Budgeting and Money Management for Beginners
It's no secret that money is one of the biggest sources of stress in people's lives. In fact, a study by Forbes showed that money was the number one cause of stress for both men and women. If you're not good at budgeting and money management, that stress can quickly become overwhelming. This blog post is designed to help beginners learn the basics of budgeting and money management. We'll discuss why it's important to have a budget, how to create a budget, and some tips for sticking to your budget. So whether you're just starting out in life or you've been struggling with money management for years, this blog post is for you!
What is a budget and why do you need one?
A budget is simply a plan for how you will spend your money. It's important to have a budget because it helps you make sure that you are spending your money in a way that aligns with your goals and values.
Without a budget, it's easy to overspend on things that don't really matter to you. You make think a budget is just for poor people, but the truth is, the most financially well-off people are diligent about knowing their numbers and keeping a budget.
See, it’s not always about how much or little you have, but WHAT you DO with it.
How to create a budget that works for you
Creating a budget can seem daunting, but it doesn't have to be. There are a number of different ways to create a budget, and you can find the method that works best for you. Whether you use a pen and paper, an Excel spreadsheet, or a budgeting app, the important thing is that you're tracking your income and expenses. I would suggest trying a few different types out then seeing what works best for you. I'm a visual person, so I love a good old Excel spreadsheet. It's easy for my husband to keep up with too and everything stays in one place. However, there are also a ton of budgeting apps. Ask around for recommendations on budgeting apps with pros and cons. Try it for a while and see which you like the best (I can’t help you there because I’m not an “app” person).
First, you must take an honest look at your finances; this includes all the money coming and and ALL the money going out, even the fries you pay in cash for at that Fast-food joint on the way home. Track every penny so then you can SPEND every penny with a purpose.
Yes, this may seem excruciating at first, especially when you realize how much money you are blowing away on wasteful purchases, but that is one of the main points of a budget! We all can easily throw away money on "little" purchases. A lot of little purchases turn into a lot of money that is unaccounted for.
Once you see where the money is draining out of your wallet, it's time to plug the holes. Cut out ALL expenses that are wasteful.
See how much difference there is between your income and mandatory expenses each month (like rent or mortgage, electric, water, etc.) and use the remaining portion, called The Green Gap, and divvy it up in the following way:
45% to any debt. If no debt, then put towards investing.
45% to an Emergency Fund in the following order:
Basic ER Fund - $3500 base + $1000 per family member/dependant
3-6 months of living expenses (however much it takes you to get by each money per person)
The remaining 10% goes to your Fun Fund - This you can spend however you'd like, but it HAS to provide FUN for you and your family. Use it wisely and guilt-free!
So, if you had a Green Gap of $100:
$45 goes to any debt or investing
$45 goes to building up your ER fund
$10 goes to FUN (this could be a cheese pizza, movie rental or buying popcorn kernels in bulk for homemade popcorn and a movie night at home!)
Tips for sticking to your budget
Once you've created your budget, it's time to start following it. This can be the hardest part, but there are a few things you can do to make it easier. First, try to automate your finances as much as possible. Set up automatic transfers into savings accounts and have your bills automatically withdrawn from your checking account. This way, you don't have to think about it and you're less likely to spend the money. Second, try to avoid using cash. When you use cash, it's easy to lose track of what you're spending. If you use a credit or debit card, you can always go back and look at your statement to see where your money is going. Finally, make sure you're realistic with your budget. If you try to cut out too much spending at once, you're likely to get frustrated and give up. Start small and make changes that you can stick to!
Set up a weekly and monthly Money Date Night with your spouse, of just you if you are single. By breaking this up into smaller segments, you will be more likely and able to stick to your budget and get your money under control.
For the weekly Money Dates: Go over your expenses for the week, any bills paid, income received, etc. Make sure everything aligns and all the money is accounted for. Discuss any new financial issues, like your child needing braces, the car needing to be looked at, etc. and come up with a feasible plan for paying for it and when.
For monthly Money Dates: Go over each week's audit and see how well you did. See if there is any room for improvement. Discuss bigger plans and goals. Set up any new goals for the upcoming month. Get an overview of that month's upcoming expenses, needs, wants, etc. and see if there is a way to fit it into the budget. Clearly communicate with each other and see how each other is doing with their own budget.
Make it fun! Do this over a tasty beverage and dessert. Literally make it like a Date Night, laugh, listen to music, and have a good conversation later. Talking about money does NOT have to be stressful!
How to deal with debt
If you have debt, it's important to include it in your budget. The best way to do this is to create a Debt Reduction Plan. This will help you get out of debt as quickly as possible and save money on interest payments.
To create a Debt Reduction Plan, you'll need to list all of your debts from smallest to largest.
Then, you'll need to make the minimum payment on all of your debts except for the one with the smallest balance.
For that debt, you'll need to make a payment that's larger than the minimum payment.
For example, if you have a $500 balance on one debt and a $1000 balance on another, you'll need to make a minimum payment of $50 on the first debt and a minimum payment of $100 on the second debt.
This will help you pay off your debts quickly and save money on interest payments. Also, do NOT add any more debt to your plate until your finances are in control!
Investing basics for beginners
Now that you've got your budget under control, it's time to start thinking about investing. Investing is a great way to grow your money and secure your financial future. However, it can be confusing for beginners. There are a lot of different investment options out there, and it can be hard to know where to start.
The first thing you need to do is figure out your investment goals. Do you want to grow your money quickly, or are you more interested in stability? Once you know what you're looking for, you can start researching different investment options. There are a lot of different options out there, so it's important to do your research and find one that's right for you.
Once you've found an investment that you're interested in, it's time to start investing. The best way to do this is to start small and gradually increase your investment over time. This will help you get comfortable with the process and minimize your risk.
Investing can be a great way to grow your money and secure your financial future. However, it's important to do your research and start small. By following these tips, you can make sure that you're on the right track! I would highly suggest you talk to a reputable Financial Advisor or Investment team who knows their stuff. We use a team we trust and have the credentials and history to back it up. Be diligent and only go with who you feel comfortable with.
Retirement planning for millennials
If you're a millennial, retirement might seem like a long way off. However, it's important to start planning for retirement now. The sooner you start saving, the more money you'll have when you retire.
There are a few things you need to do in order to start planning for retirement. First, you need to figure out how much money you'll need to have saved. This will depend on a number of factors, including your lifestyle and how long you want to retire. Once you have a goal in mind, you can start working towards it.
Second, you need to choose the right retirement account. There are a lot of different options out there, so it's important to do your research and find one that's right for you. Some things you'll need to consider include fees, investment options, and whether or not you're eligible for employer matching.
Third, you need to start saving! The sooner you start saving, the more money you'll have when you retire. There are a lot of different ways to save for retirement, so find one that works for you. You can start small, but the important thing is to start now.
There's not much more heartbreaking to me than seeing many of my older friends living off of Social Security and getting by on only $20 for the entire month after their bills are paid. Be smart now and don't put all your eggs in one basket either. There's a lot more to cover on this one topic, but I hope that at least helps you start thinking and planning for how to secure you and your family's future.
So there you have it! We've covered the basics of budgeting and money management. It's not an easy topic, but it's definitely worth taking the time to learn these concepts. If you're still feeling overwhelmed, don't worry. This is just the beginning. I'll be posting more blog posts in the future that will go into more detail about each of these topics. In the meantime, if you have any questions or want help putting together a budget, let me know in the comments below. I'm happy to help!
Until next time,
~ Crystal