Budgeting is one of the most powerful tools you can use to set yourself up for financial success. Creating a budget can help you plan and save for those larger expenses, allow you to spend your money guilt-free, and give you a clearer picture of what is working and what is not. By understanding your own constraints, you can adjust your lifestyle and behaviors (both the good and bad) to live a more meaningful and stress-free life. Think of your budget as your map to personal financial success.
Let me ask you a question. Would you ever go on a road trip without a map, or better, without Google Maps to guide you? Of course not! The same principle applies to personal finances. So, why are you trying to navigate your financial journey without a budget? I digress.
By now, you're probably asking how do I start creating a budget? Where do I even begin? Well, I'm so glad you asked. Over the next couple of weeks, I will lay out the basic fundamentals on how to create your own budget. By breaking down the process into bite-sized, actionable chunks, my hope is that this process will not only be easier, but it will stick with you. Every week, I will provide you with some background to each step, its importance, and answer some common questions I have previously received from clients. Then, I will leave you with a short assignment you can do throughout the week. So, without further adieu, let's dive right in.
My two cents: Take out a piece of paper and begin to write down all of your income from the previous month and all of your monthly expenses. For your income, write down what your take-home pay is. This is also referred to as your net income. Next, write down each expense and the amount you pay. For example, line 1 will be your rent and beside it will be your monthly rent. Line 2, write down your weekly grocery bill and beside it, the amount. With weekly expenses, multiply your estimated number by four to get the estimated monthly cost. In doing this exercise, it's important that you 1) Avoid looking back at your bank or credit card statement. 2) Try and capture all of your expenses. Yes, this includes those one-off Venmo payments. When you are finished with this exercise, answer these questions: 1. What did you notice? 2. What patterns did you observe? 3. Was there anything that surprised you? 4. Are there any expenses you didn't know the true cost?
Next week, we'll dive into the next step of the budgeting process and see how accurate your estimates were. Stay tuned!
I'd love to hear from you! If you have any questions or comments, please email me at jslimitedgroup@outlook.com.
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