My Adulting Fail

Budgeting is rarely anyone’s idea of a fun time. I used to see it as this stifling, restrictive thing—certainly not in line with my free-spirited, ‘seize the day’ approach to life. Just let me take you back to my college days for a moment, a time that jolted me into reality and reshaped my understanding of money.

I entered college believing it was my ticket to endless parties and ultimate freedom. I mean, why worry about class when life was all about living in the moment? But soon after my first semester ended, my parents made it clear that they weren’t helping to fund my party any longer. They expected more from me, and when I didn’t deliver, the safety net vanished.

Suddenly, at 19, I was navigating a world of minimum-wage jobs, trying desperately to cover rent, and staring blankly at student loan forms, clueless about things like interest rates. “Future me” problems, I thought. But in truth, those problems were knocking on my door louder than ever.

I’d never had to think about managing money with real consequences in mind. The weight of my choices came crashing down that next year, and a realization hit: had I learned the art of budgeting early in life, maybe, just maybe, I wouldn’t have found myself dropping out of college.

The Heart of Your Financial Quest

The thing to remember is that creating a budget isn’t rocket science. It doesn’t require a Ph.D. in Quantum Physics or the ability to give a TED Talk on microeconomics. It just requires a little forethought, discipline, and most importantly, a personal “why” statement.

This little statement will keep you strong and remind you why you are budgeting whenever those timely product ads start their daily attack through your social media.

Maybe your “why” is to eat out with your family once a week for much needed bonding?

Perhaps it’s to save for an experience, like that snowboarding trip to Tahoe sitting on your bucket list.

Or maybe it’s just keep the lights and heat on for the next month?

Regardless, budgeting becomes much harder without some personal pain point to draw motivation from.

So let’s ask this important question before reading on. What is an emotionally charged “why” statement to write on top of your budget sheet? I invite you to find these “why” statements in your life as you create your first budget.

Our Game Plan

In this post, we’re going to break down budgeting in a way your 10-year-old nephew could understand. We’ll tackle common mistakes, guide you through the budgeting process, and even introduce you to some nifty budgeting tools that’ll make the process less of a pain in the ass. Because if a once money avoidant spirit like me can do it, so can you.

Mastering this content is your ticket to gaining some maneuver space and start your real wealth building strategies .

So get ready for the budgeting class no one ever gave you. It’s time to grab the reins of your financial life and steer it in the direction you want. Grab a drink (a cheap one, if you’re on a budget), and let’s dive in.

Budgeting Decoded: What Exactly Is It?

First things first: What the heck is budgeting? Imagine for a moment you’re a financial detective, and every dollar you earn is a clue. Budgeting is your process of piecing together these clues to solve the mystery of where your money is going – and how to redirect it to where you want it to go.

It’s your roadmap to financial freedom. It’s like your GPS guiding you to the promised land of not living paycheck to paycheck.

So why should you care? Because budgeting isn’t about depriving yourself; it’s about empowering yourself. It’s about gaining control over your money instead of it controlling you.

It’s about knowing when you can splurge on that luxury vacation, fancy dinner, or clown suit on sale without the guilt and credit card hangover.

Confessions of a Wannabe Financial Planner

So there I was, deep into one of my Certified Financial Planner (CFP) courses, when I faced a rather embarrassing realization. I, an aspiring financial planner, had never seriously analyzed my own spending habits until that point in my adult life.

Yep, that’s right. While I was passionate about offering financial wisdom to others, I hadn’t given my own finances the scrutiny they deserved. The cavalier spending habits I developed throughout life were counter to the career I aspired for.

If you’re here, diving into this topic now, know that you’re already miles ahead of where I once was.

When I finally took that long, hard look at my own budget, the results were both eye-opening and humbling. It was like walking through a haunted house of my own making—each expense, a ghost of careless spending.

The revelation that my financial freedom was being delayed by daily coffee indulgences and frequent takeout orders stung. But this was also the moment of clarity I needed.

