Do you have a budget? Does the word ‘budget’ make you feel uneasy somehow? Last week we talked about tracking your spending and how important that is. The next step is using the numbers you track to develop a realistic budget.
This week, we’re talking all about budgeting and how it can help you save and reach your financial goals.
If you’ve never created a real budget before, have had issues sticking to your budget in the past, or are simply questioning whether or not you need a budget in the first place, this episode is a must-listen because there is no one set answer to any of these situations.
Find out more about how to make budgeting work for you and our show notes from this week’s episode.
Determining the Purpose of Your Budget
Some may argue that budgeting is not for everyone, but we beg to differ. The word ‘budget’ often has a negative connotation attached to it but a budget is simply just a spending plan to tell you how to spend your money so you can reach your financial goals.
Have debt? Need to save more for retirement? Want to take a vacation or start paying more of your bills on time? Using a budget can help you make the most of your money and improve your finances.
A budget doesn’t have to make you feel deprived but the truth is, your income isn’t unlimited and you can’t spend a ton of money on whatever you want. If you do, you won’t have any money left for the important stuff.
Budgeting helps you plan out what you’ll spend money on whether it’s a necessity or something fun. We’d actually highly recommend you include space in your budget for wants and fun expenses to make it more convenient. Just take a look at what your values are and align your spending with the expenses that are most important to you.
Commonly Overlooked Budget Categories
There are so many different ways to budget and we explain some of the most popular methods in this week’s episode. Some people like to assign an amount to specific budget categories while others like to take a more value-based spending approach or dedicate a percentage of their income to a specific category like 10% to their retirement fund.
When you’re just starting out or revamping your budget, you’ll probably use budget categories. Here are a few commonly overlooked categories that you should consider including.
Annual Expenses – It’s common to forget about annual expenses because you don’t have to pay them each month. However, when the big bill pops up once a year, it could throw you off track so try to budget ahead for the expense by breaking it up into 12 payments that you pay yourself each month. When the time comes, you’ll have the entire amount in full no problem.
Car-Related Costs – Car repairs and maintenance can add up. If you drive a lot and know you’re going to need an oil change or some maintenance, budget for that expense by giving yourself a monthly car spending allowance. Even something as low as $20/month can help you if you need a tune up or another service.
Gifts – If it seems like you have those months where you get hit with a ton of gift expenses for events, birthdays, and other celebrations, include this expense in your monthly budget so you’re not making those purchases on credit cards with no intention of paying the bill off quickly.
Household Items – How much do you spend on toiletries and household items each month? Be sure to create a budget category for this so you can get the items you need when you need them.
Guilty Pleasures – As we said earlier, don’t neglect fun from your budget. If you have any guilty pleasures that truly add value to your life, create a budget category for them if you can afford it. For example, you could set aside $25/month for coffee at your favorite cafe if that’s what you like.
Being honest with yourself and setting a budget category for guilty pleasures can actually help you avoid overspending so you can save more money overall.
In This Episode, We Discuss
- 1:45 – Who do budgets help?
- 10:45 – The difference between finance tracking and budgets
- 13:45 – Different budget methods of budgeting
- 23:50 – Big bad budget mistakes to avoid
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