How to Take Control of Your Money Through Budgeting

Budgeting is the single most powerful tool you can use to take control of your financial life and stop living in financial uncertainty.

Approximately 41% of Americans use a budget, meaning that 59% of people go about their day to day lives with little to no idea how they spend their money.

Today I want to take you on a journey where you will learn all about the benefits of budgeting and walk you step by step through how you can set up a budget that will give you control over your money, and your life.

What Budgeting Actually Is

Budgeting is where you sit down with a pen and paper, or on an excel spreadsheet, and allocate how much money you will spend on various categories for the month.

A budget is NOT simply recording your expenses and seeing where you spend everything, that is tracking expenses. With a budget you set a limit for a category and you hold yourself to it.

While tracking your spending is a good habit to have, and will undoubtedly help you in handling your money, it will not yield the same results as carefully budgeting.

Budgeting is a plan of action.

How Budgeting Will Change Your Life

Too many people think of budgeting as a bad word. People hear the word budget and they think that it will restrict them and not let them spend money on anything they want. In reality a budget will give you peace of mind, and when you get good at it, it actually gives you freedom! What?!? Yes you read that right, budgeting will give you peace of mind and freedom.

However, the first couple months of budgeting will likely yield the opposite result, and the reason is because you have no idea where you are spending your money. You have no idea how much money to allocate to each area of your life, and as a result the first three or so months of budgeting will likely not go according to plan.

After those first couple of months though, you will gain incredible insight as to where you are spending your money. You may find out, like many people, that you are spending wayyyy to much money eating out and that it would be an easy area to cut back on and save money.

You may see that you are spending a ton of money on dates, in which case you can look into more financially friendly date options.

Once you understand where your money is going and where you are spending your money you can redirect spending to align with what you actually care about. You should be spending money on what you care about most, and if you find that you are spending a significant amount of money on something you don’t actually care about then you can redirect that money and use it in a way that better serves your life.

Once you have reached the stage where you have control over your money and you are directing it where to go, this is where you begin to gain freedom through budgeting. The way you do this is by allocating money each month for fun/random things.

The fun/random line item on your budget will allow you to purchase anything (within budget) guilt free and without hesitation, whereas before you may have felt guilty or second guessed spending your money on certain things.

Your increased knowledge of how much you spend, save, and give every month will also allow you to easily figure out just how much you can afford to spend on larger purchases. If you determine that you can afford it then you will have much less stress, and if you determine you can’t then the decision has been made and there is no point wasting any more time.

How to budget

Time for a crash course in Budgeting 101.

At the top of your budget you will write out your income. If you have multiple sources of income, I like to have multiple lines so I can see where it is all coming from.

The first expense line is giving. As we here at CTM have talked about before, you should give God his share first, preferably 10%.

The subsequent lines will be the four things that you must pay for every month no matter what: food, shelter, transportation, and utilities. These are the only four things that you truly need to survive to make it to the next month. It is important to note that restaurants and other luxuries within these four categories do not count. Those will be separate line items.

The next line item will be your automatic transfer to savings. You should be transferring AT LEAST 10-15% of your income into some sort of savings or retirement account every month. This should be done by an automatic transfer so that you aren’t tempted to spend that money at any point.

After this point your budget will be pretty custom to your life. You could have line items for restaurants, birthday presents, gym membership, books, haircuts, car insurance and so on. It will be these areas that you will struggle with pinning down the most in your first couple of months.

It wont always be easy to predict every random expense that comes up in the month. I often forget about people’s birthdays until a week before and as a result don’t add a line item into my budget at the beginning of the month. This is where a beautiful line item labeled “random” comes in.

I use this line as a catch all for anything that I forgot to budget for, but you can’t use this line as a crutch. Anytime you use this line for something you need to write it down and then consider it in your future budgets. The goal is to get this line item as small as possible.

The final line item, and what is normally peoples favorite, is fun money. This is money that you get to spend guilt free on anything you want. You work hard for your money and you should get to enjoy it, just don’t go overboard.

If you get to the end of your budget and have a significant amount of money left, don’t put it all into the fun money category. Instead take some of that extra money and put it into your savings and give yourself an even bigger head start on your future.

Thank you for sticking with me through this post, I know it had a lot of information, but if you can take the things you have learned here today and begin implementing them into your life you will see drastic change for the better. Your stress about money will be greatly reduced, you will have an easier time saving and giving your money, and you will be significantly better off in the future for it.

Go out and take action NOW! Good luck.

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