So, a budget has been selected and a worksheet completed. Let me ask a question, does the budget include retirement options? If it doesn’t, why not? We aren’t getting younger here, and surely no one reading this wants to work until the end, at least, not be required to due to financial reasons. Personally, my wife and I want to be able to do what we want, when we want. Travel, see amazing sights, taste amazing food, and having amazing experiences. Those things can’t be accomplished on Social Security alone. To receive 100% benefits, per the Social Security Administration, retirement age is 67…at the moment. Retiring at the age of 62 only would provide 70%. Some of you may have already included Retirement plans into your budget, congratulations on being apart of 34%. Katie Lobosco had an article on CNN showing that 66% of us have nothing saved for retirement. That is a large percentage considering some of us are in our thirties. Retirement is not something that we can keep putting on the back burner. Start saving, start planning, and include retirement options into your budget.
What is my effective budget? We use a budget worksheet, if you need one, we just so happen to have a free one available here. At the start of the year, everything is laid out for that entire year. We have a separate tab for each month. Each month is then broken down by pay periods in that month. We utilize every cent for each pay period, and separate the funds. We have found what works best for us, is to have a separate account for each category, i.e an account for entertainment, gas, a bill account, each of us have a personal account, and different savings account. The bill account holds the funds for any bills we have, power bill, cable, cell phones and so on. Why different savings account? Long term savings, so an emergency fund for any surprises. Short term savings for want items, like a vacation, new car, or anything else that we suddenly just can’t “live” without. Short term savings assist with not relying on credit cards and their high interest rate. Having multiple accounts help us have an effective budget because there is always money for our everyday items. This also prevents errors, or those oops moments. Ever pay a bill, then forget about it. Literally forget, bank transactions typically take a couple of days to clear…especially if the payment is processed on a Friday. Thinking money is in the account, it gets spent again, which may cause an overdraft fee, and headaches. By having separate accounts, that becomes a non issue. That is our effective budget. What works for us, may not work for you. It is important that you select the budget you can work with and personalize, that is effective for your needs. If you are wondering about different budgets, I have a book that can help you. Do your research so that you are able to plan effectively. If the budget is not effective for you, and your needs, it will not be effective for your money.
So you downloaded our budget worksheet, or you have your own. If not, get our starter budget worksheet. Now you may be wondering how to effectively use a budget worksheet. What needs to be included in it? Everything, everything needs to be included. This means if you want to have money to hit up that coffee shop you can’t live without, or that burger and fries, then include it. Want to ensure you have money to play, then include it. The purpose of the budget worksheet is to track your spending and to help you with your budget selected (If you have not selected a budget, our book can help with that). Budgeting doesn’t mean no spending on anything that is not a bill, it means making responsible financial decisions and knowing what you are spending on. For the budget worksheet to be effective, and the budget to work, everything money is spent on needs to be tracked.
My preference for creating, using budget worksheets is Microsoft Excel. For some instructions on using Excel, click here. There are other budget worksheet options available, just do some research online to find what is the best option.
In the budget worksheet, you will have categories. Within those categories you put the amount that you spend for each item. Add as many categories needed, and be descriptive. When it comes to certain items, such as a power bill, that may not be the exact same every month, input the average and round-up. It is better to allocate more than what is needed, not less. If you have a surplus, that money can be allocated to another debt, some sort of savings, or even more “play.” The budget worksheet can be setup weekly, bi-weekly, monthly, and/or yearly. The initial setup will take some time, once setup it will make paying bills easier and save time in the long run.
So, why did I personally start a budget. It got to a point where all I was doing was working as much as possible, i.e overtime! As much overtime as I could get, not in order to be able to go on an awesome trip, but to pay bills. Everything I was making was going to debt. Bills were being paid, however the overall balance was not moving. I did not like that every pay-day, I was broke within a couple of hours. Money came in then immediately went back out. That was paying the minimum balance, which is where credit card companies get you. Yeah, that minimum payment may only be $25.00 a month, but paying just that amount is not going to get you anywhere…at least for a very long time. Then all those small purchases we don’t think much about. That pack of gum, or soda from the store. Those all add up! When you start tracking every purchase, and looking to see where exactly your money is going, you are going to be surprised at what you find. Try it out a budget for yourself, see what you find! Make one up yourself, or check out are FREE starter budget worksheet!
So you sat down and thought about a budget. You decided what was important, and what you could live without. Double check it. For this to work, you have to be all in. This needs to be something you can live with, long-term. This is not something that is going to be completed within a couple of months, if it does, Kudos to you my friend…you did not get to far deep before getting it under control.
For the rest of us, it is going to take a “minute.” The length is partially determined by you, and the rest the goal you are attempting to reach. Now you need to decide which type of Budget is going to best for you. How do you know what budget is going to work for you? Research them, read books (did I mention I have a book available – about this topic), use “the” Google, and talk to people. There is a lot of information out there, whatever you select make sure it matches you and your goals!
So, why should we budget? Let me ask you this first, what do you want? Is it a lambo, a mini mansion, a castle? Maybe you just want to get out from underneath some crushing school debt and tired of feeling like your working for debt and not to live. Some of us may be saying, I can do that later…there is plenty of time. Have you not noticed, the older you get the faster time seems to move. I remember when I was a kid, Christmas would take soooo long to come. It felt like a year took forever, now it feels as if you blink it is gone. Before you know it, your going to be in your mid-forties, what are you going to have to show for it?
Maybe you have that living thing down, so instead you are dodging those pesky bill collectors. Whatever your case may be, a budget can provide you the ability to have those things in life you want. Take the first step, think about what you want. What kind of life do you want to live and where do you see yourself in the future!
To a millennial, someone who actively seeks freedom and autonomy, the idea of creating a budget is not very appealing. In fact, the thought of creating something that seems as a restriction is perhaps why so many Grad students and already-in-the-workforce millennials are unwilling to budget or even think about the idea of budgeting.
The reality is, without a budget, your spending choices are unclear, which means your financial goals are unclear, and thus, you are likely to get into unnecessary debt to fund a lifestyle that is way above your current level.
Budgeting is a way to clarify how you’re spending your money and on which things. With the realization of where your money is going, you can determine which expenditures are important and which ones are not in relation to your earning goals.
Let’s get your budget on point, check out this book!