence is based on pay day. Consider making one day a week your money day. On money day, check all your accounts, see where you can make adjustments, etc.
Numbers to Know!
When building your budget, here are a few metrics that provide insights into areas where some individuals spend too much or too little money.
15-20% - Saving
25-33% - Rent
10% - Tithes
We will talk about more "numbers to know" in another post. Stay tuned!
Call to Action
Let's find our dollars and start budgeting! Before we can be trusted with more money, we should strive to make the most of the money we have to start with. To get you budgeting, I have created a basic template for you! Click HERE! Reach out if you have any questions.