I think most people would agree that budgets can make you feel constricted, weighed down, and want to poke your eyes out. I know budgets feel like you are putting your money on a diet, and is NO FUN. First of all, I don’t blame you at all for feeling that budgets are complicated. So let’s try to simplify it and see it for what it really is, crunching dollars. They are a snapshot of where our money went for that month.
Crunching dollars looks at your income, expenses, lifestyle, and financial goals. They key to it is to have a plan! I am a lover of visual graphics and pictures, they are very useful and will help you fund your dreams. It really helps to see all your income and bills on the same board. On the left I have all my bills (rent, tax, internet, phone, electricity, gas, gym etc) and then on the right I have a month worth of paydays. This clarifies what is going out and coming in each month and the best part, what’s left over for the fun stuff! Then we have to reconcile our plan to what actually happened.
Crunching plan vary from person to person, however, here’s a simple formula to start with if you are feeling overwhelmed with where to start. You can change the ratio of this to suit your financial goals depending upon where you are. There are no set rules of money because everyone’s financial situation is so different.
Save 10% to 20% – Pay your debts – and finally, live it up!
Set up separate accounts, for savings goals, debt repayment, etc. I find it so much easier when you have separate accounts set up for specific money goals and can direct money to them. Most banks allow you to have free bank accounts as part of your monthly fee packages. You can also automate money transfers to these accounts as well. Make sure to nickname them with your money goal as well (I have one account nicknamed LakeHouse!)
This formula will get you headed in the right direction. Taking action will make you feel good about your financial situation. The bottom line is that you are only going to stick with a plan that you see is working, fun, and easy to stick with.