Welcome to the Money Management Series, City Girls! This specific series covers our 5 rules of money management. If followed appropriately, you should be able to manage your own money with no problem! Being in control of your finances makes you feel secure, stabile and overall less stressed out. Let this Money Management Series serve as your guide for getting in control of your money!
The first rule of the Money Management Series is to budget your money. Last year the CGS Team stressed the importance of Budgeting in numerous articles, and nothing has changed. Budgeting your money (and following that budget) automatically puts you in charge. You are aware of all of the money that comes in and you are essentially telling where it needs to go. The CGS Team is sharing the answers to the important budgeting questions (What, Where, When, Why, and How).
What is Budgeting?
Essentially, budgeting is the act of creating, using and following a budget. A budget is an electronic or written account of your current financial situation. It contains your income, expenses, and savings. Budgeting can be done in weekly, bi-weekly, or monthly increments. If your budget is done bi-weekly, then your written account would indicate the ins and outs of your money on a bi-weekly basis. Budgeting allows you to give your income direction when paying off savings and expenses. It’s an absolute necessity when working to reach financial goals.
Where to Budget?
Every aspect of your financial situation should be budgeted. You don’t have to create a separate budget document for each aspect, but every aspect should be included in your one budget document. To ensure you have included everything in your budget, you will want to review all of your bills, bank account summaries, and credit card statements. We will give more details on this in the How to Budget section below.
When to Budget?
Even if you are on top of your finances, you need a budget. So the answer to the question of “when to budget?” is always. No debt and money to save every paycheck? Start budgeting for some of your financial goals. Even if your money is going to savings, if there is no direction then you are saving just to save. This is a good problem to have, but understanding what you want from your money is important.
As we stated earlier, a budget gives you control over your financial situation (even if it’s not a good one). This is exactly why everyone should create a budget and follow it. Are you confused about where your money goes at the end of the month? Do you feel like you aren’t making progress with saving money? A budget can provide the answers to these questions and more. A budget is definitely a wake-up call, especially if you are confused about your money. A budget will pinpoint where your excess spending is coming from. From there, you can adjust your spending as needed.
How to Budget?
When it comes to budgeting, you have plenty of options. You can write your budget out on paper, use Excel or buy software like Quicken. Regardless of the format you use to create your budget, the same principles will apply. First, decide on a weekly, bi-weekly or monthly budget. From there, indicate how much income you earn in that specific timeframe. Include your gross and net (after taxes and deductions) amounts.
Next, write down your bill, credit card payment, and other expense amounts for that timeframe. Any recurring expense needs to be included. After your recurring expenses have been tracked, write down any expenses are outside of your bill and living expense categories. This would include dining out, entertainment, gifts, coffee during the week, and more. Basically anything that you spend your money on that is not a requirement for living.
Now you will create your columns. Let’s use a twice a month pay period as an example. So if you get paid on the 1st and 15th, you would have a column dated 1st-14th and a column dated 15th-31st. Your net and gross amounts for the timeframe would be written in each column, then you would subtract your expenses during that timeframe from the income amounts.
After completing the math, you will see exactly how much is left over (if any) during that timeframe. Use this number as a starting point for setting goals. Do you see that you should have $200 leftover each month, but you go out to eat 3 times a week? When you take the time to track your income and expenses, a spending wake-up call usually happens.
Related: How to Get One Month Ahead on Bills
It’s not always easy to create your own budget. It can seem overwhelming, exhausting or just plain annoying. The CGS Team can help with this! We offer budgeting services to the members of City Girl Savings! We can do all the dirty work and create a budget for you. You provide us with your income and expense information via the Start Your Budget Form and we take it from there.
We hope that this first Money Management Series rule wasn’t too overwhelming. Budgeting is a lot of work, but it’s very important when it comes to managing your own money. Stay tuned for next week’s Rule #2!
What did you think of the first money management rule? Do you budget already? Do you have issues with your budget? Start a Forum discussion and get the advice and opinions of other members! Learn what has worked for others and share what works for you! You can also leave a comment below for the community to see!