Breaking down the Budgeting Basics “What exactly is a Budget?”

In this post, we are starting from the beginning, way way in the beginning. I wanted to go over the basics of a budget and define some terminologies. Let’s start with our main topic “The Budget “

What exactly is a budget?

According to Wikipedia, a Budget is a financial plan for a defined period, often a year. It is the sum of money allocated for a particular purpose and the summary of intended expenditures along with proposals for how to meet them.
And if you were to stumble upon Investopia’s definition, they describe it as an estimation of revenue and expenses. This is over a specified future period of time and usually compiled and re-evaluated on a periodic basis.

Whether you are budgeting personal expenses or for a business, the terminology basis is that its a plan. A plan for your money, that is estimated and re-evaluated. What many find fearful is the thought of not sticking to it. Even the thought of it not being accurate, meaning not coming to terms with your projection. Budgets always need to be re-evaluated periodically even in the middle of it. It’s not something you are carving into stone, but then become a disaster if you fail. Money being planned out is just that, “Money Planned”.

When you realize you need a Budget

Budgeting and I have always had a roller-coaster relationship. It wasn’t until I would fail at our union I would think all is lost. The fear of defeat would stall me into building up again, then we would start all over after a money pit. You might be like me, feeling you need a budget when you feel out of control of your money. And like me, you ask yourself “Where did it all go?”
There could be a goal in mind. You might be dreaming about this impossible dream about the money that can make it all happen. The feeling of just wanting it will not manifest itself into your hands. This is where a Budget comes in, and like that “The Dream” becomes obtainable. Crossing the checks off your list, getting closer to your goal will not seem so far away.

Getting Clarity could be another reason. The clarity for me is like going into the doctor’s office for an annual visit. It is what’s separates the what-ifs versus what is. It’s amazing how a budget can put your life into perspective. Think of it like Money Health Awareness, knowing your finances helps you make future goals. Budgeting can help you figure out if you are living over your means. If you need to increase your income, or maybe emulate your saving methods. You can see when its the right time to start making investments.

Lastly, when you’re making life changes. It’s sad to say but when there are big life changes, money is always associated with it. It can be as simple as being in a relationship where you might have to share expenses. Growing your family with a child on the way, that’s an expense. Major changes and happiness in life, money might not take control but it always has a foot in the race.

Where to begin?

I need a budget but I don’t know where to start? You might think it might be as easy as filling out a worksheet, reading a book or signing up for a program, but it’s not. It might start off easy but then you get stuck, or in many cases similar to me, fail, there is a silver lining. The good news ! budgets that are defined before always need to be re-evaluated, and like failing you can start over again. Money and life always need constant evaluation, so let’s begin!

We can only change once we are honest with ourselves, in this case, honest with our finances. You have been in the pits before, money pits are the worst. What is the real reason why you want to be financially free? Let’s get our goals into perspective, write them down. Write down three goals you want to accomplish with your finances?
Did you try it? I know it can be hard to hard to write just three.

I promise we will touch base on all of them, but your first step is done. Doesn’t it feel good to have goals? I smell aspiration in the air! Where does it all fall down too? Not being honest with yourself.

Money has a lot of truth with it, in fact, it mirrors your personality. Are you emotionally driven? Do you spend on your emotions?. Do you need validation or facts when making decisions? Does your risks in money purchase stall on the right timing? I had to be honest with myself and money and come to terms with how irresponsible I’m with money. My lack of saving come with a fear of not having enough to spend on expenses? My wanting to save comes with me wanting to feel secure. Security is my main reason for saving money.

Do your spending habits contradict your goals? In this case, this is why you need a Budget Click To Tweet

How do we really get honest with ourselves and Money?

The quick answer is we review our past spending history. Before we start the budget we need to review and make better choices. Take the time to look at your last month’s spending habits. Is there something taking most of your income that needs to be cut. Are you shopping at one particular retailer that you should take a break from? Now that you have your goals and your review, see how they compare. Do your spending habits contradict your goals? In this case, this is why you need a budget.

Continue to Breaking down the Budgeting Basics Part 2 for different types of Budgets

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