Set A Plan: Budget

This is Part 3 of the series of personal finance tips for my Siblings, “How Not to Blow Up Your Financial Future”.

Disclaimer: I am neither wealthy nor a financial professional- read at your own risk!

Let’s check out the overview of the 5 Steps to Not Blow Your Financial Future:

1. See the Big Picture.
2. Do the Math.
3. Set a Plan: Budget.
4. Live Within Your Means: Avoid / Eliminate Debt
5. Save: Earn More and Spend Less.

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If you fail to plan, you plan to fail.

Benjamin Franklin

What is a Budget?

Your Budget is your financial plan! It shows you how much money you have to work with, and all the ways it’s going out.

What do we look for in a Budget?

• A good budget is realistic (a.k.a. flexible) and includes true expenses as they happen—even better, before they happen—not just the ones that occur monthly.
• Ideally, it’s a shared task. Every person with spending power should have access to it and help plan it. If couples are on the same page, it’s a lot easier to Avoid/Eliminate Acquired Debt, and be unified in getting to your Savings Goals.
• No matter what budgeting system you use, look for something you can stick with to help you accurately plan for the future rather than just tracking the past. Many Budgeting Apps can be viewed and updated right from your phone, with equal access from your partner, and automatically import transactions from your institutions.

How a Budget Helps with Savings Goals

There is only one way to eat an elephant: a bite at a time.

Desmond Tutu

I find it helpful to have a budget for Christmas, Gifts, and any big savings goals like Trips. This way I have time to save with a good idea of how much we’re going to spend, I can spend from it without waiting for a giant lump sum, I can be intentional and thoughtful with gifts rather than feeling the need to take advantage of every promotion, and it’s a lot easier for me to plan and make adjustments.

My Favorite Budgeting Tool

I’ve tried many budgeting methods over the years: cash envelopes, spreadsheets, pen/paper, Quicken and iBank (paid), and Mint (free). I’ve written about my favorite budgeting method here. YNAB is founded in the same principles for good personal finance (Read about YNAB’s 4 Rules for Successful Budgeting here). If you want to try YNAB free for the first 34 days, there’s no auto-renewal or gathering of your financial info. If you’re a college student, you can even get an entire year free. Finally, if you’re my sibling YNAB has launched YNAB Together which allows me to share my subscription so you can have it free because I already paid—that’s how much this works, so help me help you but actually just help yourself. Lol, seriously- call or text me.

How to Create Your Budget

Although your budget may look very different, the whole purpose is to track your money. If you’re being smart, you’ll tell your money where to go rather than passively letting costs happen to you.

Let’s do some Budget examples.

Here’s what my current Budget is made up of…

Budget Category	Details
Groceries	Divided evenly into 4 Weeks so I don’t run out in the middle of the month.
Savings	Education, Emergency Fund, Retirement
Health	Medical, Dental, Optical, Physical Therapy, Mental Health. Contributions from HSA.
Immediate Obligations	Monthly expenses like Bills (Housing, Utilities, Auto Fuel, Car Payments, Insurance, etc.); Tithing; Household (things needed to run the household like toilet paper); Interest & Fees (if paying off debt). Jeremy has his own budget for soda and lunches.
Funded True Expenses	Not monthly, but will be due in a large lump sum and need to be funded. Next Car, Auto Registration, Subscriptions, Memberships.
True Expenses	Not monthly, can contribute to as needed. Gifts, Dining Out, Fun Money, Shoes, Clothing, Emergency Preparedness, Books, Furniture, Auto Maintenance, Recreation/Sports, Fitness, Vacation, and even “Stuff I Forgot To Budget For”
Business	Costs and goals for the side gigs. Transaction Fees, Software Costs, Materials, Marketing, etc.
Wish Farm	3 wishes are planted and watered until they’re ready for harvest. Read more about it here.
Wish List	Unfunded dreams waiting for the Wish Farm.
Credit Card Payments	Each credit card with balances so they are paid off quickly.

You can find actual real-life budgets on YNAB for every situation.

How often do I review my Budget?

Check in at least weekly because the budget is only as helpful as how often you use it. Mine is checked almost daily.

• I consult my budget before I decide to make a purchase, and can move money to fit our needs.
• I check the budget when money comes in to assign each dollar a category until every dollar has a job.
• I adjust the budget when I’m planning for upcoming costs.
• I check it to see the progress on my Wishlist Items like vacations and that special pair of running shoes I want, and feel motivated.

Takeaway

Your budget will show you that every time you spend money on something you think you want right now (instant gratification or even impulse buying), you’re taking it away from the other things you really want in the long term.

Budgeting will help you answer “Where did all the money go???”, force you to prioritize what is most important to you, and focus your money there. Knowledge is power, and now you can control and make better informed decisions. Your plan will help you spend less than you earn so that you can live within your means—which is the next step!

Love,
Kat