Budgeting For Beginners Take Control Of Your Spending

Do you struggle to keep track of where your money goes each month? I have nothing! It's all gone! Do you need to better manage your finances but don't know where to start? I have no f***ing clue. In this video, we'll break down everything you need to know about budgeting. From creating a budget to tracking it effectively and how to find the right budget for you. If you're looking to save more, pay off debt or simply take control of your spending, make sure you watch this video till the end. By the time you finish, you'll have a solid plan to take charge of your money and work towards financial freedom. Who needs a budget? Everyone can benefit from a budget. But it's especially important for people living paycheck to paycheck, whether a high income earner or a low income earner, for growing families, the self-employed, and anyone with financial goals. In order to have more success with financial goals, you'll need a budget to know how much you can allocate towards those goals. And if you want to invest, you'll need financial goals to help you decide on investments. So once again, you'll need a budget. What are the benefits of a budget? Budgets help you achieve financial goals faster. Whether it's home ownership, paying off debt, or early retirement, a budget helps you find where you can save money so you can put more discretionary income towards goals. A budget prevents you from getting into debt. When you have a plan for your money, you know where it's all going. You can prevent overspending and eliminate uncertainty, which can help reduce financial risk and stress. By managing your income and expenses effectively, you create a financial cushion that protects you from unexpected expenses, job loss, emergencies, and help you save for the future. Ultimately, a budget provides financial stability. What are the cons of a budget? A budget can feel restricting. But this is the reality according to your income. You can't afford everything you want, but you can prioritize the things you want the most and minimize the expenses that mean the least to you. If you feel like a budget is limiting your lifestyle, it's not your budget's fault you don't make enough money. What did he say? What did he say? Was that about me? A budget takes time to set and maintain. A budget requires regular tracking and adjustments. With the many benefits of a budget, it's well worth your time. Pokemon Pocket, not so much. Uh, now who got room for two Cyrus's? A budget also requires discipline. Without consistency, a budget won't work effectively. The different budgeting methods. There's no one-size-fits-all approach to budgeting. Each method is different and will suit different people. The cash envelope system. When you get paid, you withdraw whatever is necessary and put them according to your budget in envelopes marked with each category. So if you budget $1,000 a month for groceries, you put $1,000 in an envelope marked groceries. If you get paid twice a month, you can put $500 in the envelope each time you get paid. When the cash runs out, you can no longer spend in that category till next month. This budget makes it so you can't overspend. And there's also a bit of a psychological aspect to this. Seeing visual spending limits enforces the concept of scarcity and you're less likely to impulsively buy unnecessary items. Also, we feel a stronger emotional connection to handing over cash compared to swiping a card. This will cause your spending to be more intentional. This budget is for low-income earners and those who are struggling with debt, especially credit card debt. This budgeting method is very effective but comes with some disadvantages, including physical cash can be lost, stolen, or given away accidentally. The zero-based budget. With this budget, every dollar of income is assigned a job. This budget helps you ensure your spending goes exactly to the plan and keeps you on budget. This is the ultimate budget with the most advantages, but it requires the most time breaking down every expense into its own category and frequent tracking and updates. The point of a budget is to know where all your money is going, and this budget does exactly that. And with proper tracking, you'll know when to stop spending in each category. Can't stop. Won't stop. This budget is for low-income earners, those paying off debt, and those with low discretionary income. In other words, for someone who can't afford to go over their budget and overspend. This budget is also for the big spender, or someone in general who wants all the advantages of a budget and wants to effectively save money and improve their finances. This is the budget I used for many years when I first started taking control of my finances and paying off debt. At the time, I didn't have many sources of income and many expenses, so I could easily keep track of all my spending. This budget completely transformed my finances. The 50-30-20 budget. Divide your monthly income into three categories. 