This week, let's work together on 5 small steps that will enable you to worry less and feel more in control—so that it takes less effort to manage your finances this fall.
If you have struggled with a budget, maybe that's because you've been making things too complicated. Many budgets fail because they are too complex.
Here's what I've learned: Loose budgeting is surprisingly powerful. Trim the clutter and keep things simple. Start with just three broad categories—Needs, Savings, and Wants—and then add more detail as needed.
I used to loathe budgeting, but then I found "The Balanced Money Formula" (from the book, "All Your Worth", by Elizabeth Warren and Amelia Tyagi). Allocate your after-tax money as follows:
- Spend no more than 50% on Needs, such as housing, transportation, groceries, insurance, your basic wardrobe. NOTE: THE KEY TO THIS BUDGET IS TO KEEP SPENDING ON NEEDS AS LOW AS POSSIBLE.
- Spend at least 20% on Savings, which includes retirement saving and debt repayment.
- The rest—about 30%—can be spent on Wants: cable TV, dining out, concert tickets, extra shoes and clothes, knitting supplies, and so on.
Once I discovered this budget (or "budget framerwork", if you prefer), it revolutionized my relationship with money.
|Look at your budget and see if you can decipher how much you're spending on Needs, Savings and Wants. What do you see? What changes do you need to focus on this fall? Share.|