There are few things that influence our lives more than money and our ability to manage it with humility and intention. And as sad as it may be, that’s a lesson many of us learn the hard way. Even if we manage to navigate early adulthood without fully compromising our financial wellbeing, I’d argue very few of us enter the “real world” actually equipped with the skills and self-discipline needed to create a monthly budget and stick to it.
As for me, I believe budgeting is a lifelong learning process. As we change career paths, grow our families, and set new goals, there is a need to engage in regular reflection to ensure ongoing financial security and longevity. And while we can’t always predict just what that will look like, we can take the steps necessary to establish a firm financial foundation that will stand the test of time.
I’m far from a money managing guru, but throughout the last several years, I’ve adopted a monthly budgeting system that works for me and my family and is steadily progressing us toward our goals. It’s simple, but effective, and it operates on four key money management rules that anyone can follow.
1. Get Educated
There is no shame in having little knowledge or experience with creating a monthly budget and managing your finances. After all, you don’t know what you don’t know. However, it is your responsibility to put in the time, effort, and research it takes to gain that knowledge and experience and implement it in your current lifestyle.
There are plenty of ways to learn about the basics of budgeting and develop an action plan that works for you and your family.
Here are some ideas for getting started:
- Read a book (or three or four)
- Follow a few well-established budgeting blogs
- Listen to a podcast that encourages you to be smart with your money
2. Create Your Monthly Budget
Once you have a basic understanding of what it takes to create a monthly budget and stick to it, it’s time to do just that.
The first thing you need to know is that creating and maintaining a monthly budget revolves around four core practices:
Determine your total income for each month.
For budgeting purposes, your total income should be your take-home pay for the month after taxes and any other amounts deducted by your employer (e.g. insurance, retirement). If you are married, include this same information for your spouse. You’ll also want to remember to include any secondary income you might have.
List all of your expenses.
First, think about your regular monthly expenses—things like your mortgage and utilities. Next, account for any quarterly or annual expenses coming up in the next month. And finally, include all other costs that seem to occur on a monthly basis (food, gas, entertainment, etc.).
Distribute your income across your expenses.
Every dollar you spend needs to be accounted for, as does every dollar you make. Structure your budget in a way that your income minus your expenses equals zero. If you are wanting to account for your savings goals, go back in and add “savings (+ purpose)” to your list of expenses.
Track your spending throughout the month.
To make sure you’re on the right track, you’ll need to track your spending throughout the month to make sure you accounted for all of your expenses and have sufficient funds to support your needs and uphold your newly created monthly budget.
YNAB — My Budget Tool of Choice
There are all sorts of respected budgeting apps and methods out there for doing this, and a quick Google search will provide you with a comprehensive list of the most popular ones. So rather than to try and “reinvent the wheel” in that regard, I’m going to tell you about my love affair with my personal favorite, You Need a Budget (otherwise known as YNAB).
I started using YNAB about three years ago, shortly after we bought our farm and began the renovation of what is now our home. With a mortgage and regular monthly utilities to pay, my inner control freak was quickly becoming overwhelmed by the endless list of dates, deposits, and drafts, and I desperately needed a way to visualize where my money was going.
I attempted to create a monthly budget by mapping out my expenses in a basic Excel spreadsheet, and while that helped keep me organized, I still needed something less clunky and more intuitive to make the task of budgeting seem less mundane. As luck would have it, I was expressing my financial frustrations to a close colleague one day, and she immediately began raving about her favorite budgeting app, YNAB.
I acted on her recommendation without hesitation, and I don’t think I will ever turn back. It is by far the best $5 I spend every month.
YNAB operates on the premise that you must give every dollar a job. It helps you create a monthly budget that embraces your true expense while allowing you the flexibility to make adjustments as needed. If you use YNAB effectively, you’ll be able to “age your money” by spending less than you earn and allowing your unspent dollars to carry forward to the next month.
It’s simple, it’s genius, and it’s fun. You can get started with your 34 day free trial of YNAB here.
3. Live Within Your Means
Once you’ve used YNAB or another budgeting app of your choice to create your monthly budget, it’s time to practice the self-discipline it takes to stick to it. And that means being committed to living within your means. I’m not going to lie—this part is tough. But it is also so worth it in the grand scheme of things.
Over time, I’ve found there are three key practices that help me stay committed to my budget:
Even though I’m an avid planner, I can be tempted to live in the moment (or at least in the month) when it comes to money. But I’ve learned that in order to avoid stress in the long-term, it is absolutely crucial to plan for unexpected expenses.
I want to point out that I use the term “unexpected” lightly here. Even though a bill may not be coming due this month, you know that things like holidays, property taxes, and vehicle registration renewals will occur every year. The same goes for those “rainy day” expenses like car repairs and home improvements that are unpredictable, yet inevitable.
