Budget

How to Have a Life and a Budget

April 25, 2016
Having a budget shouldn’t be equated with living an unfulfilling life — in fact, quite the opposite is true. Using a budget helps you take control over a resource that is intended to fulfill your needs and wants. If done correctly, a budget should compliment your life.
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One of the biggest personal finance myths many believe is you can’t live a good life on a budget.

Budgets have a bad rep and are commonly misconceived as a punishment — something that is restrictive and limiting in the pursuit of living a quality life.

Having a budget shouldn’t be equated with living an unfulfilling life — in fact, quite the opposite is true.

Using a budget helps you take control over a resource that is intended to fulfill your needs and wants. If done correctly, a budget should compliment your life.

To show you how you can have a life and a budget, I’m going to go through a couple of statements I often hear when I bring up the word budget.

Then we’re going to discuss what you should do to if you want to budget and maintain a decent quality of living.

I understand a quality of life varies from one person to the next, but this is what makes this topic easy to talk about.

If you figure out what you want, you’ll be able to create a plan that works for you. More on that in a minute, but first let’s talk about those statements I mentioned.

“I don’t want to budget because I won’t be able to have fun (or do what I want).”

A budget is a map to financial freedom. Click To Tweet

A budget is nothing more than a plan or assignment that tells your money where to go. I like to think of our budget as a map to financial freedom.

If you create a budget, it must include all of your needs and things that are of value to you. Just because your buddy from college cuts out partying on the weekend to save up for a house doesn’t mean you have to follow suit.

Their wants may be different from yours and if you value hitting up a party every week over home ownership, so be it.

You have to create a plan for your dollars that allows you to afford the type of lifestyle YOU want to live. Just remember, party animals need food and shelter too. Your budget is where you balance your wants with your needs.

“Budgeting is hard and takes up too much time.”

I won’t sit here and lie to you, setting up your initial budget can be quite a daunting process. To set up a proper budget you have to know where you’ve been spending money and use it as a rough draft to create your budget.

For more information, read Budgets: A Quick, Easy, Simple Method for Beginners.

Once you have your initial budget set up and your spending begins to line up with what’s in your plan, you can automate most of it.

The first run with budgeting may take a while to get right, but once it’s set up and running smoothly you won’t have to spend as much time on it as you think.

You can maintain your budget by checking to see if expenses have been paid correctly and your savings are on target. This would take a few minutes each week.

There are several online tools that can help you with setting up your budget.

If you feel comfortable sharing your financial information, it will do most of the hard work for you and considerably cut down on the time you spend coming up with your budget.

A few of those tools are Personal Capital, Mint, Everydollar, and You Need a Budget.

Just plug in your income, your login credentials for your financial institutions and they will gather all of your expenses and help you create a budget that focuses on spending less than you earn and saving more.

I’m broke, ain’t no need in creating a budget.”

As you can see, I spend most of my time around country folks. We say ain’t a lot. Moving long…

If you feel like you’re broke, this is precisely the reason you need a budget or plan for your money. You have to start somewhere and deciding to write down your expenses and compare it to your income will help!

Most people don’t want to go through this process because they are scared of what they might find.

Doesn’t matter if they are spending too much on getting their hair done every other weekend or spending too much on a Benz they can’t afford — creating a budget makes them face the realities of the decisions they’ve made with their money. That’s not fun when you know you could be doing better.

If you’re running from mapping out your financial future because you claim to be broke, I’m sorry to inform you your piggy bank is only broke because of a broken mindset.

To rectify the situation, you have to stop coming up with excuses and create a plan that will not only fix your mindset but make your pocketbook a little fatter.

“Okay, so how can I have a life and a budget?”

Here are some things I want you to remember:

  1. Every dollar you haven’t told what to do is at risk of being wasted.
  2. Money doesn’t control you. It’s a tool — you’re supposed to control it.
  3. Your budget is your plan to help you achieve everything you want in life.
  4. You can afford more than you think.

Why do I want you to remember these four things? Because, when you’re creating a budget, these truths will help you conquer some of those false statements I just talked about.

