How to Budget

I have been an adult for quite a few years now, and every time I call my dad he always asks me the same thing, “have you made a budget yet?” I would always say, “I’m aware of my spending and I don’t actually spend that much.” Let me tell you something, I had no idea how much I was really spending, and I was spending way too much. I was really enjoying my life though until I came face to face with the consequences of my actions. It was sobering and somewhat humiliating. How could I have been so out of touch? Well, guess what buttercup? The first step is admitting it, however, I will never tell my dad that. I then sat down and decided to do the deed. The very thing I rebelled against for years. Let’s walk through the steps, and help you do what I did and hopefully avoid disgrace.

1. Think about your relationship with money

Many people think money is the root of evil. The part they are leaving out is “the love of money is the root of evil”. That being said, it really changes the whole paradigm, doesn’t it? I have never thought of money being evil, only that it is a tool of exchange. In fact, this ideal is spelled out well from the novel “Atlas Shrugged”. Summing it up, money is a tool of exchange, a way to trade your time for the items and experience you want. Here is an excerpt;

“If you ask me to name the proudest distinction of Americans, I would choose–because it contains all the others–the fact that they were the people who created the phrase ‘to make money.’ No other language or nation had ever used these words before; men had always thought of wealth as a static quantity–to be seized, begged, inherited, shared, looted, or obtained as a favor. Americans were the first to understand that wealth has to be created. The words ‘to make money hold the essence of human morality.”

It’s with this I leave you a chance to take a lot at how you view money. How you view money is how you will deal with it, and that is the first step in gaining control over your finances.

2. Next, look at the last two months of expenses and list them out

I sat down and listed out everything I spent money on. I then came up with categories that are required to spend money on. You know like, groceries and bills. Anything that didn’t fit in these necessity categories, automatically went into the, stop spending money category. I realized I was spending so much money on Amazon, and on things that I had a time thought were necessary, only to find they absolutely were not! Thus started the ten-day rule. If I want to buy something, not in my absolute necessity categories, I had to wait ten days. Then if I still wanted it, I could look at possibly getting it then. More often than not, I found the item I had been wanting, I actually didn’t want after thinking about it. Good-bye, impulsive buys! Anyways, I went and did my expenses for a whole year and came up with a median number that I would use as an anchor point for my budget. I came to the conclusion that I could spend around 45% less than I was. That meant saving more, or even not having to earn as much. (Hint: because I was able to figure this out, I went part-time at work, and I’m loving it.)

3. Stick to the plan and don’t stray

You have the attitude fixed, you figured out the numbers, now it’s time to make sure you don’t overdo it. Implement the ten-day rule for impulsive purchases outside the categories you’ve already determined. If your grocery budget is $800, don’t spend more than that. That’s $200 a week during the month if you do an average, by the way. The point is to see this anchor as an ultimate end all be all. If on your end you think it’s a moveable number, you will always go over budget. However, if you realize that you can’t spend more than that because it would be to the detriment of your plans, then you’re less likely to go over.

4. Realize that you don’t have to live to work!

More than 78% of Americans live paycheck to paycheck. If you budget correctly, you won’t have to worry about the next paycheck. You will build your savings, which will only add to your feeling of taking control of your life. You will slowly realize that with all the things you had bought before and felt you had to work to earn, you don’t need to be happy. You’re happier keeping your time and money to yourself. Very slowly you are implementing minimalism into your life, check out my article on minimalism now and really take control of the chaos.