Budgeting—that infamous “B-word”—often makes us cringe. It can feel like signing up for a financial diet where we must sacrifice fun (shopping, vacations) for the responsible stuff (saving for retirement). However, budgeting doesn’t have to be overwhelming or dull. By shifting our mindset and starting with small steps, we can make it work for us.
Rethink Budgeting
Budgeting isn’t about cutting out all expenses and depriving yourself. It’s about intentional spending and saving to align your money with your values. Think of money as a tool to help you live your best life, balancing current desires with future security. Being mindful of your spending can enhance your appreciation for what you can afford, like dining out or buying new clothes. Budgeting highlights the abundance in your life, not austerity.
Where to Start?
Budgeting is a skill that develops over time with consistent effort. Begin with small, meaningful steps to gain confidence and momentum. Here’s a three-step exercise to get started. If you share finances with a partner, do this together—judgment-free.
Step 1: Review Last 30 Days of Spending & Income
Start by understanding your current spending. Log into your bank and credit card accounts, export transactions into a spreadsheet, and sum up the debits and credits (excluding credit card payments). Compare the totals to see if your cash flow was positive or negative.
Step 2: Categorize Expenses
Label each expense as a either a need, want, or savings. For example, a mortgage payment is a need, a vacation rental is a want, and an IRA contribution is savings. Sort and sum up your spending in each category. This will show how much you’re spending on necessities, luxuries, and savings. One rule of thumb is to aim for a roughly 50/30/20 percent split among needs, wants, and savings.
Step 3: Eliminate Unnecessary Expenses
In the process of labeling your transactions be on the look out for charges for things that you either no longer need or value. Spot charges for unused subscriptions or fast food trips that conflict with your health goals. This is an opportunity to get some small wins by eliminating these types of expenses and freeing up money for things that truly matter to you.
Bottom Line
Shifting how we think about budgeting towards spending and saving with intention can increase our motivation and empowerment. Get started with small, actionable steps as you embark on your budgeting journey!
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