This is the part where budgeting plays a big role in your financial experience. We all inherently know that budgeting is key. However, we neglect to do it fully. I remember my budget used to be a quick notebook page of all the bills and the calculation of how much I had to pay for the month. It did not include anything that I wouldn’t get a call about if I didn’t pay. I never had a real calculation on what I was spending on food or gas. Entertainment was basically if there was money in the bank I would use it.
How many of us are like that? Your budget/ money has a mind of its own and if you have it you spend it on whatever. I’m not going to lie. For the most part it works. The problem is it doesn’t get you any closer to your financial peace. The only way to do that is to give every dollar a role to play or a job to do.
Get Clear on What’s Coming In
You need to be clear on all… wait let me say that again ALL of your income sources. If it is regular income then it should be accounted for on a budget. When you get unexpected money before you spend it, think about the place where it makes the most sense in your current plan. Should it be used to pay down debt or maybe you still haven’t met your emergency funding goal. Regardless of where you choose to put it you should take time to determine its true value in your plan before utilizing it.
Know Your Dollars Role
The same is true for dollars going out. If your budget is just the basics I encourage you to start getting detailed in your budget. You want to include, groceries, gas, entertainment, gifts, clothes, and if you are unsure add a category for miscellaneous. Your categories should be easier to determine if you have already started tracking all of your spendings. You can go back through the data you have collected and start analyzing where your money is currently going.
Your goal in budgeting is to automate your savings and investing. Budget your money right down to the paycheck. Then based on your current goals automate your savings and investing, even your bills. Know what money is your pocket money and when you get very detailed know what your plan is even for that pocket money.
Every dollar should have should be split 3 ways. 75%- Spending, 15%-Investing, and 10%-Saving. (If you are a tither, take your 10% from the 75). Remember investing should be saved until after you have hit your emergency fund goals. And by some other finance guru standards even until after you pay down or pay off your debt.
Make Your Dollars Work
Your spending should start to reflect your goals in life and not just be subject to your whims. Give your dollars a job and supervise what they are doing for you. If they are not fulfilling their role they need a new job. Eventually, you will find your right formula for managing your money.
If you are anything like me. You have probably read one or two of my blogs or someone else’s at this point. Maybe you have saved the link to put it aside for later. You realize the value of what is being taught but internally find it hard to commit to the journey. Usually, I would say it’s never too late, and on some level that is true, but I want you to consider how long you want to be on this journey of trying to prepare for your future. The sooner you feel the immediacy to start the better off you will be.
I stay tuned. I will have some budgeting tools posted for you soon.
Do you have any that work well for you? Post them in the comments.