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Whether you’re at the beginning of your life journey or you’ve been on the road for a while, perhaps the biggest factor in your peace of mind — and the freedom to do what you like — is what kind of budgeter you are.
Now you may be thinking, “What is she taking about? Why does it matter what kind of budgeter I am – or if I even have a budget?” I’ll tell you why: peace of mind and, ultimately, freedom.
Because when you have (and follow) a Budget, you have a process and system that puts you in control of your life. You will know what is coming in and going out each month; and you have cut down the surprise (stress!) element. You also know where you stand financially and can make life decisions based from a place of confidence instead of uncertainty and fear.
So, what kind of budgeter are you? If you are anything like me, you start a budget and then live by it loosely. Is there anyone else that keeps a running total of your checking account in your head?! This is not a stress-free system!
Well, I finally got tired of “forgetting” that a certain expense (my auto insurance) was going to come out of my checking account (after I’d already overspent at the grocery store) and having to transfer money from savings. So, I rededicated myself to a Monthly Budget.
It really is much easier than it sounds, so grab a notebook, a pen and calculator and let’s get started. Here are the basics of starting your own Monthly Budget.
First, make a list of all your Monthly Expenses. This would include Housing, Utilities (Water, Gas, and Electricity), Food, Clothing, Insurance, loan payments, etc. It’s helpful to review your past month or two of bank transactions to make sure you don’t miss anything. You really want to account for every dollar.
Second, list your total Monthly Net Income. This would be your income after taxes and all deductions: what you actually bring home each month. Include any and all forms of income.
Third, subtract the Total Monthly Expenses from the Total Monthly Net Income. Hopefully there is a little left over; if so, put a portion into an emergency fund and a portion into savings. If you allocate every dollar (including emergency fund and savings), you should have zero left over at the end of the month. You don’t want to use those credit cards, so make sure you have at least $1000.00 in an emergency fund for when you unexpectedly have an expense (dead car battery, dishwasher dies, etc.)
For added control, you might want to consider downloading an app like Mint or Every Dollar onto your smart phone. This will allow you to track your day to day expenses. I use this along with m y checking account app.
You’ve taken the first step by creating a Budget. But, now you need to stick to it every month. Don’t be alarmed if you completely make a mess of it the first month; this is a work in process. Just learn from your mistakes and make adjustments the next month. You can do this!
The great thing is, now that you have a Budget, you know where you stand financially. There shouldn’t be any more surprises if you make sure that you budget for everything. And you have an Emergency Fund for the curve balls that life throws you (flat tire, etc.). You can also allocate a line item to save for a vacation.
But the bottom line is, you are now in charge! With just these few, simple steps, you’ve taken back your peace of mind and given yourself freedom.