Hello, beautiful people from across the lands! Welcome to DAY 1 of the budgeting series. In today’s post I’m simply going to share how I like to budget and some basic steps to forming your own. In The Power of the B word…Budget post I explained how a budget can provide a laid out map with clear directions to your financial destination. Those directions come in the form of numbers. Knowing your numbers is the foundation of beginning to implement the plan in place. Without knowing my debt number of $91,370.18 it would be impossible to begin to plan to take action on the journey to debt freedom. I could not be intentional and clear on what steps need to be taken. The same thing goes for a budget, it provides clear steps of action for managing your personal finance.

What Is A Budget?

A silly question for some but it is important to know the two most prominent components in creating a budget. Those components are expenses and income. A budget is a financial plan that lists your expenses and takes account of your income to pay for those expenses. One of the very first steps is to list everything you expect to pay out for that month. EVERYTHING. That includes rent, food, utilities, gas, subscriptions, car note and insurance and so on. Next, you estimate your income for that month and subtract the amount. You will either have money left over, end up in the negative or have exactly zero. Will discuss next post what to do with that number.

Tell the Truth!

Knowing your numbers AND SPENDING HABITS are key! Once I did my numbers I realized something wasn’t right. I found my self diagnosed with “Where did my money go?” syndrome. Side effects are feelings of disbelief and confusion, constant scratching of head, and The Rock eyebrows. I pulled up my bank statement and analyzed how much I was spending on non-bill items. Can you guess where my money went mostly to…food! Not grocery store food but quick 4 for 4 meal after a long day of work and not wanting to cook when I got home. Or that $1.50 French Vanilla cappuccino every morning on my way to work. Those little expenses add up! In one month, I spent over $400 in non-bill items blindly! Without a thought or plan just swiping away. Once I saw that I realized why I am constantly behind on bills, why I never know where my money goes and why I need to do something about it. Analyzing my spending habits would serve very little purpose if I didn’t know my numbers from the budget. It provided a much-needed reality check!

How I organize my budget

When organizing my budget, I list my expenses by priority. The social worker in me reference to the Maslow’s Hierarchy of Needs. The hierarchy of needs emphasizes the importance of food, shelter, and warmth being the first priority before attending to any other need. In essence, I rather my cable bill get cut verses having an empty refrigerator and no heat. Now, of course, the purpose of budgeting is to eliminate those things from happening, but life happens (literally happening now) and it’s important to have your basic needs met first before anything else. Rent, food, and utilities are now my top three listed and focused on first. Next are my car note and insurance. Lastly other miscellaneous bills like cell phone, childcare, payday loan etc.

Recap

• Know your numbers (what’s coming in – what’s going out)
• Analyze your spending habits (where are you mishandling money most?)
• Organize your budget based on priority (think Maslow)

TAKE ACTION

Reading is one thing but implementing what you read is where the power is. Today if haven’t done so already list your expenses and income for the month. Then look at your latest bank statement and analyze your spending habits. What are the numbers telling you? Find out what your numbers are and begin to make a change today.

Until next time dream, believe and achieve.