Top 20 Secrets to Successful Budgeting
After 35 years of budgeting, my wife and I can confidently say that we would have never achieved financial freedom if it was not for effective budgeting. In the first 15 years of our marriage finances were very tight and budgeting was essential to our progress. Here are the top 20 secrets we have learned:
Start where you are at now
too many people feel they don’t have enough income to successfully budget. That is never true, and I can tell you countless success stories of people who started budgeting with very little income and saw huge results in the next 5 years
When we started budgeting we were a single income family making less than $30k per year with our first child. We had 3 children before we hit our 6th anniversary. Even though our budget was tight, following it allowed us to live within our means and save between 10%-15% of our income each year.
If you are married, create the budget together.
One of you can take the lead on updating and maintaining the budget model, but both must commit to supporting it. It never works if both spouses do not commit.
Simplify your banking before you start
One bank (joint accounts if married)
One credit card (joint if married)
Limit the budget categories to 12 (core categories are Housing, Grocery, Auto, Clothing, Entertainment, Miscelaneous, Giving, Car Replacement, Vacation, Savings). You can add more if you prefer once you have your budget working smoothly, but keep it simple at the start.
If Married, have separate His and Hers budget categories so each of you has some fun money that you can spend freely without discussing
Use a banking App to help you track spending by category (i.e. - TDMySpend)
Use a spreadsheet to maintain your budget categories and carry over unused balances from month to month
If Savings is less than 10% of Gross Income (target is > 15%) then you need to either increase income or reduce expenses
Make giving a priority.
God blesses our Budget when we are obedient and faithful with our Giving
Keep your Emergency Fund and all short term budget category balances liquid in your bank savings account or similar easily accessible low risk account (i.e. - not in stocks)
Stay flexible.
You will need to fine tune your budget regularly
Until you are debt free (excluding mortgage), use your monthly savings to pay off all consumer and auto loans
Once your vehicle loans are paid off, continue making the same payment into your Car Replacement budget category so you can buy a good used vehicle for cash and never borrow for a vehicle again!
Don’t buy something until you have thought about it for at least 30 days (i.e. - avoid impulse spending).
Review memberships and subscriptions annualy and determine if they are worth keeping
Once consumer debts are paid off, use your savings to pay off your mortgage early and invest for the future
Memorize Proverbs 13:11 to help inspire you be patient- “…He who gathers money little by little makes it grow!”
Discuss your budget with. your spouse at least monthly and agree on what adjustments may be needed
Review your net worth annually to track progress and use this to help you set net worth improvement goals for the upcoming year
If you have children, start them off around age 7-8 with a simple budget with 3 categories - Giving, Saving, and Spending.
T. Payne
The Path Forward Financial Inc.