Do you have a budget? Lost on what a budget is or how to start one? Look no further! Tiffany talks about her favorite topic, budgets, and easy ways to put one together. You will learn why she loves budgets so much and why you should come to the dark side! Muahahaha
Welcome to the Money Talk with Tiff (MTWT) Podcast. MTWT is a podcast where we discuss everything about money – from tips and tricks to current events. Follow me on my journey to become debt-free, and meet other cool people along the way. I am your host, Tiffany Grant, now let’s talk money.
Budgets! This is my favorite topic ever; I love budgeting and I love teaching people about budgeting. You know what? Without a budget, you really cannot get to any of the next steps of financial independence, of financial freedom, because you have to know how your money is coming in and then, going out.
Importance of Budgeting
I love to use the ship analogy. So, let’s say you’re on a ship, and you have all these little holes in your ship that you don’t even know exists, that’s where your budget comes into play, ‘cos then you can nail down what those little holes are, where exactly your money is sucking out from. With a budget, you can track every single transaction. So, you know exactly where your financial ship is going, and you don’t have all these little holes, that can make your ship sink.
For me, budgeting is a pillar of financial independence and financial freedom. So, let’s go ahead, and get into how I do my budgeting, and maybe it will help you get started. Remember “nobody is perfect,” what one person does may not work for the next person, and vice versa. That’s one thing that I remind people when I talk to people about money. We nail down what works for you, because there’s a lot of different ways you can budget, and there are different ways to get your money under control.
My Budgeting Style
So, I do my budget ahead of time. So, let’s say we’re in March, I will budget for April and March, and I put what my expected income is going to be from all sources, and then, that’s at the top. Then, I start working my way down. I’ll start with what’s most important. So that will be like housing, and food, and things like that, which will be at the top. And then, as I work my way down, into the not-so-important things. So, things like fun money, entertainment money, will come as I go down the list.
“We must consult our means rather than our wishes.”
– George Washington
The reason I do that is so if it ever gets tight, and my income is not what I thought it would be, I can start cutting from the bottom, and there’s no extra thought process on what needs to go, I just start at the bottom, and then cut, until I get it to where it’s reasonable.
Also, I use percentages. I feel like a certain percentage of my income should be used towards housing, a certain percentage should be used towards food, a certain percentage should be used towards anything else. So, I make sure that when I’m budgeting, I stay within those percentages, because I feel like if I go outside my percentage range, it’s either I’m spending too much in that category, or I may not be spending enough in that category. So, that’s simply how I set up my budget.
Now, going on into the line items. Of course, you want to have everything broken out. So, don’t just clump all credit card debt into one category called “debt”. No, that’s not how it works. You should break down each credit card, every expense category.
So, let’s say you go out to eat every so often, but then, you also go to the grocery stores, that would be two different line items. It’s not going to be one that just says “food”, because then if you clump things together, you don’t know if let’s say, most of your food budget was spent in restaurants instead of the grocery store, so you’re paying more, you don’t know that. So, the more detailed you can get it, the more you can analyze your spending and see where exactly your money is going.
I also highly recommend that you have a “blow money” category or “fun money”, and that’s just money where you know, maybe one day your friends are like “oh, let’s go out and do this thing that we didn’t plan for at that time.” You have that money available and you can permit yourself to enjoy some of your money. So, I highly recommend that.
How Budget Makes You Financially Independent
This is how I like to think of budgets, and I feel like it would help people kind of wrap their heads around the concept a little more. I think budgets permit you. I don’t see it as depriving yourself, let’s put it that way. I see it as permitting you to spend.
"A budget tells us what we can't afford, but it doesn't keep us from buying it."
– William Feather
So here’s a quick story. Not too long ago, I needed some new shoes, because if you know me in person, I wear my clothes until they are no more. After all, I’m very frugal and there are certain things I like spending money on, but clothing is not one of them.
So, I was like “oh, I need some new shoes, ‘cos these are like literally coming apart” and then I’m like “ah, but if I spend money on shoes, then I can’t pay my debt that I want to pay this month, like the extra,” ‘cos of course, I’m on my journey to be debt-free by 30. I have to hit it hard. So, I’m like “dang! this might derail my progress if I get some shoes.”
Now, you may be saying “Tiffany, you’re really overthinking that” which may be valid, maybe I was really overthinking that, but this is where the budget came into play. So, I have always had a clothing line item, I rarely used it, but it was always in my budget, so I’m like if I ever need some clothes, it’s there, the money is there. So, this particular time, I’m like “dang! I really need some shoes” and DSW just sent me some coupons so this would be a perfect opportunity, and I looked at my budget and I’m like “Tiffany! You have the money sitting there waiting for you, use it! Like this is not going to derail your progress, you’ve already accounted for the extra that you wanted to put in there, you’ve already accounted for you know, housing, food, all of that, like everything is already accounted for, you buying this pair of shoes is already in your budget, so use it.”
So, I went ahead and used my coupon, and I got the two pairs of shoes for around $20, and I didn’t go over-budget. So, that’s why I tell people it’s more of permission than depriving yourself. So, if you look at budgeting that way, it may make it a little easier for you.
Patience in Budgeting
You might ask: how long does my budget take to start kicking in? Well, it takes about a good three months to get a good working budget. Don’t think that you’re going to “blow it out of the park” the first month because the chance of that happening is slim, and even with myself, it took me about three months for my budget to be where it was workable, where I didn’t forget the subscription or something that was coming out automatically that I forgot to account for. It took me about three months to get it right, and once you get it right, then, it becomes a game.
By game, I mean when you’re like “oh! I wonder how much more I can put in savings this month, or how much more I can put on my debt this month, or how much I can save in the grocery store, or whatever the case is. For me, it becomes a game, because I am slightly competitive, so I like to play against myself and see how much more I can optimize, or how much more I can save, and for me, it is fun.
So, hopefully, these budgeting tips help you in your journey to financial independence and financial freedom. And you know what, if you have any questions about budgeting, feel free to let me know.
You could visit my website and submit a question, inquiry, or anything else, and I can help you. In case you’re like “hey, Tiffany, this budgeting is not just working for me,” just let me know, and I can shoot you some other ideas. We’ll probably talk about more in the podcast.
But, anyway, I’ll see you next episode.
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