Getting into the holiday season and getting close to a new year. With increased spending on everything from inflation, understanding where your money is going is vitally important. This is why we at the financial feast pod really push the idea of a budget for everyone.

1. What is a budget?
   There are a lot of questions about what a budget is though. Many people hear budget, and they think restrictive.
   A budget doesn’t restrict though, but rather allocates. A budget isn’t limiting you on what you can spend but telling you what you have to spend. Having a budget doesn’t take away your spendable income. It just illuminates you to what you have available to spend. A budget provides data showing you your income and your spending to allow you to make an educated decision on what you should and should not buy, based on priority.
   Even when understanding that, however, people still have an issue with a budget because the word just seems to have a negative connotation. So, let’s call it a spending plan.
   We are all ok with plans. We have a workout plan. We have a dinner plan for the week. We have a work list that we plan out of what we want to accomplish. Similarly, we should have a spending plan that helps us achieve our goals financially.
2. How do I create a budget?
   a. Find what your post-tax monthly take home amount is
   i. we like 2–3-month average, especially if your income fluctuates seasonally or based on overtime, or commission…
   b. Track your expenses each month
   i. Expenses change monthly so do multiple months again
   ii. Do the best you can for what you have now, knowing your budget will change as your lifestyle, income, expenses change. If you do not have a child and you hope to one day; If you move; If you lose your job or get a promotion.
   iii. Don’t forget about cash expenses or income
   c. What type of budget do I want to use?
   i. Proportional budget – put your budget into broad subcategories that get a percentage
3. Example: 50/30/20 (needs, wants, savings)
4. Con:
   a. trying to value a need or a want
   i. Is eating out a need or a want?
   ii. Where does entertainment fall?
   b. May be too broad
   i. May hit your budget broadly but have overspending in silly places. Maybe your eating out is 15% of your total budget. You are on your budget each month, but do you really need to spend 15% of your budget on eating out? This budget may not show you those details, so you don’t know you are spending that much
5. Pros:
   a. Does not take a lot of time
   b. Separating needs and wants may be easy for you
   c. Major emphasis on saving which is vital
   ii. Zero-sum budget
6. Each category adds up to equaling 100% of your total income
7. Cons:
   a. Much more work
8. Pros:
   a. Helps keep the emotional purchases to a minimum
   b. Gets very specific and aids in a thorough understanding of your finances
   d. Follow through!
   i. Use envelopes and cash
   ii. Accountability – a friend or a spouse – honesty
   iii. Find a budgeting tool that works for you
9. What tools can I use to help me budget?
   a. YNAB – You need a budget, or YNAB, is a popular but pretty expansive program. It is zero-sum based and does have an annual cost of $99 (or $14.99 a month). With it you can set goals, get tangible reports and sync to your bank for easier connection and downloads of expenses.
   b. EveryDollar – This is similar to YNAB in that it is a zero-sum based app as well. This app is a feature from Dave Ramsey so if you are familiar with his teachings, this may be the way to go. They have both a free version and a paid version ($80 or $12.99) which provides more perks.
   c. Mint – Mint is from Intuit and is free. It offers a free platform to begin budgeting with many of the pros of the above apps but only allows you to budget one month at a time which some find limiting.
   d. Excel – This is actually one of the ways that I budget. What I’ve done is make my own Excel document and I export my expenses each month from my bank via a CSV file and then break down my budget accordingly. It takes more work but is essentially the same thing as YNAB and Every Dollar but is free.

Should you have a budget?