Show me how to budget
What springs to the front of your mind when I say the word, money?
Dollar bills falling from the sky?
A cocktail in your hand on a beach?
It’s funny how words can come with so much meaning attached. And to test that theory, I’m going to ask how another word makes you feel. And that word is…Budget.
Restrictive, serious, boring.
A Budget can feel like a diet for your money – something you’ll stick to for about a week before throwing in the towel and ending up back at square one.
We need to acknowledge the meaning we put on the word Budget because it might help explain why many of us struggle with Budgeting.
Let’s take 10 minutes to get started with Budgeting and show you how you can achieve your goals with your next Budget.
Ready? Start the clock.
What is a Budget?
A Budget sets out your spending priorities so that you can use the money you have to satisfy what you need, indulge in what you want and save towards long term goals.
Budgeting boils down to:
Income – Expenses (Needs and Wants) = Savings for your long-term goals
Your Budget will enable you cover your needs so that you never run out of loo roll again. It also means that you can indulge in things you want and make your mum proud by contributing towards some of your longer term goals like your retirement fund so that ‘future you’ can retire into cashmere rather than acrylic.
What’s my motivation?
Like a Hollywood star cast in a movie role, in order to perform, you need to know your motivation. Your motivation for a Budget will be the goals that you want to achieve with your money.
This could be short-term goals like:
- A mini holiday break away from work
- Finally buying that pair of shoes you’re craving
- Buying your mum the perfect gift for her birthday
Or long-term goals like:
- Travelling Europe for a few months, to create memories you’ll remember
- Your investment fund to start investing now
- Building up your emergency fund so that you will stop worrying about money
Clarify your money goals and you’ll have clear motivation to achieve them with your Budget.
Should I Budget for the week, fortnight or month?
What I’ve found most effective is to Budget based on how often you get paid because you’re more likely to track your income after each pay day. If you’re a freelancer or have less predictable income, another option is a monthly Budget, which prompts you to think about all the expenses you’ll incur for the month, including big ticket items like rent.
How do I set up my Budget?
When it comes to setting up your Budget, you’ll have more success if you pick a method that works for you. Here’s 3 ways to make your Budget happen:
- Budget envelopes: This will work for you if you’re struggling with overspending. The Budget envelope method identifies your needs and wants and provides each item with an envelope filled with cash, whether that’s your morning coffee money or your Lululemon fund. What’s great about using cash is that the money you put in each envelope is finite – when it’s gone, it’s gone and you can’t overspend. We also feel the effect of spending cash more so than when we use a card, so your spending behaviour may change. The Budget envelopes method will work better with gorgeous looking envelopes that you’ll actually want to use so check out these funky looking envelopes to get started.
- Every dollar has a job: This will work for you if you think you’re bad at budgeting. The You Need a Budget (YNAB) approach is centred on the idea that every dollar has a job in your Budget so that you map out a plan for all your spending. It also includes breaking down big expenses so that you plan for these in your monthly budget and to start saving money now so that you get to the point where this month’s expenses are covered by last month’s paycheck. If you’re looking for a system that will help you get better with budgeting and prioritising your spending, check out the YNAB method and its approach to breaking the paycheck to paycheck cycle or download the YNAB app.
- Journal writing: This will work for you if you prefer taking notes by hand. The journal writing method involves writing down your expenses as they happen and adjusting your budget accordingly in your journal. As a writer, I always reach for my notebook to jot down ideas and if this resonates with you, the journal writing method could be worth trying, as you’re more likely to stick with a method that works for you. Check out the Clever Fox Budget Planner for a journal that’s structured for effective Budgeting.
How much should I save?
The sky is the limit but start with aiming to save at least 20% of what you earn and directing this towards your long-term goals.
And that’s time up!
Budgeting takes time to master. The trick is to select a Budgeting method that works for you and to pick yourself up and try again if you do end up overspending. The feeling that comes from being in control of your money and achieving your goals with money is so worth it.
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