Your money is a tool and a resource. It’s about time you start telling it what you need from it. If there is something you want badly enough, I’m sure you have the ability to create a budget, be disciplined with it, and get it.

To have a life and a budget, think of everything you want. Don’t dismiss a want because you think you can’t afford it. Write it down and think of what you need to do to make it a reality.

If you want to save up money for a down payment for a home, if you want to start a business, if you want to go back to school — all of these possibilities are within reach if you direct your money towards it.

Some of the things you want may take you longer to get than the next person, but this is why it’s important to create a plan that works for you and no one else. Prioritize your wants against your needs.

Once your basic needs have been tended to, you can confidently run after your goals and dreams. Stop saying you can’t afford stuff if you haven’t taken the time to create a plan. That’s just pure laziness.

Having a budget shouldn’t be equated with living an unfulfilling life — in fact, quite the opposite is true. Using a budget helps you take control over a resource that is intended to fulfill your needs and wants. If done correctly, a budget should compliment your life.

How to have a life and a budget in action…meet Ava.

I like stories because they help me conceptualize things better. To bring together the points discussed above, I’m going to share with you a story that will help you see how someone can have a life and a budget.

Today we’re going to talk about Ava. Ava is a 34-year-old registered nurse who lives in Greenville, SC with her 9-year-old daughter.

She is single and holds things down on her own with no other source of income. Ava is trying to figure out how she can relieve herself of so many obligations and work fewer hours.

Her daughter, Penelope, is a gymnast and swears on every moon and the sun that she is the next Gabby Douglas in the making.

The area they live in doesn’t provide the type of training this aspiring Olympic gymnast requires, so Ava wants to move cross country to help her daughter achieve her goal.

Only problem is the 25-year mortgage, $20,000 student loans, and $3,000 in credit card debt. Ava can’t up and quit her job which brings in $59,000 a year after taxes, so she has to create a plan.

This plan must include gym lessons for Penelope.  Ava also needs some time to wind down with her girlfriends every once in awhile because working 12-hour shifts in the ER takes a mental toll on her. Since she works long hours, she has to pay for someone to take Penelope to some of her gymnastic practices and tutoring sessions.

She also has to pay her mother to take her to school if she has to spend the night at her house during one of Ava’s night rotations.

Ava is frugal, but she has to make sure her daughter is at gymnastic practices and taken care of when she’s working. She isn’t willing to cut back on her daughter’s education, gymnastics, or her monthly girl time. A woman has gotta live, right?

Ava’s expenses currently include:

Mortgage $1,200

Life Insurance $25

Gas $150

Car Insurance $90

Groceries/Dining Out $600

Entertainment $250

Cell Phone $60

Savings (ER, car, slush) Emergency: $200, Car Maintenance/Replacement $100, Slush $200

Clothing $100

Toiletries $30

Household Maintenance $100

Gymnastics $140 (Tumbling and Gymnastics)

Tutoring for Penelope $80

Student Loans $310

Credit Cards $120 (minimum payment is $60)

Penelope’s Caretaker $600 ($200 per week to take/pick up daughter from school, gymnastics and tutoring when working)

Ava’s Mom $300 (to care for Penelope and take to school when working)

Monthly Income $4,917

Expenses $4,655

Leftover $262 (currently can’t account for this money)

Ava is choosing to focus on meeting her basic needs and fulfilling her and her daughter’s wants. She is planning to have a life and a budget by cutting back on the following:

Dining Out $200

Cell Phone $30

Toiletries $15

Mortgage $500

Credit Cards $120

Home Maintenance $100

Entertainment $200

Found Money $262

Total Savings: $1,427

Ava’s plan to have a life and a budget

To save up enough money to move across the country Ava completely cuts out her dining expenses. Sometimes she likes to eat out with her girlfriends; however, she offers to cook a nice dinner at home for them after one of their monthly girl meet-ups around town.

To save even more money, she is encouraging her girls to seek less-expensive options to wind down like going to free museums, free before eleven parties, and book clubs. Ava will also prep her own lunches for work.

She’s always working or spending time with her daughter so she wasn’t using as much data on her data plan. She calls her cell phone provider and gives up her smartphone package.  

