Whenever I sit down with someone for the first time to work out a plan, my first question is what kind of budget are you using. That question is quickly followed by a look of abject terror on the part of my client. Don’t be that way folks. Budgets are not scary, not hard, and are actually really nice when used correctly.
I have a theory that people are not afraid of budgets. They are afraid of knowing their actual situation. They are afraid of being limited in what they spend their money on. Basically they have the wrong idea about budgets all together.
Budgets are your Buddy
A properly executed and simple budget is THE BEST. I love knowing how much I can spend on things. I love knowing that if I am under budget I might be able to get that one thing from Harbor Freight that would just instantly make my life complete AND IT’S 25% OFF. Pleaaaaaase.
If I didn’t have a clear budget I would either think I was rich or broke all of the time and that is how the majority of the world lives. Hey I have money! Where did it go?
I am going to show you a simple budgeting system that I like to use to keep a good idea of where I am at financially. Here it is in steps.
The Index Card Method
Grab you one of them index cards from the back of the drawer in the kitchen. Got it? Great!
Now fold it in half so it looks like a little book. Refer to figure 1.1 in the blog post Factory Service Manual.
Now on the top of the first page write Food
This includes food you buy from any source including the grocery and Chipotle.
Also include beverages and other consumables. I often include household items such as toilet paper, deodorant, and classic sport cars in this category since I usually buy all of these at the grocery store. This category should also include things like cigarettes, alcohol, and other items that people tend to leave off of budgets. If you spend $300 per month on cigarettes, you need to account for it. Be honest with yourself.
Decide what you want your budget to be for that month (guess) and then record what you actually spend at the end of the month.
For the Shelter section we are going to include anything involved in keeping your pad a chill place to kick it with your crew. This includes gas, water, electricity, mortgage, property insurance, taxes, Netflix, cell phone, and bribing your neighbors for not calling the city about that car in your driveway.
This is going to be different for different folks. Some people own cars, some use the bus, some drive paid off beaters with heaters, and others use Uber. Whatever you use to get around there are costs associated. If you own a car you will want to factor in for payments, gas, maintenance, wear and tear, tires, insurance, and many other factors. If you use the bus, or take Uber you will need to account for those expenses. Track it here.
This category can be the magical mystery garden you always wanted growing up. YOU get to decide what goes here. Where is your money going? Are you telling it what to do? Here is your chance. Do you want to go see first run movies once a week? Put it down here. Do you like to play the ponies? Put it down here. This is your budget darnit! Own it! Use it! Do with it what you will but do it. Start telling yourself the truth and you will finally be able to break through to where you need to be.