Of all the skills you will build while learning to create and manage wealth, budgeting is one of the most powerful. Budgeting provides an opportunity to influence how your money is used. This is a foundational step for strategically designing your wealthy lifestyle. Here are four little-known facts about budgeting.
It takes about 90 days to get accustomed to using a budget
Your budget should change from month to month
Your budget should be adapted to your lifestyle
There are multiple ways to budget
The First Step
A number of my clients are shocked when I share with them that it takes about 90 days to start a budget. This is not because of difficulty, but rather because the process is a series of guided trial-and-error adjustments. Getting started is as simple as writing down your income, writing down your expenses, determining where each dollar will be going, and monitoring your progress frequently. The typical progression is to completely miss the mark the first month, get a little closer in the second month, and learn how to adjust periodically by the third month.
The Living Document
Your budget is not a set-and-forget type of document. I like to refer to it as a living document. This means that it will change and adapt along with your priorities and situations. Likely, the things that matter to you in the month of July have different priorities than those same things in the month of December. It is important to review your budget each month and proactively decide what you would like to accomplish for the month.
Lifestyle Budgeting
An important aspect of budgeting is to ensure that you are prioritizing the things that are important to you. Mindful spending allows you to use the resources that you have available to you to bring joy and fulfillment to your life. For each of your expenses determine if it is a need or a want. If you are consuming wants that do not contribute to your joy, consider reducing how much you spend on those wants and reallocate the funds to something more impactful.
With a budget, you will know if you are operating beyond, within, or beneath your means. Living beyond your means will drive you further into debt and make it harder to reach your goals. Living within your means will allow you to maintain your lifestyle presuming that your situation remains stable. Living below your means will allow you to build wealth; reach goals faster; and withstand the unexpected. You have the power to decide which of these situations works best for you.
Having Options
Tailoring the budgeting process to your particular style and lifestyle is key to making sure that you do not abandon the effort at the first hiccup. Your initial budget can be as detailed or loose as you need it to be. In time, you will adjust to a normal that works for you. The important part is getting started. You can start with a zero-based budget that accounts for every dollar of your income; or you want to use a rule of thumb, like the 80/20 budget, for those who do not want to spend time tracking every dollar.
What is one thing you learned about budgeting that surprised you? Drop your insights in the comments below.
One thing I learned that surprised me was that I can have a "loose" budgeting plan to start with first. Budgeting feels overwhelming sometimes because I think of spreadsheets, numbers in parentheses, Quicken, balancing a checkbook like my parents did back in the day... And boom...I want ag out. Your writing is encouraging and approachable.