How To Budget Your Personal Finances

Understanding how to manage money is one of the most important lessons in life. There’s a direct correlation between your quality of life and how well you manage your money. I am not an ultra capitalist, but I am a realist. Without money, life is HARD! Financial literacy is often overlooked in K-12. Most curriculum focus on teaching students the type of math that will not help them in every day life. I’ve personally mentored students from K-12 and in college. What I’ve learned is that most have not learned how to create and manage a personal budget. Perhaps, it’s because so few kids and young adults aren’t working in their younger years. If they’re not working, then it means they have not money to manage.

Asking mom and dad for money does not help one learn how to manage money. It goes without say that when you work and earn your own money, you’ll have a deeper appreciation for what goes in your pocket and what goes out. In the real world kids can’t count on or live on allowance, tooth fairy, or birthday money. Financial literacy starts with parents. As is the case with everything else in life, we emulate the behaviors we see around us. Now, if you’re a parent who struggles with personal finances, then I recommend you first teach yourself how to be disciplined with your budget.

I don’t want to come off insensitive or you to think that I’m naive in thinking the only reason people struggle with money is because they don’t know how to manage it. After all, you have to make money first before you can manage it. People who are struggling with education, job loss, health issues, mental challenges, and legal problems to name a few, have much bigger problems when it comes to managing your personal finances. It’s never to early to practice managing money. So, even if you don’t have enough right now, you can start practicing the discipline necessary to help you be more successful down the road.

This plan on how to budget household finances will provide resources such as apps, websites, podcasts and books to help manage a household’s finances. Let’s start with the basic elements of a household budget.

Here’s a plan for budgeting household finances:

1. Identify your income and expenses: The first step in budgeting your household finances is to identify how much money is coming in and going out. This includes all sources of income, such as salaries, bonuses, and investments, as well as all expenses, such as bills, groceries, and entertainment.
2. Create a budget: Once you have a clear picture of your income and expenses, create a budget that allocates money for all of your necessary expenses, such as rent, mortgage, utilities, and groceries, as well as savings and debt repayment. Free Annual Budget Spreadsheet on Google Drive.
3. Prioritize your spending: Prioritize your spending by putting the most important expenses, such as housing and food, at the top of the list, and less important expenses, such as entertainment and subscriptions, at the bottom. This is a big one! Too many people can’t save enough money because they over spend on things that will not help them grow.
4. Track your spending: Keep track of your spending by recording all of your income and expenses in a budgeting app or spreadsheet. This will help you to see where your money is going and to identify areas where you can cut back on spending. Free Spreadsheet on Google Drive.
5. Make adjustments: As you track your spending, make adjustments to your budget as needed. If you find that you are spending more than you planned in certain areas, look for ways to cut back on expenses.
6. Automate savings: Set up automatic transfers from your checking account to your savings account on a regular basis, this will help you to save money consistently and reach your goals.
7. Schedule time: Create a calendar for the next 52 weeks for your financial planning. What days you’ll pay your bills, what days you’ll read the books, what days you’ll upload expenses and income to your spreadsheet, etc.

Before I share some resources with you, I’d like to share a strategy to help you improve your personal finances. After all, these resources such as books, apps, etc. will require your time. And yes, I know your time is valuable! But here’s the deal, if you’re not happy with your finances then it’s time you allocate X-number of hours every month to educate yourself, create a plan and track your performance. That being said, sometimes the best thing you can do to improve your personal finances is to work harder. You see, when my revenue or income goes down and the cost of living goes up, the first thing I do is make a list of things I can do to make more money immediately. The answer is not to cut everything and suffer, the answer is to find opportunities 7 days a week and execute on them. Perhaps, you can ask your boss for more hours, start a side hustle, or offer your services on Upwork or Fiverr. If you own your own business, create a new marketing and sales campaign to generate more leads and sales, expand your product offerings, or create strategic partnerships.

Here are some resources that can help you budget and manage your household finances:

Apps:

• Mint: This app allows you to connect all of your financial accounts in one place, track your spending, and create a budget. It also provides personalized financial advice and alerts you to potential savings opportunities.
• PocketGuard: This app helps you to track your income and expenses, create a budget, and see how much money you have left to spend at any given time.
• YNAB (You Need A Budget): This app helps you to create a budget based on your income and expenses and provides you with tools to help you stick to it.

Websites:

• The Balance: This website offers a wide range of personal finance advice, including budgeting tips, credit and debt management, and retirement planning.
• Personal Capital: This website offers a comprehensive personal finance tool that allows you to track your spending, budgeting, investments, and retirement savings all in one place. It also provides personalized financial advice and alerts you to potential savings opportunities.

