Where do you start with budgeting? Do you even know how? Do you even like budgeting? You know you have to spend less, earn more and change your thinking but how do you go about it? Your friends drive you crazy with sarcastic comments as they watch you spend mindlessly. You’re the only one that can’t afford a place to live after your divorce/split from your ex-husband because you spent your way into a debt box (as I endearingly refer to it).
[quote style=”boxed”]Personal budget is defined by Wikipedia as : A family budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget. There are several methods and tools available for creating, using and adjusting a personal budget.
Because recent studies show that less than half (43%) of US households currently have savings, (i.e. they are just “making ends meet”), funds should also be allocated toward savings.[/quote]
My big life changing moment was in 2009 when I realized that as an individual I had changed; I was at a turning point. No longer happy in my marriage, I had grown apart from my now ex-husband and I had a new take on life. I separated in 2009 and my divorce finalized in 2010 but where in life was I? I was 35, had a negative net worth, got in shape (lost 30 pounds), became an avid traveler – BUT NOW WHAT?
As a newly single woman in 2010, I had never really done a budget before and realized I couldn’t afford to buy or rent a home. Luckily, I was still riding the positive high from my new life change and newly discovered health and fitness, that I decided I would start blogging about life and money.
Where do you start?
Coming to the realization I couldn’t afford a home, I wanted to immediately find out why and get on a plan that would afford me a home.
For many, even the thought of how the heck do I start a budget is overwhelming. The greatest fear is facing YOU in this process. Your spending and debt are a reflection of the person you are, or in my case, the person I was. People always say you have to be ready for things in life; ready to accept responsibility/accountability, ready for the next step in your career, ready for kids, ready for marriage and on and on. With finances, there’s no “being ready” about it. It’s a shock regardless of ready or not – to see what you’ve been spending your money on.
5 Step Beginner Budget Hack
Step One: Taking Ownership.
This is the first step to understanding your finances and who you are as an individual. To take ownership, start by tracking down all your bills, online bank logins, investments, expenses and income. You need to know every detail of the money that’s coming in and what is going out. This is probably the hardest part and could take you 4 hours to complete. Once you see the final debt number, it’s okay to be upset. I sure as heck was. In the deluded dreamland of designer fashion I was living in, I lived as if my line of credit and credit card were a bank account. If you do anything, accept the debt, your “financial awakening”, make a plan and move forward.
Step Two: Learn about yourself.
What are your money spending habits? What are your triggers? Are you an emotional spender or a follow the leader spender?
At this stage, you need to take ownership of your internal talk track. If you don’t squash any negative self-doubt right now, your debt repayment and budget plan will fail. You have to be willing to make some drastic changes and accept them to succeed. You have to be able to overcome that self-talk and the emotions that make you want to go out and spend.
Step Three: Budget time!
Make a first draft budget. Go easy on yourself. It took you years to build up those insane spending habits; it will take a few months to adopt a completely new way of thinking of your money. It is your money, remember that! You worked hard for it, so you should be conscious of where you are spending it.
Step Four: Revise, Revise, Revise!
When I first started budgeting, I revised it after a month because I found I restricted myself too much. I also didn’t have a complete handle yet on how much money I made and where it was all going. In the beginning, I revised my budget every 1 – 3 months. After two years of hard-core budgeting, I now find every 6 months works for me.
Step Five: Tools are the keys to success.
You’ll never survive without the proper tools. You need some kind of tracking tool to keep track of your finances. Whether you use Gail’s good old tried and true method of a binder and money jars or fancy software, you need something. What you use depends on your personality. Some people hate budgeting and the bare minimum paper and jars might work best. For others, like me, who want a detailed snapshot of their finances, use Quicken Cash Manager or Home & Business.
And if there were six steps, I’d say add in a sense of humor with a sprinkle of forgiveness.
My money-tracking journey:
I started by writing it all down in a small binder, using cash and jars. Gail Vaz Oxlade’s method was my first foray into tracking my finances. Then I migrated to Gail’s budget worksheet and Own Up to Your Debt spreadsheet. A full list of the tools is at the bottom of this post.
Unfortunately, I got frustrated with the cash and jars, as it took excessive amounts of time and it was hard to manage which jar to put the change back into and so on. After six months, I migrated to Mint.com. Mint is a toned down version of Quicken. It was a fantastic tool and gave me a graphical way to see my money. Unfortunately, for the Canadian market, it does not have as many features as the US has.
Fast forward another 6 months, I closed my Mint.com and migrated to Quicken Home & Business. I have been using this tool since. It’s still not perfect but I like it better than Mint.
Find Gail Vaz-Oxlade’s popular tools and interactive spreadsheets here.
Gail also has a new program available called “Tracking your money the Gail way” for a minimal cost, you can find that here.
Quicken Cash Manager or what I use, Quicken Home & Business can be found here.
Want more tools? Many of my new found Personal finance blogger friends have a lot of great lists of resources too:
Blonde on a Budget has her own resources page here.
Mr. CBB over at Canadian Budget Binder has everything from Grocery calculators to cleaning out the fridge lists.
Cat at Budget Blonde has a page reserved for her Budgeting Tips.
If all else fails, check out 6 Budget Success Tips from Inspirational Personal Finance Bloggers and the Blogroll for my fave PF bloggers that I read.
Have you started a personal budget? What helped when you first started? Please share in the comments!
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