Change the Way You Think About Budgeting

If you've never had a budget before, you're not alone. When you think of budgeting as a verb, a regular activity, rather than a one-time act of creating a budget, you'll set yourself on a track toward creating a healthy relationship with your finances.

In reality, budgeting is about creating a habit. When you think of budgeting as a verb, a regular activity, rather than a one-time act of creating a budget, you'll set yourself on a track toward creating a healthy relationship with your finances.

Jokes and memes about not checking your bank account are commonplace now because they resonate with many people. Most people avoid checking their bank accounts out of fear for what they will see. That said, keeping close track of your spending and bank account balance is what helps you stay on your budget. It takes practice and discipline, but it is doable.

Finances as part of your well-being

Maintaining a healthy financial balance is essential to your financial well-being. In a stress survey conducted by the American Psychological Association, 66% of adults said money was a significant source of stress.3 Stress can stem beyond your mental well-being to your physical well-being, with Americans with high stress levels being more likely to experience headaches, lack of sleep, or experience depression or sadness.

A few key recommendations from the article for what you can do to negate your stress that apply specifically to budgeting and personal finance are:

Don't judge yourself against others.

Especially when it comes to finances, a lot of us feel the need to compare ourselves to our peers. This is an extra layer of stress you can avoid by focusing on your journey alone.

Take your own advice.

If a friend were in your situation and asked you what to do, what would you tell them to do? Odds are you already know the answer to what the best next step is; you just need to take your own advice!

Take control where you can

Stress around your finances is frequently caused by feeling a lack of control over your spending. One way you can start to take control is by creating a budget and following it.

Small steps to take to start budgeting

1. Determine your monthly income

Specifically, your take-home pay. Add together how much your paychecks are each month, with the taxes and deductions taken out.

2. Figure out how much you owe on your bills

Add together the basic bills you have to pay each month. This includes your rent or mortgage payment, utility bills, minimum loan payments, childcare costs, and other essential bills each month.
3. Figure out how much you have to spend after your bills are paid

Subtract your required expenses from your monthly income. This is how much you have left over to spend on other expenses like groceries, eating out, gym memberships, and so on. These expenses should not exceed what you have left over to spend.

The last number is what you need to keep track of throughout the month. As you spend money, subtract each expense from your working total. An example is below:

Take Home Pay	$2,000
Required Bills
Rent	$700
Utilities	$180
Auto Loan Payment	$150
Total	$1,030

Take Home Pay	$2,000
Required Bills	$1,030
Left Over Spending Money	$970

Week 1 beginning balance	$970
Grocery Trip	$150
Coffee	$6
Online Shopping	$28
Supermarket	$49
Week 1 Spending Total	$233
Week 1 Ending Balance	$737

This is a very simple way to budget, but it is a great way to get started. Once you feel comfortable maintaining your budget this way, you can start dividing it further into smaller spending categories, deciding how much to spend on groceries, entertainment, fitness, and other categories that fit your needs.

The above example is an outline for your budget. One way to keep track is to use a spreadsheet or pen and paper.

Each week, add up charges from your card or receipts from cash purchases, and put them in the categories they belong to. Regularly tracking your expenses is how you will stay on budget. We suggest checking in at least weekly to make sure you're staying on track or adjusting as needed. Plus, it makes keeping track of what you spend less overwhelming.

After a month or two of breaking your budget this way, try setting aside a portion for savings or debt repayment. If you're not sure what you should prioritize with your finances, check out our blog that goes over what goal you should tackle first.

Find what works for you

There isn't a one-size-fits-all budget strategy that works for everyone. The most popular budgeting strategies are zero budgeting, the envelope method, and the 50/30/20 method.

Zero budgeting is the name for what most commonly comes to mind when you think of budgeting. Zero budgeting allows you to account for every dollar in your budget and is done using either a spreadsheet or pen and paper. Click here to learn more about how to zero budget.

Envelope budgeting uses physical cash and envelopes. This is an excellent strategy for anyone who has difficulty conceptualizing the abstract concept of budgeting. The double-edged sword of the envelope method is that it can make online shopping a challenge.

If you're a habitual online shopper, this can help you break the habit. That said, if there is something you actually need to buy online, it will be more cumbersome to purchase that item. Read more about creating an envelope budget in our blog here.

The 50/30/20 budget is more goal oriented and flexible budget. You allocate 50% of your income to needs, 30% to wants and 20% to your savings or additional loan payments. Read more about the 50/30/20 method in our blog here.

Knowing where your money is actually going and taking care to meet the goals you set for yourself is a fantastic way to start putting your mind at ease about money. While a certain level of stress about money definitely comes from not having enough, some of it comes from not actually knowing how much you have or if you have enough.