The word “budget” seems to have a negative connotation. It makes us think of limiting our spending and not being able to buy things that we enjoy. It may feel like something that boxes us in and limits our freedom, and in a way, it does. However, on the other hand, it really makes us free to buy the things we want without having to go into debt to get them.
Budgeting is simply deciding where our money will go so that we make sure we cover all of the most important things. Once those are covered, we can use the rest of the money however the h*ck we want, without having to worry that there won’t be enough left over.
Budgeting will look a little bit different for everyone. For example, my wife and I both work, so we budget our own paychecks separately, and we both use a little bit different systems. Here’s what mine looks like:
This is how I track my recurring (usually monthly/semi-monthly) expenses. I use it as a personal “Financial Dashboard” of sorts. Everything’s here, so I can see how much I’m spending in each area, and I can make adjustments when I see a need. This also helps me make sure I’m allocating plenty of money into savings and retirement funds — planning for the future.
I also have the “House” category in that “After Taxes” section. This is my wife’s and my main financial goal right now — we want to own a home — so I make sure that a good percentage of my money is going into saving for that.
Once we get all the way down to the bottom, that “Food/Gas/Misc.” category is pretty flexible. Any money that’s left there after going through all the categories above is mine to spend however I want, and I make sure that the other categories aren’t taking too much of the money, so there’s plenty left here for me to enjoy life now.
Besides this sheet, I also have what I call my “Balance Sheet,” where I track all my spending. The main purpose of the Balance Sheet is to make sure I always know how much money I have available at any given moment. The idea is to avoid spending money I don’t have — to avoid debt. I want to make sure interest is working in my favor as much as possible, rather than working against me. I’ll get more into that and how I use credit cards in a different post.
If you budget well and track your spending, you’ll be free to buy the things you want without burdening yourself with debt. Yes, it will take some patience and discipline, but those attributes are required in order to obtain any truly good thing, so why should handling money be any different?