Everyone can successfully budget. And budgeting can be made simple. But nothing seems to get people more squirmy that the idea of budgeting. Let’s fix that. I’ll even give you the budgeting template that I use to download for yourself.
I’ll be honest…I love budgeting. It’s my blueprint. I follow it and I will reach financial freedom. What could be better?
Did pirates hate the treasure map? Nope. So I don’t hate my budget.
Basically what I’m saying is that a budget gets a bad rap. People see it as this restrictive thing. In reality, it’s actually permissive in helping you achieve your financial goals.
However, I do understand that some people just aren’t used to using a budget or just don’t know how to go about creating one.
In fact, I was just speaking with one of my close friends and plastic surgery mentors who was expressing this exact limiting belief. But really, if you can get through medical school, let alone residency, you can devise and implement a budget! Even a surgeon can do it.
I’m going to give you simple step by step instructions to create and implement a personalized budget in one sitting.
Oh yeah, you can also download my actual budgeting made easy template to get started right here!
Budgeting made simple
Creating your simple budget
- Come up with a list of broad categories of expenses (i.e. rent/mortgage, groceries, entertainment, taxes – don’t forget taxes, etc.)
- Do NOT make one category “Amazon.” You need to break out what exactly you are buying at Amazon to avoid this becoming a black box.
- Label each expense category as a need or a want
- Go to your bank account(s)/credit card(s) and put every single expense from the past month (1st of month to 1st of month) in an expense category
- Add up the total for each expense category
- Add up the grand total for the month and make sure it is less (or at worst equal to) your monthly income
- Do you have enough left over to save for your financial goals?
- If yes, great! If no, what can you adjust to make this happen?
- Aim for a savings rate of at least 20%
- Now, go through each category and decide how much you can spend while still reaching your goals
Done! Easy! This should take you 30 minutes tops.
Note: If you have a partner, you MUST do this together. It will NOT work if one of you tries to do it alone...here’s a guide to help.
Implementing your simple budget
Once you have created your budget, you need to implement it.
Take 1 full month before reviewing it again. Then,
- Set aside 30 minutes in the evening of the first of every month
- Sit with your Excel budget sheet open (or whatever budget program/piece of paper you use)
- Go through each expense from that month (checking accounts, savings withdrawals, credit purchases)
- Tabulate and total them in the appropriate needs or wants expense category
- Calculate how much above or below you are in each expense category
- Calculate how much above or below you are in total for the month
- If you saved more than expected, put it towards debt pay down, investing, or reward yourself!
It will likely take a month or two to real get the “feel” of how much you can spend in each category. Don’t get frustrated if you are over by a bit in a few categories at first. It’s about creating a lifelong habit for financial success, not achieving perfection right away.
Will you always need a budget?
Eventually, you may not need a budget to review monthly. You may reach a homeostasis of sorts in which you intrinsically know how much you have to spend, save, etc. without looking.
This is fine.
But this will not happen for awhile. Don’t review your budget once and then think you have it down. This needs to become a habit. It should take no more than 30 minutes per month in the beginning and 10-15 minutes each month as you get good at it.
What about the anti budget?
The anti-budget gets a lot of pub. It’s the idea that you create a savings rate, let’s say 20%, and you shave this off of every pay check. You stash it in a different account. And then you spend the rest of the money guilt free.
I think that this is a fine plan. But in a lot of cases, it fails due to a lack of accountability. It’s easy to say you will do this but hard to stick with it when there are no checks and balances.
I recommend to everyone that you at least work with my “simple” budget for 6-12 months. Remember, this is your treasure map to your financial goals, don’t be in a hurry to through it out.
If after that, you have a good grasp on your financial goals and spending habits and decide you don’t need it, sure, go to the anti-budget.
Budgeting made simple works
It really does. I had never lived on a budget before this. And I was financially not in a good place.
I now live on a budget using this simple technique. No fancy apps. No gimmicks. Pen. Paper. Excel. That’s it.
And guess what?…I already have results. Credits cards have been paid off. Emergency funds have been started. Investment properties bought. Net worth increases abound. In fact, my most recent net worth update shows how all this helped us go from a net worth of -$500k to over $400k in less than 2 years!
The important thing to appreciate though is that you can do this too! Anyone can! I am not special or smarter. And I’m a full time physician. Just like I am doing, you can build your path to financial freedom taking small but important steps one and a time!
Don’t stop here though!
- Create more simple habits that will lead you to financial success!
- Start a physician side gig to make you passive money
- Finally your written financial plan using mine as a guide
- Increase your net worth in 5 easy steps today
What do you think? Do you budget? How do you do it? If you don’t, why not? Let me know in the comments below!
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