I have met people from all walks of life… from the very wealthy to those who had a large amount of debt. I am still surprised at how many people have no idea how much money they make or how much money they spend on a monthly basis. Why? I believe it's because many people have negative thoughts when they hear the term “budget”. Some people can get anxiety when thinking about creating a budget and as a result push it off to a later date. I believe that the truth is that creating a budget can actually enhance our lives! Patrice Washington stated in a Forbes interview, “Budgeting is not about deprivation at all.”. . . “They (budgets) give more to us because they give us a better sense of what we have on hand to spend and how we can plan for the future.”
It is important to know what your cash flow looks like and have a positive outlook when creating a budget, including when you are doing this with a partner. One way to get a positive perspective around creating a budget is to think about the potential positive outcomes from creating your budget. Think about the clarity you might gain regarding your spending habits. Think about the ways in which you might be able to improve the outflow of you money. Think about how you would feel if you were able to see that you have more money coming in than going out AND you are saving for things that are important to you. Talk about all the benefits with your partner.
How should you create a budget? Everyone is different, so you must find a method that works well for you. The first time I learned about a budget I was a freshman in high school. I remember my friend would sit down and pay bills for her parents because that is what she did. She took care of the finances for her parents… as a freshman in high school! I asked her, “What are you doing?!” She sat down, showed me her binder and she had all the bills listed in order of when they were due. Each pay period she would sit down and actually write out the checks and mark the line as paid in the binder, keep the check register up to date and balance it out. Shortly after, when I began to have bills such as a car payment and insurance, I did the exact same thing. I felt so accomplished, responsible, and at ease. I want you to find a way that makes you feel the same, and that way will look different for everyone.
There are many ways to create and track your budget. Some people create budgets by listing fixed expenses in a binder or writing bill due dates on a calendar. More recently, people have started to use personal finance tools on their phones and/or computers. Nerdwallet.com has an article that suggests different types of personal finance software. Whatever you do, choose a budgeting system that works best for you. Today, I use an excel spreadsheet and add the columns to keep track of other important information. And, you can always ask your financial planner for suggestions and tools.
Once you have created a budget you love and are aware of how much money you are making and spending, I believe it is MUCH easier to get a handle on your financial situation.
I hope you received value from this article. Stay tuned for step 3 of the 10 steps to transform your financial life!
References and Further Reading
McGrath, M. (2015). Why You’re Thinking About Budget All Wrong. Retrieved from https://www.forbes.com/sites/maggiemcgrath/2015/05/22/why-youre-thinking-about-your-budget-all-wrong/#5fc194c82332
Schwahn, L. (2019). How to Choose the Best Personal Finance Software. Retrieved from https://www.nerdwallet.com/blog/finance/the-best-personal-finance-software-of-2017/
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