Instead of paying full price for name brand toilet tissue and other toiletries, she cuts coupons and purchases items for a discount at the drugstore.

Since her emergency fund has more than $1,000, she decides to take $3,000 of it and completely eliminate her credit card debt. Now she can focus on building up her savings without interest accruing on her credit cards.

This eliminates the $120 credit card payment. To build her emergency fund back up to a comfortable level, she will use these savings and add it to her current emergency fund contribution.

Last, she decides it’s time to move and sell her home. She finds a cheaper townhome to rent for $700 a month and cuts out her home maintenance expense.

She monitors her budget carefully now and the once unaccounted for money in her budget now has an assignment. With all of these changes, Ava is saving $1,427 every month. Now she is going to use her savings and add it to her $310 student loan payment.

If she sticks to her plan and contributes $1,737 per month to her student loans, she will be debt free in a little over a year.  Ava has finally taken control of her money and she will have the financial freedom she needs to move across the country and pursue Penelope’s dream of becoming an Olympic gymnast.

As you can see, Ava created a plan that told her money what to do and managed to continue living a good life — all with a budget!

Before creating a spending plan, Ava had no idea where all of her money was going and it was probably being spent on shopping sprees with her friends or limitless alcohol during girl’s night out.

If she hadn’t created a budget, she would have never discovered how these decisions were costing her financially.

In closing

Now I’ve given you a breakdown of how someone can use their budget to achieve their goals. Your budget is not something that limits you in life, it’s a tool that gives you more options.

Your budget is your road to financial freedom. Without it, it’s likely costing you money you never really intended to spend and it’s keeping you from living the lifestyle you truly want.

Don’t continue to run away from using a budget because of your unwarranted fear of not having a life. It is possible to have a life and a budget and I just showed you how.

 

If you budget, what are some of the things you are enjoying  now that you’ve created a plan that works for you?

If you haven’t created a budget, what’s the number one fear that’s holding you back?

 

 

*Part of Financially Savvy Saturdays on brokeGIRLrich, Disease Called Debt and Lively Chicken*

Latoya Scott
CFEI/Social Entrepreneur
Latoya Scott is a Certified Financial Education Instructor and personal finance writer with a mission to help millennials learn how to stop living paycheck to paycheck so they can become financially carefree.

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  • DC @ Young Adult Money April 25, 2016 at 10:21 am

    I technically have never budgeted, but I do track my income and expenses. This has allowed me to know exactly where my money is going and, at times, served as motivation to “do better.” Whether it’s limiting spending in a certain area or going out and making more money, it’s provided the context and motivation to do more.
    DC @ Young Adult Money recently posted…6 Spending Areas You Can Cut if You Really Need ToMy Profile

    • Latoya Scott April 28, 2016 at 9:27 pm

      I would say this is roughly how we handle things except we go through and make sure that we have “budgeted” for everything. We only update our budget a couple of times a year and then I really just set it on auto-pilot and forget about it. So, I guess we technically do what you do which is just check the income to make sure it’s hit the bank and check to make sure the right expense amount has come out. That’s why I always encourage folks to just get started and put something on paper because eventually you won’t have to worry about an actual budget as much.

  • Allan Liwanag @ The Practical Saver April 25, 2016 at 7:24 pm

    You are correct. Budget has a bad rap because people think budget equals to restriction. It is and it isn’t at the same time.

    I believe budget is necessary in all situations. Whether you have a lot of money or none at all, it’s always best to have a budget. Budget allows you to track your income and expenses and see where you are spending a lot and a little. Executing a budget isn’t always easy but that’s ok. I believe that with time, patience, discipline, and strong will, anything is possible, in this case, follow the budget effectively.
    Allan Liwanag @ The Practical Saver recently posted…6 Ways On How To Maximize Your 401KMy Profile

    • Latoya Scott April 28, 2016 at 9:28 pm

      Very true, Allan. It certainly gets easier after the initial set up.

