Budgeting your monthly finances will keep you on a path to financial success. Using my Simple Monthly Budget allows you to be intentional with your money. Being intentional and specific with every dollar you earn and spend will provide you with a clear picture of your monthly finances. Writing out next month’s budget (Simple Monthly Budget) is Step 2 of my Net Worth Millionaire Plan.
Many people believe that budgeting is too restrictive or seems like financial handcuffs. I am here to tell you that I find the opposite to be true. I have been using a budget for over a decade and the freedom that it provides is outstanding.
It may take two or three months to get your budget down but it is worth the time. My Simple Monthly Budget sheet breaks down your income and places your expenses into categories.
First, write in your monthly income. This will aid you in understanding your monthly take home pay. You can not increase your Net Worth if your monthly expenses are more than your monthly take home pay. That is why it is so important to be accurate.
Second, before you spend a penny, make the following decisions automatic:
- Donations to a charitable organization (including your religious institution)
- Funding your emergency fund, savings account, or debt payoff
- Contributing to your retirement account, kids college fund or investment account
Donating to charity or giving to your religious institution is a choice but if you choose to do so, it should be one of the first three expenses you list. As you work through each step on my Net Worth Millionaire Plan, fund that step before you proceed to your other monthly expenses. This is called paying yourself first. This will help you increase your Net Worth and ensure that your hard-earned money will be working for you. For example, let’s say you decided to contribute $300 into your emergency fund for the next six months. That $300 should be transferred to your emergency fund before you pay your mortgage, car payment, cell phone bill and etc.
Paying yourself first is important to your financial future. If you wait to pay yourself after all of your monthly expenses, you will find that you won’t have any money left over. Paying yourself first is easier and you can adjust your monthly expenses accordingly. In my example above, do you think it is easier to save $300 a month before or after you pay your other monthly expenses? If you do it before, you will have $1800 after six months. If you save it after, I can’t be sure how much money you would have saved.
Let’s get to why many people dislike budgets. I’ve heard people say the following when it comes to budgeting:
- It’s too restrictive
- I want to enjoy my life now
- Feels like handcuffs
- It takes the fun out of life
- If I save for my future, I may not live long enough to enjoy it
Do you wish you had more money saved right now for your emergency fund, kid’s college education, or retirement? Do you wish you had more money saved so you could live in a nicer house, live in a better school district, could afford term life insurance, change jobs or go on vacation? If you answered yes, just remember that you are living in your past’s future. Today is your future from five years ago. Do you wish you did something different back then to be in a better financial place today?
Budgeting is important and that is why my wife and I sit down each month to discuss it. Many of our bills are fixed or relatively fixed expenses such as gas for our cars, the electric bill, water bill, grocery store bill and etc. Therefore, when we have our monthly budget talk we discuss our family Entertainment Budget and household spending money. Before the month begins we have determined if and how much we will spend on our children’s activities, birthday gifts, special events, eating out and fun money.
What is fun money? This is money that can be spent by either one of us with no questions asked. It’s our own money to do what we wish with no repercussions (a more detailed description of fun money will be in a future article). You can decide if you want to go to lunch, get a drink with a friend, by yourself a snack, get your nails done or save up for a pair of shoes. When you combine this fun money with your predetermined Entertainment Budget/household spending money you have the freedom to spend money and it feels better knowing that you have already paid yourself first.
Start working on your action steps below to keep winning with money.
YOUR BUDGETING ACTION STEPS
1-Be intentional with every penny
2-Fill out the Simple Monthly Budget
3-Complete the Entertainment Budget
4-Communicate with your partner-must be on the same page
5-Stick to your budget
6-Enjoy the freedom
Ultimately, your budget, when used correctly, will provide you with the financial freedom you deserve. Another good article to read is MyMoneyCoach-Budget.
