A lot of people hate budgeting. Even suggesting a budget to someone can make them uncomfortable. Unfortunately, it's necessary as it is the only effective way to keep track of your finances. It's amazing how much you can spend (or not save – however you would like to look at it) when you don't look at your bank account regularly.
Go ahead and keep your receipts for one month and watch how big the stack gets! Honestly, because you have no idea how much you've already spent, your mindset will be that you still have money to spend. A budget will limit this.
Here's a simple list of the basics you need in order to set a budget:
I prefer to use excel but you can grab a pen and paper if you wish. Write down the dates that you get paid and write down the guaranteed amount that you will receive each paycheque. It is much easier for salaried individuals to budget as they would receive the same amount of income per cheque. For people that get paid by the hour or are part-time/casual, write down a reasonable amount that you get every single cheque. If you understate it, it’s even better!
Write down your expenses, the payment amount and day of the month that you are set to make the payment for and the amounts that you believe you spend/would like to spend:
Write down your fixed expenses (expenses that do not change) - loan payments, rent/mortgage, cell phone bill, transit passes, insurance, bank fees, gym etc.
Write down your variable expenses (expenses that do change depending on your consumption) - gas, groceries, entertainment etc.
Savings counts as an expense (Paying yourself) - and should be the first thing that you decide as to how much you would like to spend on it after you settle your financial obligations - I suggest saving for retirement, ensuring you have an emergency fund and then of course for your dreams
This is literally all you need to budget! The only other thing I can think of, is that you need to fall in love with saving and understand how important it is to save. Having the proper mindset is crucial. If you don't save and are living cheque to cheque, I can guarantee you that you will feel more stress and that will be a distraction from the things that truly matter in your life. Plus, when those opportunities to live out our dreams come along (whatever it is!), you won't have the money for it! Remember, the goal is to save money for retirement, an emergency fund and our dreams by sacrificing the things that we do not need! This is how we will become happier individuals!
How I Personally Budget – Flexible budgeting:
I budget with all my spending under one account! I find it to be very tedious to set up budgets for health, car, gifts, house items etc. So, what I do is I put down all of my debt obligations which includes rent, electricity, water, Netflix (yes, I can’t give it up - way cheaper than cable), cell phone etc. Those are my monthly bills that will always be there. Any expenses that aren’t a bill, all go under one spending account; these items included, gas, groceries, gifts, house items, entertainment etc. So I literally keep three budgets: my debt obligations/bills, savings and spending. I LOVE doing it this way because I know that I have a certain amount each month to spend on whatever I want and that to me is freedom – to an extent! But it makes me happy regardless. I don’t feel guilty about buying a magazine/book, an app or coffee because I know that as long as I have some money in that budget, it’s fitting my budget! All that means is that I would have less money to spend on items for the house, entertainment, eating out, etc. It simplifies the budget. I think you should definitely give it a shot for a month! If it is your first month you will notice that it may be difficult to adjust but over the long term you will see how simple it is.
Why Does My Method Work?
It's funny because I feel like budgeting has a negative connotation, so already you look at it in a negative way. Then you put all kinds of restrictions on your budget which means you constantly have to think of all of these different budgets that you have for clothing, health, groceries, eating out etc, that it becomes stressful and overwhelming. When you flip your mindset and start looking at it in a positive way…such as, freedom and flexibility rather than restrictions, then you approach it differently. It's all about your mindset. As soon as I gave myself freedom, I found it easier to stay focused on the goal at hand - saving. I found myself trying to find ways to spend less of that “all-inclusive spending budget.” Keep your goals top of mind by simplifying the problem!
Free Budgeting Template
Download the free Excel budgeting tool here because you need something in order to keep track of what you're spending. You will notice that this tool is very interactive and doesn't pose the same restrictions that an app has. I do not like using a app as I have not been able to find one that can suit how i like to handle my finances and my budget - which is planning months down the line. This budget template will do this just. It will give you a look into your future finances given your current situation and see how decisions affect you long term! You will have to go in there and change your numbers when you've spent money, etc. But this will help you have full control!
Here is the video tutorial. If you would rather read the instructions, please scroll down past the video! Thanks