  • Aliyyah @RichAndHappyBlog April 27, 2016 at 11:16 am

    “Every dollar you haven’t told what to do is at risk of being wasted.” I love that line. It’s so true that you have to give every dollar a job in order to have a successful budget. It doesn’t mean you have to necessarily cut back on anything, just knowing what you are spending on and saving for is so important. Even when I have extra money each money, that money’s job is to be a buffer in my checking account to cover unexpected expenses without going into my emergency fund.
    Aliyyah @RichAndHappyBlog recently posted…A Look At My Goals For 2016My Profile

    • Latoya Scott April 28, 2016 at 9:29 pm

      Yep, you gotta love a good old buffer. It really makes automation of expenses each month run smoothly.

  • Eva @ Girl Counting Pennies April 28, 2016 at 7:32 am

    I loved this article Latoya! I have a budget that I’m doing my best to stick to – so far so good! Sometimes it needs a bit of tweaking around, especially when it comes to my “wants”, but I’d say that I’m pretty happy with my current budget. What I like the most about budgeting is that every penny is accounted for! I also track my spending and it really helps me stay on top of things!
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    • Latoya Scott April 28, 2016 at 9:30 pm

      Hey Eva! I really need to get back to tracking my spending because when I slack off I pick up some pretty bad (wasteful) spending habits. It’s one area I could definitely improve on.

  • FinanceSuperhero April 28, 2016 at 1:36 pm

    I have been a careful budgeter since my high school days. Back then, I didn’t really know what I was doing, but I put forth an effort and tracked my finances somewhat haphazardly, one might say.

    When I finished college and got my first job, I knew I needed to have things under control. By having a budget and understanding my financial picture, I was able to make wise choices, such as sharing rent with a friend in order to pay off a small car loan and save money before my wedding. As a result of my budget, Mrs. Superhero and I were able to get off to a good start, money-wise, in our marriage, and the progress has continued. In the next three months, we will be free of all non-mortgage debt!

    In my opinion, a budget is an absolute must-have, right up there with health insurance, an emergency fund, life insurance, and disability insurance. You make a strong case for having one! Nice article.

    • Latoya Scott April 28, 2016 at 9:31 pm

      Thank you! And yes, some sort of spending plan is an absolute must. I really don’t see any other way to achieve financial goals without it. Kudos to your soon to be debt-free experience. I’ll be waiting for an update:)

  • Tiffany Griffin April 28, 2016 at 11:19 pm

    I actually love to budget. Maybe it’s because I’m really organized and like to have control over everything. 🙂

    This is a great post. I love how you provided the example showing Ava’s expenses, and how she could have a life on a budget. I have a few family members I need to show this too. They think budgeting is impossible.
    Tiffany Griffin recently posted…4 Reasons Bloggers Quit BloggingMy Profile

    • Latoya Scott April 28, 2016 at 11:41 pm

      Thanks, Tiffany:) I know a few people like that too:) I’m glad you enjoyed!

  • Stefan - The Millennial Budget April 29, 2016 at 1:42 am

    Budgeting has such a negative concept. Sadly it is one of the reason more than half of Americans do not have a budget! I am about to graduate college and I like to think that thanks to me starting a blog it has enhanced my financial awareness. I have already planned out a budget once I start working after I graduate (maybe too early? who knows) Glad you showed that budgeting and fun can co-exist. Like I tell many people, don’t let money control you, learn to control your money. Thanks for the great post 🙂
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    • Latoya Scott April 29, 2016 at 9:27 am

      This is very true. And kudos to you for being financially aware before many are even thinking about their money. Thanks for visiting!

  • Apathy Ends April 29, 2016 at 9:38 am

    “Most people don’t want to go through this process because they are scared of what they might find”

    I love this sentence and i think there is a lot of truth to it, we have a very loose way of budgeting – automate all of our savings to hit our savings rate goal, the rest is for spending.

    I recently started going through our credit card line by line to check in on our own spending and the results were surprising (not bad, just surprising)
    Apathy Ends recently posted…The Power in being UncomfortableMy Profile

    • Latoya S April 29, 2016 at 9:47 am

      Yes, those little things can definitely be eye-opening, but it’s good you keep an eye on it!

