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Budgeting for Beginners: Your Guide to Winning With Money
“A budget is you telling your money where to go instead of wondering where it went.”
– John Maxwell
So Why Should I Budget?
1) You’ll Be Keeping Your Eye on the Prize
2) It’ll Prevent Lifestyle Creep
“It’s not how much money you make, but how much money you keep.”
3) It Sheds Light on Bad Spending Habits
4) It’ll Help You Prepare for Emergencies
“The quickest way to double your money is to fold it in half and put it in your back pocket.”
Where to Start
1) Write Down Your Expenses
2 ) Write Down Your Income
3) Set Financial Goals
- 3% had written goals and plans to achieve them
- 13% had goals in their heads but hadn’t written them down
- 84% had no goals at all
“Frugality includes all other virtues.”
4 Budgeting Methods
Zero Based Budget
Zero-based budgeting has been around for a long time.
“Money, like emotions, is something you must control to keep your life on the right track.”
– Natasha Munson
– Budget 50% for needs.
– Budget 30% for wants.
– Budget 20% for saving and investing.
Needs are the bills you absolutely must pay for survival. These include shelter, transportation, food, clothing, and healthcare.
“When money realizes that it is in good hands, it wants to stay and multiply in those hands.”
– Idowu Koyenikan
The reverse budget is also called the backwards budget. It can be done on any income – both fixed and variable.
This makes it a perfect option to include in this budgeting for beginners guide.
The concept behind reverse budgeting is to pay yourself first.
But don’t get too excited. Paying yourself first doesn’t mean you go out and splurge.
Instead, it puts an emphasis on prioritizing saving and investing.
Here’s how it works:
You determine a set amount to save each paycheck. That could be 20%, 30% or whatever amount is reasonable for you.
Once you’ve paid yourself first, then you pay for necessities like shelter and food.
Finally, the money left over is your spending money. Since everything else is handled, you can use the rest how you like.
“The more your money works for you, the less you have to work for money.”
– Idowu Koyenikan
Half Payment Budget
The half payment budget is where you take your bills and divide them in half. Each payday, you’d set aside half of the bill amount.
This budgeting method is great for people who get paid biweekly.
Why? Because the problem with monthly bills is that they aren’t spread evenly throughout the month. This usually leaves one half of the month with more due dates than the other.
And that can blow your budget.
“The budget is not just a collection of numbers, but an expression of our values and aspirations.”
– Jacob Lew