50% needs, 30% wants, and 20% savings and debt repayment. Depending on your personal situation, you may want to play around with these percentages. I would much prefer that 50% needs, 20% wants, and 30% savings. But because of high rent and mortgage payments, the needs category will likely be more than 50% of your income. This budget is simple and easy to follow as it only requires three categories to manage. To make this even easier to manage, have two check-in accounts, one for needs and one for wants, and have a savings account for debt and savings. And once you get paid, allocate the set amount in each account. This budget is for those who are new to budgeting and for those who don't want to spend too much time budgeting, but still want to follow some kind of budget structure. The reverse budget. Also known as the pay-yourself-first budget. Make a traditional budget with all your expenses and figure out how much you can save a month. Then when you get paid, you save that amount of money first, then spend the rest. This budget prioritizes saving over any expenses. But if you're in debt, you would prioritize paying off debt before saving. This method isn't for low-income earners, irregular income earners, big spenders, and those who are living paycheck to paycheck. It's more for higher income earners, natural savers, and for those who have a lot of discretionary income. With this budget, you can easily overspend without knowing it. So you need to be someone who naturally lives below their means. The no-budget budget. This budget prioritizes needs, then savings, then wants. First, automate as much as your needs as possible. Then automate your debt payments, savings, and investments. Then make sure you have enough for your essential needs, then spend the rest as you like. Now, this may not sound like much of a budget, but it still makes sure your essential needs are taken care of while giving you the opportunity to save. The key, you need to be very familiar with your spending habits, have high income, and be a natural saver. If you're someone who has been budgeting the traditional way for years and has a good understanding of your spending, you know exactly how much you can spend on your wants without even tracking it. At this point of my financial journey, this is the budget I use. I prioritize my needs, automatically put money away for savings, spend my wants, and still have money left over for additional savings. Now, I still have a written budget that tells me how much I can usually spend in each category. I just don't need to track every dollar throughout the month. You see, I have irregular monthly income. So I spend based on my lowest estimated monthly income. This allows me to save a lot when I make those higher income months. This budget is not for low income earners, individuals struggling with debt, and anyone who doesn't know how to live below their means. How to track a budget. Tracking your budget ensures you stay on course. The first way to track your budget is the tried and true method of pen and paper. Get yourself a little notepad and write down every income and expense. Keep it in your pocket and keep all your receipts. The simplicity and manual aspect of this tracking method keeps you engaged with your spending habits, making you more mindful of where your money goes. The next way to track your budget is manually entering transactions into spreadsheets. Your main options are Excel or Google Sheets. You can find free templates to use online or create your own. Using spreadsheets may take longer to set up, but you can easily total up expenses, automatically create charts, and see valuable insights. The next way to track your budget is with budgeting apps. You have your paid apps like YNAB, Monarch, or Pocketsmith. Although you need to pay for a subscription, it makes tracking your budget automatic, so you can minimize time with your budget while maximizing the benefits. Then you have the free apps or free versions you can find in the App Store, like Good Budget, Easy Finance, or Spending Tracker. You may be limited with features like bank syncing, but it's the best price of all. And lastly, you have budgeting apps built into your banking app. RBC has KnowMe Insights. TD has MySpend. Scotia has SmartMoney. Tangerine, LeftoSpend, and Coho. Using your banking app can be the most cost-efficient and less headache. How to make a budget. The first step is to calculate your monthly income. So your nine-to-five job, tips, your commissions, part-time work, side hustles, small businesses, rental income, government benefits, royalties, or other passive income sources like interest earned. If you have a fixed monthly income, then great. It will be the same every month. But if you have a regular income, you'll need to go through previous months of income and base your budget on the lowest income month. Unless it's just an odd month and is usually never that low. Either way, it's best to underestimate your monthly income. This monthly income is what you're going to base your budget on. Step two, list your expenses. Start with your fixed expenses, meaning the ones that are the same amount every month. This would be your mortgage, rent, condo fees, house insurance, renter's insurance, car insurance, medical and dental insurance, life insurance, pet insurance, internet, phone and TV, mobile plans, home security, streaming services, gym memberships, subscriptions, bank monthly fees, and so on. Now list your variable cost needs. To find out how much you should budget for them, you'll need to go back to previous bank statements. Go back at least three months, but for more accuracy, go back as much as 12 months. Now take how much you spend a month and divide it by how many months you went back. This will be the average you spend each month. Your variable cost needs will be things like gas for transportation, electricity, gas or oil for heating, water and sewer bills, groceries, prescription medication, childcare, school expenses, pet food, necessary clothing, shoes, haircuts, cleaning supplies and toiletries, beauty and skincare, business expenses, and so on. Your variable cost wants or non-essentials will be things like fast food, restaurants, entertainment, drugs and alcohol, hobbies, video games, toys, gadgets