The Easiest Way to Budget
By: Derek Condon
Tags: Financial Planning, Money, Budget, Saving Money, Finance

Budgeting is one of the most fundamental things to learn to get your finances under control. Budgeting takes a look at how much money you have coming in and how much money you have going out. Once you have a good idea of your cash flow (money in and money out) you can figure out if it’s worth it.

With shopping online, shopping through apps, and a majority of people only using credit cards, it’s never been easier than now to spend money. So it’s more important than ever to have a good understanding of our budget. Once you look into it, I’d bet you be shocked as to where your money actually goes.

How we should view budgeting

The word budget, I think, creates a lot of anxiety for people. I say this a lot, but it’s one of those things I think we could all benefit from, but we don’t all have. A lot of people think it’s similar to trying to count calories. But, by focusing so much on the numbers, it actually takes the fun or enjoyment out of eating or hanging out with friends. But that’s not what budgeting means to me. Budgeting helps ensure you’re able to enjoy the things you love to do.

To me, not knowing is often the worst thing we can do. The statistics show that a lot of people live paycheque to paycheque, and even missing one payday would cause a lot of financial strain on people. The mindset of many people in tough financial situations is that they need to make more money. Usually, considering spending less money doesn’t ever come to mind, even though it’s a lot tougher to make more money than it is to spend less money.

In the book ‘I Will Teach You To Be Rich’ by Ramit Sethi, one of the points Ramit writes about is we all have different priorities for our money. We all budget our money differently, allowing what we enjoy to fit in there. And that’s perfectly okay. For most people, it’s not a reality to be able to spend a lot of money on every aspect of their lives — even if financially that’s an option, it doesn’t mean it’s practical.

We all have non-discretionary expenses — rent, mortgage, bills, groceries, etc., and we all have discretionary expenses — fun stuff, things we enjoy, lifestyle spending. Making our non-discretionary spending allows us to be healthy and comfortable, and our discretionary spending allows us to build a lifestyle we dream of having.

Budgeting should be a balance of paying our bills, living a lifestyle we enjoy while saving for our future. Instead of crunching numbers and living in unenjoyable conditions to save every penny, it has to be a healthy balance.

Again, budgeting should be all about balance.

The easiest way to budget

When you earn money, a good chunk goes towards bills. On top of that, it’s a great habit to start saving a small portion (5% to 10%) of your income for future you. Don’t worry; you’ll thank yourself. After those are taken care of, we are left with our spending money. The money we are free to do with what we like, knowing the important stuff is already taken care of.

One of the issues with this money is blowing it quickly or getting in a position where we are shopping on credit. That’s why I like this method of budgeting:

How many hours do you have to work to be able to pay for something?

No matter how much money you make or how much spending money you have each month, this works. We all know how time-consuming working is, and we all know how much work, effort, and stress we go through to make each dollar we do. So before you buy something, think about it.

When you do this, I think it causes two main things to happen:

It puts you in a position to evaluate if the work required to purchase a specific thing is worth it. You work for every dollar you make, so it’s important for it to count. And it allows you to second think the purchase. Far too often, we make impulse purchases when we would be just as well off without it. I’ve started never buying something on impulse, but rather think about it, and if it is still available the next time I go to the store, I revisit the thought. I’ve literally saved hundreds of dollars by doing this. I almost always don’t need what I almost impulsively bought.

The next time you’re in a store or looking online, and you see something you think you need. Take a minute, think about it, and revisit it later on. It’s a simple, quick, and free way to potentially save you a lot of money. All while keeping your budget on track.