Budget. That just makes me think of restriction. Cheap. Lack. It doesn’t make me want to go all in on the money management thing. It sounds like a lot of saying, “I can’t (fill in the blank)” because my budget says so. Oddly enough, I really enjoyed making Excel spreadsheets, setting up all my categories, distributing my hypothetical income into the categories and squeezing any fun out of life–my husband would agree that’s what I did. It made for a lot of tension. But we had goals.
Since getting a good grip on our finances, budgeting has been more of a “save as much as we can and just spend smart” philosophy. In the early stages of understanding money, though, the regimen of deploying your funds to go to work is pretty important. If habits are the building blocks of success, then good money deployment is the building block of financial freedom.
If you do the 0 based budget touted by our friend, Dave Ramsey again, then you have an operating plan to work from. It can be used when you have $100 or $10,000. It doesn’t matter what the starting number is. The goal is to have all your money on the move.
0 BASED BUDGET Is when you take your total income and dump it into all your spending and saving categories until it equals 0. There shouldn’t be a “surplus.” Every dollar gets a job—either giving, saving/investing, or spending.
GIVE AWAY 10%
Some call this charity. Others call it a write off. We call it priming the pump. My husband is from Central America. He always said “Manos que dan nunca estarán vacíos.” Giving hands are never empty. The detachment that comes from giving that first fruit of 10% is invaluable in finance and in life. Never hold on so tightly to something, whether be a person, a situation, or a thing. Nothing really belongs to you, and all things are changing. When we learned to make this a non-negotiable in our finances, everything changed. We trusted that this generosity would come back to us and make us better people. I don’t believe in Karma, per se. But i do believe that what goes around comes around.
SAVE/INVEST-PAY YOURSELF FIRST-15-20% minimum
Everyone has different ideas on percentages on how to do this because every person’s goals or needs are different. There will also be a variety of deployments that will change depending on debt. This category (saving, investing, retirement) would assume you are free of consumer debt and ready to move into wealth building. If a young person can start their working years debt free and set up a personal plan for deployment, they can build wealth without a lot of sacrifice.
SPEND
The necessities of life are important. These categories can be minimal or elaborate. The most important (and the most expensive) are always housing, food and transportation. The young adult today, though, would probably list a whole lot of other categories that they deem as “necessities.” Cell phone. Eating out. Subscriptions. Clothes. Entertainment. The list has become endless. I feel bad for this new generation in regards to smart money deployment. They are constantly bombarded by the culture and media to spend, spend, spend. They are nickel and dimed to death. Not spending money seems antisocial.
SAVE TO SPEND
This would be saving money specifically for a defined object (like a car), an experience (nice date night) or down payment for house.
It is really a mindset shift. Instead of looking at money management as something you HAVE to do, a drudgery, get excited about what you CAN do with your money. When it starts working for you, it never stops and rests. Wealth can’t help but come.