When most people hear the word budget, they think about restrictions, what they won’t be able to buy, or having to eat only rice and beans. But that isn’t the case! Creating a budget makes you more aware of
your money and actually creates more freedom with your spending.
The most important thing that a budget provides is awareness. Seeing where each dollar goes is a great way to understand your habits, plan for future expenses and catch those annoying monthly subscriptions that you don’t use anymore.
With increased awareness, you aren’t only able to see where each dollar is going but you also have the ability to understand if your spending matches with things that matter most to you. Tim Maurer, a financial advisor, speaker, and author says, “Personal Finance is more personal than finance.” That’s why one of our goals at Solid Ground Financial Planning is understand what matters most to you. Once you know what matters most, it’s as simple as comparing your spending to that whatever on your list. If spending quality time with your family is most important, then your spending should match that. If vacations or experiences are most important, then your spending should match that too! When your extra money each month is going to things that matter to you and not being spent on stuff that doesn’t matter.
In today’s technology filled world, there are a bunch of great budgeting apps that make it easy to get started. Some the more popular ones include Everydollar, Mint, You Need A Budget, and Tiller. You can even create your own budget spreadsheet on Excel or with a pencil and paper.
To start your budget, simply list all of your monthly take-home income. This could be from your job, side hustle, or rental income – any source that adds money to your bank account. Next, list out all of the debt that you owe – college loans, car payments, credit card debt, or anything else. (Don’t include your mortgage here, we will add that a bit later.) With each of these debts, it’s important to list out each minimum monthly payment. After listing each debt, continue listing all of your other expenses. After all of these things are listed, you hopefully have some money left over at the end of the month. This leftover money should be put towards paying down your debt, if you have any listed. You can either use the debt snowball method (paying down small balances first) or the debt avalanche method (paying highest interest rate first). At SGFP, part of our financial planning process includes figuring out which debt repayment method is best for you. If you don’t have any debt to repay, this money can be put towards saving for retirement, something to create an experience with your family or friends or your next big purchase.
Interested in starting your journey toward financial solid ground? We’ll help you figure out where to start and support you along the way. Contact us to schedule an introductory meeting and to learn more!