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The #1 Way To Financial Freedom



If you want to live the financial life of your dreams, have millions of dollars and NEVER worry about money again, there is one essential step you have to take. You don’t have to come up with a wildly successful internet business or win the lottery. It’s actually MUCH easier than either of those things and hardly takes any work at all. Does this sound too good to be true? It isn’t, but many people are reluctant to take this one beneficial step of…Making and keeping a budget.


Budgeting is often associated with restrictions, headaches, hassles and a lot of additional work. Some people avoid budgeting because of that huge misconception. Others avoid budgeting because they don’t feel like they have enough money to need a budget. Others don’t have one because they don’t know what a budget is. Whatever excuse is given, the fact remains that having a budget is the essential first step to any solid financial plan and is the key to achieving any financial goal.


The purpose of this article is to teach you what a budget is, share with you the reasons you need a budget and to show you how to create one for yourself, so you can take control of your financial future. Whether you’re saving money for your next beach vacation, you want to be sure you have enough money to pay rent next month or you have some other financial goal, a budget is a tool everyone will find useful.




So What Exactly Is A Budget?

A budget is a spending plan based on income and expenses.


In other words, it’s an estimate of how much money you’ll make and spend over a certain period of time, such as a month or year.


Budgeting is the process of creating a plan to spend your money. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do.


Budgeting can involve making a comprehensive list of expenditures or you can group amounts spent into a few categories that you track. Some people write their budget on paper and keep up with it by hand, while others keep their budget on a computer and take advantage of tools like spreadsheets or budgeting apps.


There isn’t just one correct way to budget — The best budgets are ones that you can keep up with consistently and that track the financial information that’s important to you.


Why Is A Budget Considered An Essential Tool?


If a budget is nothing more than a list of your income and expenses, then why is it considered such an important part of financial planning? A budget’s real power comes from the information it can tell you and the focus you gain by keeping track of it consistently.

Here are 4 of the many benefits that you could realize by keeping a budget:




1. Gives Insight Into Your Financial Health

Keeping track of your income and expenses gives you a clear picture of how much money you have to save or spend. Tracking income and expenses also lets you spot patterns in how you earn money or spend it. You may find that you’re spending a lot more money eating at restaurants than you thought you were or that you earn twice as much in the Summer months as you do in the Winter months from your job waiting tables. Keeping track of your budget also lets you identify where to make adjustments. If you find that you’re spending more money than you earn, maybe you’ll find that you can balance your budget by canceling that music streaming subscription that you never listen to.


2. Allows You To Set and Achieve S.M.A.R.T. Financial Goals

Setting financial goals can motivate you to stick to your financial plan over a long period of time. Setting goals that are S.M.A.R.T., makes it more likely that you’ll achieve them.


S.M.A.R.T. is an acronym that stands for Specific, Measurable, Attainable, Relevant & Timebound. You want to be sure the financial goals you set for yourself have each of those five qualities. Rather than your goal being simply to save money, you can make your goal S.M.A.R.T., as in the following example:


S = Specific. What are you saving for? Week-long beach vacation

M = Measurable. How much money do you want to save? $1,000

A = Attainable. Is this realistic? Yes, if I stick to my budget

R = Relevant. Is this worth saving for? Yes.

T = Timebound. When do you want to have this goal completed? June 30, 2022


3. Provides Peace Of Mind & Helps Reduce Stress

When you know exactly how much money you have and how much money you will need to cover your expenses, you don’t have to worry about whether or not you’ll be able to make ends meet. If you find that your expenses will exceed your income for a period of time, you can take action early to reduce expenses or bring in more income. If you need to borrow money to make a large or unexpected purchase, you can use your budget to figure out how you’ll be able to pay the loan back. Using a budget in this way can greatly reduce the stress many people feel when it comes to their finances.



4. Makes Financial Decisions Easier

Your budget is also a tool that you can use to take the stress out of financial decision making. You don’t have to guess whether or not you can afford to buy a particular item or service. Your budget can give you the answer to that question in black and white. If your budget shows that you will still have enough money after making the purchase, you can proceed with confidence knowing exactly how this purchase will impact your finances. Basing your decisions off actual data like this takes the uncertainty out of the decision making process, gives you actual criteria to compare and allows you to make decisions in a more straight forward way.


How Do I Make A Budget?



Now that you’ve learned what a budget is and why you need one, you probably want to learn how to make your own. There are a few popular budget methods out there today. Four common types are explained below. The best budget for you to choose is A) The one that you will actually use consistently and B) The one that will help you achieve the goal you are trying to reach.


1. Pay Yourself First Budget

The pay-yourself-first budget is primarily used to help build savings and repay debt. It is a pretty simple budgeting method in that you set aside a specific amount of money from every paycheck for savings and for debt payments. After your savings and debt payment amounts are accounted for, you can spend the rest of your money however you see fit. If you have a goal of saving money and paying off debt, the Pay Yourself First Budget might be the way to go.

This is also a popular budget method because it doesn’t require you to meticulously track where every dollar is spent. Of course, it’s important to prioritize your necessary expenses like rent/mortgage and utility bills, but you don’t have to watch where you spend your discretionary income as closely because you’ve already taken care of what’s most important to you: building savings and paying off debt.


2. Zero-Based Budget

Zero-Based Budgeting is a fancy name, but the concept is simple: Income minus expenses equals zero. This budgeting method is best for people whose income amount is the same each month or for those who can reasonably predict the amount of money they’ll earn each month.

