Updated: Oct 18, 2018
Before we dive into the 7 steps, I want to first hit on why budgeting is so important. The first reason is that you can always ALWAYS spend more money than you make. How many times have you seen ex NBA/NFL/MLB players who once made multi-millions of dollars, go completely broke in a matter of years? Money is not infinite, and if you don’t control your cash flow properly it can be gone just as fast as it was earned. Next, budgeting gives you a sense of control over your life. Knowing where your money is going and why is going there allows you to wake up every morning with a sense of confidence that you wouldn’t believe. Lastly, (and most important if you ask me) budgeting gives you freedom! The less you rely on each dollar you make, the more freedom you now have. I’m sure you’ve heard time and time again, “I would quit this job tomorrow, but I need the money to pay my bills.” Perhaps this is you? If so, pay close attention to these 7 steps, and you will no longer have to stay at a job you hate just for the money.
1. Surround Yourself With People Who Respect Your Budget.
You are who you hang around! If you spend time with senseless spenders, you’ll be tempted to do the same. Surround yourself with like-minded folks and they will act as reminders of your money goals.
2. Make It Easy
Don’t create 33 different budgeting categories. No need for dining out, brunch, lunch, and fast-food to have their own categories. Set a combined category for them all and allocate funds accordingly. The simpler you make your budget, the easier it will be to maintain and follow.
3. Track Your Budget Like You Do Social Media
Perhaps the biggest budgeting mistake I see is that people think budgeting is a monthly activity. No way! Budgeting is a daily activity. If your midway through the week you should check your spending progress. Are you in good shape? Have you spent your weeks budget for coffee by Wednesday? Knowing this allows you to be proactive and adjust future spending and not be reactive once you’ve already overspent.
4. Set Short-Term Goals
Try not to spend more than $20 on coffee next week (I know this seems impossible for some). Setting short term weekly goals and achieving them can provide a huge momentum swing in the right direction.
5. Know Your Why
This is important in every aspect of life and budgeting is no different. Why are you budgeting? Is it so you can go on that trip to Europe? Or perhaps you want to save for a down-payment on your dream home? Whatever it is know it and own it. So next time you get the urge to overspend (and you will), thinking about your “why” will help you control those urges.
6. Every Day Is a New Day
During your budgeting journey, you will fail on occasions and its okay because guess what… You get another shot tomorrow! What I see so often is someone has a bad spending day or week and let the whole month go to trash. Don’t let this be you! Learn from your mistake and move forward tomorrow.
7. Give Every Dollar A Job
The worse thing you can do is allow your money sit idle in your checking account. Lazy money is wondering money. When you get paid, give your dollars a job immediately! Pay yourself first (save first) and put the rest of the money to good use, even pay bills a few days early if you must.
With these 7 tips, you should now be able to control your cash flow and give yourself the freedom you deserve. Furthermore, budgeting has never been easier to track due to the various mobile application that’s allow you to bring your budget on the go. My favorite budget app is YNAB (you need a budget), its cost a few dollars a month but has a robust budgeting platform. However, there are plenty of free apps like Mint and Clarity Money that allow for easy on the go budgeting.