The ABCs of Budgeting

As I sat and thought about what I wanted to say about the importance of budgeting, I remembered that there was once a time when a budget was not important to me. I thought it took too much time and that it was not needed as long as my bills were paid each month. What I did not realize was that a budget was my road map to success. Without it, I kept going in circles, taking detours, making wrong turns, and hitting potholes, that kept me from reaching my destination.  Every year I started on a journey to find myself no further than where I was the previous year. Have you ever felt that you were going in a circle year after year?

Well, all of that changed for me in 2004 when I learned to view budgeting from a different perspective. I realized that without a budget, I was lost. Have you ever been lost and just needed some direction? I needed direction to get me where I was going with minimal detours. It was not until I embraced the idea of budgeting that I was able to clearly see my destination and the time it would take to arrive. In other words, a budget became my GPS (Global Positioning System).

Something amazing happened once I made budgeting a priority. I found that:

• I was able to track my cash flow in and out.
• I was able to save for an emergency.
• I minimized debt.
• I was able to protect my credit.
• I found additional income to invest to create wealth.
• I was prepared for opportunities that arose.

As a result, I no longer wondered why my money kept slipping through my fingers. I was able to make smart money moves every month according to my priorities. Budgeting became one of my “power” tools to build the life that I want. My debts decreased, savings increased, and I no longer stressed over my money. This was powerful!

I would like to show you how you can have similar experiences. Let us begin with the ABCs of budgeting. Here is what you would do:

1. First, go online and print out your last bank and credit card statements (or to your file cabinet if you have paper statements).
2. Grab some highlighter pens and start highlighting where your money goes.
3. Use five highlighters – yellow, pink, blue, purple, and orange. Choose one color for each category and highlight it.
4. Yellow: Food
5. Pink: Debt Payments
6. Blue: Necessities – Rent, Utilities, etc.
7. Purple: Gas for your car or other transportation costs
8. Orange: This is all the “wants” (Luxuries/Excess)
9. If you took any money out of the ATM, put it under “Want” because you probably do not know where that money went.
10. Once you have highlighted your bank statement, add up the expenses in each category so you can see the totals. Once you calculate all your expenses, the “WANT” expense is your “FAT.” That is the money you can put toward debt.
11. Select your budgeting tool such as Mint at www.mint.com or the excel spreadsheet, Personal Monthly Budget, (my favorites).
12. Enter the totals for each category using your budgeting tool of choice.
13. Review your financial position once you have entered the data.

Monthly Income

• Monthly Expenses

= Surplus (+) of Shortfall (-)

Is there a surplus or a shortfall?  If a surplus, it would be a smart money move to pay your debt quicker, then increase your savings or invest more for retirement. If a shortfall, you want to assess your income and prioritize your expenses.

It is known that wealth building begins with the budget. If you would like assistance creating your budget, contact C.A.N. Financial Services, LLC, at 832-496-0886.