To use the Zero-Based Budget method, calculate your monthly income from all sources, then add up your monthly spending and savings amounts. Your income minus your expenses and savings should equal to zero. When using this method, it’s important that you plan out all your expenses as accurately as possible. If you spend more than you budget in one category, you’ll need to spend less in another category to make up for it.

Zero-based budgeting is a little more time-consuming than the Pay Yourself First method of budgeting because you have to put each purchase you make into a specific budget category. It’s usually suggested that you have a little budgeting experience before using this method because forgetting to budget for a large expense could throw your budget off track. For experienced budgeters, it’s still a good idea to keep extra cash in your checking account as a buffer and to have an emergency fund of three to six months expenses in case you are hit with a large unexpected expense.



3. Envelope System Budget

Using the Envelope System for budgeting is very much like using the zero-based budget method but with one big difference: You actually use physical cash and good old-fashioned envelopes to keep track of your spending in each category over the course of a month. In an envelope budgeting system, you decide how much money you are going to spend in each budget category during the month and you fill an envelope for each category with that amount of money. You then use the cash from each envelope to buy things in the given category. As you go grocery shopping, for example, take your grocery envelope and pay for your items with the cash inside.

When you run out of money in a given envelope (category), that’s it. You’re done spending money in that category, unless you want to borrow from another envelope. It’s a good idea to avoid dipping into other envelopes too often, though, because it can cause you to run out of money in multiple categories before the end of the month.

If you prefer using cash to buy things or if seeing the physical cash leave your possession is a useful tool to help control your spending, the envelope budgeting method is one you’ll likely have success using. Like the Pay Yourself First Budget, the Envelope System is also for those who want to make paying down debt a top priority. It probably wouldn’t be the number 1 budget method to choose if you don’t feel comfortable having a fairly large amount of cash on hand or if you prefer using credit or debit cards.


4. The 50/30/20 Budget

The 50/30/20 budgeting method is another straightforward budgeting method, and it requires even less work than the zero-based and envelope budgets when it comes to tracking your spending. To use the 50/30/20 method, you break down your expenses into three categories:

  1. Necessary expenses (50%)

  2. Discretionary expenses (30%)

  3. Savings and debt payments (20%)

Set aside 20% of the money you make each month for savings and to pay down debt. Half (50%) of your monthly income will be used to pay for necessary items like your mortgage or rent, utility bills and basic food items. The remaining 30% of your income can be spent on discretionary items like eating out, buying clothes or going out to a movie. All you have to do is total up your spending in each of those three broad categories. It’s that simple.


Another great feature of the 50/30/20 method is that the 50/30/20 proportions can be customized to fit your personal financial goals. You may decide to put more than 20% of your earnings into savings each month or you might need to spend more than that amount to get out of debt at the speed you want to.

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Where Can I Learn More To Take My Finances To The Next Level?

Here is a list of a few books that can help on your journey to improving your finances. These books cover a full range of financial topics to help you get in control of your financial life and help you achieve even your biggest financial goals.



You Need A Budget by Jesse Mecham is a complete budgeting guidebook based on the principles behind the award-winning financial platform — YNAB. In this book, you’ll be given the tools to learn how to track your expenses, stick to a spending plan, and make your money work for you.



It's been nearly 25 years since Robert Kiyosaki’s Rich Dad Poor Dad first made waves in the Personal Finance arena. It has since become the #1 Personal Finance book of all time... translated into dozens of languages and sold around the world.


Rich Dad Poor Dad is Robert's story of growing up with two dads — his real father and the father of his best friend, his rich dad — and the ways in which both men shaped his thoughts about money and investing. The book explodes the myth that you need to earn a high income to be rich and explains the difference between working for money and having your money work for you.


Rich Dad Poor Dad...

• Explodes the myth that you need to earn a high income to become rich

• Challenges the belief that your house is an asset

• Shows parents why they can't rely on the school system to teach their kids

about money

• Defines once and for all an asset and a liability

• Teaches you what to teach your kids about money for their future financial

success


Amazon says, "There's one sure way to whip your finances into shape, and that's with The Total Money Makeover. It's the simplest, most straight-forward game plan for completely making over your money habits. And it's based on results, not pie-in-the-sky fantasies."


Dave's previous book, Financial Peace, gave the basics of saving and investing, This book, The Total Money Makeover, puts those principles into action! You'll be exercising your financial strength every day and quickly freeing yourself of worry, stress, and debt. And that's a beautiful feeling.



In times like these, it's more important than ever to know the difference between making a living and making a life. Your Money or Your Life is even more relevant today than it was when the book first hit the stands.


Whether you’re just beginning your financial life or heading towards retirement, this book will tell you how to:

  • Get out of debt and develop savings

  • Save money through mindfulness and good habits, rather than strict budgeting

  • Declutter your life and live well for less

  • Invest your savings and begin creating wealth

  • Save the planet while saving money

  • And so much more!



Whether you're trying to reach certain financial goals or you have other aims you're trying to achieve, Atomic Habits offers a proven framework for improving every day. James Clear, one of the world's leading experts on habit formation, reveals practical strategies that will teach you exactly how to form good habits, break bad ones, and master the tiny behaviors that lead to remarkable results. He shares the power of implementing systems to reach your goals and lays out his proven system that can take you to new heights.


Clear is known for his ability to distill complex topics into simple behaviors that can be easily applied to daily life and work. Here, he draws on the most proven ideas from biology, psychology, and neuroscience to create an easy-to-understand guide for making good habits inevitable and bad habits impossible.

Learn how to:

  • Make time for new habits (even when life gets crazy)

  • Overcome a lack of motivation and willpower

  • Design your environment to make success easier

  • Get back on track when you fall off course

  • And much more


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