Throughout my growth in this fiscal skill, I’ve learned that budgeting isn’t about counting every penny or depriving oneself. It’s simply about making purposeful, informed choices with my finances.

This newfound understanding of budgeting became my gateway to financial empowerment and freedom. And believe me when I say, it has the power to transform your financial journey too.

The Landmines in Your Budget: Common Missteps and How to Sidestep Them

In the world of budgeting, there are common blunders that trip us up. They’re like invisible financial landmines waiting to blowup your well-intentioned budget.

Let’s expose a few of these sneaky saboteurs:

1. The Negligible Nibbles: Those small, frequent expenses that you brush off as “insignificant”. These are your daily lattes, weekly takeout, monthly subscriptions, etc. They’re like termites, slowly and quietly eating into your financial foundation, leaving you wondering where all your money went.

2. The Irregular Expenses: Things like annual subscriptions, holiday spending, or car maintenance. They’re not regular, but when they hit, they hit hard, knocking your budget off its feet.

3. The “I Deserve This” Trap: This is the sporadic splurging because you’ve had a hard day, or because you feel you ‘deserve’ a treat. It’s a slippery slope that can quickly snowball into a budget avalanche. I’ve climbed out of the wake of a divorce in my past and understand how this trap is one of the easiest to fall into.

4. The “Ostrich Approach” Trap: This is when you bury your head in the sand and ignore your financial situation. You don’t keep track of your spending, you avoid looking at your bank account, and you disregard your mounting credit card bills. The result? Financial disaster.

5. The Vagueness Vortex: A budget that’s too vague or unrealistic won’t do you any good. If you’re not specifying where your money’s going, it’s going to go just about everywhere.

6. The “Money Can Buy Happiness” Fallacy: The belief that spending money on things will bring you long-term happiness is a dangerous trap. Sure, that new gadget or outfit might bring temporary joy, but it’s often followed by buyer’s remorse or debt. These are the money scripts we learned as kids.

Outsmarting the Pitfalls: Your Financial Flak Jacket

So, how do we avoid these budgeting landmines? Here’s your flak jacket:

1. Track Every Penny: Yes, even that insignificant dollar you tipped at the coffee shop. You’ll be surprised how those little expenses add up.

2. Plan for the Irregulars: Set up a separate savings category in your budget for these expenses. Calculate the annual cost, divide by twelve, and set that amount aside each month.

3. Budget for Self-Care: Allocate a reasonable amount for ‘treats’. This way, you won’t feel deprived, and you’ll keep the splurges in check.

4. Embrace Transparency: Face your finances head-on. Regularly review your bank and credit card statements. Acknowledge your financial situation, good or bad. It’s the first step toward taking control. Make this a weekly or bi-weekly ritual. Eventually, those red numbers on a credit card statement will feel less and less threatening.

5. Get Specific: Allocate every dollar a job before the month begins. This includes bills, groceries, savings, investments, and even fun money.

6. Invest in “Experiences”, Not “Things”: Studies have shown that experiences bring longer-lasting happiness than material possessions. Allocate funds for activities that create lasting memories. After all, you’ve still got a life to live. In the words of Ferris Bueller: “Life moves pretty fast. If you don’t stop and look around every once in a while, you could miss it.”

Remember, it’s not about perfection, but about awareness and adaptation. Keep these tips in your back pocket as we create this budget together.

Your Financial Lifeline: A Step-by-Step Guide to Budgeting

Tracking Income and Expenses

Before you dive into the budgeting process, you’ve got to get a clear picture of your current financial landscape. How can you plan a road trip without knowing where you’re starting from, right?

So, the first step is to figure out your net total income. This is the amount you cash in after taxes and other withholdings.

After this, for at least a month, track every stinking penny you spend. Yes, even that loose change you used for parking. It might feel like a drag, but it’s crucial. You need to know where your money is going before you can start controlling its direction.

