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My (Financial) Alphabet Starts With “B”

The alphabet starts with “A” you say (Yes, I can rhyme)? Well, mine starts with “B”, and B is for Budget!

Yesterday, when we started this series, I told you that you needed a good “Why” before you could get into the “How”. Well, today is when I’ll begin spelling out how to gain your financial independence, and a well thought out, well managed personal/family budget is the cornerstone of your “How”. You cannot succeed without it. This one is going to be a bit of a “Doozy”, so bear with me. It’s the most important thing you’re going to do in your financial life, if you want to win with money.

Let me begin with some background. I’m 34, married with a nearly 3 year old daughter, and became completely debt free, including my home, by the age of 32. You might think that’s pretty impressive, but the only thing that I can think of sometimes is that I wish I knew what I know now, so that I could have started developing good habits sooner, and dug out from the debt quicker. It took my wife and I 5 years and 9 months to pay off $136,085.60. Yes, I have it down to the penny. Remember what I said yesterday about intense action? Well, intense action really doesn’t work without a goal. And our goal was that number. We HATED that number, and we wanted to KILL it. But, I digress. The point here, is that if we would have gotten started sooner, and been more serious about it sooner, we probably would have been able to shave off about 9 months to a year. What did we not really do well at the beginning? We were TERRIBLE at budgeting.

The Budget

Ahh, the budget… most people dread it. I know that we did. In fact, we put it off for the first year of our marriage, and our financial journey (As well as combining our checking accounts. We’ll get to that in another blog). “It’ll be so boring”, we said. “It’ll be so constrictive”, we said. The truth? It was the most freeing part of the process, and allowed us to really turbo-charge our plan, and get things done quicker. It actually made the process fun, because we could see exactly how our money was working for us.

That brings up a good point: A good budget puts all of your dollars and cents to work for you rather than against you. Have you ever felt that way? Not known how you were going to pay your bills? Almost every U.S. citizen will feel that pain at some point in their lives. It’s nearly inevitable, even for the wealthiest among us. The point is that if you don’t spend your money wisely, no matter who you are or what level of wealth you have, unless you have a solid budget plan in place, NOTHING matters.  The budget tells your dollars what to do, rather than having to chase them all the time because they’re misbehaving and disappearing. Get it? The main thing I want to get across here is this: As with any goal in life, YOU are your own biggest hurdle.

Building momentum is key. What part of the journey to the moon uses up most of the fuel? The blast off from earth. The rest is far less energy intensive in comparison. Budgeting is no different!

How Do I Do It?

Ok, enough of me preaching. I think you get the point. Budget = Good. No budget = Bad. So, you might ask, how do I get started and what process do you recommend? First of all, if you’re like me, you hate writing things down on paper. I always lose, accidentally destroy, or forget about paper. It never ceases to amaze me. The good news? You don’t need to keep a paper budget! My family uses www.EveryDollar.com.  It’s free, simple to use, easily editable, and has free apps for your Android or Apple device as well! FYI, there is a pay version that links to your bank accounts for ease of use, as well, but we don’t use it.

Below are screenshots of my personal EveryDollar budget for the month of February. A modest month for us, but you’ll get the point. It allows you to keep track of all of your income, as well as your outlays for charitable giving (We, sadly didn’t give a lot in February. We do most of it at the end of the year), savings, household expenses, travel expenses, debt, and literally anything that you can think of. It’s completely editable, and can be used as a template for the next month. I could teach you to do it step by step, but if you go to their website, they’ll show you all of the nuts and bolts. I don’t want to get into the weeds of teaching you someone else’s software, when they’re perfectly capable themselves. What I want to accomplish is to teach you the important process that goes INTO budgeting, and I’ll do that below.

So, what’s the important stuff when it comes to budgeting?

It takes a bit of effort at first – Much like any skill you wish to develop, this will be HARD at first. It’s not native to you. You’ve never done it before. Remember when you learned to ride a bike? Pain and frustration came before the reward of cruising down the street under your own power. Budgeting is no different. If you work at it for about three months, it will become second nature.

Speaking of effort – Here’s what you should focus your energy on:

  • Have a budget planning session around 3-7 days before each month begins, and again around half way through the month to assess where you’re at. Adjust in the middle of the month if you need to. If you’re married, make sure your spouse is a part of this process. It WILL NOT WORK. if you’re not both on the same page.
  • Make sure you input EVERYTHING that you spend money on. Haircuts, clothes, groceries, gas for your car, nights out, THE WORKS.
  • After you write down what you THINK you spend, TRACK what you ACTUALLY spend for a month or two (And forever after that). The results will probably shock you at first. That Starbucks coffee every morning, the weekly night out, those cigarettes, lunch because you were too lazy to pack instead? All of those are costing you a fortune!
  • After you figure out what you ACTUALLY spend, put a plan together to reduce spending in categories that you spend too much on, and add to categories that will actually help you in your finances (Stuff like paying extra on debt, for instance).

Within a few months of diligently tracking this stuff, you should be a pro! You’re ready to really start crushing that financial plan!

That wraps it up for today. Make sure you come back for tomorrow’s blog, where we’ll continue to work on the basics of your “How”.

 

Any tips for your fellow readers about budgeting? Questions for me? Comment below!

Are you excited about starting your journey to financial independence? Share this post with the people you care about!

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