The B Word = Budgeting
Since April is Financial Literacy Month, each week, I’m going to tackle a personal financial topic, and show you how I’m doing it too! This month, I’m going to start a “No Spend Month.” Do you want to join me? If so, follow me on IG to see how I’m doing!
This week we’re going to tackle the B word…
… Budgeting.
I call it the B word because, honestly, I don’t believe in it, at least not for our personal finances, and especially not for creative freelancers or entrepreneurs, where income may differ from month to month.
If your income differs from month to month, how do you tell yourself you only have this much money for rent, food, entertainment, clothes, etc.? You could constantly feel like a failure, or at the very least, “over spend” quite easily.
This is why I believe budgeting is actually rooted in scarcity because with the traditional way of Budgeting, you’re telling yourself, you only have a certain amount to spend, and then at the end of that month, you’re actually going down to zero. It’s actually called Zero Based Budgeting, which is a favorite amongst Dave Ramsey followers.
In the above article, they even show you what a zero based budget looks like, and how the goal is to get down to ZERO.
If you’re a believer in manifesting and the law of attraction, my monthly goal should NOT be to get down to zero. Instead, my monthly goal should be to make more money, be expansive, and to align my spending decisions with my core values!
Another way people have budgeted is the envelope method. This method has you taking out how much you make for the week in cash and then distributing that money into envelopes: Housing, Food, Entertainment, etc. The problem with this method is – who still operates in cash these days? Most of our bills are paid online, through credit or debit cards, or Venmo/Cash Apps. So, this method is challenging the way our modern day works, and I also believe that this is also rooted in scarcity because once you’ve spent the money in the Food category, are you now supposed to “starve”? Or can you go into the entertainment envelope to “steal” from there? It really doesn’t make that much sense to me.
So, here’s another method: the 50/30/20 rule.
This budgeting guideline divides your take home pay into three categories with 50% going to your essential needs, 30% for discretionary spending, and 20% into savings.
The needs category includes your necessities like housing, food, utilities, and health care, as well as payments on things such as student loans, car loans, and your credit card.
The wants category includes gym memberships, dining out, travel, and entertainment. It’s essentially the spending you could trim if you needed to free up some cash.
While the savings portion of this budget is the smallest, it’s still very important. Committing 20% of your income to things like your retirement account, emergency fund, or savings for a down payment for a home can make the difference in your financial security.
Keep in mind that this isn’t a hard rule or even a budget, but rather a guideline. For instance, if you live in an expensive city, you might need a larger share of your income to cover your housing costs.
However, this one may also be challenging because of all of the math involved every month, especially if your income is inconsistent.
But there are percentages I do want you to keep in mind, especially since housing usually takes up a lot of your spending each month: Try and keep housing to no more than 28% of your income, but ideally 25%. And overall debts and housing should be at 36% or under.
So, instead of budgeting, I’m going to advocate for something that I do love and think is very, very, very important.
I would like to advocate that you track your spending.
Yes, track instead of budget!
I want you to track because we don’t know what we’re really spending our money on until we actually track it.
So, how do you track?
Well, it’s super simple. You just write down everything you spent in the last month! If you pay cash for something, write it down in a notebook, or in the notes section of your phone. Then, at the end of the month, pull out your notes, your online checking and credit card line items, and I want you to either put all of your expenses into a spreadsheet or write it down by hand in a notebook or use a tracking app like Fleur.
If you do this for a few months, then I know you will:
Become more conscious of what you’re spending on
Be able to see patterns of behavior and decide if you want to change them or keep them (ex: every month you’re spending a lot on delivery/take out. Is this because you truly value and enjoy getting delivery or take out, or is this because you’re too tired at the end of the day to cook? If it’s the latter, you can think about getting a meal delivery service that may be less money and healthier than delivery or take out. One of my clients discovered this, and she and her partner are doing something called Cook Unity and discovering that they are saving a lot of money on groceries, delivery and not wasting money on groceries that don’t get eaten.)
Start consciously making decisions to spend more towards your values and less on what you don’t, so that you feel more fulfilled and happier!
In the book, “The Artist’s Way,” which I’m reading for the first time, it reminds you to:
“Be meticulous. Be thorough. And be nonjudgmental. This is an exercise in self-observation – not self-flagellation…It will teach you what you value in terms of your spending. Often our spending differs from our real values. We fritter away cash on things we don’t cherish and deny ourselves those things we do. For many of us, counting is a necessary prelude to learning creative luxury.”
I also have a way to track each day in my Mindful Money Mastery Guide. Get it below.
It works a lot like a Food Diary or a Time Audit. You’re going to write down all of your expenses and then how did you feel about it, as you spent that money? What were you feeling before and after you spent the money?
Just like a Food Diary, you’ll start to understand yourself so much better. Are you soothing yourself, as you buy that thing you don’t need, as you scroll Instagram? Are you someone who just can’t resist a deal? Are you stress-eating and spending money on unhealthy foods?
Whatever it is, start tracking, and you’ll soon start to see those patterns and be able to shift and change them.
With Love & Gratitude,
Since April is Financial Literacy Month, I believe that we all should have someone guiding us that is knowledgeable about finances. Of course, that can be me. However, I know that I’m also not for everyone, so I’m creating a very special summit with some financial experts that I like to follow and recommend to someone who is not quite the right fit for me. It’s called the Financial Spark Series: Experts Drop Their Best Money Moves in 60 Seconds. If you want to know what money moves money experts are using, sign up below for the Money Magic Mail, and we’ll send you all of the details.