You can start a profitable business but if you don’t know how to create a budget for yourself and managing your money, you’ll never be able to be financially free.
My guess is that financial freedom is why or part of why you started an online business in the first place. But, what happens when you spend money on tools and things you think you need
I learned this when my boyfriend had terrible spending habits, he’d be addicted going to drift stores and always on the lookout for computer deals online, even when he didn’t need the stuff.
He’d still get it because “it was a deal”. That was his logical explanation.
Yes, he sold computers and made a huge profit but because he didn’t understand this concept, he ended up always running out of money, until I had to step up my game and put an end to it.
Hence, the creation of this article. I believe if I didn’t learn this before I was going to fall into the same trap.
So If you want to learn to create a budget for yourself you’re in the right place.
Budgeting is critical to achieving financial freedom.
It’s about making behavioral changes in spending. Putting the budgeting on paper it’s not the difficult part, the difficult part comes in when it comes time to actually live the budget.
When it’s time to make the difficult decision of the expenses that you might have to cut, in order to make sure you operate each and every month according to your budget.
Budgeting it’s not something that you set and forget, you do have to actually check in with your budget periodically. Also, make sure to keep on top of your expenses, tracking your spending.
A budget is critical to your success and your financial journey is going to tell you exactly how much money you’re bringing into your household, how much is going out and how much you’re able to invest.
Anxiety, fear and overwhelm that we have in regards to our money is because we don’t know what’s coming in or where the money is going.
Once we figure that out, we regain control of our money instead of money controlling us and this is why is going to be very difficult to move on and do other things until you master it.
A healthy money mindset = A wealthy mindset
a lot of money managing is the mindset, in other words, you can’t be wealthy until you learn to think wealthy, write down your definition of wealth. Spend your money in things that will bring you joy like investing in your business.
why do you want money? write it down, It’s all about having options and overcoming limiting money beliefs, this might hurt a little but it’s a very important step, track all of your expenses.
B doing this, I learned that I love eating so much that most of my expenses went to groceries and eating out, most of the time I ended up throwing food away because we didn’t eat the food that was in the fridge for weeks or we’ve spent too much money or sometimes money that we didn’t have on eating out. I started planning ahead, whether that was meal prepping or figuring out what we wanted to eat or where we wanted to eat for the week
Remember that your network it’s not really how much you earn but how much you get to keep. Here’s simple math:
Your Networth= Assets (what you own) minus liabilities (what you owe)
Another way that helps a wealthy mindset is dealing with debt. Having debt can sometimes make us feel guilty and like we don’t deserve more until we get rid of that big burden, don’t try to pay it all off have a plan to tackle debt and still be able to have an abundant mindset while telling yourself that you’re working on that and forgiving yourself.
make saving a habit, pay yourself like you pay a bill
savings rate 10%
Other habits that can help you develop a healthy mindset are:
- avid readers
- early risers
- live below their means
- Give and help other
What You Need
- Your Income per paycheck- net income, which is the amount that you get after any distributions such as taxes, health insurance or 401 K, it’s the money that you get in your hand and in your bank account
- Your Expenses- Fixed and variable
- Fixed expenses: Expenses that don’t change from month to month and you don’t have much control over like your rent, mortgage, auto loan. Anything that stays the same and it’s predictable
- Variable expenses: These are expenses that can change every month like gas, groceries, etc. and you have more control over
Areas of Opportunity
Often times, we think of Fixed Expenses as expenses we can’t control, fortunately, that’s not always the case and there’s some room for negotiation. Once a year or every six months you should do some of these things:
- Comparison Shop ( things like Cable, insurance, internet, etc)
- Negotiate- take that lower price to your current provider until you get a better deal, if not you can always leave your company to go for the more affordable company
- Get a roommate- We understand that you can negotiate your mortgage or rent, getting a roommate is one way to lower your housing expense or subletting or If you’re in a month to month lease, try to negotiate a lower price for a 12-month lease,
- Downsize: Give notice and move into a smaller place.
Doing all of these things can make us feel uncomfortable, sometimes when we have to downsize we have to make decisions where we have to sacrifice a little bit, it can make us feel a lot of shame because maybe we’re at a point in our lives where we figured we would have it all together and now we’re looking around like we don’t have it all together and that’s something that everyone feels.
Don’t feel guilty if you have to make this decision like downsizing or getting a roommate.
Personally, there was a point where I didn’t have much money and I had just started my own blog and my blog wasn’t bringing that much money, so I took a fulltime job but felt shame because I was in my late 20’s and I didn’t have it all figure it out.
I thought that I wasn’t going to have a job ever once I started my online business but it was in that experience that I learned that nothing is below me.
If you’re trying to meet a goal and if you know which direction you’re going really focus on what the long term benefits will be. Doing these things aren’t forever, these are just temporary.
- Cut back on excess spending
- Buy in bulk and meal prepping or meal planning, or at least prep where you’re going to be eating for the week.
Maybe you already tried budgeting and it didn’t work out for you and now you see budgeting a something negative and we don’t want to attract negative feeling or doing something that ‘s negative at all so instead of calling it a budget, this will be a Money plan.
Think about it as money being your BFF and you’re creating plans with it to reach your long term or your short term goals. Because that’s ultimately what a budget is, helping you with the day to day spending so you can meet your goals.
The Allocated Percentage Method- Adjust your percentages
Pay your bills first like it’s your religion, open multiple accounts, emergency funds nickname different savings accounts and immediately when you get paid, distribute your money in these percentages to the right account. This strategy can work really well on couples.
First, Figure out what your net income and what you’re fixed and variable expenses are and see if there’s any way that you can potentially reduce them.
Choose Your percentages: Figure out roughly what percentage of your income your spending on fixed expenses and variable expenses and the money you want to devote to other areas. You can use the image above as a guide but you’d want to make your own tweaks to it.
Write Your percentages somewhere you can easily find them: For me, I worked on my percentages in a google spreadsheet, you can have them on your fridge or a notepad on your phone, anywhere where it’s visible and you can pull your percentages out.
Every paycheck, pull your percentages out: Before you do anything, you’d want to pull your percentages out and pay yourself first.
Distribute your money to the right place. and allocate your money to the different pots nothing else! no excuses!
Take it one step further and Set your bills on autopay
With this strategy, you don’t need to track a million spreadsheets or budget down to the very cent but you should check in on your goals every so often to make sure you’re on track.
It’s either you have money that you can spend or you don’t have the money to spend.
This can really get your budget gear because that’s what it did for me if I have money in my account then I have some leeway and if I don’t then I just don’t spend money that I don’t have.
You should check back on your goals within a few months.
It’s probably going to take you a few paychecks to arrive at a right allocation percentage because you’ll have to test some things out but after you arrive at a percentage you should go back yo maybe every six months or quarterly just to make sure that you’re on track to meet your goals, to see if you need to make any percentage adjustments or if you’re able to lower your fixed and variable expenses.
Maybe you want to allocate more to savings or more to advance debt payment so check in every so often, but otherwise, you just have to be disciplined with this method.
If you fall, get back up. Managing your money isn’t a perfect science. If your allocations are a bit off one month, don’t give up!
Trust the process, Your allocations in your savings account might look small right now but the small amounts you save and put towards debt add up and add up fast so don’t be discouraged!
Automate as much as you can with your money plan if you’re not someone who’s super thrilled about budgeting. Automate your bills put a calendar reminder for each paycheck to divvy up your cash.