Budgeting for beginners

Would you start a road trip without a map? Would your grandma bake her famous pie without using a generational recipe? Would Danny Ocean plan his next great heist without an elite, star-studded team and an intricate plan? Of course not. We’re talking about trained professionals who are the best at what they do.

So, if the best in the business wouldn’t start without a plan, why would you go into a month without a plan for your finances? Well, you shouldn’t. You should always have a plan, otherwise known as a budget. But what does it mean to have a budget, and where do you even start? We’re here to answer those questions and more. Here’s how you can get started with one of the most important financial tools.

What is a budget?

First and foremost, a budget is a physical document that tracks your income and your expenses. It can help you develop effective money management skills by estimating how much to spend for a set period of time. It’s designed to be a:

• Map: It clearly defines a path to whatever your goals are.
• Course of action: It gives you measurable, actionable boundaries to spend within.
• Tool: Most of all, it’s something that helps you stay informed about your own habits.

What is a budget not?

For some, “budget” is a dirty word. A restrictive word that means you must trim your spending and punish yourself for coloring outside the lines. But it’s important to remember that a budget isn’t meant to be any of the following:

• Restriction: Your budget is not meant to be a set of rules.
• Punishment: It’s not meant to be the bad cop.
• Deprivation: It’s not supposed to stop you from getting what you want.

Why is it important?

As a master document that tracks both money coming in and money going out, your budget is a comprehensive plan that makes sure no penny goes unaccounted for. It can also help you assess your decision-making abilities and avoid a lifestyle you can’t afford. Essentially, it gives you the knowledge and awareness you need to:

• Foster other healthy financial habits
• Avoid living beyond your means
• Have a sense of control over your finances
• Stay on track toward your goals
• Spend guilt-free by allocating fun money
• Clean up financial mess by organizing your financial life

But I’m already managing my money perfectly fine

Sure, budgeting helps you review your current spending, but it’s also about planning for the future month ahead. Also, spending is not static. Your habits and needs will change on a month-to-month basis. Go over budget last month? Make a plan to cut back in the next one. Come away with a little extra? Find a new place for it to go or bulk up your savings!

But I don’t know how to budget, and that makes me scared

Learning to budget is easy! Plus, once you learn, it only takes a few minutes each day. You can also find budgeting templates online with predetermined categories and advice about how to divide your income.

Then, it’s all simple math! Grab your calculator and start with the amount you expect to take home in a month. Slowly subtract the amount you plan to spend in each category, and suddenly, you have a comprehensive income and expense plan.

But I’m too scared to confront my spending habits

Remember, your budget is meant to help you manage your money, not shame you or punish you for your behavior. Don’t agonize over every purchase, and if you miss a goal or a milestone, don’t worry. It happens to everyone. Just get back on the horse next month!

Also, remember to be flexible. Your budget is supposed to help you see the big picture. It’s not always rigid, and it will evolve and change with time, just like you will.

But I’m not the only one I need to keep within my budget

Have family members who you’re also trying to keep in line? Sit them down and talk to them about the importance of budgeting and properly managing their money. If you give kids an allowance, give them their own budget so they can document their spending. That’s also a great way to teach them financial responsibility and raise future master money managers.

Myths? Busted! Budget? Beginning to take shape!

Now it’s time to get started with a budget of your own! Remember, it’s not about shame or restrictions. It’s about securing financial power and independence. More than that, it helps you track the money you’ve worked so hard to earn, manage that money with confidence and feel like you can achieve your goals.

Looking for even more ways to take your money skills to the next level? Visit our Financial Well-Being hub to see how you can reach the next step!