  • Lindsay @ The Notorious D.E.B.T. April 30, 2016 at 10:06 am

    I’m stuck in a spot where I have to stay at my (much-hated) job because I have too much debt and obligations to pay each month. I started budgeting a little under a year ago and used it as a tool to reign in my extravagant spending, and save more money. Now, between my better spending habits, saved money, and extra income from freelance writing, I’ll soon be able to quit my current job and switch to another job that is something I actually want to do. It’ll only be a 2.5-month position, so without these factors in place, I would have had to stay with my current job (read: cage).

    • Latoya Scott April 30, 2016 at 10:14 am

      Yep, I certainly understand. While my position at my full-time job has gotten better (hey, I’m going to Disney tomorrow on an all expense paid trip after all), I still feel that without my debt I would have felt free to pursue so many other things. But it’s alright now. I don’t know where I’ll end up in a long run, but I’ve managed to make things more bearable until I can make some headway with my debt. Who know’s what will happen in the future.

  • Kathryn @ Making Your Money Matter April 30, 2016 at 10:25 am

    I’m all about budgeting. The complexity of my budget has increased over time from when I was a college student to now being married with 3 kids and it’s allowed us to reach some amazing financial goals that we’ve set for ourselves and become debt free. I love the example you shared showing how to take a detailed look at your budget and finances so that you can make drastic changes, such as quitting your job and moving across the country like that.

    • Latoya Scott April 30, 2016 at 10:44 am

      Thank you, Kathryn. Budgeting definitely serves it’s purpose for those who really want to utilize it. I’m glad you’re reaping the benefits of it!

  • Mel @ brokeGIRLrich April 30, 2016 at 11:42 am

    It’s so difficult to get people to switch their mindset of budgets from being restrictive to freeing. I think once you can help someone make that step, making a budget seems like a snap.
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  • Kelly @ Brainy Chick Finance April 30, 2016 at 11:52 am

    “I’m broke, ain’t no need in creating a budget.” I hear this all the time when talking to some friends. The reflection comes in to figure out WHY you are broke but that doesn’t mean that going forward you can’t have a budget to help you out of debt.

    • Latoya Scott April 30, 2016 at 10:34 pm

      This is true, Kelly. The whole purpose of a budget is to remedy being broke in the first place. It just requires work.

  • Mrs. CTC April 30, 2016 at 1:21 pm

    I might just write down those ‘four things to remember’, they are fantastic! I am already a budget nerd myself but I could use them when discussing personal finance with people who are not 🙂

    • Latoya Scott April 30, 2016 at 10:35 pm

      Yes, pass it along if you think it will help! Thanks for reading!

  • Alexis @ Fitnancials May 1, 2016 at 1:28 pm

    I believe my problem is not assigning every dollar (as you mentioned) a task. I leave the leftover money for “extra” things that I don’t realistically need.
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    • Latoya S May 2, 2016 at 12:06 am

      Hey Alexis, sometimes it can be difficult to assign every dollar so sometimes in the event that I do have something left over after all spending and savings goals have been met, I use it as an opportunity to boost my savings even further to cut down on those little extra wants. Sorta like throwing change in the piggy bank, I guess…

  • Psychic Nest May 18, 2016 at 1:37 pm

    Hi Latoya,

    This is such a great post! I will be honest here. I started being on a budget after I broke up with my ex. At that time, I was working at a job that didn’t paid much yet I had to pay rent, take care of my dog, buy groceries, pay bills and so on. Creating a budget was crucial otherwise I would end up jobless and homeless. The budget plan started being rewarding a couple months later. I started eating healthier as I stopped eating junk food and I focused on buying veggies and fruits. The best part of budgeting is the save up money to enjoy the little things. A cup of tea on my favorite cafe each month is enough to put a smile on my face.

    Zaria
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    • Latoya Scott May 18, 2016 at 8:02 pm

      Yes, treating yourself to a little something shouldn’t even be optional. Thanks for reading!

  • Tia @ financiallyfitandfab May 20, 2016 at 9:29 am

    Great post! There is so much negative connotation around budgets but you make a great point. A budget is the foundation or start to financial freedom. You can’t afford not to budget honestly.
    Tia @ financiallyfitandfab recently posted…8 Money Management Must Have’s by 30My Profile

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