learn how to budget

As a money coach I talk to lots of people about money. I notice that the word budgeting almost always triggers a subtle (or not so subtle) grimace. Most people don’t want to hear about it, let alone do it.

According to a poll by the National Foundation for Credit Counseling, 57% of respondents viewed budgeting as nothing more than a restriction of their spending.

Here’s the irony.
It’s actually just the opposite.

“A budget actually provides the structure through which a person can be in charge of his or her spending, directing the dollars to their best use, spending should be a reflection of a person’s priorities, but without a plan, the priorities often get pushed aside in favor of the tyranny of the urgent.” — Gail Cunningham, spokesperson for the NFCC

Most people fear that knowing exactly how much money they have and specifically how they are spending it would be restrictive. But here’s the thing… the amount you have will be the same whether you acknowledge it or not.

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Not knowing is what drives you into a deeper hole with credit card debt, increases your anxieties and sabotages your financial future.

Having a budget comes down to two very simple things that change your whole financial picture:

  1. Your budget helps you spend less than you earn. Spending less than you earn frees up money to pay off debt (or stay out of debt!) and have the breathing room to build your savings. Savings enables you to roll through emergencies and pave the way for your future.
  2. Your budget helps you spend money on the things you really value, and not the things that you don’t. When you spend money based on planning, instead of ending up feeling deprived, you are actually empowered to make choices and have more of what is truly important to you.

Having a budget or creating a spending plan doesn’t have to be a complicated system. It can be as easy as writing down a list on paper or using a program that helps. Here are a couple good online tools: YNAB or Money Minder Online

So if you can’t get rid of the cringe factor when you think of a budget, call it something else! Try using spending plan. That’s what I use. Or think of it as a freedom plan!

Call it whatever you want, but when you take control of your money each month, you are choosing how to live and calling the shots on your financial future.