Every article on finance starts this way, and I apologize to those of you who already do this, but I must state, “You have to budget!” This is not directed only at those that struggle to pay their bills, it’s for everyone. Many of you are in an advantaged starting position. You have a good paying professional career. You have money available every month to satisfy all your needs and wants. But it doesn’t matter. If you want to significantly grow your wealth, you must be completely aware of where each dollar is being spent. Don’t let a comfortable income mask poor spending habits. You are going to want to maximize the capital available to generate greater income and wealth.
Why Budget?
The purpose of this budget is not for constraining your spending, or to be judgmental about your spending. The purpose is simply awareness. Once you have an honest, accurate budget, you can no longer lie to yourself. You won’t be spending by feel. You’ll have accurate data that reflects your real priorities.
Like many things in life, creating a budget is simple, but may not be easy. Adhering to an established budget is even simpler, while for many being even harder. Your seriousness about increasing your wealth can be measured by your budget. Don’t tell yourself you want to be wealthy, while not finding the time or making the effort to budget. You vote for your goals with your dollars. Your spending will tell you which goals you are voting for.
Budget Tools
I believe that the method you use for your budget is far less important than having a budget. There are plenty of books on budgeting and nearly as many techniques. Pick one. I have been enormously pleased using YNAB – You Need A Budget. I find it very similar to the cash in a jar approach. You assign your cash revenue to a budget item. Moving cash from “one jar to another” is simple and encouraged. It’s also very easy to have multiple budgets – personal, business, etc. – and easy to switch between them. They have an excellent help feature and many videos available on YouTube to answer questions and help improve your utilization of the tool. Once you create your budget system, use it to monitor your spending for a couple of months. You may notice some expenditures that are inconsistent with your goals. Adjust categories where needed. Your first goal should be to confirm that your cash income is greater than your spending. You need to be cash positive before you can begin investing to grow your wealth. The more “extra cash” you have each month, the more options you will have. Don’t let any potential Salary Seeds slip through your fingers!