Budgeting sucks but so does being "Broke"

What is a Budget and How do I Use It?

Many people avoid budgeting because it sounds overwhelming or restricting. What if you looked at it as empowering and helpful? A budget tells your money where to go. It also tells you when something’s not right, aka you aren’t bringing in enough money or you’re spending too much.

So how do you budget? It’s not as hard as you think!

Gather your Information

First, you must gather your information. You need to know where you stand – how much money comes in and goes out?

You can get the information easily – just pull your bank statements from the last few months. Record your total income from all sources (your main job as well as any part-time jobs, side gigs, or dividend income you earn). Next, categorize your expenses. Look at every expense, planned and unplanned, and account for it.

Choose a Budget

There are several budgeting plans, but these are the most popular:

· 50/30/20 Budget – 50 percent of your income covers your fixed expenses, 30 percent covers your wants or splurges, and 20 percent covers your savings and debt payoff. Work your expenses into these percentages and see where you need to cut back if you are over.

· Zero-Based Budget – Every dollar gets a job in this budget. You assign every dollar you bring in to go somewhere. It could be to pay a bill, contribute to your retirement account, put in your emergency fund, or pay off debt. At the end of the month, you should have $0 and not because you’re broke, but because you assigned each dollar a job.

Track your Income and Expenses

No budget will work if you don’t track it. How will you know where you’re spending your money if you don’t track it?

Use a free app like Mint or do it yourself using a spreadsheet or even pen and paper. As long as you track every dollar you bring and that goes out, you’ll see where you need to make changes. Whether you need to increase your income or cut back on your expenses, tracking will give you a good idea.

Why Should you Use a Budget?

If you don’t budget, consider it. You’ll feel more empowered when you know where your money goes. Many people think they are restrictive, but honestly, you’ll feel better knowing that you cut back on your habits or cut out some bills so you could invest in your future. Budgeting is powerful and makes you more knowledgeable. Don’t you feel better when you know what’s going on?

If you don’t budget yet, today is a great day to start. Keep it simple and take baby steps. Don’t beat yourself up if your budget doesn’t look as pretty as you thought it would. Realizing there is a problem is the perfect first step. From there, you’ll be able to make changes, good changes that help you have more secure finances moving forward.