What do you think of when you hear the word “budget?”
According to two recent studies, only 40 percent of Americans live on a monthly budget, and only 37 percent of us have more than $500 in the bank for emergencies. So, for many of us, the word is likely a little intimidating—or something we’d rather avoid. In reality, the majority of us aren’t too familiar with our expenses, and we’re generally unprepared for financial hiccups.
But creating (and maintaining) a budget is a major step toward designing the lifestyle and careers we deserve. Whether it’s paying rent, employing staff or investing in professional development, a budget numerically represents our interests, passions and necessities. By examining our expenses, we can better understand our habits, figure out where to cut back, determine if we’re on the right career path, prepare for potential financial downturns and create lifestyles that better mirror our values.
A few weeks ago, I sat in on a budgeting workshop led by Amanda DeWoody, a money coach based in Austin, Texas. Here are five takeaways from her talk on designing (and sticking to) a budget that aligns with your goals.
1.) A budget is simply a record of your income and expenditures.
You don’t have to have a degree in finance to become an expert in budgeting. At the end of the day, a budget—good or bad—is simply an estimate of revenue and costs for a set period of time. So, sit down and write out what you spend and what you make without judgment.
2.) Identify your personal, professional and financial goals.
If you’ve never formally recorded your income and expenses, figuring out what to slash and keep from your budget might be a hard task. To set yourself up for success, you can start by identifying a few of your goals. Write them down and map out some of the personal, professional and financial things you’d like to accomplish over the next few months (or even years). This will help you determine what kind of budget will work best for your desired lifestyle and career path.
3.) Consistently document your expenses.
With your goals in mind, you’ll also need to become more familiar with your expenses. Study your spending habits, get in the habit of writing them down. You’ll begin to notice patterns and start to question whether you truly value the purchases you make.
4.) Remember that what you spend is what you value.
Once you’ve got a handle on your expenses, determine where your budget does not reflect your ambitions and aspirations. This will help you make necessary cutbacks and create more financial room for things, experiences and opportunities that will get you where you want to go.
5.) Get comfortable holding yourself accountable and learning as you go.
Oftentimes, auditing our budgets can be a tough wake-up call. Moreover, when it’s time to make major financial decisions about what we spend, save and invest, the options, jargon and risks can be overwhelming. So, ease into the discomfort with a little research. Ask questions. Schedule time with experts. Read online blogs and books about personal and professional finances. Like any subject, financial literacy is something we learn—not something we’re born with.