How To Budget Your Money

Have you been trying to figure out how to budget your money, but keep coming up short?

If so, you aren't alone. According to the latest 2018 data from the Federal Reserve, Americans hold over $1 trillion in credit card debt.

Learning how to effectively manage your finances is one of the most important steps you can take to secure a positive future for yourself.

It's time to start worrying about money and start taking control of your finances. Are you ready to learn the money management system that will allow you to do so?

Watch the video below:

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Do you know how to budget your money?

Let's face it, saving money can be challenging. The problem lies in the mindset that people have towards budgeting. Brad Klontz, a psychologist and certified financial planner, says that “Your emotional brain responds to the word budget the same way it responds to the word diet. The connotation is deprivation, suffering, agony, depression.” There is a way out of this. It starts with the self-awareness that you have a money management issue.

If you struggle to effectively manage your money, you need to realize that this is a bad habit. The good news is that, like any bad habit, you can change it. However, if you don't perceive that your behavior is a problem, to begin with, you will stay stuck in a financial hole. This is why I believe that accepting responsibility for your current financial situation is the first step towards making a change.

Secondly, you need to know where you are spending your money. If you don't, you will only end up living paycheck to paycheck. How do you expect to ever get ahead in life if you live this way? Planning for the long-term is the name of the game.

The problem is that a lot of people live for instant gratification. They cannot resist the urge to spend their money.  Can you relate? If you spend money faster than you earn it, it's imperative that you master the art of delayed gratification. Research shows that people who learn how to manage their need to be satisfied and thrive more in their careers, relationships, health, and finances than people who give into it.

This is why it's so important to learn how to manage your money and spending.

When you have a budget in place, you don't overspend. I am going to share with you a money management method that will allow you to successfully allocate your money and finances. More importantly, it will allow you to achieve your financial goals over the long-term while enjoying your life at the same time.

It starts with calculating and tracking your monthly income and expenses. You have to know where your money is coming in from, how much is coming in, and how much money is going out. Don't be blind to your finances. A lot of people avoid this conversation altogether because they don't want to be faced with the reality of how much debt they are in. I used to have a lot of credit card debt. It caused so pain and suffering in my life. When you confront your debt, you actually feel empowered. Now you have a debt-free target to strive towards.

I'm a big fan of using credit cards instead of cash. This is a great way to build up your credit rating. Furthermore, it will be beneficial for you in the future, if you want to get a mortgage or a loan for a car. A credit card allows you to track your expenses more effectively. Lastly, credit cards allow you to get points, cashback and/or air miles.

However, you have to make sure that you don't get into credit card debt.

This kind of debt is really hard to dig yourself out of. If you do have credit card debt, I suggest that you find another credit card that will let you do a balance transfer. This will allow you to pay off your credit card more easily. Some credit cards offer people a zero percent interest rate for the first 18 months.

When it comes to determining what your monthly expenses are, you need to go through your bank and/or credit card statements. Write that number down and track it. I encourage you to create a Google or an Excel spreadsheet online that will allow you to update this information on a weekly and monthly basis.

Here is an example of what your spreadsheet may look like:

• Mortgage payment – $1000 per month
• Car payment – $300 per month
• Gas – $100 per month 
• Utilities – $ 50 per month
• Entertainment – $200 per month

Once you know what your monthly expenses are, you want to add them all up. Depending on what the total number is, you will then know how much extra spending money you have. Always make sure that you have a positive cash flow. For example, if you are making $3600 but are spending the same amount, or even more, that's a problem. Now you're getting into debt.

You have two options when this happens. The first option is to make more money per month. Simultaneously, you've also got to decrease your monthly expenses. This may require that you make some sacrifices. Don't be afraid to do so! I had to make a lot of sacrifices in the beginning stages of growing my business.

There was a time in my life when I had to live on my friend's couch for a year and sell my car.

It was the only way that I was able to get myself out of debt. A part of getting what you want is knowing what you have to give up. By sacrificing, it may seem like you are giving something up. However, you are actually gaining something much greater. You will be surprised how much money you can save by making small tweaks. Now you need to determine what the budget is that you are going to stick to. What is the hard cap that you will limit yourself to?

If you have a positive cash flow every month, the question is, “What do you do with that money?” There is a simple method for doing so that I learned from T. Harv Eker. In his book, Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth, he talks about the jar system, which is a way for you to budget and allocate your finances.

He suggests that you break down the money that you make and your expenses into six jars.

First Jar – Necessities (55%)

You want 55% of your expenses to go towards necessities. These are things like rent, car payments, insurance, phone bill, Internet, or groceries. A lot of people go into debt every month because they are too busy paying off their necessities. As a result, they are never able to get ahead and become financially free.

Second Jar – Long-Term Savings (10%)

You want to build up this reserve of money until it's at about 6 months worth of your income. This is your emergency fund money. You never know what could happen in life, whether that be a natural disaster, an injury, or a recession in the economy. You need to be prepared in advance for anything and everything.

Third Jar – Financial Freedom Account (10%)

This is money that you can use for investing in your future. The more money that you can invest here, the farther you will go. A lot of people aren't able to take advantage of opportunities when they arise, because they failed to think long-term.

Forth Jar – Education (10%)

I encourage you to constantly strive to improve yourself. You are the most valuable resource. The level at which you invest in yourself will determine how much money you make in life. Develop your skills, take courses and training programs, and find mentors or coaches that can help take your life to the next level.

If you don't believe me, take it from Warren Buffett, who is one of the most successful investors in the world. In his words, “The best investment that you can make is an investment in yourself. The more you learn, the more you will earn.”

Fifth Jar – Fun (10%)

Don't forget to enjoy the money that you make. If you are just working and making money, but you aren't rewarding yourself, your motivation will dwindle. Buy nice clothes for yourself, enjoy a massage, or go out for a nice dinner. However, don't overspend if you don't have the finances for it.

Sixth Jar – Contribution (5%)

Contributing to others is a critical piece to building financial abundance. It conditions your mind to trust that there is always more than enough. If you are constantly making decisions from a place of lack, it is impossible to attract money into your life. Don't be attached to money. Rather, adopt an abundance mindset.

When it comes to budgeting, it is not the amount that matters. Rather it's the habit.

If you can't manage the money that you currently have, you will only get yourself into trouble down the road. By building healthy money habits now, I promise that you will be able to manage larger amounts of money in the future.

Are you ready to get out of debt and put your budget to work?

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