Point of view: You’ve spent your first day off from work to create a budget for the entire month. You are proud of the outcome and excited to put your new plan to the test. A few days into following the budget, an unexpected bill pops up and completely knocks you, derailing your new budget! Now you’re discouraged, and you are starting to question if the myths you’ve heard about budgeting are true.
“Budgets are too restrictive!”
“There are always unexpected bills popping up!”
“This isn’t the right time for me to budget.”
“I make enough money. I don’t need to budget!”
Does this sound familiar to you?
You’ve probably heard that budgeting is overwhelming, but the truth of the matter is, budgeting is a simple plan for your money and can be adjusted as many times as necessary.
Think of your budget as the foundation on which you’ll build your “financial house.” I know at times it can seem easier to focus on building the “second and third level” of your financial house, such as saving, investing, and paying off debt. It’s easy to forget the importance of a solid foundation—our budget, which creates the ground on which we’ll build our financial house.
I’ve successfully built the “wealth house” of my dreams by spending time securing a solid foundation; my budget.
Let’s go over a few of my most used building blocks for you to get started on securing yours:
Budgeting to zero means keeping your money busy by giving every dollar you make a job to do. This doesn’t mean you spend every dollar you make but that you allocate all of your money to your expenses, saving, investing, and debt payments. The zero-based budgeting system keeps you aware of every dollar coming in and out and prevents you from spending what you don’t have.
The whole point of creating a budget is to reach your financial goals, but it’s essential to be realistic. A realistic financial goal is a target you aim to hit quickly based on your current income. It becomes easier to stick to your budget when you have a clear idea of what you are working towards.
Life happens, and you have to be prepared to pivot your spending when necessary. Create a cushion category in your budget to give yourself some flexibility with spending when unexpected expenses occur. You can do this by creating a category in your budget and allocating 3-5% of your monthly income to this category. At a minimum, you may not need that money at the end of the month and can put it towards your other expenses.
Here is a phrase that I live by, “Total deprivation leads to overconsumption.” Budgets aren’t meant to be restrictive and boring! It is okay to enjoy your money outside of your day-to-day expenses. Start small and ease your way up to a set amount of money each month. For example, if you are a person who loves to go to the movies, the average cost of a movie ticket is less than $10. You can start fueling your “fun fund” each month by allocating a small percentage of your movie ticket to that category each week! Don’t forget the popcorn!
Whether you pay your bills online or through the mail, the moment you forget to pay a bill on time can open up the door to let more financial problems in. If you want to stay up to date on your bills, you need to set up payment reminders. The easiest way to do this is to use the calendar on your phone or set up auto-pay. Each month, take an hour of your day and add a reminder for each upcoming bill. It is important to set a reminder for a few days in advance to avoid paying late!
Budgeting is important because it sets the foundation for every other financial goal that you have. It’s like building yourself a proverbial house: without that solid foundation, you’re not going to have a house that withstands the storms—both the literal and metaphorical one's life throws our way.
Dasha Kennedy, better known as The Broke Black Girl, is a financial activist whose real-talk coaching and strategies help women of color get ahead. In 2017, Dasha launched The Broke Black Girl (BBG) Facebook group to highlight the financial struggles young women of color face on a daily basis. Within a year the, group has garnered over 70,000 members. With over a decade of experience working as an accountant and default counselor, Dasha hopes to lead women through meaningful discussions around different aspects of financial wellbeing.