Money, Podcast

Financial Literacy Month: You Need a Budget

You Need a Budget, podcast cover image

Your money mindset is directly linked to your budgeting system. If it’s off, so is your handle on your money. Let’s get you right with this topic: budgeting. I’m here to bring you some key principles that will take some of the mental load off your strategy and automate your financial success.

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There’s so many approaches to money management aka budgeting but if you’re struggling to just get started, I highly recommend you check out my Basic Budgeting Skills with Google Sheets course on Udemy. Having some type of system to follow for your money allows you to save more, spend less, exercise self control, and reach your goals. This course helps you jumpstart that process. 

If you’re not about that life, I also have a budgeting ebook that walks you through the same principles but in a different format. Both come with my budget template and email support to set up your budget for custom monthly planning.

But let’s run back those budgeting benefits! Having some type of system (or budget) for your money allows you to save more, spend less, exercise self control, and reach your goals. So obviously in this post I will talk about my own system, but I try to keep it simple and podcast friendly. If you want a visual explanation, I can do a video as well.

Firstly, I want to set the stage or lay the foundation for budgeting. I think even in 2021 budgeting gets a bad rap. And there are literally so many tools out there meant to help you with budgeting but they are still underutilized, or not productive at all. I’m here to tell you that you’re not the problem, your mindset and/or system is the problem. So, let’s address the mindset first. After all, I did say we’d talk about this more in this month’s series.

Typically what I see for people with a poor mindset around budgeting is non-commital lackluster. You’ll spend an intense session creating one and then never follow through. Or you’ll make a super simple budget to keep things easy to follow, but you lack the discipline to follow it. There’s this misconception that budgeting is for organized people only. Actually, it’s for the person determined to ensure their financial stability. So, if this is your thinking, chuck that out the window now! 

You have to become so enraptured in the thought of your success that you see no other way but to follow your budget. And yes, I know and experience the occasional misstep and having to get back on track. But the chronic disregard for a budget is damaging to your future self. Wasted and ill intentioned money is a loss of security, loss of emergency aversion (so basically not being prepared for financial emergencies), loss of potential investment opportunities (small and large), and so on. With a budget you can at least plan for financially risky decisions even if they don’t pan out. So when all is said and done, you can say “lesson learned” with no regrets.

Now onto the budgeting system downfalls. I personally am not a fan of budgeting apps, especially those that connect to your bank account and leave you vulnerable to yet another third party with sensitive personal information. However, my biggest critique of structured budgeting apps is the lack of customization. Many times you’re trying to learn the system and adjust your spending and saving habits to the platform. I say, throw the whole system away, and work with a modular design that allows you to tailor your tracking to your own habits. I’m not saying your habits are the ideal situation, but better to start where you are and then improve.

So how do we address these two very flawed approaches to budgeting? Glad you asked. Let’s take a look at some of my budgeting principles that can be applied to various situations and customizable systems.

Set clear short and long term money goals. You can’t fathom where you’re going unless you know where you’re at. And you surely can’t come up with a game plan for today if you don’t have a clue about where you want to be. What are some things you want to accomplish quickly to better lead you to financial success? This can simply be paying off a credit card within the next 3 months. Or it can be opening a new savings account to better manage your money for a long term goal.

On the other hand, you want to have your long term goals in mind to better structure your everyday decisions. These include goals such as raising your credit score by 50-100 points, or saving a down payment for your future home (you knew I had to include that one), and the list goes on. Having a clear vision of what you want lays the groundwork for budgeting success. 

Next, know your wants and needs. This step is crucial and I debated on creating a whole post on this topic in itself. Your wants and needs are very unique to your personality, income, daily routine, etc. You should never blindly follow someone else’s budgeting plan that determines essential and non-essential expenses FOR YOU. That is for you to decide, so you’ll want to get clear on what is important to you.

A great example of this is in my course–in the lesson about identifying your wants and needs. I consider my Spotify subscription as a need and I make sure that my budget always accounts for it. If I ever ended up in a tight financial situation, that would be the last entertainment or non-essential expense I’d get rid of. Being a long time Spotify subscriber and music enthusiast (I have both of my degrees in the Arts with a focus on music) I could not see myself without this app and all it’s features available to the paid subscribers. What’s your Spotify? Where do you draw the line with your expenses on what’s most important to you?

This helps you adjust your spending so that what you desire in the short and long term work together seamlessly. As you can see, my budgeting approach is very methodical but also accommodates the emotional side of spending. So you’re addressing every angle without fully sacrificing anything.

The next step is to review your current spending. Now that you know what you’re working towards, it’s time to see if what you have been doing with your money aligns with those things. 

I recommend reviewing your bank statements from the past 30 days. Categorize all your spending into two columns: wants and needs. Can anything be cut? Do all these charges fit into your monthly income or does it go over?

This then rolls right into our next step of budgeting. Analyze your spending vs. your goals. Now that you know what categories your money falls into, does it support the goals you have set? If not, how will you adjust your spending to support a healthy mix of wants, needs, goals, AND your income? It’s a lot but there is a happy middle for all of these, at least until you can increase your income to accommodate them all with no problems. 

Lastly, you’ll want to outline a budget that meshes the two, spending and goals. And I suggest doing so by making up your own categories! You can follow the templates I provide in the B Chic Finance Workbook and then adjust, but make it your own. The important thing is to tailor your experience so that you never fall off the system.

One of my favorite strategies to ensure success is to utilize a zero-based budget to learn discipline. A zero-based approach essentially assigns all income to an expense, whether that’s fixed and variable or essential and non-essential. This helps you exercise discipline and prioritize long-term goals. You avoid sacrificing the important stuff for instant gratification that ends up jeopardizing your future financial stability. But with this strategy, you also allocate funds for entertaining and non-essential items. So you’re never completely miserable with your money.

So those are my general budgeting principles in a nutshell. Obviously that was still quite a bit of information, but if you head over to the course link, you can see where to buy and get a more in depth look and step-by-step process to set up your budget.

Here are the steps again for my notetakers:

  1. Set clear short and long term goals
  2. Identify your wants and needs (or essentials and non-essentials) in your budget
  3. Review your current spending
  4. Compare your spending to your goals
  5. Outline a budget that meshes the two
  6. Utilize a zero-based budget strategy to account for all your income and expenses

The biggest takeaway I hope you get from this is that budgeting is a pivotal part of financial stability and wealth building. Even when you have more money, you have to have the discipline and knowledge to best manage it. The Bible says that a man must be faithful over little responsibility before he can be rewarded with more. Show that you’re faithful with what you have before you ask God for more.

We didn’t even touch on the specific goals and strategies around debt, credit cards, and investments; but it puts you in the right mindset for responsible money management. Budgeting is a logical approach to resisting impulse shopping and short-term gratification.

If you’re realizing that your money is in shambles and you need help, do not worry! All you need is an accountability partner, a money mindset guide; and I am taking on new coaching clients during April 2021, Financial Literacy Month. My coaching program is a tailored 1:1 plan where I help you reshape your money mindset from toxic spending to structured budgeting and goal getting with the least amount of resistance. Go to www.calendly.com/thebchic to sign up for a consultation call. I’d be happy to talk with you and start you on the life changing journey to positive money thinking.

https://soundcloud.com/bchicu/financial-literacy-month-you-need-a-budget

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