While a budget can seem intimidating, it is simply a tool to help you become financially successful. When it comes to budgeting, the key is finding a system that works and is enjoyable for you because sticking to any new habit is challenging if you dread the process! On this episode of Financially Naked: Stories from The Financial Gym, two of our Certified Financial Trainers, Gina Funaro and Mike Poulin are here to Gymsplain budgeting. They talk through their favorite budgeting methods/tools and tips for long-term success based on their personal experience and work with clients.
Gina was a client at The Gym before she was hired as an employee. Joy is her trainer, and has been since she first started at The Gym. Gina loves budgeting. The piece of advice she gives to her clients when it comes to budgeting is to find a routine that is exciting to you and fits your lifestyle. It can take some time and experimenting to figure it out; it’s just part of the process.
You can try out a system for a month or quarter to learn what works and what doesn’t.
Budgeting Basics:
Start with multiple checking accounts. If everything is going in and out of one account, it can be hard to keep track of separate goals.
Having different accounts makes saving for specific goals much more clear.
It also allows separate accounts for fixed expenses (rent, utilities, insurance, etc) and variable expenses (daily spending)
Zero-Based Budgeting
This style of budgeting works well for folks with consistent income, and who have a good idea of their fixed expenses and spending habits.
This is where every dollar has a job, and certain accounts are designed to reach $0. Each dollar has a very specific duty and requires pre-planning.
It can take some time to get into the groove of a ‘zero-based budget’ because it doesn’t leave much room for error. It takes some time to get used to your account going down to zero, especially if you come from a scarcity mindset.
Anti-Budget/No Budget Budget
Great for folks who don’t like to track every transaction or deal with complex money management systems. If the apps or spreadsheets stress you out, this is a good system to try.
Start with your paycheck and determine your fixed expenses and savings goals. Once you know those numbers, subtract the total fixed expenses and savings from each paycheck, and everything left over is what’s left to spend on variable expenses/whatever you want!
50/30/20 style budgeting
A mix of the ‘anti-budget’ and ‘0-based budget.’
This balanced approach uses your take-home pay from each paycheck.
50% goes towards ‘needs’ - fixed expenses, transportation, groceries.
30% goes towards ‘wants’ - travel, home purchases, variable spending
20% goes towards ‘building wealth’ - long term savings / other investments
All cash/cash envelope system
Great for folks who like a hands-on approach or like to see the physical cash to visualize their budget.
Each time you’re paid, withdraw the cash budgeted for that period and use it for your variable spend. Once the money is gone in each category, it’s gone, or you can roll the leftover cash into various sinking funds.
Different tools for budgeting:
Pen & Paper is always a classic choice
Check the app store for FREE apps
Final thoughts and tips
When it comes time to plan your budget, pour a glass of wine or whatever makes the process enjoyable for you. Make it a fun money date.
Find what works for you and stick with it.
Once you find a system that works and start to see the savings grow, following a budget becomes easier.
There is no right or wrong answer, personal finance is personal, and it’s a learning experience.
You can use a mix of styles, or create a system that works for your goals.
Read more about budgeting on The Financial Gym Blog:
If you want a Certified Financial Trainer to help you figure out the best budgeting system that works for you, book a complimentary consult call to learn more!
