You Don't REALLY need a budget!

NO you don’t really need a full-on budget to build financial freedom! You can still effectively manage your money with a super simple, high-level budget. You just need to have a clear understanding of your income, expenses, and savings. When you know what money is coming in, and what is going out, you can start saving for your lifestyle today, as well as for a comfortable retirement.

Spreadsheet geeks like myself, are ready to show off their detailed budgets with pride! I have a household budget, travel budget, retirement budget, each with loads of categories and cool graphs. I don’t just know how much we spend on vacations in total, I also know how much for airfare, accommodation, transport, food and activities!

For the majority of people (who are not spreadsheet geeks), this would suck the fun right out of their holiday!! Don’t worry, I have a solution for you too.

There are only 3 things you MUST do for your budget, and the rest you can happily IGNORE.

Budgeting You MUST do

1. Understand Your Current Financial Situation

To achieve financial success, its crucial to understand your current financial situation. This involves evaluating your income, fixed expenses (such as rent and utilities), variable expenses (like groceries and entertainment), and debts. Don’t procrastinate, just do it.

Often times the hardest step is acknowledging the issue and being brave enough to face it. Thousands of people spend too long in denial, neglecting their finances, hoping they’ll magically improve. They have no idea how much their monthly expenses are or how much debt they are in.

46% of student loan holders have no idea how much debt they owe.
65% of Americans have No Idea How Much They Spent Last Month
34% of Americans have no idea how much of their income goes to paying their debt.

But hope is not a strategy, and the “lalala I’m not listening” strategy is not effective in money matters. So congrats on taking the important first step!

Remember, you can’t manage what you don’t measure. If you have no idea how much you spend, what interest rates you’re paying or how long it will take to pay off debt then you won’t realize how debt is preventing you from reaching goals, such as buying a home or early retirement. If you don’t take the time to figure out how much you earn, spend and owe, you can’t make a plan to to achieve financial freedom.

2. Determine Your Net Worth

Remember, your self-worth is NOT determined by your Net Worth, so don’t be hard on yourself if your number isn’t what you’d hoped. This is just a snapshot of your financial health and your starting point – you’re on the road to improve it.

To calculate your net worth, you subtract your total liabilities from your total assets.

Total assets will include your investments, savings, cash deposits, and the value of your home, personal items and car. A Zillow estimate will do for your home value, or you can call a realtor friend. For your car, use Kelley Blue Book.
Total liabilities would include any debt, such as student loans, credit card debt, car loans and mortgages. You’ll want to be precise on these ones, so reference your most recent statement and note the balance and the APR, the latter of which we’ll use later.

– Negative net worth is a sign that you need to focus energy on debt reduction.

+ Positive net worth means you’re doing some things right, and may be on track depending on your age, and number of years to retirement.

3. Set Savings Goals

Once you know your net worth and what areas you need to work on, the next step is setting clear and attainable savings goals. Whether you aim to build an emergency fund, pay off debts, or save for a big purchase or retirement, having specific targets will keep you focused and motivated. Make sure your goals are realistic and time-bound, allowing you to track your progress and celebrate your successes along the way.

You DON’T need to know how much you spend on coffees or lunches out
You DO need to know how much you need to save for emergencies and retirement, and if you’re on track.

All you REALLY need to know is are you on track for your savings goals? If you’re not sure where to start, ensure you have 3-6 months living expenses for emergencies saved in a high interest, online savings account. Somewhere where its earning interest and can be accessed when needed (but not so easily you’re tempted to use it in non-emergencies). For retirement, use online calculators offered by the your retirement account providers (401k, IRA, Roth, etc) are held at. Fidelity, Vanguard and Charles Schwab all have great tools to help you determine your long-term goals.

Remember, the BIGGEST factor to how good your lifestyle is in the future, is how early you start saving.

And of course, Stick to Your Budget

Creating a budget is easy, sticking to it requires discipline and consistency. You’ll need to resist impulsive purchases and unnecessary expenses. Remind yourself why you set your goals, and what’s important to you. When you’re tempted to spend more than you can afford, think about what you’re giving up and how much longer you’ll need to wait to achieve your goal of your holiday, house, car, wedding, whatever.

Things you Can Ignore, unless You’re Really Into Spreadsheets!

For greater Clarity, Create a Detailed Personalized Budget

When it comes to budgeting it’s important to tailor your approach to fit your individual circumstances and financial goals Start by listing all your sources of income and then categorize your expenses. Remember to track even the smallest expenses to get an accurate picture of your spending habits. Use our budget template to get you started!

Allocating Funds Effectively

Once you have a picture of your income and expenses it’s time to strategically allocate your funds. Prioritize expenses while also leaving room for savings and investments. Remember, budgeting isn’t about restricting yourself; rather it’s about being intentional with how you choose to spend your hard earned money.

Embracing the 50/30/20 Rule

One well-known budgeting approach is the 50/30/20 rule, which suggests allocating 50% of your income towards necessities, 30% to discretionary spending, and 20% to savings and debt repayment. This simple yet effective method ensures a balance between meeting your needs, enjoying life, and securing your financial future.

And if You’re REALLY Into Spreadsheets…Don’t Miss This

If spreadsheets are your thing and you really like to nerd out, then you must check out Tiller. It is absolute spreadsheet nirvana. Tiller allows you to automatically budget, track your net worth and investments and forecast when you’ll reach your retirement goals. I had spent months trying to build features into my budget template that would allow me to scenario plan for retirement – “If I sell this property in 10 years time, and I pay for my daughter’s college education in 5 years time, and I reduce my income to part time work…..” It was complicated , time consuming and overwhelming.

I decided that someone with more advanced spreadsheet skills than I must have surely wondered the same thing and developed a solution. And I was right – that solution is Tiller, and there is a community of like minded folks who continue to enhance the Tiller offerings. Using Tiller’s Cash Flow Forecast & Retirement Planner tools, I was able to finally scenario plan and know when and how I had reached my financial independence!

Retirement planning on Tiller gave me the confidence I needed to leave my full time role and know my money isn’t going to run out, which is simply priceless!

The Benefits of Budgeting

Regardless of whether you’re targeting financial independence and early retirement, or just starting to understand budgeting basics, you’ll definitely experience these benefits from having a budget:

Financial Freedom
Less Financial Stress
A healthy outlook for your financial future gives you control and options for how you choose to live!

In the beginning, it’s ok to just go with the flow as your savings grow. Once you get the hang of money management, you’ll likely prefer to know more detail of where you money goes, and understand how your saving and investing decisions can determine how quickly you’ll reach financial freedom. Thankfully, there are a range of spreadsheet options to meet everyone’s specific needs.

FIND HAPPY. LIVE RICHLY.

FAQs

Is budgeting suitable for everyone?

Absolutely! Budgeting is a valuable financial tool that can benefit anyone, regardless of their income or financial goals. You can stay high level, or get down into the details, as long as you have a savings goal.