The budgeting process is a 5-step method that takes you through the various stages of budgeting. My belief is that how we spend our money, or rather how we treat money, reveals the type of mindset we have when it comes to personal finances.
By the slightest chance, you’re a person with a high salary and low debt that’s great but this article really isn’t for you; I do urge you to stick around and read on because your finances might not be as perfect as you think.
This article is for people who are new to budgeting and perhaps haven’t come to terms with the fact that they have a problem handling their own money.
This part of the budgeting process is the first step to fixing your financial instability. If you haven’t accepted that you are experiencing money problems, it doesn’t matter how many budgets you create because your mindset won’t allow you to follow through.
Accepting you are now in the position of needing to create a budget is nothing to be ashamed of.
You are now able to dig through those piles of mail, check your emails, look through any files where you may have stashed your collection notices, and come to terms with what you owe.
This is your first step to moving forward with getting rid of debt and building financial stability.
Before you actually sit down and create your budget you’ll want to go through the bills you’ve collected. I recommend organizing your bill statements in different piles; separate them.
This part of the budgeting process makes the rest of this process easier. After categorizing your bills using a Priority Matrix, review the items marked urgent.
Then, address items that aren’t that important and really holding back your financial progression. All bills are important but there are some bills that need to be paid immediately and some that can wait.
The second part of the review process during the budget process is after the budget has been implemented. This type of review happens when you’re actively working on budgeting your finances achieving your budgeting goals.
Periodically you will review the status of your budget to determine if you need to change anything. Additionally, you will review the progress of your budget to ensure it’s practical.
If your budget doesn’t match your lifestyle and entail ways to improve your spending habits, you risk the chance of successfully reaching your budget goals.
As needed, you’ll need to tweak and make changes to your spending plan. This will ensure your budget is in line with your lifestyle decreasing chances of overwhelm. You might be in a situation where you must firmly stick to your budget.
That’s perfectly okay to do but even with a tight budget, revisions could be wise if needed.
If you’re not willing to revise your budget when needed you may find that you become overwhelmed because you’re not meeting your budget goals.
I recommend revising your budget only as needed. Yet, I caution you against revising your budget plan to fit wasteful spending.
For example, you’ve created your budget and it’s the middle of the month. You feel like you’ve been doing and you want to treat yourself to a new pair of shoes. However, shoes are not in your budget.
Instead of you sticking to your current budget, you decide to revise your budget plan to fit the purchase of a new pair of shoes. These types of impulse revisions are not recommended.
Make sure your revisions include all sources of income. Take this time during your revision to remove expenses from your spending plan that are not effective.
Basically, you want to make sure that during each revision of your spending plan you are working towards your budgeting goals.
To properly implement your budget, make sure you are working with money you actually have. If you are not implementing your spending plan, there is no point in having one and that’s just the truth.
Make sure you set spending limits for yourself and that you aren’t incurring additional debt or expenses. I always say if you feel like you want to purchase something that’s going to deduct from the money you bring home, WAIT.
Sit on your desire for a few weeks; maybe a few months and evaluate whether or not a new expense is necessary.
If you are new to budgeting or this is the first time that you have said okay I’m going to get serious about budgeting I’d recommend working through monthly budgeting cycles. You’ll follow through with your budget for the first month and at the end of the month, you’re going to come back and look at whether or not your budget is feasible.
Revisions may need to be made but if not, remain with your current budget. Use the end of month to analyze your budget and see what worked and how you can continue on the right track with your spending.
Through discussions with friends and family, I notice that overwhelm comes from taking on too much in the beginning of the budgeting process. It’s similar to when you say you need to lose weight.
You know you want to lose weight but you’re not specific about losing weight. There’s no real goal set for the steps you’ll take to drop the pounds. So, you start on a weight loss journey and you look at YouTube videos, go to Google and you read a bunch of weight loss blogs. You may change your eating habits for a bit.
But you aren’t following through with your plan because essentially you didn’t have one.
At the end of your weight loss journey, you don’t notice any progress and you feel like you’ve failed. Going forward you feel like you can’t lose weight because you’re going to fail.
This is what happens when people start budgeting; the same mindset applies. You either believe it’ll work or you don’t.
Don’t follow through with your spending plan and you won’t meet your money goals. That is the truth that some people unfortunately they don’t want to believe.
Therefore, working on your monthly budget in monthly cycles at the beginning is helpful. The pressure of following through doesn’t feel as immense when your budgeting process is handled in smaller steps. You see yourself getting closer to your budget goals and you may reach them faster with this method.
When you find your budget is working for you, don’t change it.