Budgets suck: let's framework instead
Budgeting sounds so restrictive and icky. That's not what we're about here because the Treat Yourself fund is definitely not restrictive in my books
Dear Finance Diaries Baddies,
Welcome back to another edition of The Finance Diaries, your go-to source for all things leading you to that financially free life on your vision board! Today, we're diving into a topic that's crucial for every success story: Budgeting Basics.
Scratch that. If you hate the term budgeting, let’s glow up that word and call it a Financial Framework instead. It sounds less restrictive and sounds cooler and more refined.
Budgeting financial frameworking, or even just the concept of having spending guidelines for ourselves, are so important to stay focused on our goals. Whether you're just starting your career or you've been in the workforce for a while, mastering budgeting financial frameworking techniques is essential for achieving your financial goals. So, let's break it down and explore some effective strategies and tools to help you take control of your finances.
The TECHNIQUES:
Track Your Expenses: The first step is understanding where your money is even frigging going. Start by tracking your expenses for a month to identify your spending habits.
Set Financial Goals: Whether it's saving for a down payment on a multiplex, upping your stock portfolio, paying off student loans, or building an emergency fund, setting clear financial goals will give your
budgetingfinancial framework efforts purpose and direction. Make sure your goals are SMART (Specific, Measurable, Achievable, Relevant, Time-bound) to increase your chances of success.Create a Budget/Framework: Once you know how much you're spending and what your financial goals are, it's time to create a budget/framework. Allocate your income towards essential expenses like rent, groceries, and utilities, and prioritise saving and investing for the future. Don't forget to leave room for TREAT YOURSELF spending on things like dining out and entertainment.
Use the 50/30/20 Rule: A popular budgeting rule of thumb is the 50/30/20 rule, which suggests allocating 50% of your income to needs (like rent/mortgage, insurance, groceries), 30% to wants (going out, takeout, pets, shopping, subscriptions, drinks), and 20% to savings and debt repayment (and INVESTING). Adjust these percentages based on your individual circumstances and financial goals.
Personally I thought this was a good general rule, but when I started Paying Myself First (see below), I flipped the last two categories to be 50/20/30 and put A LOT towards investing (sometimes even more than 30%)!
The TOOLS:
Hellloooooo!!! My Pay Yourself First Budgeting/Framwork Template (link!) that I created based on the Rich Dad Poor Dad / The Richest Man in Babylon books (by clicking that link, you’ll get them from my storefront). Pay Yourself First (without ruining the books that you must absolutely read) - is to always invest (aka pay yourself) before any other item on your budget. By applying this method, you won’t invest “whatever is left over”: you will always invest (AKA pay yourself) first!
YNAB (You Need a Budget): YNAB is a comprehensive budgeting app that helps you give every dollar a job, track your spending in real-time, and set and prioritise your financial goals. It's great for creating a zero-based budget and staying accountable to your spending habits.
EveryDollar: Developed by personal finance guru Dave Ramsey, EveryDollar is a zero-based budgeting app that helps you plan your monthly budget and track your expenses on the go. It's user-friendly and offers customisable budget categories to suit your lifestyle. (I knowwwwww so many of you have beef with Dave Ramsey’s principles: but the fundamentals are there in this budgeting app!)
Mint: Mint is a popular budgeting app that automatically syncs with your bank accounts and credit cards to categorise your transactions and track your spending. It also offers bill tracking, credit score monitoring, and personalised financial insights to help you make smarter money decisions.
Cash Envelopes: these are getting more and more popular as we absolutely lose ourselves with tap tap tapping our credit cards. If you need *extra* incentive to see your money going in and out of your account: start using cash! They make very cute cash envelopes too (linked here is mine!). The best part is that you can still put everything on credit: you can just transfer your physical cash to a CREDIT CARD envelope like I do!
Remember, budgeting is not about restricting yourself. I’ll say that again: BUDGETING ISN’T RESTRICTING YOURSELF: it's about aligning your spending with your priorities and values. That’s why I like to call it a Financial Framework instead of a budget: you are reframing your spending, not limiting yourself. By mastering these techniques and leveraging the right tools and apps, you can take control of your finances and work towards a brighter financial future and eventual financial freedom.
Yours in financial empowerment, always,
Stephanie
xoxoxoxo