Updated: May 18, 2020
Are you struggling to save money, make ends meet, or make sense of your income? The average American family lives on a budget every month. There are many reasons why you should too! In my opinion, budgeting gives you the opportunity to maximize your income each month. Who wouldn't want to do that? Learn to allocate your money in a way that will not only pay your bills, but build your financial future!
So, let’s jump right in, shall we?
When most people hear the word budget, they tend to cringe at the mere thought of having their finances controlled. Well, let me share a secret with you. Creating a budget changed my ENTIRE life.
Once, you start learning your own financial mindset and habits, you will be being to see where change can take place for you to build a financial future of your dreams.
There are two essential reasons you should begin creating a budget. Whether you are walking onto campus for the first day, just graduating. starting a new job, or a seasoned worker, creating a budget you can stick to will change your finances in a positive way forever.
Reason #1 Taking the time to budget your monthly income will help you pay off your debt substantially quicker.
Reason #2 A budget will help you make the most of your monthly income an prepare for your future.
But, first, what is a budget? Ok! Before you jump in headfirst, there are some essential key words I believe are valuable along your journey towards financial freedom. I began my journey to financial health by gaining knowledge about the dictionary’s meaning of freedom, money, legacy, budgeting, debt, investing, and wealth.
Understanding key terms can positively influence your financial outcome! It is vital to make sure you have the correct definition of these words. Sometimes, a person can think they know the actual meaning of a term used every day. In actuality, they may have a slight misinterpretation that could affect their overall perspective of handling money. As a result, that may cause someone to misuse their money, make poor money management decisions, or miss out on financial opportunities that could help them gain financial independence down the road.
Learn basic money terminology to help you budget
If you don’t know the correct definition of budget, how can you accurately create a budget? It is essential to understand basic terminology. That way, you will be able to build your finances, a working budget, and see your money grow over time. As a result, you will develop a more accurate understanding of your finances. Then, you can build a financial legacy for your future that lasts beyond yourself!
"Simply put, a budget is a plan that shows your income and expenses."
Simply put, a budget is a plan that shows your income and expenses. Yep, that is it! It is a plan! You will be creating a plan to help you maximize your income and begin budgeting to build your savings. Like I told you earlier, I used to cringe at the word “budget”. So, I decided to give it a try right after college. I created a budget using a spreadsheet and allocated all of my monthly income. After one month, I was hooked! I saved $800 my first month of teaching! It was amazing. When you create a budget, you give yourself the opportunity to reach financial goals.
These financial goals can include:
1. Decrease student loan debt
2. Eliminate credit loan and debt and usage
3. To build an emergency fund in case of an emergency with your job or health
4. Build a retirement portfolio
5. Save a down payment for your first home
6. Save for your child’s college expenses
Whatever your financial goal may be, creating a budget will help you get there quicker.
Let’s get started with building your budget! Let’s download your materials. Grab your monthly income spreadsheet here.
Where are your finances? It is important to sit down, grab all of your monthly expenses, loans, debt, and current bank statements. So, head over to your computer and download your most recent bank statements. Simply log in to your online banking system.
Check your account balances for the day. Make sure you take into account all of the pending transactions. There are two total amounts in your checking account. One amount is the available balance. This means the amount you have available after all of the pending transactions are taken out of your account. You need the available balance for your income tracker.
Start with your income
Your income is the amount of money you make in a day, week, or month. Depending on your job, your income could be hourly, fixed, variable, or based on your annual salary. You need to know how much money you are bringing in each month. Then, you can start to create a plan on where you need to allocate your money.
Grab your pay stubs, online paycheck documents, any checks, or sources of income you have coming in for the month. You will need to record the amounts on your income tracker. Writing down your income will help you build your budget in the next steps.
Variable income is the amount of money a person makes, but the amount changes. Many contractors and project-based workers experience inconsistency with their income.
Allocate Your Money
Allocating your money is when you distribute your money to a particular area like rent, groceries, entertainment, etc. Hourly income is when you are paid by the hour. For every hour you are present at work you get paid a certain amount. If you are unsure of your hourly pay, make sure to check with your manager to gain knowledge about your compensation.
Start Your Budget
Now, you are aware of your monthly income, you are ready to distribute those funds to the correct areas using your monthly spreadsheet and the cash envelope system (we will talk about this a little bit later).
Don’t Forget to…
Download the FREE monthly income sheet, monthly budget spreadsheet, and your monthly cash envelopes! Make sure you are using your bills, expenses, and loans to accurately record you’re the amount of money that comes out of your account in one month. This step is very important because you will need to know where every single dollar goes each month. Once, you have this information, you will be ready to begin your next step in the budgeting process.
Final thoughts on beginning your budget...
I know, it can seem a little daunting at first when you begin getting all of your expenses down. But, remember the fun part is when you start to see your #budget work. When I say work, I mean you will begin #saving money, paying down your #student loans, and more financially responsible for the long run. When it comes to your financial future, it is important to budget and distribute your money each month.
Following The 21 Day Budget system will help you find success in building your financial future. It definitely helped me pay off my student loan debt, buy a home, and build a savings account.
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