Budgeting Tips That Make All The Difference
Consider this you one stop shop for creating a successful budget. Here we discuss everything you need to know that you thought you already did, and show you the top tips and tricks of what is really behind the majority of multi-millionaires financial success. Financial freedom doesn't happen over night, and it isn't done in one single swing. Budgeting is the foundation to a well versed plan, and it all starts right here.
The Basics of Creating a Budget
This may seem a bit repetitive to some of you reading this, but understanding the basics is a vital step to a successful budget. This is the ground work of building a successful financial future, and it all begins with what you think you may already know. You'd be surprised at how helpful a quick refresher is on the basics of budgeting.
What is a budget?
If you were to ask any top financial expert on the number one thing that will impact your financial health, 99% of them would tell you "you need a monthly budget!" Too often families are finding themselves with a week left in the month, and their bank account has $0. Naturally, they then turn to their credit cards to pay for their living expenses until the next paycheck arrives.
Sound familiar? We've all experienced this to some extent i'm sure. But what is this weird thing called a monthly budget? There's a lot of talk about the need for one, but what is a budget and how do you set one up?
A budget is a simple calculation of your total income, minus your total expenses for a given period. By tracking the amount of money you have coming in each week, and knowing where every dollar you work for is going to, you are less likely to overspend.
Think back to the last time you were short on money near the end of the month. Did you have a budget in place? Didn't think so. Now you see the importance of creating a budget and tracking where your money goes each month.
What are the benefits of a budget?
Your budget is your financial map. Without a map, how do you know where you are going, or even where you want to go? Your budget can be looked at as your path to get to your financial goal. Your financial goals can range anywhere from achieving a certain net worth, becoming debt free, paying off your car, paying off your credit cards, saving "x" amount of dollars for your kids education, saving for retirement, etc.
Pick any one of the common financial goals I listed above for example. Now ask yourself, how are you going to get there? The answer to that question is your budget, and the reason you need one.
Among many other reasons, here are many benefits of having a budget:
- No more running out of money at the end of the month, its all planned for accordingly.
- You can consciously save more money for that big vacation you’ve been waiting for, or for other similar large events/purchases.
- You have the peace of mind knowing all your expenses are prioritized and money set aside to pay for them.
- You have planned and saved for unexpected emergencies that will happen sooner or later.
- You can live life with less stress knowing you have your finances in check.
- Your ability to buy fun toys are planned for accordingly, and thus achievable.
- By budgeting regularly, your financial well-being can only improve and get better.
Who needs to have a budget?
EVERYONE! Even the wealthiest people in the world have budgets. Enough said. Next topic...
Budgeting habits of today's multi-millionaires
You may have been wondering, what do today's millionaires do that make them so wealthy? There have been a few studies done on this, and the answers all have in common one thing: they all have a plan for where their money is going (aka they have a budget).
What are some of the things millionaires do that make them wealthy?
- They save regularly
- They invest regularly and invest for long term
- They live below their means – in other words, they don’t spend more than they make
- They aren’t concerned with impressing people they don’t know with fancy toys and lifestyles
- They avoid debt
Want to know more about the millionaire habits of today's wealthy? The Millionaire Next Door will answer all your questions on how to achieve millionaire status, and give you the perspective and motivation to achieve financial freedom.
How To Budget Your Money Like A Pro
Budgeting can be a stressful time of the month. Naturally, some of us procrastinate the budget because we don't want to see all the bills and debt we have to pay. "Out of site, out of mind"...right? Wrong!
Budgeting needs to be a habit and a lifestyle event that is followed as religiously as eating food to stay alive. If you don't budget, you won't survive financially in the long run. Here's how to create a well thought out budget.
The step-by-step process to create a budget
This doesn't have to be complicated, so we laid out these steps to organize a system to follow that ensures you cover all your bases. The steps to creating a budget are (with greater detail on each step below):
- Make a list of all your monthly obligations and their minimum payment amounts.
- Calculate your total monthly income for the upcoming month.
- Subtract your total expenses from your total income.
- Are your total expenses more than your total income?
- Yes – stop here and review where you can cut expenses. Prioritize your needs vs. your wants. Consider options to pay down your debt quicker, or request financial assistance if your options are depleted. This is your financial goal until you can answer “No” to this question.
- No – Proceed to step 5
- Set realistic financial goals with your discretionary income (money left over after subtracting out your expenses from your total income).
- Review and update, then rinse and repeat.