Budgeting – Mindset & Practice

Budgeting – Mindset & Practice

by | Dec 13, 2022 | Budget, Finance

It’s that time of year! The holidays are here, and with rising costs of inflation it has become easier to spend more than one can afford. Whether it be on gifts, travel or food, there is no doubt the expenses are higher around this time of year. That’s why it is important to understand the significance of a budget, not just during this season but all year round. A budget is a great tool you can use to keep track of your finances and stay on top of your spending, even when you don’t have extra expenses. A budget will make the most of your money. It is important for everyone to follow a budget to hit financial goals they want to reach, but it is not always that easy.

A Budgeting Mindset

Budgeting may seem easy to do once you get all the numbers written down, but sometimes it’s harder to do in practice. This is because not everyone has a healthy budgeting mindset. How you feel about money, how money was viewed in your household growing up and how much money you have can affect your thinking about a budget. It can make you feel discouraged, or that there is no need for a budget, especially if you already think you can’t hit the goals you want to based on your expenses vs. income. That’s why it is important to examine your current relationship with money and try to realize what makes you uneasy about a budget.

There are ways to cultivate a positive mindset about budgeting, it’s necessary to try and change that if your view is less than positive. A negative mindset is what can derail you from sticking to a budget or even planning for one altogether. One great way to change that is to simply just believe you can be successful with your money! Believe you can reach your goals that you set in place for yourself, if you don’t, you will never actually reach them. Imagine a constant voice complaining about how you’re never going to get to where you set out to go, it’s even harder to tune it out when it’s your own voice. Believe in yourself. Another way to change the way you think about money is to not compare yourself to others. If you are constantly comparing your financial situation to someone else’s, you are never going to fully focus and stay on track to achieve your goals. You also have to remember that money is not evil, it is a tool that you can use in your life. A lot of people work very hard for their money, but once you receive it, you have to remember to make the money work for you. Do your research! Find out which type of budget would work for you, read books on budgeting and finance, find a positive influence to follow through this money-saving journey, whether it be a notable figure in finance, or a friend that already has a positive mindset and good relationship with money. Set your goals, long-term and short-term. You can break down long-term goals by setting short-term goals to achieve them. One of the best ways to change your mindset about money is to be grateful for what you have. While you may not be where you want financially, be grateful that you have the tools to plan ahead and get where you want. Be grateful for the necessities you already have and the income you bring in already. Nothing will discourage you more than thinking you can’t get to where you want to be because you don’t already have what you want to achieve.

Ways to Budget

There are many different ways to budget but some of the most common ways to budget are; the cash envelope method, the zero-based budgeting method, the 50/30/20 method, weekly allowance budgeting and budgeting by paycheck. Here are the descriptions for each budgeting method.

Cash-Envelope Method: for this method you would assign each envelope to a different category of expenses. For example, groceries, car payment, travel, mortgage, savings etc. You then would assign a set amount of money for each expense and use cash to fll each envelope. Once the money is spent from the envelope, you cannot assign or spend any more money for that expense

Zero-based Budgeting Method: In this method, the budget requires that you put every single dollar from your paycheck or income towards your budget. There would be no money left over once you fit everything into the budget. You would make your categories for all expenses, like bills, savings and debts, and no penny is left over for you to spend on things that are not part of your budget.

50/30/20 Method: This method uses a 50%/30%/20% split and is assigned to different categories. 50% would go to necessary expenses, 30% to wants/non-essential purchases, and 20% would go to savings or debt repayment. You can also flip the 30/20 so 30% would go to savings and debt repayment and the remaining 20% to wants, depending on what works for you.

Weekly Allowance Method: In this method, you would assign a set amount to spend for the week. This would typically be the lowest possible amount you would need to make it through the week, so that the rest can go to necessary expenses and savings

Budgeting by Paycheck: for this method you would assign your paycheck to different categories. Each paycheck there would be a portion for bills, necessary expenses, debt repayment and savings. Alternatively you can also split up expenses between 2 paychecks if you get paid more than once a month. One paycheck could be for necessary bills, another for savings and debt repayment.

There are other ways to budget if none of these seems right for you. It’s always important to do your own research when planning for a budget, even when it comes to picking out the kind of budget you want to follow!

Budgeting for the Holidays

There are many different tips and tricks you can use to make the most out of your money during the holidays. The best way would be to create a holiday budget for friends and family. Write everyone down that you need to get a gift for and assign a specific amount that you must not go over for each gift. You would also assign an amount for other categories such as food and travel expenses, maybe even shipping costs if you need to order gifts or ship them out. This is a great way to keep track of how much you plan to spend during the holiday season.

Besides creating a budget, there are other tips you can use to get the most out of your money. Start planning and shopping early, don’t wait until the last second to get all of your gifts. Shop sales and avoid ordering online and that usually generates extra costs in shipping and duties. Use a cash system to ensure you don’t go over budget. Alternatively, save up the cash and use a cash-back credit card to earn rewards on all the items you purchase, then use the cash to pay it off in a timely manner so it does not sit on your account and build interest. There are many different ways to save money, but the most important thing you can do is create a plan. You can even create a separate savings system that allows you to save for the holiday season all year long.

Sticking to it

Sticking to a budget is not always easy, but it is necessary. Do not feel discouraged if you don’t get the hang of it right away or if you go over budget. Budgeting takes time, planning and practice. You won’t get better at it if you don’t try! Make a plan, go over your budget with someone else, and don’t forget to revisit your budget as time goes by. The same budget you had 4 months ago may not be the budget you would need today.

Besides the budgeting methods listed, in this day and age of technology there are plenty of free budgeting tools that you can find online or as a mobile app! Here are some free resources you can use to budget:

Intuit Mint – Free Banking App: https://mint.intuit.com/failover/homepage/index.html

Google Sheets Free Spreadsheet: https://www.google.ca/sheets/about/

Budget Bakers – Wallet: https://web.budgetbakers.com/signup

If you ever need help with budgeting or getting your debts in order so that your budget isn’t being eaten up by them, give us a call at 800-335-8176 to see how we could help you get your debts in order.

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