The evil and overused word that none of us like to mention.
I remember when I was in high school, my mom tried to get me to make a budget…. That never happened.
I appreciate her efforts. It wasn’t until later that I realized that creating and keeping a working budget would help Jen and I pay off over $50k of debt.
The word “budget” probably has a specific ring to it for you too, right?
This post is meant to be a guide for those of you who have little experience with a budget or if you do have experience, to give you the inspiration and perspective you need to get back on track so you can reach your financial goals.
Why is it important to keep a budget?
It shows you the health of your financial situation. Your budget is your pre-planned spending schedule.
Without a budget, your finances take the direction of wherever the wind decides to blow. This is an important concept to understand. The budget acts as the
If you want to end up in a specific location, you have to set your own sails. Your budget acts in a very similar way.
How do you do that?
First, get right mentally. Without the commitment to yourself that you are going to keep a budget – you will likely fail.
Budgeting is a single piece of your financial strategy. It is essential that you master this early.
Here are three tips to help you master your working budget.
Consistently analyzing your finances will show you amazing insights into your spending habits.
It won’t be fun at first but if you stick with it, you'll begin to see areas of improvements.
If you are married or have a partner check out our post on why it’s important to manage your finances together.
We recommend setting one month, three month, six month, and year-long goals.
Set goals that inspire you to continue when things get hard. We prefer the S.M.A.R.T. goal system. Which is what our free budget sheet is based on.
If you would like to download that worksheet along with other tips on how we paid off $50k of debt, enter your name and email address below.
Just remember. When you want to give up and go buy yourself an overpriced pair of shoes or that splurge purchase, your goals will help you remember what you’re really fighting for.
The easiest way to create a budget is to first write down how much money you earn each monthly. Write down your net earnings (the amount you get paid after taxes).
Next, write down every outgoing expense you have. List them all, no matter how small. Netflix, car insurance, hospital bills, credit card payments, etc.
This may take some time but it will be extremely valuable to you later. You will learn that you probably only need a specific amount of groceries, gas, and spending money each week.
If you have extra cash left over after you pay your bills, this is going to be the fuel you need to reach your long-term goals whether it's investing, paying off debt, or saving for a big purchase.
Whether your goal is to become debt free, like we did – or to ramp up your savings or investment accounts – your leftover money will allow you to see how long it will take for you to reach your goals! Write down that date!
If you realize that you don’t have any money left over after you fill out the budget sheet, then it’s time to get creative about earning extra income on the side or cutting expenses.
Budgeting and figuring out ways to earn more and spend less can be a powerful exercise! Take the budgeting process and use it to your advantage.
Don’t forget to download our free budget and goal setting template. Enter your email below and we'll send you an email shortly with your download.
We would love to hear your biggest challenges with creating or keeping a budget. Please share your thoughts and comments below. We read all responses and your feedback will help us know what to share with you next time!
Zack is one of the co-founders of FreeUp and is in charge of setting the strategy for the blog and managing the day-to-day operations. When he isn't plotting new ways to create awesome blog content, he likes to geek out about global affairs, ride motorcycles and can probably be found hiking somewhere during his days off.