Budgeting

You need a budget to tell your money what to do. This applies to you if you are a millionaire or make $10,000 a year. You’ve heard the stories of wealthy people who end up being broke over time or a lottery winner that loses all of their money in a short period of time. Failure to make a plan for every dollar creates frustration and will leave you broke. Our goal is to build wealth over time. To do that, we need a budget.

The most challenging part of creating a budget is sitting down and actually creating a plan. Here’s a simple way to create a budget:

  1. Gather all of your financial statements
  2. Add up all of your income.
  3. List all of your expenses in two columns: Fixed and Variable.
  4. Subtract your expenses from your income.
  5. Adjust your budget accordingly to allow for savings.

There are also other great applications or resources to help you budget digitally. Here are a few great ones you can try:

  1. MINT -Mint automatically categorizes transactions from linked credit and debit cards and tracks them against a budget you can tweak and customize to your needs. Get alerts when you go over budget, and track by category or look at your overall cash flow to get a well-rounded picture of where your money goes each month.
  2. POCKETGUARD – This app is easy to setup and connect to your bank accounts to help you track how much you’re earning, putting toward recurring bills, spending on everyday expenses, and depositing into your savings account. It has has a feature to help you track each individual bill and find opportunities to save. PocketGuard looks out for recurring bills from phone, TV and Internet companies, for example, and helps you find a better deal on your monthly service costs.
  3. GOODBUDGET – Goodbudget is a perfect option for couples that want to share their budgeting process . It uses the envelope budgeting philosophy to power your proactive budget for all of your bills and spending. Because you can share and sync budgets with budgeting partners across the iPhone and Android spectrum, it is great for couples with shared finances. When you add a new transaction, you have the option to add a whole slew of details and break up the expense into multiple envelopes. Budget by category (called envelopes in the app) with up to 10 for free. Add to your envelopes from your income every payday and you’ll know just how much you have leftover for extracurricular purchases.
  4.  EVERYDOLLAR – This is a great tool to help you track your expenses and bills as well. It uses the budgeting system known as zero-based budgeting. You assign every dollar to a category. It’s very similar to envelope budgeting.This is where you input your monthly income and plan your entire month’s spending ahead of time. You set up budgeting categories and then allocate your income to those categories.Then you use the app to track your spending on a daily basis. If you have the free app, you manually enter your transactions. If you pay for EveryDollar Plus, you can link accounts and it’ll automatically pull in transaction data.

Once you have a budget in place, another GREAT way to stick to your budget is to separate your money and AUTOMATE as much as possible. Here’s how to organize and separate your money to set yourself up for success:

  1. Set up 2 separate checking accounts
  2. Label one of them your spending account. Link this account to your debit card. Label the second account your bill account. Set up automatic payments with all of your bills.
  3. Calculate your average bill amount from the 1st to the 15th and from the 16th to the end of the month. Set up a transfer or have the amount sent to your bill account every two weeks.

Adjust and tweak your budget as needed.  You will have control of your money. You will have a greater sense of well being. You will be well on your way to building wealth over time.

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