What do you think of when you hear the word budget? Do you feel limited or restricted? Does it make you think you can’t have any fun?
I’m here to debunk those thoughts. A budget is a tool. A budget is a spending and saving plan. It’s something that can bring awareness to where your money is going. It’s so easy to swipe a credit card and not pay attention to how much you’re spending at the end of the month, and you’re left wondering why you don’t have any money to take that tropical vacation in the cold winter months.
I want to share with you how you can bring an awareness to your spending, evaluate your spending based on what’s most important, and create money habits that align with your values and goals.
Bring an awareness to your spending
Before sitting down to create a budget, first figure out where your money is going right now. This is about tracking your spending every month. You can use software like Quicken, Wave Accounting, or Xero. It will link with your bank accounts and track your spending for you.
I like to start in excel or a google doc. That way you take ownership of reviewing each individual transaction.
Start with your fixed expenses. These are things like rent or mortgage, insurances, and loan payments. These are expenses that come out of your account every month in the exact same amount. Sometimes there’s not much you can do to make changes to your fixed expenses, but take the time to review them and look for opportunities to spend smarter.
Some tips to reduce fixed expenses:
- Have you shopped your car insurance anytime recently? I shopped mine with a women-owned firm Eley Insurance Agency earlier this year and saved $100 per month!
- Are you driving an expensive car? Could you move and lower your rent payment?
- Subscription based services – I’m not saying to get rid of that Netflix subscription, but do you have subscription based services that you’re not using? Many of us sign up for $10 a month here, and $15 a month there, without really using these things, and guess what, they add up!
One you have your fixed expenses added up, it’s time to move on to variable expenses. I like to break down variable expenses by category. Some categories could be groceries, utilities, dining out, entertainment, and travel. There is more wiggle room for making changes with variable expenses
Evaluate your spending based on what’s most important
Now that you have a snapshot of what you’re spending your money on, it’s time to really look at the numbers and think about them.
Are there expense categories that surprise you? Is there something that’s much higher then you expected?
Some clients tell me they didn’t even realize how much they were spending on certain things. It’s the ease of the credit card swipe that can really sneak up on you or a general lack of awareness of the numbers.
I want you to look at your spending as it relates to what matters most. Are you overspending in areas that aren’t really important, while ignoring areas that can make a more meaningful impact in your life?
When you’re looking at these numbers, don’t judge yourself. Don’t let those feelings of anxiety, shame, or doubt creep up. Remember, this is just a starting point. You can’t go back and change anything that happened in the past. You can only move forward in a more productive way.
Create money habits that align with your values and goals
You have an awareness of your spending. You have identified spending habits that aren’t based on what’s most important. Now it’s time to align your spending with your values and your goals.
The first question you want to ask yourself – what are your values and your goals?
If you haven’t done a core values exercise, start here.
For goal setting, grab my 5 step financial guide to living your ideal life here.
It’s a step by step guide helping you set goals and create a savings plan to meet those goals.
One thing to think about is the WHY behind spending. For example, you may dine out a lot because you love spending quality time with friends. Well, could you fulfill that deeper need in a way that costs less or is free? Consider cooking in or spending time outdoors. You’ll still get that quality time without the large price tag.
Once you’ve gone through my 5 step financial guide and you have set a savings goal for the things that are most important, I want you to automate and systematize your savings.
That means having an automatic transfer of funds, on a regular basis, from your checking account to a separate savings account that is earmarked specifically for the goal you’re saving for. That way, saving for your goals is treated almost like an expense item because it’s coming out every month automatically.
If you’re worried about this, know that it’s much easier to go in and stop an automatic contribution then it is to remember to make a contribution every month.
Most importantly, keep a positive mindset about your spending and saving. This is a process and a journey and results come from small, consistent action steps taken over time. Happy budgeting!
If you have questions or want help, schedule a free 30 minute call with me here.