Budgeting is important for many many reasons. It gives you the peace of mind that you know exactly where your money went during the month. It also helps you plan for the future.
Life has a funny way going up and down and round and round. There’s always something that happens unexpectedly and it’s important to be able to have a little bit of cash to back you up when your car gets a flat. Not only is is good for rainy day spending, but what about farther beyond that? How about retirement?
It’s important to think about the long run when it comes to budgeting. Otherwise, you’ll get impatient at the slow progression in the bank account. When you think big picture about finances, everything seems to make more sense.
For example, let’s say you want to put $400 a month into a separate retirement fund and you do that for one year. That’s only $4,800 at the end of the year. But, what if you do that for 30 years in an account with 6% compound interest? At the end of 30 years, you’re looking at well over $150,000! See, how important it is to look at the big picture?
The word budget tends to seem restricting to those who like the ability to spend money whenever they please. But, it doesn’t have to be! Budgets can be whatever you make them to be. If you would love to keep your daily caffeine intake in the morning, you can! You simply budget it into your monthly budget. The more restrictive you are, the harder it gets but the more money you’ll be saving in the long run.
Budgeting will help you get out of debt too! We primarily use budgeting as a tool to budget our monthly expenses and know how much at the end of each month we have to throw towards debt. This is how we were about to pay off $21,000 in 15 months. It’s all budgeting!
Budgeting requires serious dedication and a lot of sacrifice. I can’t tell you how many times I’ve walked into a store and browsed the clothes section wanting to buy something but I knew it was out of my planned budget. I ended up putting it back on the rack and walking away from it. I can do that because I know it wouldn’t be like this forever but only until we pay off all of our debt that finances have to be this strict.
How to budget
Sit down and think of your top three financial goals that you want to achieve in the next 10 years. There are some things you need to consider when making your financial goals so you don’t say, “in the next 10 years, I want to be a billionaire!“ That’s easy to say, but it’s likely not going to happen if you’re starting out at $0 in the bank account.
Gather financial statements
We’re about to go through all your finances, so it’s important to have a computer where you can check your bank account, your monthly bills, and anything else that comes in or goes out during the month. Take a moment to gather all that information so you can sit down and write out your budget next. Now you won't be distracted and you can focus all your attention on writing out your budget.
Know monthly expenses
Now, that we know you earn $3500 a month in income, it’s time to see where all that money goes when you reach the end of the month. When you’re writing this all down in the budget sheets. Be sure to list them in order of importance. You want to write them in order that works best for you but you definitely need the basics like shelter, food, and clothing. For example, Tithe (Giving money to the church is first) then rent/mortgage, food, health insurance, water bill, electric bill, gas bill, car insurance, gas for the cars, phone bill, Netflix, etc.