Money Monday #4

now, back to our scheduled programming.

i've had a couple of you ask about budgeting and what is the right method to use.

i'm here to tell you all:
there is no right method!

you need to find one that works best for you and your family.

budgeting is kind of a scary word.  no one really likes talking about budgeting, it makes people often feel restricted, and there always seems to be a negative connotation with the word.

so, we are going to call it a "spending plan."  doesn't that initially make you feel like you have more freedom?  i think so.

the first thing with finding a spending plan is setting goals.
what do you want to achieve with your money?
the next step is to estimate your income and expenses.
you do this by tracking everything.
once you see how much you are spending in each category, evaluate what you would like to spend in that category.
then choose a control system.  there are many options and you can even combine a few to find what works best for you.  you can purchase software, use the envelope system, the checkbook method, or come up with one of your own.
you many find once you implement it that it's not working.  and especially when life changes come along (married, child, new job) you might have to reevaluate it.

it's also important to remember there are many different money personalities.  so not everyone will spend their money the same.  some people are savers.  others are spenders.  so remember this.


now i will tell you what has worked for me, but don't think it's the right one for you.
my friend told me about a free website called mint.com
i think it is awesome!
i choose this method because i'm not very good at writing stuff down or saving receipts and i use my debit card about 99% of the time.  if you use cash, this might not be the best resource.  this website tracks all of your expenses for you and puts them into categories (that you can name and choose) and then tells you how much you have left to spend in that category.  it's very good for me, because i can easily log on and at-a-glance see where i am at.  in my busy schedule, this works best for me.
i also make everything automatic.
there is this book called The Automatic Millionaire by David Bach.
it pretty much changed my life.  i LOVE this book.
it has made my life so much easier.  essentially you make all your payments automatic, including paying yourself into a savings account/retirement account.  i never have to worry about getting to the bank to make payments or out right forgetting about them.  it's all done for me.  in a way, it's a spending plan because you are already setting aside savings, payments, rent, savings for hawaii, etc. but you don't have to actually DO anything.  it's great.  i love it.  and it's so easy.  just ask your financial institution to help you set up the payments.
and i think you should read that book because it just shows you don't have to make a ton of money to become a millionaire.  you just have to be smart with your money. 

i just have to say that i am a HUGE advocate for paying yourself first.  (saving 10% of your income is what experts usually recommend, if you are saving more than that, GREAT!)  please, please have a savings account, even if it's not very much.  it's so important.  and if you think that you can't afford to save right now, pay yourself first, and i promise you you'll have enough left.  don't be tempted to dip into your savings.  even better, put it in a retirement account!  then you can't touch it.

you think i'm crazy for telling you to start a retirement account in your early 20's?  in another post, i'll show you how important it is to start now!

i could go on and on about this, but i'll stop for now.  soon i'll tell you about stumbling blocks to budgeting.  stay tuned.



thank you shelby and lindsay for asking questions about budgeting.  i hope this helps.  if you want me to expound on anything, let me know.