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Pop quiz! What exactly is a budget?
a. A way to track your spending at the end of each month.
b. A general plan for your monthly spending.
c. A way to spend your monthly income on paper, on purpose, before the month begins.
d. A financial tool that nerds use to torture free spirits.
If you answered “C,” then you’ve got it. A budget is all about planning for the month ahead. Around Dave’s office, we describe it as “giving every dollar a name.”
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So what’s your plan? Do you name your dollars before the month begins? Or do you wait around and survey the damage later on?
To successfully budget, you have to sit down each month (with your spouse, if you are married) and come up with a gameplan for your money—on paper and on purpose—for the upcoming month. Dave's class, Financial Peace University, will help you do this.
Budgeting isn’t about giving yourself a list of vague guidelines—well, this month we’ll spend less on eating out and more on paying off the credit card. No, it just doesn’t work that way.
You’ve got to define those limits ahead of time. This isn’t Washington D.C.—you can’t just spend money however you want to and ignore the consequences! If you’ve got $50,000 in debt with a $40,000 income, and you’re spending $800 a month on eating out, then you’ve got to make drastic lifestyle changes immediately. It’s not the time to become a regular at your favorite restaurant.
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Make decisions. How much are you going to spend on groceries? Think beans and rice if you have to. How much are each of your bills? How much more can you put toward your debt this month?
A budget isn’t a financial straitjacket, though some free spirits would disagree. A budget is really just about making a plan—and, when you do that, you’ll actually experience more freedom than you had before. A lot of people are shocked when they realize they “find” more money after creating a realistic budget and sticking with it.
For all you first-time budgeters out there, we’ve created a small list of helpful budgeting tips:
- It will take three to four months for you to get the budgeting process down.
- Remember, spend every dime on paper before the month begins.
- Overfund your groceries category. Many people who haven’t budgeted don’t realize how much money they spend on groceries.
- The budget is not a “whipping tool” for an unwilling spouse. Guide them along, but don’t beat them over the head with it.
- Married couples should budget together. When you got married, the preacher said, “and you are one.”
Give every dollar a name—mortgage, credit card bill, groceries, car repairs. Name them all. Once you have a plan and a purpose, you’ll be well on your way to creating financial peace and changing your family tree forever!
You don't have to do it alone. We're here to help! Dave's class, Financial Peace University, will walk you step by step through creating a budget and taking control of your money.