You know the saying, “good things come to those who wait?” Well I think that’s only half of it. Good things also come to those who work. Take a moment and look at your life. What are you working towards? Where is your time, money and effort being invested? Are those decisions in sync with where you want to be financially? You see, when it comes to managing our finances, we can’t necessarily wait around for good things to happen. We need to put in the effort to construct a budget and adapt a lifestyle that launches us toward the good. Whether we’re in a financial mess or building upon a solid financial framework, if we are serious about reaching our goals, we will do what it takes to get there. Those who faithfully display diligence in adhering to their financial plan will reap the benefits. Do you believe that for yourself? Because at the end of the day, success looks a lot like hard work. Now let’s take a look at the top five categories every budget must have.
1. Income
Obviously, no budget can survive without funding. This essential category lists all types of income earned. Don’t forget to include things like side jobs, rental income, social security, or sales from an eBay/Amazon/Craigslist account. If you’re income is variable, take the annual average net amount and divide by 12 to structure it monthly.
2. Expenses
This category is usually the one that gets us in the most trouble, only because we have a hard time establishing the difference between a need and a want. Let me break it down. Basically, expenses are either classified as essential or non-essential. Essential expenses are needs, where non-essential expenses are wants. The essential expenses are those things we all need to survive and function daily: food, housing, transportation, clothing, and utilities. The non-essentials, or wants, are things that we could technically do without: recreation, dining out, entertainment, and other material items that we don’t need to survive. Keep in mind that all needs can actually be disguised as wants. For example, we all need clothes, but that doesn’t mean every article of clothing we own needs to be from the most expensive stores and in the latest fashion. The same is true for the house we live in, the type of phone we have, or the car we drive. We can still get from A to B in an older, paid off vehicle versus the pricy, brand new car that usually comes with a car loan. So unless we can truly afford it (aka, you are debt free and live well below your means) be prepared to reassess those “needs” if your budget is suffering and a downgrade is needed.
3. Saving
It should be of no surprise that saving for the future is important, but more often than not, it’s usually an after-thought. The money comes in, and before we know it, it’s gone, and there’s nothing left to save. If this is your situation, pay a visit to the expenses category and hash out those needs versus wants to give your budget some wiggle room. Saving is a must, not only for short-term emergencies, but for long-term planning. This could mean saving for college, a car, a house, a wedding, your kid’s college, a health savings account, or retirement, to name a few. So if we find ourselves lacking in the saving category, it’s time to stash some cash away. Your future self will thank you.
4. Giving
Possibly the most unpopular category, this budget must-have sometimes gets neglected. Hear me out. It’s no secret we live in a culture that promotes consumerism and thrives on individualism. With all this fixation on ourselves, we can easily be distracted and forget to shift the focus outward. Giving financially can perhaps be one of the most challenging things to practice, especially if we are used to taking all the time, but it is definitely the most rewarding. If your budget has crowded this one out, make room for it. Whether it’s giving to your church, a charity, or even someone you know who has a financial need, giving regularly is a great habit to start if you haven’t already.
5. Debt
Finally, the category most of us are very familiar with – debt. Now, if you are one of the rare gems living debt-free, congratulations! But seriously, please cheer on the rest of us from the side-lines; we need your encouragement. Here’s the deal. Our debt, and I mean all of our debt, needs to be listed in our budget, no matter how small the amount. If we get it all out in front, much like expenses, we can clearly see the full picture and make any necessary adjustments. The debt category must include all debts, each with the original amount borrowed, minimum monthly payment, interest rate, and term (in months) it will take to payoff.
Again, no budget is complete without these essential categories. I’m confident we can collect our thoughts better about where our money is going by having an organized budget. With a little determination and effort, we can get to where we want to be financially, because there’s no such thing as surface-level success. So let’s get to work!