5 Steps to Budgeting Success
- Chris Ridl
- May 13, 2023
- 4 min read
Unsure how to be successful with your budget and make it change your lyfe?
Don't worry! Most people feel the same way. They want to be fiscally responsible, improve how they spend money and increase their savings but they put it off because they don't have the right road map to budgeting success.
Here are my 5 steps to budgeting success:
Understand what you want out of budgeting.
Set up a budget plan with your lyfe priorities and goals in mind.
Develop habits and discipline.
Track your goal progress.
Enjoy your Success.
Go ahead and watch the video on the 5 steps and/or continue on.
1) Understand what you want out of budgeting
If you don't understand what you want out of budgeting, how are you going to have the discipline to keep going or how are you going to put together the right budget that fits your lyfe? Whatever you want now is going to change but you need a PLAN.
Ask yourself these questions before starting:
What is important to you?
What goals do you have in lyfe?
What do you want money to do for you?
What do you want for your future self/family?
Answering these questions will help you understand what your savings goals are and to quantify them. These questions will also help you prioritize where to allocate your money within your expense categories. Don't allocate money to places that are not as important to you.
2) Set up a budget plan with your lyfe priorities and goals in mind.
As mentioned above, your budget should be set up to allocate money to things that are most important to you. Have these priorities next to you as you put together your budget in this step.
Things to remember while creating your budget plan:
Income = Savings + Expenses
Savings = Amount needed to hit your goals on time
Expenses = Monthly Expenses + Yearly Expenses
Putting together your budget plan:
Understand your historical spending.
How much and how often have you spent money on different categories (last few months or year)?
Which expenses are regular and which are infrequent?
Create a yearly budget based on your historical spending.
Map out monthly and yearly expense categories through the end of the year.
Monthly categories are expenses that occur frequently (monthly).
Yearly categories are expenses that occur infrequently (yearly).
Sum up all monthly and yearly expenses.
Compare your expenses to your monthly income
For the year: Income - Monthly Expenses - Yearly Expenses = Savings
For each month: Income - Monthly Expenses - Monthly Savings = Yearly Expense Allocation (make sure Income - Monthly Expenses - Monthly Savings is greater than or equal to 0 each month)
Once you complete these simple math problems, you now need to understand if you have enough income to meet your expenses and are on track to meet your savings goals.
Adjust your discretionary spending categories to make sure you have enough income to satisfy your expenses and savings. Focus on areas that are less important to you (refer back to step 1).
Tips: If you are just starting out, keep your categories simple and create less. Do not get overly detailed. You can do that later when you are more experienced. Create an "Other" category for items that don't fit.
The reason we determine the expenses first is we want to understand what we currently spend so then we understand where we want/need to cut to make our expenses fit in our income and savings plans. If we start the other way around, we won't truly understand where we need to currently cut spending in our lyfe. We can now be more conscious in the areas we just cut down from historical spending.
Check out our video on getting started or continue on!
3) Develop habits and discipline.
Although getting your budget set up right is important, this is THE MOST IMPORTANT step of them all. You won't be able to keep yourself motivated every week or month to make the right financial decisions, you have to create habits and discipline. If you don't develop the right habits to establish discipline then you will fail following your budget and improving your finances.
The most important habits to develop are:
Pay bills on a consistent basis (autopay if you can)
Develop a strategy for shopping without buying what you don't need (Check out our videos and posts on Checking Yourself)
Review your budgeting consistently (weekly, monthly, yearly) - Pick a time of the week or a trigger each week/month to review your budget.
Review your budget before making major financial decisions (map out purchase impact, income/expense changes, etc.)
Start with small actions that will lead to mountain moving results. - JUST GET STARTED DOING SOMETHING
Make creating habits a priority.
Just start doing something.
Create triggers that make sure you are developing these habits subconsciously.
Check out our library of habit videos:
4) Track your goal progress
What if you were trying to lose weight and you never checked your weight? How would you know if what you were doing was working? Don't get me wrong, you don't want to check your weight or budget every day otherwise you will overreact or worry too much but you need to understand where you are so you make adjustments where needed and celebrate your progress.
As stated above, you should be creating a habit to review your budget weekly, monthly and yearly. Check your savings progress, debt payoff progress and income/expense progress regularly. Not hitting your savings goals or debt payoff goals? Then check out your income/expense progress to understand where you need to adjust your spending or maybe increase your income. Budgeting isn't always about squeezing your expenses either, you could also work towards a pay raise at work (promotion, extra skills, etc.) or start a side biz!
Your Lyfe Budget$ has an app that can help you with tracking your progress!
5) Enjoy your Success
Enjoy the process. Enjoy your money. Reduce financial anxiety. Set your lyfe up for success.
I look forward to reviewing my budget progress each month. Having a budget has reduced my financial anxiety greatly, especially when I have large financial goals or need to make large purchases. Knowing that I am on track and can afford those expenses or reach those goals allows me to live my lyfe free of major financial stress.
Hopefully this helps you get your lyfe on track for financial success! Please comment any questions or ways you would add on to this process!
Message me about Your Lyfe Budgets' new app! I will help you through all of these steps with an app subscription!
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