Bottom line (pun intended!), budgeting is a financial management tool that involves creating a plan for how you will spend and save your money.
If you don’t have a basic budget, then I’m going to be brutally honest with you—you’re wasting your money and missing out on savings and investment opportunities or just not making enough to cover your day-to-day expenses.
Disclaimer: I am not a financial adviser. If you are in debt and need help, please contact support for professional advice.
Money like all things needs a plan, flow, and discipline.
Budgeting is the fastest and simplest way to get your finances on track. Here’s my simple seven-step approach to budgeting.
- Determine your income and expenses—including debt
The first step is to calculate how much money you have coming in (income) and going out (expenses). This will help you identify areas where you may be able to cut back.
You can do this using a free budgeting app such as Mint (US) or Frollo (AU).
- Create a budget plan
Once you know your income and expenses, you can create a budget plan that outlines how much you will save and spend.
It can be helpful to further use a budgeting app or spreadsheet to track your progress. I use Frollo and Google sheets to track my money.
- Track your spending
Regularly review your budget and track your spending to ensure you are sticking to your plan.
For example, Christmas—did you budget for this? Or a vacation? It’s easy to track your money when you’re living day-to-day, but anything outside of your usual schedule can throw your budget off.
Tracking helps you identify areas where you may be overspending and make adjustments as needed.
- Increase your income
So much budgeting is focused on reducing spending. This is a great way to maximize your savings and discover where and how you’re wasting money. But it’s also a great way to establish how you can earn more income as well.
If you have a full-time job, ask for a raise. Do your research and find out what others in your industry or even your own company are earning.
Start a side hustle. This is a wonderful way to tap into your creativity and do something you not only enjoy but will also add another income stream.
- Set savings goals
Setting savings goals can help you stay motivated and focused on building wealth. Without clear goals, it’s hard to create abundance. Savings goals can be short-term (e.g., saving for a down payment on a car) or long-term (e.g., saving for retirement).
I recommend having three different savings accounts for storing short-term and long-term savings. For example, have one account with a small amount of savings for emergencies; a second for long-term savings for things like down payments and deposits, and another for your safety fund (a year’s worth of income).
I’m not a financial advisor so I can’t recommend any specific investments but I can say that assets build wealth so please consult with the proper professionals who can help you build a portfolio.
Assets include stocks, real estate, collectibles, businesses, etc.
- Celebrate the wins
If you hit a savings goal, celebrate. After a while, you’ll be more excited by the money you’ve saved rather than the thing you bought. This is the true path to wealth!
If you need any help meeting your financial goals, book a BELIEF HACKING™ session to clear any beliefs preventing you from creating wealth.
Once you get your personal finances on track, then you’ll be all set to uplevel your business!