The Budget Episode: Let’s Build a Plan for Your Hard Earned Money
- liveyourmoneystyle
- May 19
- 4 min read
Updated: May 21
Welcome to the second episode in our 5-part podcast series on the 5 Essential Pillars of Personal Finance. At Your Money Style, we believe personal finance doesn’t have to be complicated—and that continues with building and understanding your budget.
Your budget is the foundation and game plan for every dollar of your income. Building a budget allows you to plan for how you want to spend, save, and invest your income. Let’s dive into how to make sure you’re building the best budget that works for you.
Why Budgeting is Important for Everyone
In this episode we dive into why having a budget is important for everyone, no matter their financial status! And also the helpful steps you can take before creating a budget, and then also how to create and manage the budget that works perfectly for you. It’s helpful to understand where we are spending our money and ensuring our game plan is setting us up for our future financial goals.
Build the Recipe for Financial Success
Building and managing a budget is similar to creating and following a recipe for your favorite cookies or cake! We know this sounds a little crazy but hear us out. Most cookie or cake recipes call for the foundation ingredients. Think of these like your:
Eggs
Flour
Sugar
Milk
Just like most recipes call for those ingredients to create our favorite treats, most budgets have foundational items needed like your
Cost of housing (rent or mortgage)
Groceries
Transportation (car payments/ gas, or public transportation
Insurance
And then there are the fun extras that recipes call for like sprinkles or frosting. These are similar to spend categories like your entertainment and vacation funds. And then while you’re baking your favorite recipe you might want to make a little extra to make then put in the freezer to enjoy at a later date. Think of this as your savings and your investments. They aren’t necessarily things that you will enjoy now, but your future self will appreciate that you planned ahead for you to use later in life!
Steps to take BEFORE Building a Budget:
Complete a realistic assessment of your expenses
Download or go through the last 3 months of your spending form all of your bank and credit card statements
Assess what you have been spending your money on and organize these into different categories like hosing, transportation, groceries, personal cre, clothes, dining out ect (You don’t have to use these categories - feel free to make your own!)
Evaluate if what you are spending money on aligns with your lifestyle and brings you joy! Its okay to realize some areas aren’t worth spending your hard earned cash on
Decide if your spending habits the last three months will work going forward or if you have to make some changes. This could be as small as cancelling a subscription to a streaming service you never use or as big as completely overhauling your entire approach to money
Knowing your current spending habits will set you up in the best place to now start creating the budget that will work best for you!
Create Your Budget
Now that you know what your expenses are next it’s time to create your budget for the next month, quarter, or year. Whichever time period you are looking for.
There are different methods that you can use to monitor and maintain your budget, which we will get into. However, to start at a very basic level, first write down how much money you take home (meaning after taxes) each month. Let’s say this is $5,000. Then, you add up all the money you typically spend in the month. Is this more or less than your income? If it’s more than your income, then you should go back to evaluate your spending to find areas you can reduce where possible.
If your spending is less than your income, then you have a decision to make.
Do you have high-interest debt where you should be making extra payments? If so, you will want to prioritize making extra payments there until you pay off the high interest debt. -credit card debt for example.
Next up is starting to save. Do you have an emergency fund set up? Assess whether you should be setting aside money towards this.
Finally (but not least), determine if you have money to start investing. This could be in an employer sponsored 401(K), IRA, or general investment.
Managing Your Budget
There are different methods you can use to manage your budget. Think of these different types of budgeting methods like varying levels of recipes you might make. Some recipes have a few ingredients and steps while others have a lot more ingredients.
We are going to chat through 4 different ways you can start to manage your budget. We will start with the most detailed to the least detailed method:
Every Penny Counts: Assign every income dollar a job into much more detailed categories. Think about this like you are tracking spend at Target vs Amazon, clothing spend, food etc.
Envelope: You create spend “envelopes” to help you stay on track in a category. This method goes back a long while because people used to keep money in envelopes to be able to pay the bills. This method is good for you if you want to manage your spending in a bit more detail so you don’t overspend. It could be you are trying to pay off some high-interest debt so you want to limit your spending in certain areas.
50/30/20: This is a simple method to track your spend in 3 categories 50% Needs, 30% Wants, 20% Savings/Investments (aka your future self).
Budgeting Apps: You might prefer to use a budgeting app to track your spend on the go. You can link your accounts to consolidate your spend.
Common Budgeting Mistakes
No one is perfect and budgeting doesn’t have to be either! Here are some common budgeting mistakes that we and many others have made:
Underestimating your variable expenses
Forgetting about expenses that don’t happen on a monthly basis
Making it overly restrictive
If you have a partner, not involving them
You don’t review or track it after it created
Episode Resources:
Explore the 5 Pillars on our website
Have questions or want to share your story? Email us: hello@liveyourmoneystyle.com