For the tactile inclined, a written financial goal journal like this onehow to communicate with my wife about finances.

You’re in this together, so sit down and hammer out your financial goals as a team. Make sure you’re both committed to sticking with the plan.

Roll with the Punches: Adapting to Changing Financial Situations

A budget isn’t a one-and-done thing. It’s more like a living, breathing document that needs to be tweaked as your financial circumstances change.

Got a raise? Brilliant—time to revise the budget.

Did an unexpected expense just occur after investigating why the A/C is off? Bummer—but again, time to revise the budget.

The point is, don’t let life’s curveballs throw you off your budgeting game. Adapt and move. Have a bias towards action.

Creating a budget is really just about understanding where your money’s going and telling every dollar what to do.

Spending Systems: Your Wallet’s Playbook

So you’ve involved your spouse, developed a few “why” statements, and then completed honest research of your situation for one month (pro tip: pull and categorize your last few bank statements online with a spreadsheet). Next, it’s time to pick a budgeting strategy.  

Just like the athlete in the gym, we need a plan to follow to keep us on course.

This is where the different types of systems come into play. These help us understand our relationship with money and how it is flowing from our bank account and out of the house.

While the different budgeting systems all share common goals, how they get you to the goal is where each one shines uniquely. Simply picking the best system for your own situation is needed next.

Below are four common systems to get your budgeting juices flowing: 

The “Envelope Method”: Retro Budgeting at its Finest

Why Choose It: Remember the feeling we used to get at receiving a letter in the mail? Yes? Okay grandpa. This method brings budgeting to life and appeals to the tactile lovers among us. Using cold, hard cash can make you more aware of your spending habits compared to the distant feel of a card transaction.

How To Do It: Continue to categorize your monthly expenses. Categorize essentials like rent and groceries to leisure activities, coffee, and the like. Create labeled envelopes for each category, e.g., “Groceries”, “Entertainment”, and “Gas”. After setting your budget, fill each envelope with its allocated cash.

The rule? Only spend what’s inside. If an envelope empties out before month’s end, it’s time for some creative problem-solving! So, if your “Eating Out” envelope is empty, time to embrace home cooking (or mooching off a friend).

Best For: Those who appreciate tangibility and are keen to gain a genuine perspective on their spending.

Zero-Based Budgeting: Every Penny’s Got a Plan

Why Choose It: Control is power. And more control makes you feel, well…more powerful. Each dollar you earn has its own purpose, ensuring nothing goes to waste.

How To Do It: Begin anew every month, listing all your expenses. Allocate your earnings until there’s not a dollar left without a role, from bills to fun to the surprise “shit, didn’t see that coming” expenses. Got some leftover cash? Direct it to savings or treat yourself to something nice.

Best For: The control freaks. Those who enjoy planning their day down to the minute – yes, Karen, we’re talking about you.

The 50/30/20 Rule: Clear, Crisp, and User-Friendly

Why Choose It: Simple, straightforward, and relatively painless.

How To Do It: Post-tax income goes three ways – 50% to the essentials, 30% to fun (because what’s life without a little fun?), and 20% into savings or clearing that pesky debt.

Best For: Those seeking a straightforward budgeting strategy that offers both discipline and flexibility. This one is easy to put into a spreadsheet and see the numbers without much thought. I like this one for its simplicity. Simple = more likely to stick with it.

Value-Based Budgeting: Because Every Penny Should Count

Why Choose It: Your money should resonate with your values, ensuring it’s spent on things that truly matter to you. It’s not about accumulating crap, it’s about experiences and memories.

How To Do It: Reflect on your passions and rank what makes your heart sing. Allocate a significant part of your budget towards those joys, while minimizing expenses on non-essentials.

Maybe you’re an experience junkie? Set aside money for those concerts or travels.

If fashion is your flair, then make room for it, but maybe opt for a home-brewed coffee.

