4 Steps to Budgeting
Controlling your spend is the key to protecting your savings. A budget is a plan for where every dollar goes after you have allocated how much you plan to save (e.g., 10%). Budgeting isn’t something to see as restrictive or scary. Instead, think of it as a tool. And like any good tool, when you know how to use it, it makes life easier.
This is how to budget the remaining income after saving:
1. Organize the budget by month
Monthly budgeting is the easiest way to plan for most people. Most bills are monthly. Many people get paid monthly or biweekly.
For example, create a budget for the month of July.
2. List out income expected that month
Write down every dollar expected to come in that month. This includes paychecks, side gigs, tips, anything you plan to sell, like on Facebook Marketplace, as well as money rolled over from the previous month. Ideally, it all flows through one checking account to keep things clean.
Here’s a sample July income:
July 1 (leftover from June): $200
July 5: $2,000 paycheck
July 14: $2,000 paycheck
July 18: $150 (sell the couch)
July 26: $3,000 paycheck
Total income for July: $7,350
3. List every planned expense or goal for the month
Next, map out where all income is going. This is everything planned for spending or saving for the month, including fixed bills, like mortgage/rent, HOA, utilities, and the car payment; flexible/variable expenses, like groceries, gas, and eating out; savings goals, other debt payments, childcare, travel, healthcare, and subscriptions.
It takes a few months of budgeting to get this part correct, and that’s okay. It took me about three months to get it in good shape.
4. Subtract all expenses from total income
The budget should zero out, meaning income minus expenses, including savings and debt payments, equals zero. Every dollar is accounted for.
If over budget, it’s a sign to reduce expenses where possible or find ways to bring in more income to bring it to zero.
If under budget, it’s a surplus. Decide ahead of time where to put the extra dollars, like towards savings.
Why this works
When your income and expenses are laid out clearly and organized, it puts you in control of your situation and reduces stress. I advise sitting down every month to work on the budget for the next month, agree on changes if you’re doing this with your spouse or committed partner, and re-align on your goals. It’s not always perfect, but it’s the most powerful habit to have to protect your money and plan your future.
Reach out if any questions come up and I’ll see how I can help.
justin@wealthandwisdomcoaching.com
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