How to build a budget you can actually stick to

The word budgeting, Jason said to me outside of class, was for a long time synonymous with handcuffs and restriction. The word restriction in the dictionary means to limit one’s freedom of movement or action. In reading that world alone, some of you are feeling the actual physical manifestation of being unable to move. It is no wonder that the mere idea of talking about finances can be debilitating for some.

But, truly it should be synonymous with freedom.

Right now 8 out of 10 people are living paycheck to paycheck and that is because they never learned or applied the most foundational part to financial freedom, budgeting. Instead we are so used to going to work, earning a paycheck, spending unconsciously, and borrowing money we have not yet earned to pay for our lifestyle.

Some of you are thinking, well I have never had to borrow money before. Do you have a car payment? A mortgage payment? A credit card payment? A home equity loan? Student loans? Medical bills? If the answer is yes to any of these, then you have at some point guaranteed your future earnings to pay back borrowed money. YOUR FUTURE!! That’s indentured servitude in the 21st century. That debt is what should feel restricting, not a budget.

Budgeting allows us to become conscious. It puts the control of our future back into our hands by giving us a map for our money to follow when it comes in. Below is a recommendation on how to assign your money to different categories by Dave Ramsey: 10% to giving, 25-35% housing, 5-10% utilities, 10-15% food,10-15% transportation, 5-10% health, 10-25% insurance, personal 10-15%, recreation 5-10%, saving 10-15%.

Here is a real life breakdown

Income: $5000

Giving (10%): $500
Housing (25%): $1250
Utilities (5%): $250
Food (15%) - $750
Transportation(10%) - $500
Health (5%): $250
Insurance (5%) - $250
Personal (10%) - $500
Recreation (5%) - $250
Savings (10%) - $500

Total (100%) = $5000

How to track it all

Now that you have these numbers, you need to track them! It’s not enough to set a budget and come back at the end of the month to see if you hit your targets. BE INTENTIONAL. Some of these categories might be on autopay and be directly deposited from your bank account, like the mortgage. Other of these may need a separate account where the funds are immediately distributed at the beginning of the month, like savings. And others may need to be taken out in cash and put in an envelope so you know tangibly when you are reaching your limit, like groceries.

There are free apps like mint, you can use the note section in your phone, or be nerdy and make an excel spreadsheet. But every transaction needs to be recorded, so find a way that works best for you.

Next Steps

Each class in the series builds upon the other, so if you don’t nail the most foundational piece of budgeting, saving, paying off debt and investing for wealth is pointless for me to teach you. Get to it!!!!