Budgeting for the Money: How to Never Run Out of It

Budgeting is a clichéd topic. Much has been said about it, experts have mushroomed over the years and yet the heart of the matter has remained the same.

Typically, people who make money find themselves in one of two situations:

1. There is too much money at the end of the month
2. There is too much month at the end of the money

By now most of you would be either pitying or scoffing at those who belong to the second category of individuals.

After all, they would need budgeting the most, right?

You would be wrong.

For those who struggle through the month, it is necessary to gauge expenses and plug the gaps.

Hence, they need budgets.

For those who have lots of moolah, it is crucial for them to make sure that they don’t spend themselves into poverty.

Hence, the high-rollers also need budgets.

Budgeting is a no nonsense method to keep your expenses in check and save you from heart attacks every time you take a look at your bank balance, no matter how much you make.

Why is budgeting underrated?

Most of us think budgeting is a good thing. However, one thing to realize is that simply suggesting financial tools or savings schemes like a budget will hold water only if a cash-strapped individual is willing to use it.

Budgeting typically requires you to dig in your heels and grind it out with your finances till the next refill.

Some individuals skip this part out of plain disregard and end up getting financially stretched by the second week of the month.

Of course, some people were simply never taught how to create an effective budget.

Thus, I’m providing you with two ways of creating a budget you can stick to.

Types of budgets

Zero based budget

This method involves deducting your savings and expenses from your income and telling every dollar where to go (everything should “zero” out). The idea is that no money floats around tempting you to spend it on frivolous items.

We all know that extra money lying around will likely get spent. This budget eliminates that possibility.

This budgeting style is good for those who are sticklers (or who want to become sticklers) with their money. It instills great spending habits and forces you to be super-disciplined.

However, most people don’t like discipline. They like flexibility.

The self-healing budget

Here’s a saner approach to be super comfortable financially every month. I call it the self-healing budget.

This method is similar to the zero-based budget with a twist; it tricks you into being more disciplined.

To embark on such a budget, craft it to where you intentionally have a few extra dollars left over during that pay period.

This results in a ‘cushion’ that does NOT get spent. Instead, it rolls over to the next pay period.

If you accidentally go over-budget, you don’t have to freak out, because your cushion will grow back over time until it is back to where you started with it.

Hence, your budget begins to “heals” itself.

Once your cushion reaches a sizeable portion of your income, you can even reward yourself with a purchase (that should be not more than half of the ‘cushion’).

Now you’re setting up incentives to stay on-track with your budget.

This method of budgeting is a strong way to keep your expenses in check while providing flexibility in case something goes wrong.

However, don’t habitually overspend; it will completely defeat the purpose of the self-healing budget and set up bad spending behaviors!

How to set up a budget

Before embarking on a budgeting plan, you need to bear the following in mind:

• Determine your take home pay
  • This step involves how much of disposable money you have in hand post taxes and bill payments
• Setting up categories of expenses
  • Identify expenses that have been unnecessary. These could include trips to restaurants, purchasing apparel unnecessarily, so on and so forth
  • Use expense tracking apps in case you want to be geekier and surer in understanding your types of expenses.
• Prioritize these categories
• I recommend the following order
  • Pay God (if you have a religious affiliation)
  • Pay yourself (via savings, not spending)
  • Pay your bills and purchase groceries
  • Leftovers go to wants and miscellaneous expenses (entertainment, food, clothes, etc.)
• Be timely in paying due bills so that one is clear about the money in hand. The idea behind this is to ensure that your creditors are at bay and you do not incur late payment charges as a result of such lateness

If you follow these simple yet effective rules in managing your money, you will know where your money is going, control your expenses seamlessly and actually have a sizeable amount in the bank.

Control your money with an iron fist. That will ensure you will never run out of it.