Today I will be visiting my alma mater, Spelman College, to sit in on a class taught by the smartest woman I have ever met, Dr. Michelle S. Hite (seriously, she is probably one of the top ten people who have significantly impacted my life). Just thinking about Spelman puts me back in an academic frame of mind, so for today class, I will be teaching Budgeting 101. In my opinion, budgeting is like using common sense, everyone should do it but not everyone does. The importance of making and sticking to a budget is the freedom of knowing exactly how you spend, what money can be spent elsewhere, and where you overspend. So grab a pen and paper and let’s get started:
- LIST YOUR SOURCES OF INCOME
- CREATE A LIST OF YOUR MONTHLY EXPENSES
- Fixed (Mortgage/Rent, Car Payments, Insurance, Emergency Fund)
- Variable (Utilities, Groceries, Gas, Food, Entertainment)
REARRANGE YOUR LIST IN ORDER OF PRIORITIES
This is the time for you to really think about what’s important. Shelter, Food, Utilities, and Gas are at the top of my list. Although I hate to do it, I can live without costly entertainment.
- ASSIGN A BUDGET TO EACH EXPENSE
WRITE DOWN EVERYTHING YOU SPEND YOUR MONEY ON (for 2 weeks)
Do not leave anything out in this step. If you spend $1.00 at the vending machine, $3.00 for Girl Scout cookies, and $7.00 for parking downtown when meeting friends for drinks, you already splurged $11.00 on random spending that you probably don’t even consider when mentally reviewing your spending for the day. Writing EVERYTHING out will help you see exactly what, where, and how you spend your dineros.
CUT OUT IMPULSE SPENDING
My friend and Rah Tiffany (hey girl) put herself in a mental shopping rehab back when we were in college. At first, my friends and I thought she was crazy, but in fact she was making the best financial decision as a then single black female addicted to retail (thanks Kanye). She went almost 40 days without random impulse shopping. Following suit, I did the same. I reviewed my spending habits from the previous step that revealed my mindless exhaustion of funds at the mall. I would get up, go to the mall, see something I thought I couldn’t live without, buy it, then after working so hard at shopping I would go for lunch, go back to shopping and finally come home. Now looking back, I have to ask myself, did I really need those shoes, that purse, that book, that phone case, or that expensive lunch….NOPE, I did not. Then I thought to myself, wow, I could have taken that money and put it in my bucket list fund. Trust…skydiving will be more memorable than that cute shirt I purchased sometime last season.
PAY FOR EVERYTHING IN CASH
This tip makes its way into almost every post I write. This is a must for financial empowerment!!!
REVIEW YOUR BUDGET MONTHLY
Things change. Financial situations change. Keeping your list up to date is the only way to ensure that your budget is working for you.
Good Luck and Enjoy!
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