What IS a BUDGET?

Woah there! Did you just CRINGE at the word “budget”? You, like many other people, may get a negative feeling even mentioning the big “B” word. I personally love it. I get EXCITED when I get to talk about budgeting. My day is MADE when someone tells me how my budget tips made their financial plan AWESOME. So excuse me for getting a little giddy and bubbling up when the word “BUDGET” resounds.

Let’s talk about the word BUDGET. I want to help you if you are someone that cringes at the word “budget.” Do you feel like budgeting is restrictive, like you’re going to fail, like it is all the things that you’re not allowed to do, or that it is looking at what you’ve been doing wrong? I really want to encourage you that the word budget doesn’t have to be so negative and scary for you; however, if you are having a hard time shifting your mindset on that, please change the name. Call it a money plan, call it a success road map, call it whatever you want. Turn that negative word into something positive for yourself. In this blog post, I am going to be saying “budget”, but you can replace that in your mind’s ear if it helps!

The word “budget” does NOT have to be scary; but if it IS, just change the word. Call it a money plan. Call it a success road map. Call it your PATH TO FINANCIAL AWESOMENESS. Call it whatever feels good to you.

Lindsay Plumb, Founder of the Pretty Money Club.

So what IS a budget?!
(Click here for my free 5 day budget makeover series that will take you through creating your budget step by step.)
One of the reasons many people have a hard time budgeting is because they don’t actually know what a budget IS in the first place. Let’s cover that now. A budget is a plan. It is a road map for how you are going to spend your money. It is NOT an analysis of how you HAVE spent your money. A budget is looking FORWARDS. It is NOT looking backwards. It is finding the facts of how you have been spending your money only so that you can create a plan to modify your spending in the future. It is making sure that you have money set aside for FUTURE YOU. It is planning ahead for expenses, like new brakes on your car, a new hot water heater, or having someone come clean your gutters and mow your lawn. It is figuring out what your NEEDS are vs what your WANTS are. It is how you figure out how much money you have to spend on your LIFESTYLE, after covering all of your NEEDS. It is achieving your lifestyle goals, like a family vacation, by putting aside money every month to get them. It is consistently checking in on a monthly basis. It is checking in any time your financial situation changes, or you add a new goal to your life. I break the budget down into the following pieces:

STOP looking at the UNICORNS! (Find the FACTS)

One of the things that people do wrong when they budget is that they look out the window and they see unicorns. Now, what do I mean by that? I mean they’re in a fantasy land. They’re not looking at reality and using the facts of their life and their expenses when they create the budget. What are the chances of you staying on track if your numbers are grabbed out of thin air? You HAVE to use real numbers when you are creating your spending plan. This small piece of the budget is often times what people think the entire puzzle consists of. I talk to people every day that tell me they have a budget, when really, they have a breakdown of the money that they HAVE SPENT already. This is important, but it’s just a small part! If you’re using a spend tracking app, you can pull up your banking records for as long as you have had the account (or credit card) and have the app categorize it FOR you. (Make sure you go through and check how the app has labelled your purchases… often times they are not correct and need to be manually adjusted.) If you haven’t been tracking your spending, you need to look through your banking history, your credit card history, or if you have used a lot of cash (which I do NOT recommend doing), your receipts, and create a master list of your regular (and irregular) expenses. If you take part in my FREE 5 day Series called the “5 Day Budget Makeover” I provide you with a list of common expenses, plus a bonus list of the most commonly FORGOTTEN expenses that throw your budget off. Create a master list of your expenses.

Do you REALLY need that?! (Needs vs Wants)

I want you to get two colours of highlighter. If you don’t have highlighters handy, but you have kids at home, grab some crayons. You know you have those around, right!? I want you to decide which colour is for needs and which colour is for wants. Go through your list and highlight the needs and wants. Now, it’s very important for you to look through the lens of someone else when deciding if something is actually a need. People will tell me all the time that they NEED this or they NEED that… but they don’t. They have created their life to WANT things SO BADLY that they NEED it… but they don’t actually need it. So be careful when going through this list. I would also encourage you to share your results with a friend or a family member, or maybe your partner and see if they agree with the needs and wants. This should take you no more than ten minutes. Your needs can look a little different than your neighbors do. For example, I NEED my cellphone plan. I use it for work all the time. I use it to do group coaching calls with video from my phone. I make notes on it when I have a great idea that I just need to share with my Pretty Money Club members, but I’m at the park with the kids and don’t have a pen handy. So, my phone is a NEED. Maybe you don’t use your phone for much aside from social media and communicating. So do you really NEED that giant data plan? My friend is a lash artist. She NEEDS her lashes, because she teaches courses on how to become an awesome lash technician. If hers don’t look good, she loses her credibility, and it affects her business negatively. I certainly don’t NEED lashes. They would be a WANT for me. I could make excuses for myself and claim that I NEED them because I am on webinars and videos all day long sometimes… but I really don’t. Don’t make excuses for yourself. Let someone else help you decide. This is something that I talk about with a no nonsense attitude in my 5 Day Budgeting Makeover Series.

Future YOU Needs Money Too!!!