Best For: The philosophers among us. If you’ve ever found yourself deep in thought about the universe at 3 a.m., this might be your jam.

Combine these values into each bucket of the 50/30/20 budget above and you might have a good thing going.

Remember, a budget isn’t a prison. Find the approach that speaks to you, stay committed, and watch as your financial journey becomes both empowering and enjoyable.

Up Your Game: Using Budgeting Tools and Apps

Picking Your Weapon: Introduction to Budgeting Tools and Apps

Budgeting “why’s” explored, your partner’s support apparent, once month’s expenses tracked, and an initial strategy is picked. Now we need a method to catalogue the strategy. Unless you’ve got a weird fetish for spreadsheets (I’m looking in the mirror with this one), doing all your budgeting manually can be a colossal pain in the ass.

But guess what? We live in the glorious age of technology, and there are a boatload of apps and tools out there ready to take the grunt work out of budgeting.

Apps like Mint, YNAB (You Need A Budget), or PocketGuard can track your income and expenses, show you your spending habits, and even help you set and monitor your financial goals. Hell, some of them will even tell you when you’re about to blow your budget for the month.

I personally like and use Mint, but the world is your oyster here.

The point is that adopting a budgeting app is like hiring a personal finance assistant that’s on call 24/7. You get to see in real-time where your money’s going, identify spending patterns, and easily tweak your budget without breaking a sweat.

Plus, these apps offer a visual representation of your financial progress, which can be a real morale booster. Seeing your debt shrink or your savings grow can give you that extra nudge to stick to your budget.

But, like everything in life, not all budgeting tools are created equal. So, take the time to do a little research, test out a few options , and pick the one that fits your needs best.

Remember, it’s not about finding the most advanced tool; it’s about finding the one you’ll actually use.

The Road to Financial Freedom                

The Journey Begins: How Mastering Budgeting Is Only the First Step

Okay, you’ve got the budgeting thing down. You’re tracking your income, you’re cutting back on unnecessary expenses, and you’re setting financial goals. Awesome. But don’t go popping that champagne just yet. Mastering budgeting is just the first step on this wild road to financial freedom.

It’s the launchpad, the base camp, the starting line – pick your metaphor.

There’s still a whole universe of personal finance out there for you to conquer. We must still delve into saving, investing, and debt management. Those topics come in other posts, and I get it. This all sounds overwhelming, maybe even a little scary. But remember, every expert was once a beginner.

Just like with budgeting, you can learn to navigate these financial waters one step at a time.

Your Takeaways and What’s Next

We’ve dissected budgeting, cut through some confusion, and given you a roadmap to creating your own budget. We’ve also navigated you through potential budgeting pitfalls and handed you some ideas for cool budgeting tools.

Your homework this week is the following:

1. Create a personal “why” statement for next month’s budget.

2. Pull past bank and credit card statements to figure out how you spend your money.

3. Have “the talk” with your spouse and discuss what you are doing next month – and why.

4. Pick a strategy to try out. It doesn’t have to be the four I presented. Find one that resonates with your values and style.

5. Figure out how to track: Spreadsheet, app, website, heck – a piece of paper. What we don’t measure we can’t monitor.

6. Analyze your spending after 30 days of the above. Adjust and repeat. This will become less work the more it’s implemented as a habit.

7. Teach and set up your kid’s budgeting plan. Don’t let the next generation down like you may have been let down. Their weekly allowances can be budgeted as well. This is a lesson more than an allowance.

Budgeting isn’t an Everest climb. It’s a liberating skill that anyone can master. But don’t mistake having a budget for a silver bullet that’ll magically solve all your money problems. It demands consistency, a truckload of honesty, and a dash of patience.

So, stay curious. Stay hungry. Keep reading, keep learning, and keep challenging yourself. After all, your financial freedom is a journey. And we are all navigating this messy world together.

And with that, my friend, you’re just getting started down the right path.