Podcasts:

• Marketplace: Marketplace is an American radio program that focuses on business, the economy, and events that influence them. The program was first broadcast in 1989. Hosted by Kai Ryssdal since 2005, the show is produced and distributed by American Public Media.
• The Stacking Benjamins Show: This podcast provides a wide range of personal finance advice, including budgeting tips, investing strategies, and retirement planning.

Books:

• “Your Money or Your Life” by Vicki Robin and Joe Dominguez: This book provides a comprehensive program for transforming your relationship with money and achieving financial independence.
• “The Simple Path to Wealth” by JL Collins: This book provides a straightforward and easy-to-follow guide to building wealth through investing in low-cost index funds. It also includes advice on budgeting, saving money, and living a fulfilling life.
• “The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money” by Ron Lieber: This book provides practical advice and tips on teaching children about money, budgeting, and values. It also includes real-life examples and strategies for parents to help their children develop healthy financial habits.
• “The One-Page Financial Plan: A Simple Way to Be Smart About Your Money” by Carl Richards: This book provides a simple and easy-to-follow process for creating a comprehensive financial plan on one page. It covers budgeting, saving, investing, and protecting your assets, and provides practical advice and tips for achieving financial success.

These books are popular because they provide a comprehensive understanding of personal budgeting and personal finances in a simple and easy-to-understand way. They also offer actionable advice and tips that readers can implement in their own lives to improve their financial situation.

Over the past 20 years I’ve used numerous resources, read tons of books, and have attended many events to get better at managing my finances. The thing is, the economy will always keep changing, and life will throw stuff at you that can change your financial well-being in a heartbeat. You have to be careful not to use resources from self described experts like Tony Robbins, Robert Kiyosaki, Dave Ramsey, Suze Orman and many others. Many of these gurus have the same advice, pay off your mortgage, yadi, yada… Their whole business model is to sell you their stuff and get you to listen to their shows so they can sell more ads and make more money. How does this help you? It doesn’t! Don’t spend money on attending a financial or personal development conference that is there to simply suck you dry.

The stories these people will tell you are meant to get you hooked, like Robert Kiyosaki’s “Rich Dad, Poor Dad.” The man is a fraud! Just search for the claims and you’ll find articles like this one. Believe me, I have no reason to speak out about these people other than the fact that I’ve purchased their products and found them to be a waste of time and often dishonest. I attended a workshop on real estate investing in 2005, where Kiyosaki partnered with Trump University. You wouldn’t believe the scam these people were pulling on attendee’s. The reason I bring this up is because I think it’s important to avoid these cult-like organizations who just steal from poor people. They’re as bad as the MLM (Multi-Level Marketing) pyramid schemes or personal development, cult-like, membership organizations like Landmark and Life Spring. Just search for “Landmark Forum complaints,” “landmark forum ruined my life,” etc.

Do not go to Youtube or Tik Tok for advice from these online gurus. It’s all a scam! The more views and subscribers they get the more money they make. For their part, Youtube and Tik Tok always rewards the creators saying the most outrageous things without any proof.

Once you’ve created your plan and schedule, now it’s time to think about the stakeholders in your financial tool belt. Here are some relationships to think about.

1. Bank: What bank will you do business with? Try a Credit Union or Community Bank instead of a big bank. If you own a business then check out Nav.
2. Accountant: Take time to interview a few bookkeepers for your business and CPA’s for your personal taxes. If your returns are simple, you can file for FREE with the IRS.
3. Investments: There are many options when it comes to hiring a financial advisor. I do not recommend a traditional stockbroker or financial planner. You can find a financial planner who is a fiduciary. You can find one near where you live by going to the National Association of Certified Financial Fiduciaries – what this means is you’ll only pay for the advice, not a commission on the trades or investments you make.
4. Borrowing: Whether you need a car loan or a mortgage, you need to shop around and compare rates. I recently had a great experience using Capital One to find a new car. I ended up getting financing first from my Credit Union. For credit cards you can use Nerd Wallet or Bankrate to get the best deals. *CAUTION: a credit card can be a blessing and a curse. The trick with credit cards is to only purchase what you can pay off the following month. This way you’ll pay no interest and still get the rewards. If you start to carry a balance and pay interest you’ll quickly find yourself in trouble.

While the resources listed can help you to create a budget, track your spending, and make better financial decisions, you truly don’t need to spend much more than your time managing it and reading a few books. Then you put it into practice! Keep in mind that budgeting and managing finances is a continuous process and requires patience, discipline and consistency. These resources are also popular because they offer a range of features that make budgeting easy and provide users with the information they need to make better financial decisions. They also offer a user-friendly interface and the ability to link all your financial accounts, making tracking and budgeting more efficient.