Every financial planner talks about setting a budget. Budget, budget, budget. Write out your expenses so you know how much you have left. I cannot tell you how many budgets I have written out and revised. Not only in my personal life, but also in my previous work life where I would create budgets for other departments. I have first-hand knowledge and experience that a budget is only good if followed.
Yes, the unexpected comes up that wasn’t budgeted for, but realistically how often does that happen?
When creating a budget there are 3 categories that must be accounted for before you begin to list your expenses.
It is imperative that you pay yourself first. A rainy day fund is of the upmost importance. You need a cushion. Your top priority cannot be to pay your bills and expenses, when times get tough the electric company doesn’t care how you diligent you were to pay your bills on time, if you can’t make the payment now, they will cut your lights off.
Set aside 10-20% of your paycheck after taxes. I recommend opening a saving account either with a passbook or online. An account that makes it a process to take out cash. This will prevent you from making impulse buys.
Think about your future. What are your plans once you retire? Will the monies you are collecting be enough to afford the lifestyle you are envisioning? If you save consistently it will become a great buffer.
Luke 6:38 Give and it will be given back to you, pressed down shaken together and running over. Regardless of your beliefs we all understand that in nature’s law whatever you give will be given back to you in abundance. Hence the term “you give what you get.”
Every paycheck after taxes give 10% of your earning to your church or to a charitable organization. A word of caution, do your research on the charities you donate to. Ensure the money you give will be used to help the less unfortunate. We have all seen major charities collect money and not use if for aid and relief.
We have all been blindsided by life, whether we lost our job, were sued, had an accident, divorce, etc. unexpected expenses come up. Having an unexpected account allots you the ability to pay your bills while still maintaining your savings account for retirement .
Every paycheck save 5-10% of your after tax earnings. Put this in a separate account. You can have it in a passbook or online account if you think you will tap into it for personal use. However as this is for unexpected situation I recommend keeping it accessible. You can keep it with your bank in a separate checking account; refrain from linking the account to an ATM or debit card.
You should set up separate accounts for each category and have the funds automatically deducted from your check. If you rely on yourself to put the money in these separate accounts, odds are they will not be deposited.
You cannot achieve your life’s purpose without a plan, hence the importance of a budget. Let’s face it money makes the world go round. A well thought out budget takes into account your current lifestyle, and you plan for the future. Need assistance with reaching your life’s purpose? Check out our One-on-One Coaching Service.