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Til Debt Do Us Part - Learn How to Budget

07/05/14 | Dana LaRieal Morales

When you hear the word budget, do you break out in hives?  Are you scared to even know where you stand with money.  You aren't alone, a lot of people fear the worst so they don't even want to know.  Is this how you feel?  Budgeting doesn't have to be scary.  You just need to first figure out where you stand, work to develop a plan and organize your spending.  The first step is to ask yourself these key questions:

  1. How much are you and your family spending each month? If you don't know the answer to this question, more than likely you are spending more than you even realize and most of it is probably on things you don't even need.
  2. Do you have a family budget?  Don't beat yourself up, because many families don't, however, that doesn't mean you shouldn't have one.  budgeting will help you create and stick to a plan.
  3. When was the last time you conducted an evaluation of your spending? I know, I know it can be scary but ignoring it won’t change anything if there is a problem, it will only make it worse. I refer you back to #1, because if you don't evaluate it there is no way for you to know just how much you are spending.

So, now that you know you need to budget, let's focus on fixing the issue(s) and not ignoring them. True happiness lies in reality and I am hoping to help you get there, by learning how to budget.  To get started you really need to evaluate the situation at hand, so let’s break it down.  I encourage you to check out my budgeting lesson in Organized Academy to help you figure out where you stand financially.  The lesson goes through specifics on how to set up your budget and I promise you it isn't hard at all.

Once you developing your spending list, you can see exactly how much is coming in vs. how much is going out.  For many this basic exercise throughs you completely for a loop.  We always tend to forget things too, so I recommend you think about those necessities as well as those extras you randomly get.  You know that quick convenience store run or that Starbucks stop you made last week.  Create a category where that expenditure will live too.  Now, although I am focused on personal/family spending, the same concept of budgeting should be done for your business as well.  Many times in our business we tend to have rosy glasses on and don't take into account our expenditures along with our profits.

Ok, now that you have detailed out your spending into a high-level monthly budget, let's dig a little deeper to see just where you can make some adjustments.  I want you to evaluate your spending.  This will help you to develop your plan of action as you begin to work your plan and organize your spending.  Now, back in the day, I used to watch a show called, “Til Debt Do Us Part” which aired on CNBC.  The show would evaluate a couple/family’s spending habits and assists them in identifying the spending problem and walk through developing a plan on how to fix it.  I'm not sure if the show is still available on streaming devices, but you can definitely try googling it. It had a lot of great tips that you can use here in the US and it really made you think about your spending and where you could make adjustments.  On one of the episodes, they showed Gail Vaz-Oxlade's debt wheel which broke down how much she feels you should typically be spending in each category.  She broke it down as follows: 

  • Savings = 10%
  • Transportation - 15%
  • Life = 25%
  • Debt = 15%
  • Housing = 35%
To really evaluate your spending I want you to take last month’s spending and break it down into these five major categories represented in Gail's debt wheel. Once you do that, you should break each of those down even further to see how it is actually being spent (grocery, retail shopping, entertainment, restaurants, etc.). I believe that a lot of what most households spend will fall in the life and debt category, but I wonder where you will be.  

Now before you get yourself all worked up and frustrated, you may not be anywhere close to it the numbers that Gail identified.  That's ok because you are working on making the necessary changes so you can get there.  Right now, you are creating your spending baseline so you know exactly how good or bad your situation is...remember you are working to correct the problem.  It will take a little time but the goal is to start developing your plan of action.

Alright, you are almost there, now you just need to determine how you will be working to get those areas closer to these percentages above. Everyone, no matter their age, can make adjustments in their life spending. My husband and I also regularly revise our family budget based on our needs and our goals for the month, quarter or year.  

So let me know…what are your goals and plans as it relates to your finances?  Were you shocked at your overall percentage breakdown?  Make sure to share any tips you have for staying out of or battling debt in The Circle.  I look forward to hearing from you!