Before you begin to budget, it is important to consider and evaluate exactly what budgeting is and what it is not. All too often, when a person thinks about budgeting, their thoughts wander to this restrictive, no-fun punishment for the way they handle their money. This isn’t true at all. By budgeting appropriately and within your means, you can create a plan for spending your money in important ways and allow you to live a life that you enjoy. If you consistently budget over time, you’ll find that you can more easily achieve financial goals while also taking care of your day-to-day responsibilities. Through self-assessment, goal planning, commitment, and a little bit of math, you will find that budgeting is the foundation of your financial success.

Why even make a budget?

You might be thinking that budgeting seems like a waste of time. You know what you have in your bank account and you know what your regular bills are. You may think you don’t need a process to get by financially. This plan - or lack thereof - might work for you for a while, but it is sure to cause you problems over time. When you budget, you are not just planning for right now; you are anticipating and planning for the future while also alleviating some of the risks associated with the unknown. Sound budgeting gives you peace of mind. Peace of mind in knowing that you are living within your means while simultaneously allocating resources for future events.

What is a Budget?

At its most basic, a budget is a plan that you utilize to balance your income and expenses. It’s a plan for spending your money so that you do not over-extend yourself financially. Budgeting is both a mental and physical activity. Just thinking about your expenses is not budgeting. You need to use a tool that you are comfortable with using consistently. It can be a piece of paper and a pen, a spreadsheet, an app, or anything else that you are committed to using on a regular basis. You must make it a physical activity because one of the most important budgeting steps, one that many people fail to do, is to review and revise your projections based on new data. If you are only trying to budget mentally there is really no way you can do this.

In summary, a budget is:

Your foundation of financial success
Written down or entered manually
A reflection of your values
A spending plan
Balancing your income with your savings and expenses

In order to budget it is helpful to break budgeting down into a set of predefined steps. For the rest of this module, you will get to explore each of these steps while also learning about the importance of understanding cash flow and its impact on your ability to stick to your budget.

Learning Checkpoint:

Optional Worksheet: Mindful Spending Worksheet

[Chapter 1]: Introduction to Budgeting

[Chapter 2]: Assess Yourself and Your Values

[Chapter 3]: Organize Your Financial Life

[Chapter 4]: Track Money Coming In

[Chapter 5]: Track Money Going Out

[Chapter 6]: Cash Flow and Setting Up a Budget