Why you need a simple, straightforward budget

I learned all about making a budget when I was growing up. My dad tried to instill healthy financial teachings, and while I didn’t heed his advice early on…and as a result made some pretty bad financial decisions that lead to bankruptcy, I can say now that making and keeping a straightforward budget has been key to getting my family back on its feet.

The pandemic, subsequent lockdown, and loss of jobs/income made it abundantly clear that most people were not at all prepared for what could happen if a budget and savings weren’t thought of in advance.

I think that all too often people look at budgeting and think it is just too hard; how do you decide what is a necessity and in what order those necessities should be taken care of? Additionally, what type of budget are you going to create? Are you an envelope type of person, a spreadsheet person, or a person that functions solely in your head (kudos to you if you can do that!)

I have tried several different ways, and honestly, there are perks to each, but if you are just starting out, it is easiest to actually write down everything so you have a visual concept of what your bills/income look like. To learn more about how budgeting can help, click here.

Creating a straightforward budget should be fairly easy; you are quite literally taking your monthly income and one by one deducting your necessities. These are things like rent/mortgage, utilities, and food. After you have determined what HAS to be spent, then you can take the remainder and break it down into additional categories, one of which should absolutely be savings. After that, determine what you want to put aside as “play money” this is for you to spend on things like entertainment, eating out, etc.

straightforward budget
Image by Steve Buissinne from Pixabay

Now, if in the process of creating this budget, you determine that after the necessities are paid for, you have little to no money left for anything else, then it might be time to think about whether or not you are living outside of your means…is the rent high where you are currently living, are you spending more for utilities than you should be? Take a deeper look at your necessities and see if there are any changes that can be made.

Alternately, you could think about picking up extra work, such as Uber, Lyft, or even as an Amazon driver, just to cushion your finances a bit. Now, back to the savings part, I know I said that this is an extra, and I didn’t put that into the necessary category, but in reality, it should be. Having dedicated savings can help for emergencies, whether they be housing-related, medically related, or as seen recently, pandemic related.

Dave Ramsey has a great book that I have taken notes from called Total Money Makeover, and in it, he discusses budgeting and saving, and he has something called Baby Steps, with the first step being to save $1000 as quickly as possible. This is your emergency fund, and it’s important that you have one.

The other budgeting step that he talks about, that I love is the snowball effect; essentially you are taking all of your debt, paying on them, and as you pay off the lowest balance, you roll that payment forward into the next lowest balance, and so on and so forth. For this, I like to use a site called, undebt.it. It keeps all of my accounts in one place, I can watch my snow ball plan pick up speed, and see when I will have all things paid off…as well as keep an eye on my credit utilization.

All in all, creating a straightforward budget doesn’t have to be hard, or intimidating. Just start with the basics…here’s what I make, and here is what I have to spend to keep a roof over my head, my utilities on, and food in my bellies…then play with the rest!

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