Even setting aside $20 a month will put you in a much more stable position to handle these expenses when the time comes than if you take an “out of sight, out of mind” approach.
Do yourself a favor, and be prepared.
Talk about your goals.
Saying things out loud has a way of making us feel more committed to them. This same principle applies to our financial goals. Make a conscious effort to tell people about the ways you are trying to reduce your spending, pay off your debt, and pad your savings. You’ll be less tempted to break your budget, and you might even inspire others along the way.
Learn to say no.
Sometimes friends and family invite us to join them in activities and outings that are unplanned and simply do not align with our monthly budget. It is so easy to tell ourselves that since we “technically” have the funds to make it happen, it won’t hurt anything or that we can move things around and make it work. And while splurging on a manicure or a night out might not always result in late payments or going hungry, engaging in these types of activities on a monthly basis will inevitably set us back in paying off our debt, increasing our savings, and reaching our long-term financial goals.
I won’t lie—as a recovering people-pleaser, this one is still super tough for me. But I’ve found that one of the major benefits of sharing your financial goals with others is that they become more understanding, which in turn, makes saying “no” feel like less of a sacrifice. Plus, more times than not, it turns out that your people just want to spend time with you, and there are plenty of ways to make that happen that don’t involve spending extra money.
4. Stretch Your Dollars
Once you become fairly confident in your ability to stick to your monthly budget, you can start focusing on ways to enhance the reach of your budgeted dollars by bringing in some residual income. And let me tell you, friend, in a world driven by convenience and technology, the possibilities are endless.
Start a side hustle.
Taking on a secondary job or “side hustle” doesn’t have to mean sacrificing your freedom. In fact, it can be a great way to broaden your skillset, discover your strengths, and make plenty of extra money while doing it. And what’s more, there are a multitude of side jobs that can be done on your own time, and many of them, from the comfort of your own home.
For example, you could:
- Start a Blog
- Open an Etsy shop
- Become a Virtual Assistant
- Teach Online Courses
- Freelance Write
- Proofread Court Reports
- Take Online Surveys
Like I said, the possibilities are endless. If you’re interested in learning more about some of these side hustles, I would recommend checking out The Busy Budgeter’s tips and tricks on making money from home.
Earn cash back.
Even if you’re not ready to commit to another job (totally understandable), there are a few ways you can stretch the dollars you are already earning.
The best way I’ve found to do this is by [responsibly] utilizing apps and credit cards that allow me to earn cash back.
These three are my favorites:
Chase Freedom Unlimited Credit Card
The Chase Freedom Unlimited Credit Card offers a 0% Intro APR for 15 months, plus 3% cash back on all purchases in your first year and 1.5% cash back thereafter.
I applied for the Chase Freedom Unlimited card about three years ago as way to establish my credit. By using this card to pay my major bills each month and then paying off the balance in its entirety before the end of each billing cycle, I am consistently able to earn about $40 cash back per month.
If you think this card might be good fit for you, you can apply for yours here.
I know Ebates has been around for quite some time, but I only started taking it seriously last year after I heard my aunt bragging about the cash back she had earned on her online holiday purchases. And as a girl who does almost all of her shopping online, I can’t believe I didn’t jump on board sooner.
Setting up your Ebates account is seriously so easy. Use this link to start earning now!
Ibotta is another cash back app that is relatively new to me, but offers serious value. Specifically, Ibotta allows you to redeem cash back offers by shopping at a participating store (physical locations only) and uploading your receipt to their super intuitive app. You have the option to receive your cash back via PayPal or Venmo, or you can apply your earnings toward gift cards.
You can learn more and create your Ibotta account here.
One of the hardest parts of budgeting is simply to start. But once you do, I promise your lifestyle will change for the better. It’s a long-term commitment, but if you follow the four rules outlined in this post, you will have a firm foundation on which you can build a sustainable budget and a life you love.
To review, you can start your budgeting journey by taking the following steps:
- Educate yourself (Check out The Busy Budgeter and Living Well Spending Less)
- Download your free budget outline and expense spreadsheet (Scroll up!)
- Select a budgeting tool (I prefer YNAB)
- Live within your means (Start talking about your goals and practice saying no)
- Check out Chase, Ebates, and Ibotta to start earning cash back
That’s it, friend! You’re on your way to achieving true financial freedom! Doesn’t it feel good?
I can’t wait to hear about your journey, but before you go, I want to leave you with one final piece of advice.
No matter where life takes you, always remember the words of Jonathan Swift:
“A wise person should have money in their head, but not in their heart.”
Until next time,