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Are you eyeballs deep in debt and looking for a money plan to help you pay off debt?
You’re not alone, most Americans don’t like thinking about budgets.
I had no idea what was happening with my money about 4 years ago.
I thought I needed a wizard and a cape to magically save up money for our goals.
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After learning more about personal finance and budgeting, I realized money isn’t challenging.
The simple act of budgeting has helped our family save over $180,000 in four years by telling our money where to go.
This post will cover how to make your first budget, or money plan.
I think you’ll find budgeting will set you free and even more so if you like the hustle and grind.
Here’s my top 5 actionable tips to using your money to reach what matters to you most.
Money Plan Step 1: Download your spending history
To plan where you’re going, knowing where you’ve been helps.
To do this, download your last 3 months’ worth income and expenses. Total up the sum of your income and expenses.
Many banks have an online feature to help you download your spending history.
This information will give you a rough estimate of what your spending habits are.
Your past spending report shows what you value and where your heart is.
You give your precious time for the items you buy. You can make more money, but you can’t make more time.
You don’t have to spend a lot of time on this to get an idea of your spending habits.
If the total of your spending is negative, then it means you’ve overspent your income.
If you’re total spending is positive, it means you’ve not overspent. It also means you might have money you could send elsewhere.
This snapshot of the last 3 months help you answer if
- your spending reflects your highest and best values
- there are surprise charges you don’t recognize
- your expenses are what you expected them to be
- you spent more than you earned
- there is money left over you could use to reach money goals
- you are on track to reach your goals
2. Take a deep breath
If your spending isn’t where you’d like it to be, don’t worry. You’re doing better than you think.
Rather than kick yourself for spending oopses, use it as an opportunity to build new ground.
Ask yourself, “How can I plan a life that excites me beyond my wildest expectations?”
Dream up what you can do with the freedom to do anything you want.
Organizing your finances and following a budget is the first step to getting most everything you want.
3. Make a budget
In modern thinking, a budget gives most people ulcers.
Not here, though.
A budget is your plan for your money.
It doesn’t always mean restriction and cutting out all your favorite purchases.
In fact, if you’re spending your money based on your highest and best priorities, then you may never feel deprived.
To get started budgeting:
Going forward, estimate your income for the next month.
Pile it together and include anything positive that comes into your account.
This can include
- Side jobs
- Child support
Then estimate your expenses from the pay you take home.
Pile it together and include anything you expect to spend in the month.
This can include
- Loans and debt
- Personal expenses
- Child care
Total it up.
Income – savings – expenses should equal ZERO.
If you want more information about budgeting and paying off debt, Dave Ramsey is the king-kong guru in the personal finance space.
His popular book Total Money Makeover will give you all the details.
Whatever goal you have, it’s worth it to break the current American standards of debt.
It’s 1,000% worth it to be free!
4. Use cash where useful
Using cash can be really helpful.
Some easy ways to use cash are when paying at
- personal funds
- pet care
- child care
- and more
To use cash, you can withdraw your budgeted amount during payday.
When the cash is gone, you’re done spending until you earn more income. It’s simple and helps you know where you’re spending is.
The peace is worth it.
5. Review your spending
Periodically, it’s good to review your spending to make sure you are following your budget.
Budgets can change a lot if you get an unexpected bill, overtime at work, or other changes to your financial story.
It’s important to make those changes to your budget so you have a current plan for your money.
- How to save 88% on loan interest
- 9 Grocery budget tips to help you save hundreds every month
- 4 shrewd financial planning tips to help you pay off debt
- 101 No Spend Activities
Do you budget your money? What dream is your budget helping you achieve?