The Foundation of the Baby Steps
I reference the #babysteps to financial freedom in many of my posts. If you’re not familiar with them, I’m going to spend the next few weeks introducing you to them.
But first, let me say that it doesn’t matter what Baby Step you’re on right now. What matters is that you establish a firm foundation to empower you to move through the baby steps.
You might be wondering what makes up this foundation?
It’s called a #budget.
What a budget is not…a list of anticipated expenses.
I hear this all the time. When I ask people to tell me about their budgeting process, they say, “I have an excel spreadsheet where I have all my bills listed out. I know exactly where the money is going.” The problem with this approach is that most of them do not track what is being spent. They forecast the expenses but then in the middle of the month they have no idea how much money they have left for that category.
What it is…a place where you allocate every single dollar you anticipate bringing home.
If you have a tool, (Excel, EveryDollar, YNAB, or bank apps) to help you allocate the dollars before you bring them home and then categorize all the transactions once they clear the bank account, then you probably have a working budget.
If you don't think you have a working budget here is your homework. It’s the beginning of a new month, so if you don’t have a budget, take some time with your partner/spouse (as applicable) to:
Decide what your take-home pay will be.
Allocate all of that money to expenses. This could include savings, donations, gifts, or household repairs to name a few.
Every time there is a transaction in your bank account categorize it and deduct it from the category total. For example, if I forecasted that we would spend $100 in dining out and we go to a fast food restaurant and spend $30, we know that we have $70 left in this category to spend for the month.
Do some research on a digital tool (as referenced above) to help make this categorizing easier. It will also give you real-time data. If you’re wondering if there’s enough money in the category for the month, just check the app, or your spreadsheet if that’s your thing.
Below is a template budget you can use to guide you as you create your first budget!
If you want some help establishing your first budget, connect with me. There's nothing to be ashamed of. We don't learn this in school.
If you learned this already, let me know in the comments section where and how you learned to budget. 🔽 🔽