and tools, excessive clothing, shoes or accessories, home decor, gifts, allowances, services like lawn care, massages, and so on. Step three, create sinking funds, a saving method that helps you afford a bigger purchase later on. For things like home and car maintenance and repairs, you may not have monthly expenses, but if you think of it annually, something is bound to happen. So think of a reasonable amount to spend annually on each expense and divide it by 12. This is how much you should save a month towards one of these expenses. It's best to keep sinking funds separate in other accounts. If you have a lot of sinking funds, you may keep them all in one account separate from your daily spending account. Other categories or goals you may want to put in sinking funds include property taxes, income taxes, Christmas, vacations, or purchasing a new old vehicle. Sinking funds can be included in a savings section of your budget. Step four, create a list of smaller annual expenses. This includes things like holidays, birthdays, credit card annual fees, Costco memberships, computer software, annual fee subscriptions, vehicle registration, annual licenses, and expenses that are longer than annual like driver's license renewal and passport renewal. You will keep this list separate from your monthly budget, but refer to it when making your monthly budget and add the necessary expenses. Step five, list your debts. Before you can go all out on your savings, you will need to list and prioritize your debts. This will include credit card debt, student loans, personal loans, buy now pay later plans, line of credits, overdue bills and collections, and so on. Do not include your mortgage or car payment here. You want to pay at least minimum payments for all your debts and may want to add additional funds to the highest interest debts. Step six, figure out how much you can allocate towards debts and savings. Get your expected monthly income and subtract your expected expenses. What you're left with is for debt and savings. If you don't have enough to cover your debt payments, you're likely spending more than you make, which means your debt is increasing. If you do have enough to cover your debt payments, whatever money is left over is discretionary income, meaning you can spend it however you like. So this can go towards savings or increasing your debt payments. Now let's say you have no debt payments. Then all your discretionary income can go towards savings. Step seven, create financial goals. If you have high interest debt like credit card debt, paying this off should be your number one goal. Next would be to save for a starter emergency fund of $2,000. Once you complete these two goals, you can either focus on paying off the rest of your debt, not including your mortgage, or can focus on building your emergency fund for three to six months of living expenses or a combination of them both. These would be their most financially responsible goals to complete first. Then you can create yourself some fun financial goals like a new car or a vacation and or create longer term goals like saving for a down payment on a house, retirement or your children's education. These longer term goals will involve investing. So that's why it's important to pay off your debt and have a fully funded emergency fund first. If you want to learn more about financial goals, check out the video up here or look for the link in the video description below. Step eight, choose a budgeting method. Based on how much work you want to put into a budget, how much time you have for a budget, your income level, your debt level, your spending habits and how effective you want your budget to be. Step nine, put in your income, your expenses, your debt payments and savings goals into your budget and follow your budget method strategy. Step 10, adjust and improve. Throughout the month, review your budget and see if you're staying on budget. Also throughout the month, you'll want to learn as many money saving tips and tricks as possible to help you reduce your expenses and cut unnecessary expenses. Check out my money saving guide up here or look for the link in the video description below. At the end of the month, do a final review of your budget and see where you went under and over your budget. Try to understand why and maybe make some changes and don't forget to check your annual list to see if you need to add things to next month's budget. As each month goes by, you'll refine your budget and hopefully pay off your debts and increase your savings rate so you can complete your financial goals faster. Eventually, after budgeting for a while, you'll start to understand where all your money is going without even tracking it. But this is something that takes time. I may not track my budget like I used to, but I know my spending habits. I know I can get takeout food once a week and still be under budget. I know I can go to a nice restaurant once a month. I know I can get a case of beer once a week. I know I can take my son out every weekend and take my wife out every other weekend. I know I can go grocery shopping once a week plus one big Costco trip a month. I know that my needs and my savings are my priority and I know buying any wants will only cut into my savings. I live below my means while I live a lifestyle that doesn't feel restricting. For me, budgeting has been life-changing. It's given me the freedom to live on my own terms, avoid financial stress, and focus on what truly matters, my family and my goals. If this sounds like something you're interested in, check out one of the videos on the right of the screen. See you there.