Inside of the Pretty Money Club, my members hear me saying all the time “future you needs money too.” You have to plan for “future you.” What do I mean by “future you?” I am told every day that budget get thrown off because of unexpected expenses. When I ask what the unexpected expense was, I usually hear things like “My car broke down and needed work!” or “My hot water tank started leaking!” Those are actually an EXPECTED unexpected expenses. It is absolutely 100 percent expected that your car is going to need maintenance. It is absolutely 100 percent expected that your house is going to need maintenance. It is 100 percent expected that your kids are going to need clothing, go on field trips, and have registration fees for activities and sports come up. It is expected that someone will get married and you will want to give them a wedding gift. Those are not unexpected events. What is unexpected sometimes is the schedule, but not the fact that this expense is going to come up. You need a list of the EXPECTED UNEXPECTED’s for FUTURE YOU. What about goals? Goals are going to be achieved by who? Future you! You need a list of goals… like vacation, kids education, new car, renovations. Whatever is near and dear to your heart… write it down. If you aren’t budgeting for your goals, they either won’t happen, or you will spend money that you don’t have to achieve them. I provide a list of the most common “expected unexpected’s” that throw people off in my  FREE 5 day Series called the “5 Day Budget Makeover”. It’s worth checking out.

Figure Out Your LIFE…style.

Now that we understand the concept of future you… we are going to come back to current you. We’re going to make sure that current you know exactly how much you can afford to spend on a monthly basis without blowing the budget. Now if you have budgeted in the past most of you have used templates or models that have had you allocated money for kids clothing, your clothing, entertainment, miscellaneous, wine, coffee, hobbies, toys, all of the needs on your list. I don’t like doing that. I don’t got time for that. If you do, congratulations; I want you to go and use it to spend time with your kids, or get in some more exercise. It’s not meant for budgeting.

Here’s how I do things: I call the amount of money that you can spend, after all your needs are met and Future You has been planned for, Lifestyle Spending, or a Lifestyle Amount or a Lifestyle Number. The concept is all around your lifestyle. Lifestyle money is the amount of money that you can afford to spend this month without breaking the budget, without stealing from future you, and without jeopardizing your goals. Sounds great, right? Imagine if you could spend totally freely, knowing that all the things that were important and necessary in your life and all the things that lit you up and you want to achieve are going to happen while you were spending this money. Imagine what will happen when your spouse has the same thing. They have a lifestyle budget amount also. And they can go out and spend freely with no nitpicking, no judgement, no questioning on why they spent that on this, or this on that that everybody involved in this budget can spend freely knowing exactly what amount they have to spend. Does that sound good?

(If you NEED to figure out how to get your LIFESTYLE BUDGET on track, do my 5 Day Budget Makeover Series!)

Okay, so here’s where we are finally going to get our numbers into the budget.

  1. We’re going to take all of our needs and put them into the budget
  2. We’re going to take all of our future you categories and numbers and put them into the budget.
  3. We are going to take all of your sources of income and put them into the budget.

Now, you are going to notice that some quick math happens. And we take one number away from the next, and we come up with your lifestyle budget. This is the money that you get to spend on whatever you want.

If your lifestyle budget has four figures, or more… I want you to go back and look at your future you categories. Look at areas that you can beef up in your future you categories. If your lifestyle number is only two digits… I want you to look for areas where you can decrease your expenses or shift your goals maybe to be a little bit longer than you would hope for. It’s very important that you have at least a few hundred dollars available for spending.

Why is that? Well, because life is expensive! There’s a lot of stuff to buy and pay for. You could convince yourself that your family will live on ramen noodles, but it’s not going to be sustainable. This budget needs to have money to spend. And so if your lifestyle number is too small, we either need to work on decreasing the expenses, or increasing the income, or shifting the goals.

Make that budget STICK

Now, moving forward, the way you’re going to keep this budget alive is with a monthly review. At the end of every month, I want you to go and plan out the following month. Make sure that you check out the calendar and there are no new unexpected events coming up that you can’t afford somewhere. Make sure you know how much income is coming in next month. You HAVE to do this each and every month, regardless of how similar your months may be. Most times your monthly expenses and monthly income will be the same, or very similar, unless you have a variable income. Why are they going to be similar? Because your wants and your day to day spending is coming out of that lifestyle amount, so knowing exactly what you have coming up at the beginning of the month that is going to be spent from the lifestyle amount is very very important. Give yourself half an hour so that you can sit down with a cup of tea or a glass of wine and look forward at the next month. Make sure you have a conversation with your spouse or your kids to make sure that everybody is involved and everyone is on the same page before moving into the month.

You’re also going to review the budget any time that your expenses are going up or down our income is going up or down. You want to review it if you have any financial changes. So… no buying a puppy or a new car before looking at the budget. This is your road map to success. It’s not some numbers that you’ve thrown on a piece of paper to forget about in the future. This is the road map. This is where you come, this is your GPS to find your financial success. You have to come review your budget when you want to make a major purchase, add a goal for your future, if you get a raise, if you lose your job, if you have a baby… all of those major changes!

I HIGHLY recommend that you take part in my FREE 5 day Series called the “5 Day Budget Makeover” 

to really dig deep into what EXACTLY a budget IS and what it IS NOT. You’ll also be invited to join a Facebook Group full of people who have already completed the 5 Day Series. This will offer you a chance to message me, personally, with questions! I’d LOVE to support you. You’ll also have a community of like-minded people who can share stories and offer strategies that worked for them. Get plugged in and get budgeting!

Published by theprettymoneyblog

To all you women that are working too damn hard to feel like you’re just getting by paycheque to paycheque… To all you ladies that just don’t have the freaking time for financial jargon and complicated budget systems… ​To all you women struggling to feel in control of your money, ’cause you know you can rock it if you just had a simple map… I see you. I GET you. I'm a busy mom of two boys and a wife to my business partner. I love baseball, red wine, and our family trip to Mexico every year. After more than a decade as a licensed professional in the personal finance industry, I’ve figured out strategies that are simple, but have massive impact on your wallet. I’ve left out the jargon and fine print because I know you don't have time for that. The Pretty Money Club enrolls new members twice a year for the 8 week course that will turn your ugly budget into top model pretty money... and most of our members stay in the club after class is done to keep learning and stay in touch with all the women they built community with.

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